The friend who’s moved out then counter-claimed for legal expenses he notched up defending his position.
The tribunal has decided that each owed the other $233, which left neither out of pocket.
Tribunal referee Krysia Cowie said it was the fairest outcome in a situation where each felt aggrieved by the other, and each considered they had suffered a loss.
Sign of the times
Increasingly, more people sought to enter the housing market by purchasing property with friends, two expert property lawyers in New Zealand told NZME.
While it might be a good way of getting on to the property ladder, it was not without its pitfalls, especially if there was no agreement or it was drafted without expert advice, Joanna Pidgeon said.
Adina Thorn said it was a sign of the times.
“Property is so inaccessible to the average income earner in this country that for a lot of people, it might seem better to do this than rent.”
The living situation became “very tense”, said Disputes Tribunal adjudicator Krysia Cowie. Photo / 123rf
Thorn said the concept might sound like a good idea, as long as the purchasers remained friends.
“What you really should be doing first is ask the ‘what ifs’: What if this doesn’t work out? What if we don’t get on? What if we don’t want to live with each other anymore?
“What if someone falls in love and wants to move on?”
Thorn said these were the first steps anyone should ask themselves before venturing into such property arrangements.
Friendship strained further by missed deadline
According to the decision, Colin* and Erik* were once good friends.
In July 2023, they decided to buy a house together.
Colin contributed 75% of the equity and Erik the rest.
However, in January 2025, their relationship broke down and Colin agreed to buy Erik’s share of the house.
In a written agreement, Colin agreed to pay $44,575 to Erik by an agreed date, and Erik would then have a month to move out.
He agreed to pay $200 a week in rent until then.
But Colin missed the payment deadline for the buyout when an investment failed to return what he needed.
The living situation became “very tense”, Cowie said in the decision.
Erik moved his cooking equipment into his room so he was self-contained and could avoid shared spaces.
Colin and his partner used the rest of the house, Cowie said.
Rent payments stopped
Erik stopped paying rent. Colin was worried he might have to sell the house, so he went to a lawyer.
Erik was sent a letter which required him to seek legal advice in order to understand it and to defend his position, Cowie said.
A couple of months later, he got his $44,575 and promptly moved out, after paying $1521 in unpaid rent and living expenses owed.
Colin then lodged a claim in the tribunal saying he was owed money as a claw back on a home loan, plus rates and for shared household expenses.
Cowie said the pair received about $3850 from a home loan provider on the basis that they would own the home for four years.
Erik counterclaimed for legal expenses incurred and for money he claimed he had overpaid.
The tribunal had to decide if the pair had agreed on how their property and costs would be divided after their friendship ended and, if so, whether Colin had breached the agreement.
Cowie found he had.
She said the consequences of his not receiving rent were a result of this breach, and therefore, no award was made to him for that expense.
They agreed earlier that Erik was liable for $233 in costs for power and internet for the additional eight weeks he lived at the property.
Colin also claimed $185 for miscellaneous flat expenses, such as cleaning products and consumables, recorded in an app.
Cowie said from the evidence provided, Colin was unable to show that there was an agreement that Erik was liable.
The former friend was unsuccessful in claiming $185 for miscellaneous flat expenses, such as cleaning products and consumables recorded in an app. Photo / 123rf
“I find it was part of the usual give and take in a house-sharing arrangement and there was no agreement in place that determined the residual liability for [Erik] above what he also contributed,” she said.
Dispute ‘escalated by choice’
Cowie said while there was never any dispute over shares in the jointly owned home, the pair chose to escalate the dispute over relatively small ancillary costs.
She found Colin liable for a nominal amount to compensate Erik for the costs he incurred getting legal advice on Colin’s breach of the agreement.
Cowie fixed the contribution at $233, being the same amount Erik owed Colin for power and internet.
“It means that neither party will owe any amount to the other and the loss they each incurred will lie where it has fallen.”
Nutting out a mortgage
Thorn said another potential pitfall for friends buying a home together was how a mortgage might work, including obligations around legal requirements.
Pidgeon said factors to consider included that even if each party had separate loans with a bank, they may need to be a co-guarantor with the mortgage over the whole property, to secure all owners’ debt.
She said another consideration was financial contributions and how they might be fairly apportioned, such as the deposit.
Another potential trap was that anyone not in a qualifying relationship, such as marriage, a civil union or a de facto relationship, was not protected by the Relationship Property Act, the Ministry of Justice said.
Friends who co-owned a property were treated under the law as standard business or co-ownership associates, rather than romantic or domestic partners.
Pidgeon said a property might usually be owned as tenants in common in the specific share owned by each party.
The advice from Thorn and Pidgeon was for friends or relatives thinking about buying a place together to first see a lawyer in the town or community where they lived, who could help draft an agreement.
Property lawyers Adina Thorn and Joanna Pidgeon warn about the pitfalls of friends going into a house purchase together. Photos / Supplied
“I would strongly recommend having a property sharing agreement drafted by a lawyer as they can ensure that the agreement covers all sorts of potentialities which may not occur to someone buying a home,” Pidgeon said.
Thorn acknowledged that legal services were “really hard and unaffordable” for a lot of people but it was important to get good advice.
“It’s a stone you do need to turn over.
“It’s not easy, but I don’t want to be that person that says ‘Don’t do it’ either, because this is a way into home ownership and it works for some people.”
Know your co-owner well
Pidgeon said another point to consider was the shifting dynamics of one or more within the group.
She said life events were bound to happen, such as overseas travel, marriage and having a family, which meant the property might no longer be suitable.
“Will it then become an investment property for one and still a home for the other person?”
Pidgeon said someone else might face financial difficulties through being made redundant, which could force a sale if loan obligations were not met.
“You need to have confidence in the financial strength of your co-owner,” she said.
It was also important to consider what might happen if a partner moved in, or a flatmate, and how they might contribute to costs.
There were also home maintenance costs to consider and how they might be arranged.
Pidgeon said co-owners also needed to think about what would happen if one wanted to sell and, importantly, how to handle any disputes.
*Names have been anonymised, in line with statutory suppression rules around decisions by the Disputes Tribunal.
Tracy Neal is a Nelson-based Open Justice reporter at NZME. She was previously RNZ’s regional reporter in Nelson-Marlborough and has covered general news, including court and local government for the Nelson Mail.