What is a Cohabitation Agreement? Do I Need One?

A Cohabitation Agreement is a legal document that is designed for unmarried couples who wish to purchase property together. The agreement can detail the percentage or amount of each party’s contribution to the purchase as well as outline each parties’ responsibility of expenses and improvements. A Cohabitation Agreement can be extremely important if the couple ever part ways or wants to sell the property. It makes it crystal clear as to how sale proceeds will be divided, without a costly legal battle.

Unlike marriages, where each party has legal rights to the division of property under Family Law statutes, cohabitating parties do not have the same legal rights as to the division of property. This can be a devastating realization if one of the parties is not on the title and he/she contributed a substantial amount for the purchase.

There are many situations where you are not married but want to buy a home together with your boyfriend/girlfriend, fiancé, sibling or life partner. You can build equity, pool your money, and split monthly expenses. Sounds like a perfect way to afford buying a home. However, life happens… so be prepared.

First, you should carefully consider how to take title. Second, you should consult with an attorney to draft a Cohabitation Agreement which lays out the structure of your purchase and expectations of the arrangement.

There are three ways you can take title to the property:

  • Sole Ownership. Sole ownership is when only one of the parties goes into title. If you decide to put only one of your names on the deed, beware; the party not listed on the deed has no legal right to the property whatsoever. Therefore, the other party can evict him/her at any time.
  • Joint Tenancy. Joint tenancy is when both parties go into title and have equal ownership with rights of survivorship. If one party passes, their interest in the property automatically passes 100% to the surviving party, upon the filing of an Affidavit of Survivorship and certified copy of the death certificate.
  • Tenants in Common. Tenants in common is when both parties go into title and have equal ownership (50/50). If one party passes, that party’s share will not automatically pass to the surviving party, but will go to the deceased party’s estate.

In Minnesota, if the deed does not state joint tenants on the face of the deed, title is presumed to be tenants in common. It is common for married couples to go into title as joint tenants vs. tenants in common. In the unfortunate event that one spouse dies, the surviving spouse can avoid going through an expensive probate and remain 100% owner of the property. However, if you are not married, tenants in common is often the preferable choice. With an appropriate Cohabitation Agreement, both parties can feel protected without the expense of costly litigation in the event their relationship turns toxic. If you end up getting married, you can always sign a Quit Claim Deed and change ownership status to joint tenants.

Trust me when I say, I have seen it all.  Purchasing a new home is an exciting event. However, whether your situation is boyfriend/ girlfriend, brother/sister or life partner, owning property together can be complicated if the relationship ends badly and be costly. Therefore, the appropriate choice of how to take title and a carefully crafted agreement by an experienced attorney, executed ahead of time, can protect everyone’s interest…. because life happens.

This article was originally published in Real Estate Agent Magazine.