What Legal Requirements Apply to Sharing Property?

If you'll be sharing a car, home, or other major or real property with others, perhaps as a way to reduce costs or build community, you'll want to consider whether there might be any legal roadblocks to your plan.

For example, zoning and building codes could prevent you from running a business out of your home or converting a single-family home into several units. Or, contractual restrictions in a purchase contract for a planned development or in a lease could limit how you may use your property; for instance, your condo complex's rules might not allow you to turn your front yard into a community garden.

You'll also need to follow the applicable laws for your shared activity. For example, a carshare group will have to make sure the vehicle is registered and licensed, and passes smog requirements. A childcare co-op might have to be licensed by the state or local government.

There might also be tax consequences to your sharing arrangement. For example:

  • If your state taxes vehicle sales, you and your co-sharers may owe taxes if one of you sells a car to the group.
  • If real estate changes hands, whether from one member of the group to the group as a whole or from a departing member to an incoming member, taxes may be due.
  • If your group sells shared property that has increased in value, members may owe tax on the gain.
  • If some members of your group provide services to the group in lieu of paying an initial contribution, the government might treat the value of the contribution as compensation, subject to income tax and employment taxes.
  • If there are tax breaks associated with purchasing or owning a certain item (for example, a tax credit for alternative fuel vehicles or tax deductions for property tax and mortgage interest payments), you'll have to decide who gets to take advantage of those benefits.

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