What to write into a cabin co-ownership agreement, and what to leave out of it

Buying a cabin with friends goes in a predictable order. Somebody finds the listing, four households drive up on a Saturday, everyone loves the porch, and the offer goes in before anyone has asked what happens if one of you loses a job. The agreement comes later, if it comes at all, and it usually arrives as a thirty-page template that spends six pages on who gets which week.

That is backwards. The agreement exists to protect a large amount of money over a long time, and most of its clauses should be about that money. The calendar is the part that changes every year, and a signed legal document is the worst possible place to keep something that changes every year. This post puts a number on what the agreement is protecting, lists the clauses that belong in it, and makes the case for keeping the schedule somewhere else.

What the agreement is protecting

Say four households buy a $320,000 cabin with 20% down, $16,000 each, and a 30-year mortgage on the rest at 6.5%. Unlike an inherited place, this one has a loan, and the loan does not care whose turn it is.

Cost per year to carry the cabin

$29,620Cost per year to carry the cabin

Households on the deed

4Households on the deed

Each household's share

$617 a monthEach household's share

That is about $7,400 a year per household, or $617 a month, on top of the $16,000 each put down. Over a decade each of you will pay in something like $90,000. Nobody signs up for that on a handshake with a bank, but plenty of people do it on a handshake with friends, and the agreement is what turns the handshake into something that survives a divorce, a move or a bad year.

The clauses that belong in it

A lawyer in the state where the cabin sits should draft this, and an hour or two of fees is cheap next to the numbers above. Walk in knowing what you want each clause to say, and the hour goes a long way further.

• How title is held. Tenants in common, joint tenants, or a small LLC that owns the cabin with each household holding a quarter. The choice decides what happens to a share when an owner dies, and whether a creditor of one owner can reach the cabin. This is the question to ask the lawyer first.
• The monthly contribution. The $617, paid into one shared account on a fixed date, with the mortgage, tax and insurance paid from that account and never from anybody's personal card.
• What happens when someone misses a payment. This is the clause most templates skip. Three months missed is about $1,850 the other three have to cover or the loan goes late. Write down whether the others can cover it as a loan to that owner, at what interest, and at what point a missed run of payments becomes a forced sale of that share.
• Capital calls. When the roof goes and the fund is short, how much each owner can be asked for, how much notice they get, and what happens if one cannot pay.
• Decision rules. Which decisions need a simple majority, which need everyone, and a spending threshold below which whoever is there just gets it fixed.
• Renting it out. Whether the cabin can be rented to strangers at all, who handles it, and where the income goes. Check the insurance before you agree to anything; a policy written for personal use may not cover paying guests.
• Death, divorce and marriage. Whether a share can pass to a spouse or a child, or whether the others get to buy it first. A new partner is not automatically a new owner unless you say so.
• The exit. How a share is valued (an appraisal both sides accept, or the average of two), who gets first right to buy it, how long they have to pay, and what happens if nobody wants it. Agree this while nobody wants out.
• Disputes. Mediation before court, and who picks the mediator. It is a dull line and the one that saves the friendship.

What to leave out: the calendar

Most templates include a schedule. Household A gets weeks one, five and nine, household B gets weeks two, six and ten, and the holidays rotate on a grid printed in an appendix. It looks thorough. It is also the clause that is wrong first, because the first time a household has a wedding to attend on its week, or a new baby, or a kid who starts playing travel hockey, the signed schedule stops matching what people want to do. Then you have two choices, both bad: amend a legal document to swap a weekend, or ignore it, which teaches everyone that the agreement is optional.

This is the split the table below makes. The left column is what a signature is good for: money, ownership and what happens when things go wrong. The right column is what a calendar is good for.

AllDibs is built to be that right-hand column. Whoever manages the cabin sets each household's budget of weekend and midweek nights once. Booking a stay spends the credits, the credit comes back when the stay is over, and the calendar will not accept a stay that overlaps another one. The guide to sharing a cabin walks through how that looks for a family place, and the same shape suits four households of friends.

Before anyone signs

Sit the four households down for one evening before the lawyer. Go through the list above and answer every item out loud, including the uncomfortable ones. If you cannot agree on what happens when somebody misses three payments, you have learned something important for the price of dinner, and it is better learned now than in year four.

If one of the households is really a set of siblings who inherited the place, most of this still applies, minus the mortgage, and three siblings sharing a lake house covers the version where the argument is about who does the work. Either way the agreement handles the money and the exit, and once it is signed the only thing left to settle every spring is whose weekend it is. That part is what AllDibs is for, free for your first five items.