Legal & tax
A new way to share a home only works if the legal and tax foundations are genuinely sound. Here's how the agreement, your ownership, and the tax position all fit together.
How your interest is protected
Both owners are registered on the property's title as tenants in common — a well-established form of co-ownership in New Zealand law. This isn't a private side-agreement; it's real ownership of a real asset, recorded publicly.
Each owner's interest is recorded against the title at LINZ as tenants in common — legally protected, not just contractual.
The Passive Owner is paid their full recorded interest first when the home is sold; the Resident Owner receives the remainder — much as a home loan is repaid first.
The Passive Partnership Administrator receives and passes on the weekly payments, kept separate from its own funds, and keeps the register accurately.
The agreement is designed to leave very little to argue about, because it is run by pre-agreed formulas managed independently. If a dispute does arise, a staged process — good-faith negotiation, then mediation, then binding arbitration — gives both sides a fair, low-cost path.
With co-ownership both parties are legally tenants in common, so none of the tenancy / landlord laws apply.
The Resident Owner must keep at least a 20% share, with up to 5 years to restore it if the property value falls faster than market averages.
Only after sustained default and written notice — but it is much less likely, as your payments go down if the market falls, and rising interest rates won't affect you because your occupancy fee % is fixed for the life of the agreement.
The agreement
A single co-ownership deed defines every right, obligation and process. It's built to be used by ordinary people, with five clear parts.
The specifics: who the owners are, the property, the starting shares, and the ownership register.
Each owner's rights and obligations, how the register updates, the occupancy fee, expenses, selling, and disputes.
When and how an independent valuation can be obtained, and who pays for it.
The defined terms and rules of interpretation that keep the agreement clear and consistent.
Plain illustrations of how the register and fees are calculated in real scenarios.
Tax position
Co-ownership of property as tenants in common is well-established in New Zealand law — as is the tax treatment that follows from it. Passive Partnerships doesn't create a novel legal structure; it applies existing co-ownership principles in a structured, transparent way. The tax position isn't uncertain — it flows from law that's been in place for decades.
The Resident Owner pays the Passive Owner for sole use of the shared home. This is a payment between co-owners — not rent under a tenancy agreement. Although the occupancy fee is not rent under a tenancy, payments between co-owners for sole occupancy of co-owned property have a well-established legal precedent of being exempt from GST.
The occupancy fee is income for the Passive Owner, declared and taxed at their applicable rate.
Both parties' capital gains are taxed the same way as for other property owners — currently no capital gains tax in most circumstances in New Zealand. The bright-line test and other property-tax rules still apply in exactly the same way as they would to any property owner. The value of each party's share on sale is based on their registered interest, applying fair market principles throughout.
The bright-line test may apply to the Passive Owner's share on sale, depending on when the property was acquired. Both owners should check their position, particularly if the property is sold within the applicable bright-line period.
As stated above the Occupancy Fee is not subject to GST but GST does apply to the Administration Fee charged by Passive Partnerships.
Tax treatment depends on individual circumstances. Both owners should take independent tax advice before signing.