How to Legally Co-Own a House

By George Khoury, Esq. on October 21, 2016 | Last updated on March 21, 2019

When married couples buy a house, typically both names are put on the title, or deed, and both are considered the legal co-owners of the home. However, that is not the only way to legally co-own a home. In fact, many people that only own half a duplex actually co-own a home and don't even realize it.

Also, it is not too uncommon for friends and non-married couples to buy homes together, and this can be where things get more complicated. Questions arise such as:

  • Whose name goes on the title?
  • How is financing going to be secured?
  • How much of the mortgage is each person going to be responsible for?
  • What's each person's percentage of ownership?
  • What happens if one person can't afford to pay the mortgage or bills?
  • What happens if one person wants to move out or sell?
  • What happens if there is an un-resolvable disagreement?

If you can't reach an agreement with your prospective co-owner on the above questions, you may want to consider finding an alternative to co-ownership, such as only one person buying with the other person becoming a tenant. Or find a single building that has individual units that each of you can afford individually.

Ownership Options

There are generally two basic options for how two unrelated people can own a home together. They can either have a Joint Tenancy, or a Tenancy In Common (TIC). In a joint tenancy, generally both owners have equal rights to the property, and upon death of one owner, the other owner becomes the sole owner, though this is not always the case. A TIC allows both owners to exercise control over their portion of the home, as well as for each owner to sell, assign and pass their ownership interest on to their heirs upon death.

Joint tenancies are most frequently used by couples who want to establish a family home for themselves and their children. TICs are most frequently used for duplex, triplex, and multiunit residential buildings. Usually, TICs are preferable when each owner will have an independent space that they can exercise control over.

TICs can be used for sharing a single unit as well, however, this can create problems if there are disagreements, financial issues, or one person wants to sell or move out. TICs work well in multiunit situations with each owner having their own separate unit because it allows owners to sell their units, and for each owner to get individual financing that does not affect the other owners.

If it is more than just one other person, you may want to consider going a more business oriented route. Sometimes co-owners opt to form a limited liability company (LLC) that will secure the financing and actually own the home. This works well when there is a commercial purpose for the purchase, or when there are multiple individuals who want to own the home together.

Lastly, there's the living trust option, which requires quite a bit of legal assistance to set up, but may be right if you're considering joint ownership with family members.

Getting Financing

If you are considering going the TIC route, and you and your potential co-owner are buying half a duplex each (together getting the whole duplex), then you should be able to secure independent financing. If you are planning on purchasing a single unit together, as a joint tenancy or a TIC, then it is likely you will need to obtain financing together.

If you need to finance the purchase together, there will be many considerations to discuss about who is paying what, and what happens if someone can't afford to keep the payments up at a later date. Additionally, there should be a conversation about the responsibility for the necessary bills such as home insurance, utilities, regular maintenance as well as upkeep.

Sign an Enforceable Agreement

The most important thing you can do if you're planning on purchasing a single unit with another person, or sharing a building as a TIC, is to sign an enforceable agreement that clearly delineates who pays for what and accounts for everything that can go wrong. Having an experienced attorney review your agreement is critical, not only to make sure it is enforceable, but also to make sure you didn't miss any of the common pitfalls that come with joint ownership of a home.

If you are going the LLC or living trust route, having an attorney help get it set up is basically a necessity. Forming a LLC or living trust for this purpose is a complex process, where essentially you are forming a business or complex trust. Be wary of doing it yourself as it can end up costing you more money than it costs to hire a lawyer if you do it improperly.

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