What happens to our house when we as an unmarried couple split up?
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Answer:
Unmarried couples buying property together can face issues when the relationship ends. If both names are on the deed (the title), then both will have certain rights but not necessarily the same legal rights and protections that married couples have. An agreement at the time of purchase is recommended.
Ownership of the property may or may not be equal. Sometimes one individual in a couple will have more money. She may pay more of the down payment and monthly mortgage payment. The couple can agree to give her a larger ownership share of the house.
Another decision to determine is what happens if one of the individuals dies. One option is to write in the contract that the couple has a joint tenancy with the right of survivorship. This means that the surviving person receives sole ownership. This option allows the house to be transferred easily to one person.
Another option is to write that both individuals are tenants in common. This means that each person decides who receives their share. The decision can be written in a will. The share will usually go to the closest relative if there's no will, as set out in the intestacy laws of the state where the property is located.
Absent a written agreement, it may require the courts to determine who will get the property and/or how the equity or deficient in value would be split. Absent a contract between the owners stating otherwise, any co-owner is entitled to liquidate his/her interest ant any time through a “partition” lawsuit. The purpose of a partition is to divide the property between co-owners. Since most developed real estate cannot be physically divided, in the modern age, partition is accomplished by a sale of the property and a division of the proceeds.
In most partition lawsuits, the co-owners also seek an “accounting” of the expenditures of each co-owner for property related expenses such as mortgage principal payments, property taxes and improvements.
If a co-owner contributes more money for the purchase and/or pays more of the property expenses such as mortgage, insurance, taxes, maintenance, repairs, improvements, homeowners’ assessments, etc. will the ownership interests be divided according to the percentage each contributes or will there be some other formula or method to provide for reimbursement? Will the difference be treated as a gift or a loan? In many cases, absent an agreement between the owners, payment of a larger share of the down payment is treated as a gift. On the other hand, if one co-owner pays more of the property expenses after purchase, he or she is often entitled to credit or reimbursement at the time that the property is divided. The decision about how to apportion and credit the down payment and the expenses of ownership should be made by the co-owners in writing before the purchase takes place to avoid any misunderstanding or expensive legal battles later.
