I see this a lot lately. With the high values of real estate, more unmarried couples are purchasing property together. There are countless reasons why couples purchase real estate together. It’s a great investment both for income and appreciation, and it offers an affordable place to live so money is not just being thrown away. But many couples don’t think about the worst case scenarios when they buy property together. Many couples may not know that the protections and rights married couples enjoy don’t automatically apply to them since they are not married. Beyond some oral discussions with one another, there are probably no written agreements between the parties.
Preparing a Co-Ownership Agreement
Most couple ownership problems can be avoided by spelling out the terms of the relationship in a written, signed agreement. For example, what happens if you or your significant other wants out of the relationship? What will happen to the property? Having a co-ownership agreement can spell out what will occur if that happens. For example, you and your significant other could do a buyout of the other’s interest. Or both parties could agree to put the house up for sale and split the proceeds after it sells. Either one of these options could prevent a long drawn-out legal fight.
If there is no agreement, one co-owner could file a partition lawsuit to force the sale of the home. A partition lawsuit is something both parties should avoid since they will burn up any equity they may have in the home by hiring lawyers. You would also still have to pay real estate fees to the Realtor who lists or sells the property. You may also have to pay a court receiver, who is another attorney that reports back to the court about the sale of the property and so forth. Establishing a co-ownership agreement can eliminate the courthouse and the lawyers. It’s the key to keeping any equity you may have in your house.
Make Sure Your Estate Plan Is in Order
Another thing a couple needs to do is prepare an estate plan with the co-ownership in mind. Remember, the protections of community property do not apply to unmarried couples. So not having an estate plan could find a person co-owning a property with someone he or she may not want to co-own a property with. It could even be a significant other’s children or parents.
The advice for the day is that if you are going to buy property with a significant other and you aren’t married, it’s best to have a written agreement in place with detailed terms for your co-ownership. You should also make sure both of you have estate plans in place so you can prevent costly legal fights and battles.
