As more people are living together without being married, co-ownership agreements are becoming more commonplace, but what exactly is a co-ownership agreement? A co-ownership agreement is a contract that creates the rules of which two or more people agree to abide by while owning property together while unmarried.
Married couples have automatic interests in property owned by their spouse, and a co-ownership agreement can help unmarried people sort out similar issues,, such as if one party dies and if the parties no longer wish to own the property together. These agreements create a legal relationship where there otherwise wouldn’t be one.
The rights created in a co-ownership agreement can include survivorship rights. This means that when one owner dies, the remaining owners automatically receive that person’s piece of the property. For example, if a couple each has a 50% share in a home, and one dies while the property is co-owned, the surviving owner would automatically get the other person’s share of the house. Survivorship rights allow the surviving co-owner to inherit the property outright, to avoid probate, and to avoid a potentially nasty fight with the deceased owner’s heirs.
Other provisions the co-ownership agreement can account for is what happens if you no longer wish to own the property together and how decisions regarding the property are made, how bills are paid, and how repairs to the property are made. Most commonly, provisions are included as to which party has the first right of refusal for a buy-out, whether the parties must secure their interests in the property with a life insurance policy, and whether capital contributions to the property are reimbursed at the time the property is no longer co-owned.
A co-ownership agreement is also important if a couple’s intention is to give one partner equity in a home that the other partner already owns. Such an agreement can allow the new partner to earn equity over time or at the time of buy-in, while preserving the first partner’s pre-existing equity in the home.
We think co-ownership agreements are important for anyone buying property with someone they’re not married to. If you’re contemplating such a purchase, please contact us to discuss how best to protect yourself.