The answer to that is less than satisfying: It depends. Being unmarried often allows for a cleaner break than if you were married and had to go through a legal divorce. But you may have somewhat complex legal issues to resolve if:
There’s nothing to prevent an unmarried couple from settling their differences on their own. If the breakup is relatively amicable, you can make a list of the assets you need to divide and mutually agree to an arrangement. If you're able to do this, you should put your terms into a written property settlement agreement. Your agreement may also address any future financial support that one of you will provide for the other (sometimes referred to as "palimony").
And if you have children, you'll need to decide child support, custody, and visitation issues. Both parents—whether or not they were ever married—have an ongoing obligation to support their children.
If you're at all concerned about the possible legal effects of a tentative agreement, it's a good idea for each of you to have separate lawyers review it before you sign.
Mediation for unmarried couples works similarly to divorce mediation. You and your partner can meet with a trained, neutral mediator to discuss your differences and identify solutions. It’s important to understand that it isn't the mediator’s role to decide who gets what. Rather, a qualified mediator will keep you focused on the issues and guide you toward achieving a satisfactory compromise.
Mediation is fairly informal. It often takes place in the mediator’s office or online, at convenient dates and times. If you want to have someone accompany you, whether a lawyer or a friend, you should request it up front, so everyone knows what to expect.
Compared to court battles and arbitration, mediation is typically a cost-effective way of resolving your disputes. You and your partner can split the mediator's fee, and you don't need to hire lawyers. However, you may want to consult with appropriate professionals to get appraisals of your real estate and other property. (The two of you can also split those costs.)
Although mediation is the most common form of alternative dispute resolution for couples who are splitting up, some couples might want to use arbitration instead. Unlike a mediator, an arbitrator will decide the outcome of your dispute. In effect, the arbitrator takes the place of a judge. So think of an arbitration as a mini trial. Because of that, couples frequently have lawyers representing them in arbitration.
Most arbitrations require that you agree not to appeal the arbitrator’s final determination to the courts. This is sometimes referred to as "binding arbitration." During the arbitration proceedings, you and your significant other set out your positions by presenting relevant evidence, with documents and testimony (from you or any witnesses you may have).
As with mediation, couples can share the arbitrator's fee. But arbitration is usually more expensive than mediation. On the upside, however, the case is over once arbitration is done. With mediation, if the process doesn’t result in a settlement, you’re basically back to square one and may end up in court.
In another form of ADR known as “collaborative law,” both sides in a dispute attempt to negotiate a settlement with their specially-trained collaborative law attorneys. States that have adopted the use of collaborative law have strict rules governing the process. To use collaborative law, you first have to find out whether your state permits it. Then you’ll need to determine what kind of disputes it applies to.
Many states restrict the use of collaborative law to family law, such as divorce or dissolution of domestic partnerships or civil unions. In that case, you might be able to use the collaborative process for standard family law issues such as custody and child support, but not for your property-related disputes. You'll need to check your state's laws on this. If your state does allow it outside of the standard family law context, it might be something for you to consider.
If you've tried but simply can't resolve your differences, you can go to court. Unless you're trying to resolve child-related issues, such as child custody or support, you probably won’t be in family court. Rather, you’re likely to be in civil court, and a judge will hear your case much the same as if you were arguing over a failed business arrangement.
If you end up in trial, you’ll have to pay attorney’s fees and court costs. Also, you'll be subject to the court’s timetable. The inability to control scheduling can be particularly painful, especially if your judge's docket is full and you end up waiting several months for a hearing date.
In most states, when unmarried partners break up, they generally retain ownership of property held in their own name. Also, there’s normally no statute governing post-breakup financial support. So if either partner is claiming an interest in property that's in the other's name, or is seeking support, it can create a complex situation.
For example, if one partner makes a claim based on something the other partner allegedly said during the relationship, the judge (or arbitrator) will have to determine who promised what to whom. It's generally difficult to prove these types of oral agreements.
There are ways around this scenario. You and your partner can create a living together agreement at or near the beginning of the relationship. These agreements can cover various issues, including:
Be sure to put your everything in writing and sign the agreement. To create a living together contract, you can use Nolo's book, Living Together: A Legal Guide for Unmarried Couples.
If you have specific questions or want a professional to review your proposed contract, you should speak to an experienced family law attorney.
]]>While some of these live-in relationships will stand the test of time, many won’t. A Stanford University study found that both same-sex and opposite-sex unmarried couples have much higher breakup rates compared to married couples, even when they’ve been together for two decades or more.
People who are unmarried and uncoupling might face issues similar to their married counterparts when it comes to property division, financial responsibilities, and child custody.
Although it’s not as legally cumbersome as a divorce, breaking up while living together takes preparation. It’s important to know what rights you might (or might not) have when ending a live-in relationship and consider situations where you might need legal advice.
Generally speaking, breaking up with someone you live with is not as complex as when a married couple goes through a divorce.
“You don’t have to go through the court system like you do if you're married because you don’t have a legal status to be resolved or terminated,” says Frederick C. Hertz, an attorney and mediator in Oakland, California, and co-author of Living Together: A Legal Guide for Unmarried Couples.
This makes breaking up a cheaper, simpler option for most unmarried couples. But on the downside, Hertz says, “If there are conflicts, you don’t have ready access to the legal system.”
That’s because laws that protect married couples—on property ownership, financial support, child custody, and more—don’t apply to unmarried couples. And that can sometimes make a split complicated.
Whether you want to initiate the breakup with your live-in partner, or suspect the end of the relationship is near, it’s best to be prepared. Hertz recommends completing these six important tasks before talk of breaking up gets serious.
You might need to make immediate plans to protect yourself and safely leave the relationship if you’re being threatened or abused by your partner. Some states have legal protections for tenants who are experiencing domestic violence. Consider applying for a temporary restraining order if you need to keep your partner away from you and your home.
Breaking up with someone you live with isn't always cut and dry. Sometimes there are factors that complicate matters for one or both partners.
That's why it's a good idea to have an agreement in place even before you move in with each other, or at least before either one of you decides to leave, Hertz says.
Writing a living together contract or cohabitation agreement gives couples the option of creating a number of legal documents that help protect their rights as a couple and safeguard each of their individual assets.
Hertz strongly recommends a written cohabitation agreement for couples in certain circumstances. This includes when:
The difference between the end of a marriage versus an unmarried union when it comes to a home is that laws in most states are highly favorable to whoever owns the property, Hertz says.
It’s not possible to cover every situation here, but we’ve put together examples of different scenarios to give you an idea of what you might expect. Always consult a legal expert in your state for advice specific to your situation.
When both partners own the property:
When one partner owns the property:
When you’re renters:
If you and your partner are raising children together—and you’re both the legal parents—your marital status is irrelevant in the eyes of the law.
You don't necessarily need to go through the court system if you can come to child custody and child support agreements on your own. However, if conflicts arise with child custody or support, you or your partner will need to file a case in the family court system.
In most states, you can’t combine the child custody dispute with a financial dispute, Hertz adds. So, if you're ending a relationship with your live-in co-parent and there are financial and custody disputes, the matters will have to be handled as two separate legal actions.
In most cases, you won’t need to go through the court system when breaking up with someone you live with—as long as you and your ex can agree on how to divide your assets and share child custody and support. But, that doesn’t mean you shouldn’t consult with an attorney.
Hertz recommends getting legal advice in circumstances such as when:
If you decide to consult an attorney, search for one who’s experienced in family law issues related to unmarried cohabitating couples.
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This article summarizes the law on housing discrimination against unmarried couples and provides practical tips on avoiding problems with landlords.
Do you have a legal right, as an unmarried couple, to rent a place? Not under federal law. The Federal Fair Housing Acts (42 U.S. Code § § 3601–3619) prohibit discrimination on the basis of race or color, religion, national origin, gender, familial status (having children and pregnancy), and physical or mental disability. Marital status is not one of the protected categories under federal law. (Public housing is an exception. Several courts have interpreted federal law to protect unmarried couples from discrimination there.)
State law is not much better. The majority of states don’t have any legal provisions protecting people from discrimination based on marital status, meaning landlords may legally ask questions about your relationship and may refuse to rent to you if you are an unmarried couple.
While some 20 states ban discrimination on the basis of marital status, most of these states’ laws extend protection to married couples only (meaning that landlords cannot treat married tenants differently from single tenants). Only a few states—Alaska, California, Massachusetts, Michigan, and New Jersey—have clearly ruled that the term “marital status” refers to unmarried couples. In these state, landlords cannot refuse to rent to you simply because you and your rooomate are not married. Oddly, courts in Maryland, Minnesota, New York, and Wisconsin have ruled that the term “marital status” protects single people from being treated differently from married people, and vice versa, but does not protect unmarried couples.
Your best protection against discrimination may be a city or county ordinance prohibiting discrimination on the basis of sexual orientation. Although usually passed to protect the housing rights of gay and lesbian tenants, most local laws forbidding discrimination based on sexual orientation also protect unmarried heterosexual couples as well.
If you suspect (or know for sure) that a landlord won’t rent to you because you’re not married, first find out whether your city or state has a law that has been interpreted to prohibit discrimination against unmarried couples in rental housing. If the answer is yes, you have a decent chance of winning if you fight back.
And keep in mind that even if you live in a state that prohibits discrimination on the basis of marital status, it’s no guarantee you’ll get the place you want. Landlords may reject you for legitimate business reasons, such as a bad credit history or negative references from other landlords.
For more information on housing discrimination, see the Tenants section of the Nolo website.
If your state or city has no law prohibiting discrimination on the basis of marital status, you’ll have to decide how open you want to be with your landlord. Here are some suggestions:
• Act in a highly responsible and respectable manner. Be ready to present financial and credit information and personal references, especially from former landlords. If you convince a landlord that you’ll be excellent tenants, other factors, such as your marital status, will be less important.
• Don’t flaunt the fact that you’re not married. In an age when many married women use their own last name, many landlords will assume you are married and won’t ask. Most won’t care.
• In conservative parts of the country particularly, it may help to go with the flow. In every city, and most large towns, there are neighborhoods with lots of unmarried people. This often tends to be true near universities. If you are new to an area, ask around.
You may not want to rent from a landlord who obviously disapproves of unmarried couples living together. This is especially true if the landlord lives nearby. Life is too short for all the hassles you’re inviting by renting from someone who’s inappropriately interested in tenants’ private lives. If at all possible, look elsewhere.
Few, if any, people selling a house will care about your marital status. But if a seller does refuse to sell to you simply because you aren’t married, you may have little or no legal recourse in most places. In a growing number of states and in some cities, discrimination on the basis of marital status in the sale of real property is illegal. However, in many of these states, courts have ruled that “marital status” applies to married couples (or sometimes single people) but not unmarried couples. If you run into problems buying property as an unmarried couple, contact your city attorney’s office, state fair housing office, or the U.S. Department of Housing and Urban Development (HUD) for advice.
If you face a serious threat of discrimination, consider presenting the house purchase offer in one name alone, and then add the second name only when you are ready to close escrow.
In a few areas, you may face an unexpected obstacle: zoning ordinances aimed at barring unrelated people from living together. Most of these laws prohibit groups of people from living together, but a few also prohibit two unrelated adults from living together. Although it’s very unlikely you’ll run into this sort of problem, it still makes sense to check that the city—or neighborhood—in which you plan to buy isn’t zoned only for people related by “blood, marriage, or adoption.” Also, if you’re buying a co-op or a property subject to a community association, check the rules for any restrictions.
For more information on buying a house, see Nolo's Real Estate section.
]]>Before you launch in, however, make sure you and your future roommate agree on a few matters; not just everyday things like who takes the trash out and who goes grocery shopping, but what happens if and when you decide the relationship isn’t working, or one of you has a major life change such as a new job in another state. Who gets to keep the home? Do you both have to leave? Can one of you buy the other out and if so, at what price?
Well before such an issue turns into a crisis, it’s wise to plan for the possibility that you and your roommate will, eventually, want to part ways, and that either one or both of you will then want to keep the home.
The best way to plan is to create a contract that outlines, among other things, your various options. Below is a rundown on what to include in this written agreement.
Start by determining each of your ownership interests, as a percentage. Typically, each owner would want a 50% share, but that’s not your only choice. Maybe, for reasons unique to your situation, one roommate wants to own more or less than 50%. This could be due, for instance, to one of you planning to front more of the down payment, or one of you wanting to limit the value of his or her property ownership in order to qualify for certain benefits.
You also want to be clear about how you own the property legally (take title). Do you want the property to go to your roommate in the event that something happens to you? Or do you intend for someone else to inherit your share? See How Unmarried Couples Can Co-Own or Take Title to a Home for further tips.
In order to fairly divide up your ownership interests, factor in not only what each of you pays toward the property initially, but what each is expected to contribute to it later, in the form of monthly mortgage payments or even services. If one of you is willing to clean, cook, and grocery shop, for instance, such services have a value that can count as a contribution to homeownership. Keep track of each contribution you make to the home—not just the initial one—so that when you leave the investment, you will get back your entire share.
Flexibility is important when making any type of agreement, and shared homeownership is no different. That’s why it’s worth adding a clause to your contract stating that you have the option to renegotiate the terms of your ownership.
This gives you many options not just when things go bad, but also when circumstances change for any reason. One of you may get a raise at work and want to make a cash contribution to pay down the mortgage. Or maybe you need money and want to take a lesser share in exchange for cash from your roommate.
Knowing that you are not stuck in a situation sometimes makes what seems like an irreconcilable problem—one that might otherwise lead to one or both of you having to leave or sell the house—solvable. And by including a contractual option to renegotiate, you are laying the groundwork for an exit strategy, just in case.
The simplest exit strategy is what’s called a buyout. In this scenario, each roommate is given the option to purchase the other’s share. The terms of the buyout must be outlined in your contract. Will you want a cash buyout? Or are you willing to let your soon-to-be-exiting roommate pay you over time? How will you decide the current value of the house? And then, will you charge interest, and at what rate?
Valuation can be an especially contentious issue, so be clear about acceptable methods for setting a price. The simplest way to arrive at a sales price is to look at recent sales of comparable houses on the market. This is something a real estate agent or professional appraiser can assist with.
If both of you think you may not want to renegotiate terms of ownership, nor consider a buyout, nor deal with rentals, you can include a provision in the contract that requires a sale of the house when one roommate wants to leave. You may never use it, but it could come in handy someday.
Sometimes, one roommate wants to move out but does not have the money to buy his or her share. Or maybe one roommate has a temporary remote work assignment. What then?
This is when it is helpful to have a rental clause in your contract. The roommate who is leaving can rent out his or her portion of the house and continue to have the benefits of homeownership in the form of passive income. Note, it is wise to have a clause stating that the remaining roommate has the right to interview prospective tenants for compatibility and veto anyone he or she is unwilling to live with.
Both parties can, of course, eventually decide to sell the home and recover their respective percentages plus any profits. All selling costs should be shared according to ownership percentages. Be sure to consider the logistics of preparing a house for sale.
To prepare for this, your contract should answer questions regarding whether you agree to stage the home prior to sale, when furnishings will be removed from the house, and what other routine items need to be taken care, and at whose expense, before the home can be listed for sale.
]]>Be sure you both date and sign your settlement agreement and each keep a copy. It’s a good idea to have your signed agreement notarized, just in case there’s a future need (in court or arbitration) to prove that the signatures on the agreement are not forged.
Your signed agreement is enforceable in court in the same way as is any other binding agreement—assuming the agreement doesn’t call for an illegal action.
Be sure to have an experienced attorney review your agreement, especially if you have substantial assets.
Often, you won’t have the right to decide whether your partner will be a cotenant or a subtenant: Your landlord will want all roommates to sign the lease or rental agreement and become tenants.
If you want to have your partner move into your apartment or rental house, here’s our advice:
Letter Requesting Permission to Add a Roommate
1500 Peanut Street, #4
Dallas, Texas
June 2, 20xx
Smith Realty
10 Jones Street
Dallas, Texas
Dear Smith Realty:
I live at the above address and regularly pay rent to your office. I would like to add a second person, Julie Renoir , to my lease beginning July 1, 20xx. She will be glad to complete a rental application and provide a recent copy of her credit report and references.
I will call you soon to discuss this further. Thank you very much for considering this request. Very truly yours,
Clem Lawrence
Renting a place together and signing the same lease is the most common way that two people become cotenants. But you and your partner can become cotenants in another way, too. If you have a place and your landlord approves of an additional occupant, your partner can sign your original lease and become a cotenant. And suppose your partner moves into your rental and is openly acknowledged as a resident by the landlord—the landlord knows she’s there, accepts rent from her, responds to her requests for repairs, and in every other respect treats her just like he treats you. In many states, this behavior on the part of the landlord will make your partner a cotenant, just as if she had formally signed a lease. This means that you’re each on the hook for all rent and all damages to the rental—it doesn’t matter how you split the rent or who caused the damage. You are each independently liable to the landlord for all of the rent and for complying with all terms of the lease or rental agreement. (This is known as the “joint and several” liability rule.) The landlord can hold all cotenants responsible for the negative actions of just one, and terminate both of your tenancies with the appropriate notice. For example, you can be evicted if your partner seriously damages the property, moves in a dog (contrary to the landlord’s no-pets rule), or otherwise violates the lease or rental agreement.
If your landlord approves your request to add a roommate, he or she will probably ask both you and your partner to sign a new lease or month-to-month rental agreement. From your landlord’s point of view, this is far more than a formality, as it makes the new arrival a cotenant who is 100% liable to pay rent and make good on any damage. It’s also desirable from your perspective, because it makes it completely clear that you and your partner share the same legal rights and responsibilities.
A landlord who agrees to an additional cotenant may ask for a rent increase on the theory that more people means more wear and tear. By signing a new lease or rental agreement that creates a cotenancy, you are, in effect, starting a new tenancy, so the landlord can increase rent immediately, rather than give you the usual 30 days’ notice (for a month-to-month rental agreement) or wait until the lease ends.
Unless your rental unit is covered by rent control—or if the landlord is using a big rent increase as a not-so-subtle way to discriminate against you for an illegal reason—your landlord can ask for as much extra money as the market will bear.
But just because your landlord asks for a big rent increase doesn’t mean you have to say yes. One good approach is to counteroffer a lower amount. Let the landlord know that you may rethink adding a roommate, or even move out yourself, if you can’t reach an acceptable compromise.
The landlord also has the legal right to change other conditions of your tenancy when you add a cotenant and sign a new agreement. One change that is particularly likely is an increase in the security deposit. However, this is one area where the sky is not the limit, because many states limit the amount of security deposits. Usually the limit is a multiple of the monthly rent. Keep in mind that if the deposit is already at the maximum, but the landlord raises the rent for the new occupant, the maximum security deposit goes up, too.
People sharing a rental unit usually have certain expectations of each other as roommates. We recommend that you write them down. After all, you sign an agreement with a landlord almost as a matter of course—why not do the same with each other? It’s a good way to make sure you’re both clear as to your responsibilities to each other as tenants—who pays what portion of the rent and utilities, who gets the place if you split up, and the like.
If your relationship ends down the line, memories may have blurred and questions such as “Whose apartment is this, anyway?” may turn into serious disputes. To avoid later problems, write down your understanding when you first move in together. A sample Agreement Covering Rented Living Space is included here.
This agreement can stand alone or be incorporated into a more comprehensive living together contract. You can edit this agreement—for example, you can include paragraphs about living expenses, cleaning responsibilities, or anything else that is important to you.
Agreement Covering Rented Living Space
Julie Renoir Clem Lawrence agree that:
1. We will jointly rent Apartment # 4 at 1500 Peanut St., Dallas, Texas We have both signed a month-to-month rental agreement with the landlord, Reuben Shaw , and have each paid $ 750 towards the security deposit of $ 1,500 .
2. Each of us will pay one-half of the rent and one-half of the utilities, including the basic monthly telephone, cable, and DSL charges. We will each keep track of and pay for our own long distance calls. Rent will be paid on the first of each month and utilities within ten days of when the bill is received. Utilities will be in the name of Clem Lawrence .
3. If either of us wants to move out, the one moving will give the other and the landlord 30 days’ written notice and will pay his/her share of the rent for the entire 30-day period even if he/she moves out sooner.
4. No third person will be invited to stay in the apartment without the agreement of both.
5. If one of us no longer wishes to live with the other, but both want to keep the apartment, the following will occur [check one]:
Julie has first rights to stay in the apartment and Clem will move out.
We will ask a third person to flip a coin to see who gets to stay.
The person who needs the apartment most will retain it. Need will be determined by a third party whom we agree is objective, within two weeks of the date when one informs the other that he/she wishes to separate. In making this decision, the third party will consider each person’s relative financial condition, proximity to work, the needs of any minor children, and [list any other important factors] .
Other. ________________________________________________.
The person who is to leave will do so within two weeks of when that decision is made, and will have an additional ten days to pay his/her obligations for rent, utilities, and any damage to the apartment.
6. Any dispute arising out of this agreement 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 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.
7. Additional agreements: ______________________________________.
8. This agreement represents our complete understanding regarding our living together and replaces any prior agreements, written or oral. It can be amended, but only in writing, and any amendments must be signed by both of us.
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.
The Tenants section on this site includes many useful articles on renting a place with others and a sample roommate agreement. It also covers renters’ rights when it comes to security deposits, moving out, and other issues. Also, the article Who Gets the Apartment When an Unmarried Couple Splits Up? discusses the impact of a separation on your rental housing.
]]>If the two of you didn’t sign a joint house ownership agreement that sets forth your intentions in case of dissolution, you have two choices. You can either follow the legal procedures that apply in your state—typically this means the court will order the property to be sold, and the net proceeds (after paying mortgages, liens, and costs of sale) to be divided—or you can reach your own compromise settlement.
In order to sort out who gets what regarding your house, you will need to resolve a few basic issues.
Your first possible conflict may be over who owns what percentage of your house or other real property. Especially if one of you believes he or she owns a larger share, or if only one partner is listed on the deed, this can be difficult if you haven’t previously signed a house ownership agreement. Remember that in just about every state, having both names on the deed to the house creates a legal presumption that you are 50-50 owners, and anyone claiming a different percentage has to prove the existence of an agreement saying so (often in writing).
Fights frequently arise when your contributions to the property have been unequal. Often a partner who has contributed less financially (say, to the down payment) believes that he or she chipped in something else of equivalent value to the property, such as labor to fix up the house. Take into consideration whether either of you has made any significant extra monetary or labor contributions to the property (for example, one of you just paid $15,000 for a new roof, built a garage, or paid the entire mortgage payment for the last three months). If so, be ready to award that person appropriate additional compensation, most often in the form of a reimbursement rather than a greater share of the equity. When trying to reach an agreement, put aside the most extreme arguments of either person, and acknowledge that there is merit to each side’s more rational demands. If conflicts arise over house ownership, it’s best to try the following approach to reach a fair settlement regarding these claims:
• Read the discussion on contracts for equal and unequal ownership of a house for ideas on how to adjust ownership fairly when one person contributes more to the down payment and the other makes other contributions (money or labor).
• One possibility is to reduce each partner’s total contribution (down payments, mortgage payments, labor, improvements) to a dollar figure. By comparing the two figures, you can come up with what percentage of the house each of you owns. If you can’t resolve disputes over the value of your contributions, it often makes sense to get the help of a real estate professional.
• Narrow the financial gap between the two of your positions by compromising on other demands or making other financial concessions.
• Compare the benefit of splitting the difference to the cost of fighting over every last penny. Hopefully, looking at what will happen if you don’t settle will encourage you to come to a compromise figure. If you still can’t reach an agreement, convene a single mediation session where you limit your discussion to this one point of disagreement. In most instances you will reach a compromise by the end of the day. If you are still at odds, convene a single short arbitration session where you empower the arbitrator to resolve this financial dispute quickly.
Next, you’ve got to decide whether you will jointly sell the house to a third party or whether one of you will buy out the other’s interest. Usually, it is much easier and cheaper for both of you if one of you sells to the other (rather than selling it to a third party) because you avoid all the costs that accompany a market sale. So if either or both of you are interested in holding on to the real estate you own together, it makes sense to attempt to negotiate a mutually agreeable solution.
Assuming you haven’t already agreed (pre-breakup) that one person will have first dibs on buying out the other’s share in the house, you may use a coin flip or some other simple mechanism to determine who stays and who goes. (These options are included in the house ownership contracts ) Or, if both of you want to keep the house, you can conduct an informal “auction,” where the partner who is willing to pay the most gets to keep the place. You can also use mediation or arbitration to resolve the conflict. An arbitrator can be given the power to decide who should stay (after hearing whatever arguments you each make) and perhaps award the selling partner financial compensation for having to move.
If you can agree on who is going to buy the house but can’t agree on a sale price, the best way to set the price is to get an appraisal from an experienced real estate appraiser familiar with the local market. If you can’t agree on an appraiser, each of you can get your own appraisal and you can average the results. Understand that most appraisals estimate the sale price, but do not take into account the cost of selling the property. If you have your jointly owned real estate appraised and then agree that one of you will buy out the other, you may want to reduce the price by the amount of the real estate commission that would be charged if you sold the place to a third party. In other words, even though you won’t have to pay a commission when one of you sells to the other, the buying partner will need to do this eventually, so the buyout evaluation probably should reflect this.
In coming up with a buyout price, make sure, in addition to deducting the amount of the broker’s commission, you also figure out and deduct the cost of any deferred maintenance that would have to be done if the place was put on the market. Next, of course, subtract the remaining mortgage amount to arrive at your combined “equity.” Assuming this is a positive number, this is the sum that you should use to determine the buyout price (which will be 50% of that number if you own the property in equal shares).
Find out from a local broker or attorney what the procedures are for doing an internal buyout, and make sure you take into account the costs of transfer. Some states impose transfer taxes or recordation fees, and these need to be allocated between the two of you. Often it’s best to forestall possible disputes by agreeing to pay transfer costs and taxes 50-50. In addition, obtain the proper deeds and forms and, if necessary, have a professional help you fill them out. You may not need to use a title company or buy title insurance if your transfer is relatively straightforward and you aren’t worried about the selling partner’s ability to deliver title to his or her share free of any liens or judgments. If you are worried about possible liens, you will have to go through a title company and purchase title insurance—which can add more than $500 to the cost of transferring title. Either way, once the property has been deeded to one of you, this person will need to record the transfer deed with your local property recorder’s office.
Finally, figure out your options regarding your mortgage. Quite often, the selling partner will agree to keep his or her name on the loan, at least for a year or two, in which case the buying partner would not need to obtain a new mortgage; of course, in this case the buying partner should give the selling partner written assurance that the mortgage will get paid each month, to help prevent the selling partner from ending up with a tarnished credit rating or facing a bank’s demand for payment. If one partner takes his or her name off the loan, in some states and with some banks, the remaining partner can retain the existing loan in his or her own name even after a buyout. (With some loans the selling partner can even be absolved of any further liability.) But in other areas and situations, the buying partner may have to get a new loan. To present a financial statement strong enough to qualify for a new mortgage, the buying partner may need to defer making payments to the selling partner (or make very low payments) for a period of time. If this isn’t acceptable to the selling partner, it may be possible for the buying partner to obtain a home equity loan in addition to the first mortgage.
Even if the buyout is amicable and all deed forms have been signed and recorded, be sure to write up a simple agreement stating what you’ve agreed to. This way you will have a document setting forth your entire agreement, in case a dispute arises later. A sample Home Buyout Agreement you can tailor to your own situation is included here. If you prepare this type of agreement, be sure to have it reviewed by a real estate attorney or broker. You’ll want to make sure that any special rules covering internal buyouts are covered in your agreement.
If neither of you wants the house, you will probably sell it on the market (most likely with a broker’s help). Be sure to select a qualified broker who is sensitive to the fact that you are splitting up. The broker can handle the delicate arrangements of fixing up and showing the home, knowing that things may be tense between the two of you. But given that it’s in both partners’ interest to sell the property for the best possible price, try to work cooperatively.
Once you’ve sold the place, you still need to divide up the proceeds according to your respective percentages of ownership. Fortunately, a dispute about how much each of you owns need not slow up a sale. You can simply agree in advance to put the disputed portions of the sale proceeds into a joint account requiring both signatures; include a proviso that the funds will not be disbursed until you jointly decide on the division and put your decision in writing. If you do not decide within some defined period of time how to divide the profit, agree that the dispute will be mediated and, if no agreement is reached, arbitrated.
If you can’t resolve this dispute by negotiation or mediation, consider submitting it to binding arbitration. You can use a real estate broker (if the dispute is primarily about the value of each party’s contribution) or an attorney (if the dispute is primarily legal) as your arbitrator.
If you own other real estate, such as an investment property or a vacation home, you need to go through the same process as with your primary residence. Decide whether either of you is going to buy out the other’s share or whether you are going to sell the place to a third party. Then figure out the property’s value and resolve any competing claims for reimbursement for extras. Once the dust settles, you may even be able to continue owning the property jointly as an investment. This is especially likely if you agree to hire a professional management company so you don’t have to deal with each other over the details. But if you go this route, be sure to have a written management agreement for the property—you are business partners now, not lovers, so you need to act in a businesslike manner.
For more on the legal and financial issues of selling real estate, see Selling a House in the Real Estate section of this site.
]]>Any unmarried couple that plans to jointly own a house or other real property should prepare a written contract. When it comes to an investment of this size, it’s just plain nuts to try and wing it with pillow talk. If, later, your relationship becomes rocky, your memories of the details of a spoken agreement may differ. Written contracts, particularly over something so expensive and important as a house, are the only way to protect yourself should you separate from your partner. Even if you are equal owners, having an agreement in place can make a dissolution far easier to manage.
Here are the basic terms to include in a contract for unmarried couples who want to share equal ownership of a house (see the "Sample Contract for Equal Ownership of a House," in Nolo's book, Living Together: A Legal Guide for Unmarried Couples, for details):
How you are taking title or sharing ownership . You will typically do this as tenants in common or joint tenants (see Clause 2 of the sample contract).
How you are splitting costs (down payment, purchase price, closing costs, taxes, and all other housing costs, including maintenance and repair bills). Clause 3 of the sample agreement assumes you will share costs equally, but you can work out whatever arrangement works best for you. To avoid disputes over money spent on home improvements, we recommend that improvements over a set dollar amount (such as $500—the amount is up to you) require mutual consent, with each partner paying half.
The effect of a breakup on home ownership. Clause 4 of the sample contract recognizes three possibilities: (1) One of you wants to keep the house and the other doesn’t. (2) Both of you want the house. (3) Neither of you wants the house.
Most likely, only one of you will want to stay or both of you will choose to move on. But if both of you want the house, problems are likely to develop. Clause 4 anticipates this possibility by providing several choices for deciding who gets the house should you split up and both partners want it. For example, you may want your contract to automatically give one of you the first right to buy out the other partner’s share in the house at fair market value within 90 days. Or you may opt for a coin toss to decide who gets to buy out the other. (The winner of a coin toss is entitled to buy out the loser’s share at fair market value within 90 days.) You may also come up with your own approach to decide the question of who owns the house if you both want it—for example, you could provide for the decision to be made with the help of a mediator.
If one partner does buy out the other, it is extremely important to change title to the home to reflect the new ownership arrangement. Clause 4 specifies that the buying partner must execute the appropriate documents to do this. In addition, the partner selling a share of the home should ensure that his or her name is taken off the home loan. Otherwise, the selling partner will have no interest in the home, but will still be on the hook for the mortgage. (Usually this will require the buying partner to refinance the home and obtain a new loan in his or her name only.) Clause 4 requires this of the partner buying the home. If the buying partner cannot qualify for a new loan, Clause 4 states that the home must be sold to a third party.
See the article Who Gets the House When an Unmarried Couple Splits Up? on this site for more on this subject.
How to determine the market value of the house should one of you need to buy out the other. See Clause 5 of the sample contract for details.
What happens to the property if one of you dies, or one of you is unable to pay your share of the expenses, such as monthly mortgage payments. See Clauses 6 and 7 of the sample contract for sample language.
The Sample Contract for Equal Ownership of a House also specifies that your agreement is binding on your heirs and estates (Clause 8) and provides for mediation should a dispute arise (Clause 9).
What if you and your unmarried partner wish to own a house equally, but only one can come up with all the cash needed for the down payment? One common approach is for you to take title to the house as equal owners (either as joint tenants or tenants in common) with one of you lending the other their one-half of the down payment, to be repaid on an agreed-upon schedule. To do this, you would need to edit the sample contract (specifically Clause 3 which covers the down payment) and prepare a separate promissory note setting out the exact terms of the loan. You will also need to edit Clause 4 regarding who gets the house should you split up. For details on preparing a promissory note, see Nolo’s Personal Finance section.
Another option is for the person who contributes less of the down payment to fix the place up in exchange for equal ownership in the home. You would need to edit the sample contract included here to reflect your agreement.
Finally, you may decide that you do not want to share equally in ownership of the house and prepare your agreement accordingly.
After your contract is written, the safest legal approach is to record it at your County Recorder’s office along with the deed. To do this in most states, you’ll need to get your signatures notarized. Notarization means that a person authorized as a notary public certifies in writing that you’re the person you claim to be. If you want to have your contract notarized, you and your partner must appear in front of the notary and show proof of your identity. The notary will watch each of you sign the document and then will complete an acknowledgment, including a notarial seal. You can often find a notary at a bank, lawyer’s office, real estate office, or title insurance office, or at private post office businesses. Most charge under $20 to notarize a document.
Some couples, however, shouldn’t or don’t want to record their agreement—either for privacy reasons or because they don’t want to bother recording every amendment they make in the future. And, some counties won’t allow such documents to be recorded, though they may allow you to record a one-page “Memorandum” or “Abstract” of your agreement, summarizing the basic terms.
There’s no clear right or wrong here. Recordation isn’t necessary to make the agreement legally valid. Just make sure you have a safe place to keep the agreement, like a safe deposit box or other secure location.
Basically, an agreement between unmarried couples will not be enforceable after marriage unless it was created shortly before the marriage in the anticipation of marriage. Instead, your state’s marital property laws will apply.
In many circumstances, you will want to an experienced real estate lawyer’s help in preparing a house co-ownership contract. See Nolo’s Lawyer Directory for the names of local attorneys who can help.
]]>Despite your best intentions—just as is true for your married counterparts—statistics suggest that your relationship may not last forever. The anger and sense of loss that so often accompany a separation cannot be overcome by any law or counsel; emotional crises are best addressed through the help of friends, family, and therapists. On the legal front, however, breaking up can be a lot easier for unmarried couples than going through a divorce. As long as you and your ex can agree on how to divide up your assets, there is no need to involve lawyers or the court system. Even if children are involved, in most states you have the opportunity to separate in private, according to whatever arrangements the two of you agree on. But, if you and your ex are unable to resolve your disputes in an amicable fashion, you may end up in court. This can often be very difficult, because the codified divorce procedures that apply to married couples do not apply to unmarried folks.
While the specific rules differ slightly from state to state, the basic legal principles that regulate the property rights of unmarried couples can be summed up as follows:
We urge unmarried couples to prepare written living together agreements covering your property, your home, and other important issues. Doing this while your relationship is going well will head off lots of problems should you ever break up, Properly written living together agreements are legally enforceable in court. Most important, a written living together agreement can minimize the potential of even going to court.
Without a written agreement, separation will be more difficult, particularly if you have lived together a long time, or a lot of money or property is involved and your split is not amicable. In this case, you’ll definitely want to consult an attorney or financial adviser.
Sometimes when an unmarried couple decides to live together, one partner already owns a house and the other partner moves in. When this happens, issues of property ownership and how to deal with expenses inevitably arise.
In some cases, the person moving in simply agrees to pay half (or some other agreed-upon portion) of monthly expenses, (mortgage payments, insurance, taxes, and the like)—putting off the decision to share ownership until both partners gain confidence that their relationship is likely to endure.
In other situations, the couple decides that the person moving in will become a co-owner by paying the original owner for half of the property’s equity. This can be done in one lump sum or by paying the existing owner in monthly installments (under a separate promissory note). Whatever your agreement, you’ll want it in writing, spelling out all the financial details, such as the fair market value of the house, how you will share ownership in the property, and how and when the person moving in will make payments to the current home owner. See the Sample Agreement for One Person to Move Into the Other’s House and Become an Immediate Co-Owner included here for a model in preparing your own agreement. For advice on the general clauses included in house ownership agreeements, see the article Contract for Equal Ownership of a House by an Unmarried Couple included on this site.
If a nonowner is going to contribute to his or her partner’s residence and never become an owner of record, we strongly recommend having a written agreement clarifying whether or not the nonowner will receive any share of the appreciation, or will simply be considered a renter.
If you decide to sell a share of your house, spend some time with a tax accountant and real estate attorney unless you are totally confident that you understand all the tax and legal issues involved. The rules for a partial buyout by an unmarried partner are a bit murky, so if a lot of equity is involved, check with an accountant or a tax attorney. See Nolo’s Lawyer Directory for a list of local real estate and tax attorneys.
Check out the tax consequences. If you receive no money from the sale of an interest in your house in a particular year, there is normally no taxable gain or income to report from the sale; but it may be considered a gift, which can have long-term estate tax consequences for the donor. If you do receive money from the sale, you have to determine what percent is a return on your initial capital (not taxed) and what percent is interest and profit (which may be subject to a tax if the house has a great deal of value). However, federal tax law now provides that if the house has been your residence for at least two of the last five years before the sale, the first $250,000 in capital gains received by each partner is not taxed. In some states, you also may have to pay a transfer tax or increased property taxes. For information on tax laws involving real estate transactions, see IRS Publication 523 on the IRS website; this specifically covers tax issues when selling your house.
Beware of the Due on Sale Clause. If you sell a share of a house already subject to a mortgage or deed of trust, you may need lender approval under the terms of a “due on sale” clause. Most real estate mortgages contain a due on sale clause that requires that the borrower pay off the entire mortgage before selling the property, unless the lender approves the sale without full payment of the mortgage. The lender may not approve for a variety of reasons, especially if your fixed rate mortgage interest rate is below the current market rate, but many lenders do not enforce this clause at all. This may mean you’ll need to pay off the existing mortgage and refinance. Or it may cause you to rethink the wisdom of the entire transaction. For example, you might decide not to change ownership at all, but instead use the other partner’s money to purchase other assets that would remain in his or her name, but be used to benefit both partners.
Where one member of a couple is more affluent than the other, the most realistic approach for many couples is to draft an agreement that allows the person moving in to become a co-owner gradually. Although there are a number of ways to do this, the most common is to provide that each month the person moving in will pay a portion—or, possibly, all—of the monthly mortgage cost in exchange for receiving a tiny equity share in the house. See the Sample Agreement for One Person to Move Into the Other’s House and Become a Co-Owner Gradually as a model in preparing your own.
There is no correct way to determine how much the gradual co-owner must pay before he or she becomes a half-owner of the home. Many factors come into play, making the calculation tricky. For example, the value of the home probably will fluctuate during the time period when payments are made. The more the original owner has already paid, the more the gradual co-owner will have to pay. The length of the mortgage will factor in too. And finally, part of the gradual co-owner’s payment will go towards interest, not principal—making the interest rate important as well.
There are several options to determine the amount the gradual co-owner must pay before owning a half interest in the home:
• Some couples ignore all of the above factors and decide that the new owner simply must pay an amount equal to the original owner’s current equity.
• Some couples decide that the gradual co-owner must pay more than the original owner’s current equity, perhaps 25% or 50% more, based on an estimate of long-term appreciation. Couples that follow this approach do so on the theory that money already invested is worth more than money to be invested in the future. And, the fair market value of the house is likely to increase over time.
• Another approach is to consult an expert in real estate finance who is familiar with the local market, and get an opinion as to what would be a reasonable amount.
]]>When you buy a house with your partner, you must decide how you will own the property, or "take title.” Since in this context “title” is a synonym for “ownership,” your decision has huge and lasting consequences, particularly on estate planning issues. Assuming you are buying the house for personal and not business use, you have three basic choices:
• one person holds title as sole owner
• both of you hold title as “joint tenants,” or
• both of you hold title as “tenants in common.”
If a recorded deed contains only one name, that person is the legal owner and has full legal power to sell or will away the house or other real property, even if someone else has contributed to its purchase and holds a nonrecorded interest.
Sometimes, a couple that jointly owns a house is tempted to put only one name on the deed to save on taxes, avoid creditors, or for some other reason. The tax savings can be attractive if one of your incomes is very high and the other’s is very low, because it allows the high-income person to take all the house-related tax deductions. Or, if one person’s credit is terrible, it may seem like a good idea not to mention his or her interest in the property in order to get a loan to buy the house.
In most cases the risks inherent in putting a jointly owned house in one person’s name far outweigh the benefits. If your partner is the only one named on the deed (and is therefore presumed to be sole owner), you may be out of luck if your partner sells the house and pockets the money, or dies and leaves it to someone else. Sure, you can sue your ex-partner in an attempt to recover the amount of your financial interest in the property, but this type of lawsuit is often difficult to win, as most states have a strong legal presumption that the person whose name appears on the deed is the owner. In any case, a lawsuit designed to prove that a person whose name does not appear on the deed is a co-owner is likely to be expensive, stressful, and time-consuming.
If one person’s credit will absolutely doom a loan application, it may be possible to take out the loan and purchase the property in one partner’s name alone, and then add the second partner’s name to title immediately thereafter. But be very careful here: Make sure you actually follow through and add the partner’s name officially, and be aware that in some places transfer taxes and fees may apply to the transfer. In some instances the lender may be entitled to “call in the loan” if you add someone to title like this, but in our experience this rarely happens as long as you stay current on the loan payments.
If you decide to list only one name on the deed, you may want to sign a separate contract that spells out the actual property interests of both parties. Before you do this, be sure to see an experienced real estate lawyer. Being an “off-title” owner can create a myriad of problems, especially with the tax authorities. You may not be able to deduct your mortgage contributions or any profits earned if you later sell the property. Or, creditors may claim that you are trying to conceal assets from them, which could lead to other problems. You should also talk with a lawyer about whether to record such an agreement with the County Recorder’s office if you do make it. In some places it can be very expensive to add someone to title later on, especially if that person is not your legal spouse, so make sure you investigate before making a final decision.
If you take title as joint tenants, you share equal ownership of the property and each of you has the right to use the entire property. If one joint tenant dies, the other automatically becomes the owner of the deceased person’s share, even if there’s a will to the contrary. This is called the right of survivorship. In fact, some states require that after the words “joint tenants,” you add the words “with right of survivorship” (hence the common abbreviations JTWROS or Jt Ten WROS).
An advantage of joint tenancy is that at the death of the first joint tenant, the property passes to the surviving joint tenant without the expense and trouble of probate proceedings. But just because you establish a joint tenancy does not mean it will last forever. If one joint tenant sells her share, the joint tenancy ends (in most states this is true even if the other joint tenant is unaware of the sale). The new owner and the other original owner become tenants in common (discussed below). And in most states a joint tenant may end the joint tenancy at any time, again with the result that the owners become tenants in common with no right of survivorship.
Before taking title as joint tenants, be sure to consider the following issues.
Joint tenancy is appropriate only when each joint tenant (in theory, there can be any number) owns the same percentage of the property. Thus, you and your partner can each own 50% of the house, or three people can each own one-third. But if you own 60% of a house and your partner owns 40%, joint tenancy won’t work. In that case, you’ll be tenants in common.
However, having one person provide most or even all of the down payment doesn’t mean you can’t be joint tenants. As long as you agree to own the house equally, joint tenancy will work fine. This can be accomplished if the person making the down payment gifts a half interest to the other or, more typically, if the more affluent partner agrees to lend the other his or her half of the down payment. If this is your plan, make sure that the loan is documented in a promissory note or a written agreement, as in some states a joint tenant has no right to a reimbursement unless the owners have a written agreement.
Taking title to a house in joint tenancy is an effective way to pass it on to the survivor without going through probate (and with no need to include it in a will). However, if you own a home by yourself, and want your partner to get it when you die, it’s rarely a good idea to change the title to a joint tenancy just to achieve this result. Here’s why.
First, by putting the house in joint tenancy, you immediately gift one-half of it to your partner, which may have tax consequences. Also, if you later split up, in most states you have no right to get that half back. Second, if your partner incurs debts, creditors can attempt to collect from his or her share of the equity—something that wouldn’t be possible if the house were still in your name alone.
If you want your partner to get the house when you die, it is far better to make a will or living trust stating that desire. Then, if circumstances change, you can simply change the will or trust. For more on wills and trusts, see Nolo's Estate Planning section,
Sometimes, the partner who owns the home is worried that, upon the owner-partner’s death, the other partner will have no place to live. But the owner-partner would eventually like the home to go to another heir, perhaps a child. In this case, the owner-partner could retain sole ownership of the property but grant a life estate to the other partner—which would give the nonowner-partner full use of the property until his or her death. Then, when the nonowner-partner dies, the home passes to the heir. Joint tenancy also can create estate tax problems if only one person in the couple has contributed to the purchase. If this is your situation, talk to an estate planning lawyer familiar with legal issues facing unmarried couples.
Perhaps the most common way for unmarried couples to take title to real property is as “tenants in common.” Unlike a joint tenancy, a tenant in common has no automatic right to inherit the property when the other partner dies. When one tenant in common dies, his or her share of the jointly owned property is left to whomever is specified in a will or living trust. This might well be his or her living together partner, but it could also be someone else. If there’s no will, the person’s intestate heirs will inherit his or her share–and that does not include a living together partner.
If you choose to own the home as tenants in common but agree that if one partner dies, the other will get the entire home, be careful. Your partner could change his or her will at any time to leave his or her share of the property to someone other than you. And there’s no rule that says your partner must notify you of the change.
Tenants in common can legally own property in unequal shares—for example, one person could own 80%, and the other 20%. When ownership is unequal, both names are still listed on the deed as tenants in common. In most states, you can specify your ownership percentages on the deed or in a separate written agreement that you sign, and in some instances may wish to record the document along with the deed at your County Recorder’s office. You can also use a written agreement to provide for reimbursement of a down payment. If you do own property in unequal shares, be sure to put your agreement in writing. The law will normally presume 50-50 ownership when the deed to a piece of property says it is held by tenants in common or as joint tenants.
If you’d like your share of the home to go to someone other than your partner when you die, but want to make sure your partner has a place to live, you can own the home as tenants in common and include a life estate provision in the deed. This means that upon your death, your partner can remain in the home until he or she dies. Then, your share of the home passes to your chosen heir.
What happens if you take title in one legal format and later jointly agree you want to change it to another? For instance, because one of you makes a larger down payment, you decide to take title as tenants in common. Several years later, after the birth of your child, you both decide it makes sense to change to joint tenants so as to avoid probate if one of you dies. This can be accomplished by purchasing a blank deed form and then making and recording a new deed granting the property “from Andrew West and Joanne Yu as Tenants in Common, to Andrew West and Joanne Yu as Joint Tenants With Right of Survivorship.” You will also need to prepare and record a new deed if one partner is sole owner of a house and the other partner will become a co-owner (discussed below). Check with an experienced real estate lawyer make sure you’re using the proper deed and language and to determine whether this will trigger any tax liabilities. If your home is in California, see the Nolo book Deeds for California Real Estate, by Mary Randolph.
In some cities, counties, and states, unmarried couples can register as domestic partners; some employers also provide benefits to registered domestic partners. Domestic partner registration won’t have any impact on who holds title, nor on any claim a non-owner might have, based on contributions to a partner’s property. The only effect it might have is on transfer taxes in some cities or counties. Check with your local County Recorder if this is an issue for you.
Buying property will likely be an occasion for the two of you to talk about “the marriage question.” We don’t offer any relationship advice, but we do recommend that if marriage is on the horizon, this would be the right time to make that decision. Title and taxation issues both are profoundly different if you are married, and changing your marital status after you buy the house can invite some complicated tax and ownership issues. And by the way, don’t be tempted to tell the title officer you’re married if you’re not—it will only create confusion and possible problems down the road.
If you have any questions about taking title, be sure to consult with an experienced real estate attorney.
For more information on buying a house, see Nolo's Real Estate section.
]]>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.
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.
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.
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.
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.
Sample Joint Purchase Agreement When One Partner Is the Legal Borrower
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.