Now that we were really talking about building a house – bringing with it a whole new level of financial commitment – a thorny old subject came to the fore.
The six of us had talked many times about the necessity for a formal exit agreement. There had been no real difficulty organising ourselves for purchasing something together, but working out how we might pull out if necessary was a different matter. Every responsible person knows you have to have such an agreement, but we had successfully skirted the issue whenever it came up, obviously operating under the notion that we could handle anything fate threw at us. Besides, we were working so hard to build momentum for creating this thing: how could we even consider what we might have to do to dismantle it?
There might have been five apathetic individuals in the matter – but Judy was not one of them. She finally put her foot down. “I can’t in all good conscience go any further with this project until we have our exit agreement worked out,” she announced.
With no great enthusiasm, we set a meeting for an evening later in the week.
In the lead up to the meeting, I forced myself to think about an unknowable future. I could easily picture the six of us three years from now, living in a beautiful big house on our property. We’ve spent loads of money getting it built and set up, but that investment is more than compensated for by all the pleasure, natural beauty and camaraderie that we are experiencing.
My imagination liked this part.
However, I could also get glimpses of unforeseen events that could derail us. As a matter of fact, I found that as I unleashed my latent pessimism, I could invent any number of misfortunes.
For example, what if one of the six of us dies, and the remaining partner doesn’t want to stay on? Or what if there is a family crisis and someone needs to move far away to be with an ailing sibling? What if someone wakes up some morning, looks at his/her partner and says, you’re not The One For Me anymore? – divorce, disruption. Disaster.
I could picture financial calamities: what if someone mis-invests in the stock market, runs out of money and can’t afford to stay in the arrangement? What if costly medical or family expenses drain someone’s resources and they need their capital from the house and land to live on?
Or what if someone hears the call for a life elsewhere and wants to move on? What if someone just gets cranky and doesn’t want to be involved anymore?
What if we have a falling out and can’t bear living together?
I felt extremely ill at ease sitting with my negative fantasies. But they underlined what I knew (what we all knew) – that we needed an exit agreement that would allow someone to get out of the arrangement with their spirits and finances intact. As I fully expected to be one of the partners wanting to stay on, I could see that a pull-out also had to be workable for those who had built a life on the property.
The evening of our scheduled meeting arrived and we gathered around the kitchen table. Judy set the stage in her usual forthright manner. “We all recognise that at some point, someone might need to draw out of the arrangement. At the very least, someone’s going to die first, and what happens then? So I figure we need to put together a procedure that would be as fair and painless as possible.”
“Speaking of pain,” Eve said, “I’d rather be at the dentist. She raised a hand to forestall Judy’s response. “I know, I know…” she said, “…but it all does seem rather ghoulish.”
“Or unlucky,” I added. “Like we’re inviting trouble in talking about it.”
“I’d say we’re inviting trouble if we don’t talk about it,” Judy retorted, and there was nothing I could say to that.
“We all know this is something we have to do,” Rick said. “We just hope we never have to use it.”
The only way I could think we’d never have to use it would be if we all died simultaneously, but I held my tongue, as that didn’t seem to be a comment that would add value to the conversation.
“All right, shoot,” Michael said. “Let’s get this over with.”
We began by exploring some of the things that could go off the rails, much as I had a done on my own a day or two prior. The mood was sober, but the brainstorming served as a wake-up call. There were indeed a lot of disruptive things that could happen as our lives played out before us.
Eventually, the conversation moved on to safer ground: a methodical look at how our agreement could handle these potential challenges.
We recognised that first there would be a trigger event where one party wants to sell, and formally brings that to the notice of the rest of the household.
What would happen next?
Well, we would need to know the value of the property – so there would have to be a valuation. We defined what that process might look like, and how it might be adjudicated. We decided to call that Step One.
Okay – we have someone wanting to sell, others wanting to stay, and we’ve established a price. What could happen now?
The simplest possibility would be that the remaining two couples wish to buy out the share of the leaving couple, so they split the cost of the one-third share and make the purchase. Step Two, therefore, involved giving some time for that possibility to work itself through.
But what if one of the remaining partners can’t afford or doesn’t want to buy out the share? In that case, the other partner would have the option to purchase the entire third share, thus becoming a two-thirds owner of the property. This identified Step Three.
So far, so good.
However, what if neither of the remaining partners wants to buy out the share? In that case, someone else would have to be found. Making it even trickier, this party would have to be acceptable to the remaining householders. We acknowledged that this could be by far the most difficult step, but because it would be in everyone’s interest to make it work, it was worth including as Step Four.
We couldn’t think of any other ways the exit was likely to go. That meant that in the event that we couldn’t find a new partner, Step Five was where we resorted to putting the property on the market, selling it and dividing the proceeds into thirds. We concluded the process by identifying the costs that would be incurred along the way, and resolved who would pay for them.
We discussed another aspect we felt was important. We all had children, and wanted to be able to include our third of the property in our respective estates, to be bequeathed to our heirs in the event of our deaths. On the other hand, we didn’t want someone’s death to automatically kick into effect the exit procedure that we’d just defined, requiring us to sell the property if we couldn’t afford to buy out the heir.
So we agreed we would put a caveat into each of our wills that our portion of the house was not to pass into our estate until all others of the original parties had agreed it could do so. In other words, the heirs wouldn’t inherit their share of the property until the last man (or woman) standing had fallen.
And that was it. We’d done it.
Michael slapped his thighs and stood. “Well, that wasn’t so bad,” he said. Coming from Michael, who hated meetings, that was high praise.
“Better than the dentist, after all,” Eve allowed.
Rick and I thought we should run the whole agreement by Jim, a good friend and lawyer, well-known in his field as an effective negotiator. Over the years, he had been unflaggingly interested in our project, full of questions, always wanting an update on the latest happenings and especially enjoying news of discord and upsets.
Best of all, he was a fierce advocate for Rick and me, with our interests at heart. If he felt the agreement protected us, I knew it would protect all six of us. The Shedders approved our suggestion that the group engage him to draft our contract.
Jim looked over our notes. He tightened up the time frames, suggesting we limit each step to three months, making a total of one year the maximum that could elapse before the initiating party would get their return. He also reminded us that an heir could in all probability successfully contest the clause delaying their inheritance, but if he/she was willing to exercise goodwill, our intention would be honoured.
Jim turned our five steps into formidable legalese and emailed it back to us. Late that afternoon, we sat around the kitchen table to complete the process. One by one, we ritualistically signed the printed copies before us.
“Perhaps we should be doing this in blood,” Judy said.
“I’m not sure mine is still flowing, after all this talk about death, falling out, and parties of the third part,” Michael replied. We laughed uneasily.
As I sat at the table, chin resting on my drawn-up knee, I thought, no wonder we feel the need to be flippant – this has been a disturbing part of our adventure. How much easier it is to just go into denial about unpleasant possibilities. I didn’t want to think about what I would do if Rick died, or if one of our marriages broke down, or if in my eighties I found that a home I loved had to be sold from under me. And to make the whole exercise even more elusive, I knew that no agreement would ever cover all the things that could happen in our lives, or make them easy when they did.
There was, nonetheless, a certain comfort in having our Five Steps defined.
“One last thing,” Eve interrupted my thoughts. “I want to acknowledge Judy, the unsung hero of this part of our journey. It’s the strength of our group that there’s a Judy in it, making sure we get done what’s needed.”
Judy squirmed. “Yes, I could tell I was everybody’s favourite person for cracking the whip,” she said. “Thank you all for humouring me.”
“On that note, I think we need to head out for a celebratory dinner,” Daniel suggested. There was unanimous agreement and an immediate scraping of chairs that I’m sure represented our haste to leave this conversation behind.
But first toast of the evening would without doubt go to Judy.