Buying a Vacation Home With Family in BC

Key things to discuss before you buy

1. Decide exactly who is buying the property

• Who will be registered on title?
• Who will be borrowers on the mortgage?
• How much is each person contributing to the down payment?
• Will everyone own an equal percentage?
• If one person contributes more, does that mean they own more?
• Is anyone contributing money but not going on title?
• Remember that mortgage liability and ownership percentages are separate issues. A lender may require borrowers to be jointly responsible for the entire mortgage even if their ownership shares differ.

2. Decide how title should be registered

In BC, two common forms of co-ownership are:

Joint Tenancy

• Each owner has an undivided interest in the property.
• Includes a right of survivorship.
• If one owner dies, their interest generally passes to the surviving joint owner(s), rather than through their estate.
• Often used between spouses.
• It can become complicated when siblings, parents, adult children or multiple family units are purchasing together.

Tenancy in Common

• Each owner has a defined ownership interest.
• Ownership does not have to be equal.
• For example:
  • Parents – 50%
  • Adult Child #1 – 25%
  • Adult Child #2 – 25%
• An owner’s share generally becomes part of their estate when they die rather than automatically passing to the other owners.
• This structure can provide greater clarity for unrelated owners or extended-family purchases.

For many multi-family vacation-home purchases, tenancy in common is worth discussing with the buyers’ lawyer, particularly where contributions or intended ownership percentages differ.

3. Have a written Co-Ownership Agreement

This is probably the most important recommendation.

Family members may get along extremely well today, but circumstances change. A lawyer-drafted Co-Ownership Agreement can establish the rules while everyone is still on good terms.

The agreement should address:

• Percentage owned by each person
• Initial down-payment contributions
• Responsibility for the mortgage
• Property taxes
• Insurance
• Utilities
• Strata fees, if applicable
• Repairs and maintenance
• Major renovations
• Furniture and improvements
• How annual expenses are divided
• Whether a reserve/emergency fund will be maintained
• Who manages the bank account and pays bills
• How decisions are made
• What requires unanimous approval versus majority approval

It should also address how the family actually gets to use the vacation home:

• How weeks/weekends are allocated
• Holidays and long weekends
• Whether owners can bring guests
• Whether friends can use it without an owner present
• Pets
• Cleaning responsibilities
• Damage caused by guests
• Whether the property can be rented
• Who receives rental income
• Who manages rentals and related expenses

4. Have an exit strategy before purchasing

This is the area families often overlook.

Agree in advance on what happens if someone:

• Wants to sell their share
• Can no longer afford their share
• Gets divorced or separates
• Dies
• Becomes incapacitated
• Moves away
• Has financial difficulties
• Stops contributing to expenses

The agreement should establish a buyout process, including:

• Does the family get the first opportunity to purchase the departing owner’s share?
• How will the property be valued?
• Will you use one appraisal or multiple appraisals?
• How long does everyone have to complete a buyout?
• Can an owner sell their interest to an outsider?
• What happens if nobody can afford to buy them out?
• At what point must the entire property be sold?

This is particularly important because BC’s Partition of Property Act provides mechanisms through which parties with interests in land can seek partition or sale of jointly owned property. (BC Laws)

In other words, “we’ll just figure it out if someone wants out” isn’t a great exit plan.

5. Consider death and estate planning

Every owner should review their Will and estate plan at the time of purchase.

This becomes particularly important with tenancy in common.

For example, imagine two sisters buy a cabin 50/50. One sister dies and leaves her estate to her children. The surviving sister could suddenly find herself owning the vacation home with her nieces and nephews.

The co-ownership agreement and each owner’s estate plan should therefore work together.

Ask the lawyer about:

• Right of first refusal
• Buyout rights upon death
• Life insurance to fund a buyout
• Whether ownership should pass to heirs
• Whether spouses can inherit an interest
• How joint tenancy versus tenancy in common affects the intended estate plan

6. Understand the tax implications

Don’t assume a vacation property will automatically be tax-free when it is eventually sold.

A cottage or vacation home can potentially qualify as a principal residence, provided CRA’s requirements are met, but generally only one property per family unit can be designated as a principal residence for a particular year. (Canada)

That means owners who already own their primary homes should obtain tax advice about:

• Future capital gains
• Adjusted cost base
• Tracking renovation and improvement costs
• Rental income, if applicable
• Principal residence designation
• Changes in use
• What happens tax-wise when an owner dies or transfers their interest

Keep records and receipts for major capital improvements from day one.

7. Understand the mortgage implications

This is another important conversation before writing an offer.

Depending on the lender and structure:

• All owners may need to be included in the mortgage application.
• All borrowers may be jointly responsible for the mortgage.
• One person’s debts or credit situation can affect qualification.
• Removing someone from title later isn’t necessarily as simple as signing their name off.
• The remaining owners may need to requalify for the mortgage.
• A transfer of ownership may involve legal fees, lender approval and potentially tax consequences.
• Future borrowing capacity for each person may also be affected because the vacation-home mortgage is part of their overall liabilities.

8. Talk about the uncomfortable scenarios now

Before purchasing, I would encourage every family to answer one simple question:

“What happens if our relationship or financial circumstances are completely different five years from now?”

The goal isn’t to expect problems. It’s to make sure a financial disagreement never has to become a family disagreement.

Recommended professional team

Before removing subjects, I’d recommend the family speak with:

Mortgage Broker → BC Real Estate Lawyer/Notary → Accountant/Tax Advisor → Estate-Planning Lawyer

Ideally, the legal agreement is prepared before or alongside the purchase, rather than after everyone is already on title.

Bottom line: For a vacation property being purchased by siblings, parents/adult children, or multiple family households, I would generally encourage them to specifically discuss tenancy in common + a comprehensive co-ownership agreement + updated Wills with their BC lawyer before deciding how title will ultimately be registered.  Get advice from your lawyer when deciding what suits your family best. 

This is general information rather than legal or tax advice;

The right structure depends heavily on who is contributing the money, who will use the property, and what everyone wants to happen to their share in the future.