Dear Mr. Premack: My partner and I have been together for several years. We have just bought a house together. In our excitement, we forgot to talk with you about the legalities. What are some things that can go wrong if we do nothing? What if our relationship ends? What if we decide to get married? – LT
You are living with someone who is not your spouse, and you recently purchased a home together. While it is true that this house will be your home, it is also true that this is very much a business transaction because you are not married. Co-owning a home can be complicated, especially if one of you dies, gets into a car accident, wants to sell, gets sued or ends the relationship. Here are some important things you need to know about co-owning a home in Texas.
First, it is very likely you signed a mortgage note to pay for the house. This legal obligation is “joint and several” – which means that if your partner leaves in a huff one day and does not come back before the next payment is due, you are liable for the entire payment. The bank does not care if your romance has ended. Can you afford the payments on your salary alone?
Second, at the time of purchase you need to determine how to hold title to the property. The most typical way to co-own title is as tenants in common. If one of you dies, that half interest passes under the terms of the Will. Have you done proper estate planning, including a Will? Do not use the random internet to make a Will. The survivor is left liable for the entire loan, and now must share ownership with the decedent’s heirs. The heirs never signed the loan, so they might insist that the property be sold so they can get their equity. If neither of you has a Will the picture is even more bleak because you cannot be sure who the heirs at law are going to be nor what legal process must take place to determine who will take over the decedent’s interest and obligations.
You should consider creating a proper legal binding written agreement that specifies how you and your partner are going to use the property, how you are going to share the expenses, taxes, upkeep, repairs, remodeling, etc. it should address lifestyle issues as well. What if your partner’s behavior changes to throwing loud parties? What if you break up but your ex stays in the house and brings home his new romantic interest? What if one of you wants to sell but the other does not? If your partner walks away, you must carry the burden 100% unless your partner chooses to keep up their side of the payment or you sue them to force them to keep up their obligation.
Consult an estate planning attorney about creating a Living Trust as a management tool for the house. Consider a Cohabitation agreement stating you are not common law married, that you have no intention of being spouses (unless you specifically decide to get married in a formal manner), and which can be enforced in court if either of you violates the agreed ground rules.
The agreement also needs to address how co-owning a home affects your taxes. Co-owners may be able to deduct mortgage interest and property taxes on their income tax returns, depending on their share of ownership and use of the property. Income tax aside, you’ll also have to pay a share of the local property taxes, and if your partner walks out on you those taxes are all on your shoulders (again, you can sue them but the taxes are still due).
If one co-owner ends the relationship, the agreement will be very valuable. Unlike married couples who can rely on divorce laws to divide their property, unmarried couples who jointly own property have no such laws to guide them. The Cohabitation agreement and Trust agreement can determine how the property will be controlled and handled should the relationship end.
Co-owning a home can be rewarding, but it also comes with challenges and risks. By understanding your legal options and preparing for different scenarios, you can enjoy your home without worrying about unexpected problems. It is not too late for you both to consult with legal counsel to put your expectations into a binding legal framework to protect your relationship and your financial futures.
Paul Premack is a Certified Elder Law Attorney for Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. To contact us, click here.
Column published on April 10, 2023.