The Calm Before the Storm: When Unmarried Couples Buy A Home Together
By Beau Brincefield*
Today, more than ever before, unmarried couples are deciding to purchase homes together. In fact, in 2003, eight percent of all U.S. households were owned by unmarried couples. Although there may be many reasons why purchasing a home with a non-spouse is a good idea, the parties should realize that almost half of such cohabitations break up within five years.
This statistic may not surprise anyone, considering that about half of all marriages end in divorce within a few years, too, but it is a fact that unmarried parties, especially, should take into consideration when they buy property together. When unmarried co-owners decide to go their separate ways, serious differences and problems usually arise just as they do when married co-owners split up. Unfortunately for unmarried co-owners, however, they do not have the benefit of either the protections provided for married couples by the Virginia Code nor do they have an established body of case law to rely upon as married couples do.
Consequently, when unmarried couples purchase homes together – or any other significant property, for that matter – it is important for them to have a written agreement that spells out their respective rights and responsibilities with respect to the property, not only while they live there together, but also if and when a time comes when they decide that living together is no longer working out the way that they had hoped it would.
REALTORS® can do a great service for their clients who are unmarried couples seeking to buy a home together by suggesting to them that they should consider obtaining a written Homesharing Agreement that would deal with at least the following issues:
- Down payment. Who pays how much?
- Closing Costs. Who pays how much?
- Liability. Who signs the note for the loan?
- Title. Who gets what percentage of ownership? Survivorship?
- Ongoing Payments
- Mortgage. Who pays how much? Rent?
- Real estate taxes. Who pays how much?
- Insurance. Who pays how much for property insurance? Real? Personal?
- UOA/HOA/POA fees (if applicable). Who pays how much?
- Utilities. Who pays how much?
- Maintenance, Repairs, Replacements. Who pays how much for each type of expense? Who decides what is needed and when?
- Improvements. Who pays how much? Who decides what is to be improved and when?
- Other Expenses. Who pays how much for any other expenses?
- Occupancy. Who is entitled to occupy what portions of the property? May a party lease their space to someone else?
- Personal Property. Who owns what personal property acquired prior to homesharing? Who owns what personal property acquired during homesharing?
- Sale or Transfer of Interest. Under what circumstances will a party be allowed to sell or transfer their interest in the property; or compel the sale or refinance of the entire property? Put/call options? Who is entitled to stay? Who must go?
- Management/Control. What degree of agreement (unilateral? unanimous? majority?) is necessary between/among the parties before a decision can be made that materially affects the use and/or enjoyment of the property?
- Default. What happens if one party cannot pay their share of any required payments?
- Distribution of Proceeds upon Sale. What is the priority of distribution of funds upon sale?
- No partnership. Agreement does not create a partnership for any purpose, including federal income tax purposes.
- Termination of Agreement. Under what circumstances, if any, can a party terminate this agreement?
* Mr. Brincefield [was] the senior attorney in the law firm of Brincefield Hartnett, P.C. in Alexandria, Virginia and a member of the NVAR Hall of Fame.