Breaking Up is Hard to Do — Cohabitating and Owning a Home

Today, more and more people are choosing to live together rather than get married. It’s inevitable that when they do so, they accumulate property. While no one ever anticipates breaking up, unfortunately, it happens. And when it does, it can be quite complicated to unravel each party’s ownership of items, especially property.

John and Sarah have been living together for 5 years. They were both doing well in their careers and decided it was time to take things to the next level and purchase a home together. While John did not have stellar credit, he made quite a bit more than Sarah and he was able to provide the down payment. However, using Sarah’s credit score is how they were approved for a loan. When it was determined that due to John’s credit difficulties that only Sarah’s name would be on the loan, John and Sarah agreed that once the loan closed Sarah would put John’s name on the title to the house. Once the house was purchased title to the property was in Sarah’s name alone and not John. Sarah and John both shared in making the monthly mortgage payments. John usually covered more of the cost. Both John and Sarah paid for general repairs and maintenance. Sarah never made the time to put John ‘s name on the house. Unfortunately several years in, they decided to part ways. John wanted to move to another state and wanted to get his equity out of the home. Sarah, angry at the break up, declared that the house is in her name alone and that John is not an owner and refused his request to receive any equity from the house.

This scenario happens all too often. The question is, when a cohabitating couple breaks up, who gets the house? Does the house get sold? What if one party doesn’t want to sell?

Get Your Name on Title
A title company could have drafted the deed that would put John on title prior to the purchase. Sarah could sign it and John would hold it pending the close of the purchase. Then John would be in control over when his name went on title to the property.

Does John have an Interest in the House?
John has an equitable interest in the house. He can go to court and the court will grant him legal rights to the property and force the property to be sold if Sarah cannot buy out his interest (provided there is equity in the property).

Is there a Pre-Purchase Agreement?
Of course, hindsight is 20/20. Unfortunately most couples simply don’t think they will break up, much less see the need for a written agreement. A pre-purchase agreement can streamline the break-up process immensely in terms of dividing up assets and obligations. It will set out each party’s contributions to the purchase and provide a road map for future mortgage payments and maintenance expenses. This can give clarity as to how the equity in the home will be distributed and which party will remain responsible for the obligation should they choose to stay in the home. If there is no agreement and one party chooses to stay in the home, there are several factors to consider.

If both Partners are on the Loan: Removing Leaving Partner from Liability

When a couple breaks up, the last thing they want is to have any ties to their ex, financial or otherwise. Often the remaining partner will say that they can take over the payments on the home and the leaving partner is free to go. The remaining partner, however, fails to realize that the lender was not a part to their new arrangement. When the leaving partner goes out and tries to buy another home or make a major purchase, on paper they are still responsible for the old house. This puts the leaving partner’s credit at risk. In these situations a sale, even if forced is best.

These types of cases can be complicated, and it’s always wise to consult with an experienced family law attorney to ensure that your interests are protected.

What To Do Next:
Experiencing a family law issue can be overwhelming and stressful. Knowledgeable family attorneys do much more than represent clients, they understand how choices made in the legal process can drastically affect life afterwards.

Sandra F. Banks offers clients a No Hassle Family Law Strategy Session to make sure every client gets guidance on how to achieve a stable, secure and happy future.

What’s more, if I’m not the right attorney for the case, you have my commitment that I’ll point you in the right direction. Just call my office at 510-336-2369 to schedule.