The family cottage: Whether you own one or have spent summers at one, you know it’s far more than a welcome refuge from the daily grind.
It’s also a storehouse of priceless memories and milestones – particularly if it’s been in your family for generations. Maybe it’s the place you (or your kids) learned to swim. Or where you saw your first bear. Or perhaps your cottage memories recall rainy nights playing board games by the light of a kerosene lantern. Or sunny days spent fishing with aunts, uncles, cousins, parents and grandparents.
Regardless of the nostalgia it conjures, a shared family cottage also comes with responsibilities – especially if you want to keep it in the family for generations to come.
The good news is there are plenty of ways to make sure your summer abode remains the scene of warm family memories, both now and in the future. Here are 6 tips to keep in mind:
1. Cherish the past, but keep it in perspective
“People often have an idealized view of the cottage,” says Cindy Hatherley, a real estate agent with RE/MAX Parry Sound-Muskoka. “They tend to only remember the wonderful summers of their childhood, not the hard work involved.” This can prevent families from having an honest discussion about how to equitably share the responsibilities of cottage ownership once the parents are no longer in charge (and paying the bills).
“You really should have this talk before the cottage is handed down,” says Hatherley, “But even if you discuss it afterward, it’s not too late.”
Indeed, getting all interested parties on the same page may be the best way to preserve the getaway for generations to come: “Disagreements over the family cottage are one of the most common reasons we see people selling,” says Hatherley.
2. Put everything in writing
Your cottage-sharing strategy should include a clear succession plan. This process should begin with the parents taking a clear-eyed view of the situation, says Peter Lillico, a Peterborough, Ont.–based lawyer who specializes in this area.
“The conversation should start by asking each child not just whether they’d like to inherit the cottage, but also whether they’re prepared to share it, put in the work, act as a steward for the property for a generation and, if applicable, to have part of their inheritance tied up in it,” says Lillico. “This will help set the right expectations with your children, so those who do commit will be prepared to take on the responsibility.”
Any co-ownership situation should include a cottage-sharing agreement (CSA), drawn up with the help of a lawyer. Your CSA will be a detailed document spelling out how everything will be handled – from big issues, such as what happens if one party wants to sell his or her share, to routine things, like who will be responsible for regular maintenance.
- Now that you’re doing some long-term thinking, it’s a good time to meet with an estate planning and financial services specialist. Get professional help to put all your affairs in order – not just your cottage.
3. Master the day-to-day operations
A key part of any CSA is a framework for dealing with major (and minor) decisions relating to the property.
“Typically, operating issues, like whether to replace the dock, will be decided by a majority vote,” says Lillico. “Then there are what I call primary decisions, like whether to sell the cottage outright or knock it down and build a new year-round home on the site. Those would require unanimity.”
4. Think ahead to avoid big expenses
Major repairs, especially when they are unexpected, can strain any group of cottage owners – family or otherwise. The best way to head them off is to be proactive.
“We’re trying to phase out things that will cost a fortune when they break,” says Stéphanie Verge, part-owner of a family cottage on an island in Ontario’s Georgian Bay.
“Our septic system is old, and we live in fear of the day it stops working. Having a water-access-only cottage means replacing it will be more expensive than if we were on the mainland. This year we’re installing a solar-powered toilet to take some of the pressure off the system.”
It's also important to protect yourself against the cost of a fire, theft or other disaster, with home insurance on the building and its contents (including boats and other recreational equipment).
5. Have an exit plan
If one party wants to sell his or her stake, there should be clear guidelines in the CSA on how it will be valued. Setting these guidelines is especially important in an era of rising prices: For example, in Muskoka, Ontario, 2 hours north of Toronto and one of Canada’s most popular cottage regions, waterfront sales reached a new record in the first 5 months of 2017. They rose 2.9% from the same period a year ago, according to the Canadian Real Estate Association. The median price in May 2017 for waterfront properties jumped 24.4% over the same time the previous year, to $522,500.
“A popular option is fair value discounted by 20%,” says Lillico. “If the idea is to keep the cottage in the family, this makes it easier for the others to buy the seller out; the sibling never paid [for their interest] anyway; and it acts as a bit of a deterrent.”
6. Don’t forget the fun part – staying there
Your CSA should also stipulate how you’ll divide time at the cottage, particularly during the summer months and in-demand long weekends.
Hatherley has had clients who like to rotate these desirable time blocks. “In 1 year, 1 party will get all of July and the other will get all of August,” she says. “And the next year, they’ll switch.”
Also, remember to spell out how the cottage can be used. Will co-owners be able to rent it out, for example?
The bottom line
No cottage-sharing arrangement is perfect, but setting clear guidelines will help ensure the weather — not your cottage co-owners — is your main summertime worry.