Tips for Horse Co-Ownership
It’s quite common in the horse world for two friends or a trainer and a client to purchase a horse together. At the start, it sounds like a great way to share risk and expenses and embark on an equine adventure that might not otherwise be attainable. But when the relationship falls apart, the inevitable questions arise…how do I get out? How do we divide expenses and profit? What happens to the horse?
The answers to those questions are best arrived at BEFORE the co-ownership ever begins. The most obvious step is to make sure there is an EXECUTED Bill of Sale which identifies both parties as owners and their specific share of the horse. Incredibly there are a large number of horse sales which take place with the buyers never getting around to securing an executed (signed) Bill of Sale. An example of how this affects a co-ownership: one partner has financial problems forcing the other partner to shoulder the majority of expenses. The partner who has paid most of the expenses decides to engage in “self-help” by selling the horse and keeping what he or she claims is her share plus expenses. Did she have a right to sell the horse in its entirety? What about the buyer? What type of cloud now rests on the title of the horse?
Plan Ahead:
Agree to rights and responsibilities before buying a horse and entering a horse co-ownership
Even prior to purchasing the horse, I recommend a co-ownership agreement which sets out the rights and responsibilities of both owners. Often, I hear from prospective clients that they don’t need an agreement because the co-owner is their friend or trainer and they get along great. Good to hear they get along. If that’s the case, then it should be easy to draft an agreement that everyone is happy with! An attorney can point you to some of the issues that are important to include in your case. Here are some to consider:
• A schedule of owners, identifying what share each owns
• Where the horse will be kept and who will pay for board
• Who will train the horse and who will pay for training
• Whether the horse will compete, how often, where, who will pay for competitions, who will receive prize money
• Whether the horse will be bred and if so, who will have breeding rights, proceeds from breeding, and ownership of offspring
• Who will pay for veterinary services, maintenance, and the like
• Who can ride the horse
• Provisions for insuring the horse, including who will be the named insureds, and who will pay for the insurance
• How expenses will be reimbursed
• Provisions for selling the horse and how proceeds will be distributed
• Provisions on transfer of ownership interests, including partner buy out or sale to a third party
Every co-ownership agreement is different. An attorney can point to issues which need to be addressed and/or included in the agreement. Spending the time and money up front will help prevent potential future problems and save money in the long run.