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Real Estate & Finance

Deed brings responsibility

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This article originally appeared in the October 1, 2006 edition of Boca Raton News, www.bocanews.com. Reprinted with permission.

by Christopher J. Schuster

Q: My boyfriend and I want to buy a house but I cannot afford to contribute to the household expenses. We plan to get married but do not have a date. My boyfriend wants us to live together and says he will put my name on the deed and I will not have to worry about the expenses. Are there any legal concerns with such an arrangement?

A: Unfortunately, yes. It is not uncommon for two people in love to purchase a home and have it titled in both names, even though the expenses have been paid by only one person. Problems arise when the relationship ends and the co-owners cannot agree on how the assets and the equity in the home should be divided. Commonly, the owner who has paid the expenses will seek what is known as “judicial partition” and an accounting.

When a co-owner sues for partition of land, he or she seeks a division of the property into shares of fair and equal value to avoid inconveniences resulting from joint ownership. When dealing with real property, this normally results in a sale of the home with the equity divided between the co-owners according to their percentage of ownership. Thus, if two people were 50% owners pursuant to the deed and there is $200,000 in equity in the home following its sale, then each co-owner would receive $100,000.

Although each partition action is different, problems may arise for the co-owner who has not paid his/her fair share of the expenses in the home. When partition is sought, and the court has determined each owner’s percentage of ownership in the property, the court then conducts an accounting to determine whether each coowner has paid his or her proportionate share of the expenses. These expenses generally include mortgage payments, insurance, taxes, association dues, repairs and improvements to the home. If one owner has paid more than the other, then they will receive that money back for the other co-owner from the sale proceeds.

That is because Florida law provides that each co-owner is responsible for his/her share of the expenses. Thus, if two people co-own a home, each is responsible for 50 percent of the household expenses absent some agreement between the co-owners. A co-owner’s excess payment toward the expenses does not increase his/her ownership interest, but will entitle him/her to reimbursement of those payments from the other co-owner. That reimbursement will commonly be paid from the monies received at the time the home is sold but could be the subject of the litigation at an earlier time. If those reimbursable expenses exceed the co-owner’s proportionate share of the sale proceeds, then that co-owner may have to pay the reimbursement from his/her own money.

By way of example, above I mentioned that if there were $200,000 in equity each coowner would receive $100,000. However, if the total amount of expenses paid towards the property over a number of years was $210,000, then each coowner’s proportionate share of the expenses would be $105,000. The co-owner who has not paid any of the household expenses would be required to reimburse the $105,000 to the other coowner. Although the first $100,000 would come out of the equity received at the time the house was sold, the additional $5,000 may have to be paid from some other source.

If you are going to buy a house with your boyfriend before you are married, then I would recommend that you pay your proportionate share of the ownership expenses until you are married or have a written agreement signed by you and your boyfriend that provides that all payments made by your boyfriend on your behalf towards the household expenses are a gift. There may be tax consequences resulting from such an agreement and a tax attorney should be consulted.

Christopher J. Schuster received is juris doctorate magna cum laude from Michigan State University-Detroit College of Law. He concentrates his practice in commercial, general civil, and probate litigation, as well as general representation of condominium and homeowner associations. The above Question & Answer is provided for general informational purposes only and should not be considered as legal advice as to any specific matter. You should not act solely upon this information without consulting legal or other professional advisors.