If you're planning to buy a house with someone else (particularly someone who is not a spouse or partner), you absolutely must put your co-ownership plans into writing. Otherwise, if a problem develops that you can't resolve on your own, a court might wind up making important decisions for you, or even ordering the property sold.
Also realize that the legal requirements for house co-ownership agreements vary by state (such as rules for taking title as tenants in common), so failing to learn about this could lead to problems and disputes later. Let's talk about:
- what topics to cover in that agreements, and
- how to take the next steps in creating one.
What Your Co-Ownership Agreement Should Cover
Here are the topics your house co-ownership agreement should cover.
- Who will buy the house (pay the money and take title)?
- When will the owners buy the house?
- By what legal arrangement will owners take title?
- What will the ownership percentages be (50-50 or something else)?
- What is the purchase cost?
- How will the down payment be divided among co-owners?
- How will the mortgage payments be divided among co-owners?
- What happens if one person is unable to make mortgage payments?
- What if one owner wants to refinance or borrow against equity in the property?
- How will other homeownership costs be divided (taxes, insurance, utilities, maintenance), and what happens if someone can't pay?
- Who gets to use what part(s) of the house?
- What are each owner's responsibilities for upkeep, maintenance, and cleaning?
- What about subletting and guests? Are they allowed, and for how long?
- What if one owner wants to sell and move out? Will the other owner have a right to buy that person's share before it's offered to someone else? How will you determine the value of that owner's share for purposes of the buyout?
- What if both owners decide to end the arrangement? Who has the right to buy the other out?
- How will costs and profits be divided if the house is sold?
- What happens if one owner dies?
- How will the owners resolve disputes?
These are major decisions, which you'll want to think over and discuss in advance of committing them to paper. As friendly as things are now, consider worst-case scenarios: everything from a guest who won't leave to a natural disaster destroying the house to a sale when property values have dropped.
You'll probably want to prepare a separate attachment regarding house rules, such as guest policies and cleaning responsibilities.
Where to Learn More About Co-Ownership Agreements
The Living Together section of Nolo also discusses various forms of contracts for unmarried people who want to share ownership of property. Also, because your shared home represents a major economic investment, you should hire a lawyer to help you prepare an agreement that meets your needs.