What’s the best way for me to protect my interests?
In addition to the rise of ‘fractional equity ownership’ in Colorado real estate, it seems more and more common for individuals to buy a house together absent formal marriage. In such a situation, it is advisable to enter into an agreement that sets out the “rules of the game” before purchasing the house. Such an agreement can be called a “Co-Tenancy Agreement,” a “Co-ownership Agreement,” a “Property Ownership Agreement,” or something else. This article refers to the agreement as a “Property Ownership Agreement” or “POA.”
Tenancy in Common or Joint Tenancy
Multiple people can own real property together in two common ways: tenancy in common or joint tenancy. The most important distinction between the two occurs when one of the owners dies. When an owner in co-tenancy dies, and absent some other arrangement, their interest in the property must be probated according to a will or intestate succession laws. The surviving owner may or may not inherit the decedent’s interest depending on the outcome of the probate. The interest of a deceased owner in joint-tenancy, on the other hand, automatically transfers to the surviving joint-tenant without the need for probate administration.
Property Ownership Agreement
In either scenario, unmarried owners could benefit from a POA that sets out their expectations and understandings with respect to the property. Amongst other things, a good POA should:
• Memorialize the amount of funds each owner invests into the property
• Address debt payment obligations
• Outline responsibilities for maintenance, repair, and other household expenses
• Clarify how and when the owners can sell the property
• Spell out precise POA termination events
• Contemplate the consequences of the death of one or more of the owners
• Set out a clear explanation of how proceeds should be distributed after a sale
If you are contemplating purchasing a property with your partner and want to ensure your mutual expectations and understandings are addressed, please contact us here .
