Family property, want to build a cottage

[JasonW75]

Wisconsin
My family (parents) bought a lake lot many years ago with the intent of building a cottage. Over the years they lost interest and wanted to sell it. My sister and I didn't want to see it sold, and my sister had some extra money at the time. She came to an agreement with our Dad to pay him for the land and would record the deed transaction at a later date.
Now, I have some money to build a cottage, and my sister does not. We want to record the deed, so that it is no longer in our parents name. We want to do this in the most sensible way that will spell out a percentage of ownership for both of us, commensurate with our contributions. Her contribution of having paid for the land will represent 20% of the expected value once the cottage is built.
How do we specify this ownership share in the deed? Is there a simple way, or do we need to establish a trust? Or a partnership?
In the next 2 years, I expect to take out a construction loan to fund the building project. I'd like to do this on my own, without my sister needing to co-sign. If her name is also on the deed, would a bank still allow me to take out a construction loan?
The "plan B" that I have is to buy my sister out of the land, but then that sets me back quite a bit of money that I would have used as a down payment on the building project. My sister is happy to be a 20% owner in whatever I build, so she's willing to work something out that will allow us to proceed.
Thanks for your thoughts.

 

[Zigner]

You need an attorney...both of you.

 

[JasonW75]

You need an attorney...both of you.

Yes, I understand that. Just hoping for some direction so that we can adequately understand the questions that will come up, and we can pick the right attorneys with experience in these matters.

 

[Zigner]

Yes, I understand that. Just hoping for some direction so that we can adequately understand the questions that will come up, and we can pick the right attorneys with experience in these matters.

Gotcha- random internet strangers with no real understanding of any of the facts of the matter are great resources for "direction" for you. Best of luck!

 

[PayrollHRGuy]

Yes, I understand that. Just hoping for some direction so that we can adequately understand the questions that will come up, and we can pick the right attorneys with experience in these matters.

Any real estate lawyer should be able to help you. As far as family members co-owning property, my experience says don't do it.

 

[adjusterjack]

As far as family members co-owning property, my experience says don't do it.

Agree. The idea is a recipe for disaster.

Though I do have some comments.

She came to an agreement with our Dad to pay him for the land and would record the deed transaction at a later date.
We want to record the deed, so that it is no longer in our parents name.

Since the property is titled to your parents you can't record anything until your parents execute and record a deed conveying the property to your sister who paid for it.

Once that deed is recorded, your sister is free to execute and record a deed conveying the property to you and herself jointly stating the percentage of ownership on the deed.

My sister is happy to be a 20% owner in whatever I build, so she's willing to work something out that will allow us to proceed.

If she wants to give up 80% ownership of the land that she bought, that's up to her.

In the next 2 years, I expect to take out a construction loan to fund the building project. I'd like to do this on my own, without my sister needing to co-sign. If her name is also on the deed, would a bank still allow me to take out a construction loan?

There's only one place that can answer that question. That's at whatever bank you choose to apply to.

 

[zddoodah]

She came to an agreement with our Dad to pay him for the land and would record the deed transaction at a later date.

When (approximately) was this agreement made? Was the agreement in writing and signed by both of them? Why was the deed to be recorded "at a later date"? What was the date when the deed was to be recorded? Who had the obligation under the agreement to record the deed? Did your father actually deliver a deed signed by both he and your mother to your sister? Or was the deed also to be prepared "at a later date"?

How do we specify this ownership share in the deed?

I guess this means there is no deed in existence yet. Correct? Is there a reason (other than saving a few hundred dollars) why you want to do this based on input from anonymous strangers on the internet rather than a local real estate attorney?

That being said, it is not uncommon for a deed to say that the transfer is made "from [grantors' names] to Jane Smith, an unmarried woman, as to an undivided 20% interest, and to John Smith, an unmarried man, as to an undivided 80% interest." I'm not suggesting that this is the best way to do it (and, obviously, I don't know your or your sister's marital statuses), but it's one possible way.

do we need to establish a trust? Or a partnership?

You do not "need to" do either, but it might be that one or the other would be a good idea (yet another good reason to confer with a local attorney). Among other things, what happens if a rift forms between you and your sister and you decide you don't want to own the property with her (or vice versa).

In the next 2 years, I expect to take out a construction loan to fund the building project. I'd like to do this on my own, without my sister needing to co-sign. If her name is also on the deed, would a bank still allow me to take out a construction loan [in my name alone]?

You'd have to ask bank loan officers, but I doubt it.

 

[FarmerJ]

Is that parcel - lot large enough that it can be split in half and still be able to build on it ? If so then the best thing may be your buying her out after its been sub divided ( yes you could also do a contract for deed too and a attorney can draw one up for you , this way later if there is a problem where something happens to her your not going to have a bigger mess legally.

 

[STEPHAN]

Buy her out, everything else asks for trouble.