Buying a Home Together with a Cohabitation Agreement

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So you are thinking of buying a home together, Cohabitation.  Everybody believes it will be sweet bliss after they move in together.  However, is that reality and what are the “what ifs” in Cohabitation?

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While being married affords certain well defined legal avenues for the “what ifs” cohabitation does not.  Basically in Minnesota when a couple is married the home in question whether purchased before marriage or while married is by MN law a 50/50 ownership.  There are legal docs or actions that can alter that, for example. prenuptial agreement.  Far and away the most common situation for a married couple is 50/50.

However, with cohabitation there really is not a well defined path on splitting the property.  This is where a Cohabitation Agreement comes in.

I know, this can’t happen to you and your partner right?  You trust each other and there are no foreseeable problems.  Let me ask this, how many couples do you know that cohabited either broke up or never married?  Doesn’t have to be a break up, it could be the death of a partner.

The problems become who owns what?  How much are they entitled to?  Do the children of one of the partners have an ownership interest?  What portion of the unpaid bills is paid by whom?  These are just few of the questions.  Again, a Cohabitation Agreement drawn up can significantly reduce the issues if there is a “what if”.

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In a recent class we were told about a lawsuit for a cohabitation couple.  They bought a home together with one of them doing the financing only, the other putting down 60% of the down payment.  One had money and the other had the credit.  They split the bills and paid them from a joint account that both would put their paychecks into.  They ended up in a huge nasty break up with both sides wanting money.  Who gets what?  Who is the owner?  Is there ownership in the home because of paying bills to keep the home maintained and liquid?  This became a two year litigation that was settled out of court and according the attorney sharing this story the attorneys made the most money.

One trend has been retirees moving in together to save on taxes and share the cost of one home instead of two.  When one of them passes this is where heirs come in and want an ownership position for their parent’s cohabitation home.  Do they deserve one?  How much?  Does the living partner have to sell to pay off the heirs?  People moving in together need to figure this out on paper before buying a home.   A Cohabitation Agreement is what should be looked at to protect both parties.

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Ask your real estate agent for a referral to a good attorney who can draw up your Cohabitation Agreement.  The attorney may recommend a Prenuptial Agreement instead depending on the situation.  Either way seek professional help.

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