Living With Your Lover? Better Get it in Writing

By Amy A. Edwards

When people marry, the law gives them numerous rights and obligations. But what happens if you aren’t married? The law treats the relationship differently, even if you have children together. If two people in a relationship purchase a home together, each might assume that having both names on the deed protects them if they later separate. But, that can create more questions than answers. This article is about joint home ownership by unmarried people in North Carolina, and includes information to discuss with an attorney before signing the offer to purchase property. 

What Are the Problems?

There are more than you might think. Below is a list of four main topics: ownership, finances, the relationship between you and the other co-owner, and estate planning matters, followed by potential ways to avoid these problems.

Ownership

• Even if both parties are named in the deed, the type of ownership (and the various rights of each type of ownership) depends completely on how the deed is written. How should it be written?

• Do you want survivorship if the other party dies before you do? Do you want to have each person leave their share of ownership to their heirs? Are you considering a life estate?

• Your property rights are different if you marry before or after you buy the property in joint names. In fact, to accomplish certain ownership rights, parties must deed the property they already owned before marriage back to themselves after they marry.
   
• Unmarried co-owners have an inconvenient method to divide or sell the property if they separate and can’t agree on what to do. They file a lawsuit called a “partition” that requires the court to appoint three commissioners, paid by the co-owners, who meet on the premises and report to the court how they think it should be divided. NC Gen. Stat. §46.

Finances

• Who is responsible for paying the mortgage, taxes and insurance?

• Is there any protection for one co-owner if the other is sued and a judgment for money owed becomes a lien on the property, such as a small claims case which might have an 8% interest rate?

• Should one or both owners sign the promissory note for the mortgage?

• Is there a home equity line of credit? Can it be “frozen” until you figure out what to do? Who pays the loan and the interest?

• If one person pays a substantial down payment, should he or she get it back if the house is sold, even if there is no equity in the home (i.e., it is “upside down”)?

• If you leave the residence after you separate, will your name remain on the mortgage obligation until it is paid off? Should the house be sold if the other owner can’t refinance the mortgage into his or her sole name?

The Personal Relationship  

• Who will move out if you decide to separate? If you are married, the law sets out a procedure for a spouse to ask that the other spouse be ordered to leave the residence. But if you are unmarried, you are on your own if you haven’t made arrangements for this in advance.

• After a separation, who pays the mortgage, and who has the right to remain in the home? If you are unmarried, there is no alimony to supplement the income of one party after the couple separates, even if they have children together or one parent is not gainfully employed.

• If you have a prenuptial agreement, it is only triggered after you marry. If not, it has no legal effect.

• If you separate, do you expect 50% of the value of the house, even if the other party has paid for the mortgage payments? Do you have records that show who paid the payments? Did you pay the mortgage from a joint bank account, making it difficult to trace the payments that each owner made over the years?

 Estate Planning

• When married people acquire a home in both names, survivorship rights are often automatic but if an unmarried co-owner dies, will his or her next-of-kin own half of the property along with the surviving co-owner?

• Should you have life insurance to help with the cost of paying for and maintaining the home if an owner dies?

• Do you want to add anything to your will or update it to account for the new legal rights and obligations you have?

What Is the Solution to These Problems?

Many of these problems that can be avoided or minimized ahead of time by written contract. Although such a contract looks kind of like a separation agreement, it is really an agreement between co-owners of real estate, as would be the case with multiple co-owners of rental property, for example. The great thing about contracts is that you can customize one to your particular situation, avoiding the burdens of filing a lawsuit or playing chicken when neither party wants to be the one paying the mortgage after the breakup. While a contract is important, proper estate planning is also critical, especially because only married couples have certain absolute rights to the other spouse’s property in the event of death. If you don’t make any decision on these matters, the state makes those decisions for you.

Amy A. Edwards is a family law attorney in Greenville, NC, certified by the NC State Bar Board of Legal Specialization as a Family Law Specialist, and is licensed only in NC. Laws change. This article is current as of December 2017. www.AmyEdwardsFamilyLaw.com © 2017.