A property-sharing agreement can help reduce the financial risk of a co-owner of a property in the event of a breakdown in the relationship between owners, especially when the contributions of the co-owners to the property are not the same. If a co-owner is late in the loan obligations or wants to sell the property, the co-owners can apply to the Property Sharing Agreement and enforce the commitments it contains. Unless otherwise stated in this agreement, the net profits of the property are distributed pro-rata and according to their respective interests and distributed to the parties. All losses and liabilities generated in connection with the activity are borne and paid by the parties in the same proportion. To determine whether the share of shares should be structured to create tax benefits for the investor, it is important to balance costs and benefits. A central question is whether the investor can actually benefit from the tax benefits because of his or her overall tax situation. Another question is whether the creation of tax benefits for the investor will reduce the tax deductions available to the occupier. The answers to these two questions vary by party and property, and it is advisable to consult an accountant or lawyer. The parties own real estate and improvements on this property, located in the county, state of, and in particular in Schedule A (the “property”) described as a common tenant. The percentage of each party is set in Appendix B.
One of the most important changes in the distribution of shares is whether the parties intend to create tax benefits for the investor. If investors want tax benefits, it is necessary for the occupier to pay the monthly rent to the investor for the use of the percentage of the property that the investor owns. When this approach is adopted, the investor usually uses the total amount of rent to pay for property-related expenses. The result is: (i) the total monthly expenses of the occupier are the same, as if no rent had been paid (since the amount the occupant pays in rent is offset by the amount that the investor contributes to the operating costs); and (ii) the investor has no taxable income (since the amount the investor receives as rent is offset in dollars per dollar by the amount he/she contributes to property expenses).