People own and lease horses in many different ways, such as partnerships, syndicates, co-ownerships and co-lease arrangements. Sometimes owners and lessees do not even know what shares they hold or when their lease expires. Regardless of the ownership or lease structure, these relationships are often fraught with problems as they are rarely documented, and the owners and lessees all have different intentions or plans for the horse.
We regularly hear the same story - a group of friends or family decide to purchase and/or lease a horse. Some may be involved for the excitement of having a horse, while others own the horse with a view to make a profit or establish a valuable breeding prospect. Something then happens, such as an offer made by a third party to buy the horse, or a decision about the future of the horse’s racing or competition career needs to be made. There is a disagreement between the parties which results in thousands of dollars being spent on legal fees to reach a resolution.
There is no legal framework that sets out the rules for resolving these types of disputes. While documentation may not prevent disagreements from arising, they can set the process for dealing with and resolving those disagreements.
As we have discussed in previous articles, when there is no documentation governing the relationship between parties, the only option for resolving the dispute is lawyers, negotiation or court.
- Ownership arrangement
Regardless of the structure of the ownership, there are a number of situations that a written agreement should address. These include:
(a) Who are the owners and what shares do they hold?
(b) What is the ownership’s intention for the horse?
(c) What are the payment arrangements?
(d) Do all of the owners have the same rights in relation to the horse?
(e) How are decisions made in relation to the horse? (i.e is a third party offer is made to purchase the horse, or some owners want to geld or retire the horse)
(f) What happens if a resolution can’t be reached?
2. Lease arrangements
Leases can exist in many different forms and confer different levels of control in relation to the horse. Issues can often arise where the lessor and lessee have different understandings of their rights and obligations in relation to the lease of the horse. A lease agreement, or deed of lease, should cover the following points:
(a) Who makes decisions about:
(i) Veterinary care;
(ii) Competition/races/trial entries;
(iii) Engagement of riders/jockeys;
(b) Does the lessee have a first right of refusal if the horse is to be sold;
(c) Does the lessee pay to lease the horse, if so, how does this work?
(d) Does the lessee get a portion of the stakes?
(e) Who is responsible for payment of expenses relating to the horse?
(f) Does the lessee have an agent capacity, in that they can enter into agreements on the owners behalf in respect of the horse
3. Documentation available
Recently New Zealand Thoroughbred Racing (NZTR) has confirmed that they are looking to follow Australia’s lead in the thoroughbred industry and make documentation of ownership arrangements compulsory. A standardised Co-Ownership Agreement will likely be available on their website once these changes come into force. They have also said that where documentation is not completed, a default set of contractual terms (as contained in the standardised Co-Ownership Agreement) will apply to all co-ownership arrangements. It is hoped that other industry bodies such as Harness Racing New Zealand and Equestrian Sport New Zealand also look to implement similar requirements.
In the meantime, we have available a free template Sale and Purchase Agreement and Deed of Lease (these documents are designed for one-off private deals) from our website at www.nwm.co.nz. Resources can also be found at the Trainers Association and NZTR websites. However, for people or businesses that sell or lease regularly or are looking to enter into a co-ownership arrangement, we recommend talking to us before using a pro forma document.
Alice Nunn is an Associate in the Equine Team at Norris Ward McKinnon.
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