Agreement to Share Ownership of a Car or Other Joint Purchase
Here's how to prepare an agreement to jointly purchase a major item such as a car.
Many people make purchases item by item, understanding that whoever makes the purchase owns the property. You could buy the kitchen table and chairs, and your girlfriend buy the lamp and stereo. If you split up, each keeps the property he or she bought. In this situation, you would use the Agreement to Keep Property Separate form included here.
Purchases also can be pooled. You can jointly own everything bought during the relationship, and divide it all 50-50 if you separate. In this case, the Agreement to Share Property, also included here, would be appropriate.
While these types of consistent approaches to property ownership may simplify things, they are required by neither law nor logic. You could choose a combination of the two methods. Some items may be separately owned, some pooled 50-50, and some shared in proportion to how much money each of you contributed toward the purchase price or how much labor each put into upkeep.
How to Prepare an Agreement for a Joint Purchase
Many unmarried couples opt for a basic keeping-things-separate approach, at least when they first get together. However, an unmarried couple will often want to own one, or sometimes several, major items together, as would be the case if you pool income to buy a car and an expensive sound system. Clause 6 in the sample Agreement to Keep Property Separate form allows you to easily do this.
You can prepare an Agreement for a Joint Purchase using the form included here. Simply fill in the details of your joint purchase, including the item or property bought, the percentage of ownership (such as 50-50 or 60-40) each of you has, and how you will deal with the property should you split up. For example, you may specify that one person automatically has the right (of first refusal) to buy out the other’s share. You may agree to do a simple coin toss or come up with your own approach depending upon the particular property.
Buying a Car Together
It’s not uncommon for unmarried couples to purchase a car together. If you do so, be aware that buying a car means entering into a series of agreements with third parties (for example, a car dealer, a bank, and an insurance company) that are binding regardless of the status of your relationship.
It's important to understand your state vehicle ownership rules before you come up with an agreement to jointly purchase a car (or if you want to change ownership or title in a car you already own). State rules often vary, so don't just rely on the general vehicle ownership rules described below, Check with your state’s motor vehicle department regarding the words that should be used to establish the different types of joint ownership of motor vehicles. These may be slightly different from those outlined here.
Here are some of the common legal ways you can jointly share ownership of a car. You will want to choose the one that is most financially viable for your situatins.
Sole Ownership. If you intend that the vehicle will belong to only one partner, but the other partner will advance part or all of the down payment in the form of a loan, the borrower should sign a written contract to repay. This contract is a called a promissory note. If you choose this option, you should register the vehicle in the borrower’s name only.
If you decide that only one of you will own the car, you can include the other partner as an “additional driver” on the car insurance. One advantage to sole car ownership: If the car is involved in an accident, only the partner who owns the car can be sued. (But if the other partner was driving, that person could be sued for negligent actions.)
Joint Ownership. If you intend to own the vehicle jointly, you’ll need a written agreement outlining the details. This is especially important if only one of you signed for the loan but both of you will be contributing toward its repayment. When you register the vehicle with the state, put it in both names. Depending on state law, you often have three options with car registration:
Option 1. “Thomas Finnegan or Keija Adams.” This creates a joint tenancy in many states; if one person dies, the other automatically inherits the car without going through probate. However, depending on state law (see Option 3, below), the “or” form of ownership lets either party sell the vehicle without the knowledge or consent of the other.
Option 2. “Thomas Finnegan and Keija Adams.” This establishes a tenancy in common; both signatures are required to transfer title of the vehicle. At death, however, each person can leave his or her share to anyone he or she wishes. If no estate plan is made, the nearest blood relative inherits the deceased person’s share by intestate succession. If you want your partner to inherit your interest in the car, include it in your will or consider Option 3, below.
Option 3. “Thomas Finnegan and Keija Adams, as Joint Tenants With Right of Survivorship.” Not only does this let the survivor automatically inherit the car without going through probate if one of you dies, but it also requires both signatures to transfer title while you’re both alive.
How to Edit and Sign Your Agreement for a Joint Purchase
See our tips for writing a living together agreement before preparing your own agreement. You can edit this Agreement for a Joint Purchase as you see fit, or use it as a starting point to prepare your own agreement. For example, if one of you purchased the jointly owned item by credit card, you may want to add details to Clause 2, clarifying that one person made the purchase, but that the item is jointly owned. See the Sample Joint Purchase Agreement When One Partner Is the Legal Borrower, for ideas.
Make two copies of the final draft (including any attachments) so you and your partner each have a copy.
Sign and date both copies of your agreement. It makes no difference who keeps which—both are “originals.”
Keep your copy in a safe place, along with other important documents, such as insurance papers, title slips to jointly held property, leases, copies of wills, important financial papers, and the like.
Keep in mind that only the partner whose name is on the credit card used to purchase an item is legally obligated to pay, even if you have an agreement splitting the cost. If only one of you signs a credit agreement to purchase an item, only that person is legally obligated to pay the creditor. This is true even if you and your partner sign an agreement to share ownership and payments. The creditor will accept money from anyone and properly credit the account, but if a payment isn’t made, the creditor will pursue only the person whose name is on the account.
More Advice on Sharing Ownership of a Car or Other Major Purchase
The Sharing Solution, by Janelle Orsi and Emily Doskow is a practical and legal guide on how to create and maintain successful sharing arrangements--from purchasing a car or house together to forming a buying club to purchase household goods.
Agreement for a Joint Purchase
Amy Randolph and Brett Bow
agree as follows:
1. We will jointly acquire and own a Sony flat-screen television set (the Property) at a cost of $ 1850 .
2. We will own the Property in the following shares [fill in]:
Amy will own 50 % of the Property and Brett will own 50 % of the Property.
3. Should we separate and cease living together, one of the following will occur:
a. If one of us wants the Property and the other doesn’t, the person who wants the Property will pay the other the fair market value (see Clause 4) of his or her share of the Property.
b. If both of us want the Property, the decision will be made in the following way [choose one]:
(1) Right of First Refusal. Amy shall have the right of first refusal and may purchase Brett’s share of the Property for its fair market value (see Clause 4). Amy will then become sole owner of the Property.
(2) Coin Toss Method. We will flip a coin to determine who is entitled to the Property. The winner, upon paying the loser for his or her share of ownership, will become the sole owner of the Property.
4. Should either of us decide to end the relationship, we will do our best to agree on the fair current value of the Property. If we can’t agree on a price, we will jointly choose a neutral appraiser and abide by that person’s decision.
5. Should we separate and neither of us wants the Property—or if we can’t agree on a fair price—we will advertise it to the public, sell it to the highest bidder, and divide the money according to our respective ownership shares as set forth in Clause 2.
6. Should either of us die while we are living together, the Property will belong absolutely to the survivor. (If either of us makes a will or other estate plan, this agreement shall be reflected in that document.)
7. This agreement can be changed, but only in writing, and any changes must be signed by both of us.
8. Any dispute arising out of this contract will be mediated by a third person mutually acceptable to both of us. The mediator’s role will be to help us arrive at a solution, not to impose one on us. If good faith efforts to arrive at our own solution to all issues in dispute with the help of a mediator prove to be fruitless, either of us may pursue other legal remedies.
9. If a court finds any portion of this contract to be illegal or otherwise unenforceable, the remainder of the contract is still in full force and effect.
Marcus Lyons and Karen Moore agree as follows:
1. Marcus has entered into an agreement with Racafrax Company to purchase a bedroom set consisting of one king-size bed, one double dresser, two night stands, and two lamps at a total cost of $2,500.
2. Marcus has agreed to pay to Racafrax that sum in monthly installments of $240, including interest, for 12 months, due on the first of every month beginning January 1, 20xx.
3. We intend that this bedroom set will be owned equally by both of us and that we each will pay one-half the cost.
4. Karen will pay Marcus $120 per month at least one week before each monthly payment is due. Marcus will pay the entire installment due to Racafrax in a timely manner.
5. Should either of us fail to make his or her share of the payment, the other will have the right to do so, and the ownership percentage of this person will be proportionately increased. If, for example, Karen makes sixteen payments (all of hers and four of Marcus’s), she’d own , or , of the furniture.
6. Each of us shall keep a record of payments made. All payments shall be made by check.
7. If we stop living together, Marcus may buy the bedroom set from Karen by agreeing to be solely responsible for the rest of the monthly payments to Racafrax and by paying Karen one-half of the difference, if any, between the bedroom set’s current resale value, and the amount of money still owed to Racafrax.
8. If Marcus does not want the furniture under the terms set out in Paragraph 7, Karen may buy the bedroom set by paying the full amount still owed to Racafrax, so that Marcus no longer is obligated to make payments to Racafrax, and by paying Marcus one-half of the difference, if any, between the bedroom set’s current resale value and the amount of money still owed to Racafrax. Alternatively, Karen may enter into an arrangement with Racafrax to take over the payments herself, and pay Marcus one-half of the difference between the bedroom set’s current resale value and the amount of money still owed.
9. If neither person wants the bedroom set, the furniture will be sold. The balance owed Racafrax shall be paid from the proceeds of sale, and any remaining money will be divided between us equally or, if either of us has made extra payments under Paragraph 5 of this agreement, according to our ownership share.
10. Should either of us die while we are living together, the furniture will belong absolutely to the survivor. If either of us makes a will or estate plan, this agreement will be reflected in that document.
11. This agreement can be changed, but only in writing, and any changes must be signed by both of us.
12. Any dispute arising out of this contract will be mediated by a third person mutually acceptable to both of us. The mediator’s role will be to help us arrive at a solution, not to impose one on us. If good faith efforts to arrive at our own solution to all issues in dispute with the help of a mediator prove to be fruitless, either of us may make a written request to the other that the dispute be arbitrated. If such a request is made, our dispute will be submitted to arbitration under the rules of the American Arbitration Association, and one arbitrator will hear our dispute. The decision of the arbitrator will be binding on us and will be enforceable in any court that has jurisdiction over the controversy. By agreeing to arbitration, we each agree to give up the right to a jury trial.
13. If a court finds any portion of this contract to be illegal or otherwise unenforceable, the remainder of the contract is still in full force and effect.