There has been a rise in couples cohabitating and purchasing real property together before getting married. While California is a community property state, California Law does not recognize common law marriages, and unmarried individuals are generally not entitled to support following a breakup. I have had countless consultations with individuals who purchased real property with their significant other before getting married, and then they breakup/separate.
Oftentimes, one individual is solely obligated to pay the mortgage on the real property, while both individuals are listed as co-owners on title. The question is, what happens now? Well, technically, both individuals are co-owners, so they both have equal rights of management and control of the real property. What this means is that one individual alone cannot sell the real property unless both agree to sell it. The other options are for one individual to offer to buy out the other individual’s interest, or to file a lawsuit with the Court to partition the real property and divide the proceeds therefrom.
Also, if you are the sole obligor on the mortgage, you must continue to pay to avoid a negative impact on your credit and/or foreclosure. This is quite the conundrum as most nonmarried couples do not envision that their relationship will end (which is why they agree to buy real property together in the first place), so they do not have an agreement in place to address this worst-case scenario.
Co-ownership of real property prior to marriage without any written agreements in place is a pervasive problem. I recently spoke with a senior colleague of mine, Elliott Luchs, to ask if he has ever drafted a nonmarital real property ownership agreement. To my surprise, in his nearly 50 years of experience as an attorney, he has drafted this type of premarital/nonmarital real property co-ownership agreement several times. Mr. Luchs has also drafted Nonmarital Cohabitation Agreements, which are agreements between nonmarried couples who live together, but who are not acquiring real property (i.e. two individuals renting a home together).
Many couples are reluctant to discuss the “what if” we break up scenario. However, it is vitally important for nonmarried co-owners (or cohabitants) of real property to have a written agreement in place to protect themselves. If you decide to co-own property with your significant other while unmarried, have this frank discussion with them, and see what happens.
More often than not your significant other has the same reservations or concerns. Best case scenario is you never need such an agreement, but you will be glad you have one if things do go south.
About the Author: Kiki Manti Engel is an attorney at the law firm of Reid & Hellyer, A Professional Corporation where she practices business and real estate litigation. She may be reached at (951) 695-8700.