Traditional rites of passage often fall by the wayside as times change, and one of the clearest examples can be seen in the current housing market.
According to the National Association of Realtors, nearly one out of five first-time homebuyers are now unmarried couples. That’s the highest percentage ever recorded and nearly a five-fold increase from four decades earlier, when almost no one bought before tying the knot and the cost of housing as a proportion of total household income was far less compared to today.
For unmarried romantic partners, combining forces to purchase their first home may seem like a sensible approach when considering our current reality of inflation and home price spikes. But buyers contemplating this option should beware — the consequences of failing to plan and protect your legal interests comes at a high cost both financially and emotionally. Couples do not want to contemplate the idea that they will not be together forever, but, sadly, reality shows not all romantic relationships are built to last. And if you cannot agree on what to do with the house when it is time to move on, things can get messy, and expensive, fast.
Unlike divorce, where the marital home is automatically incorporated into the overall division of assets, there is no automatic legal process addressing the status of property co-owned by unmarried romantic partners. In Georgia, under O.C.G.A. § 44–6–160 et seq., property owners have the right to file a statutory petition, a legal remedy that prescribes a process for dividing jointly owned real property subject to principles of equity, which is a legalistic way of saying “subject to fairness.” Historically, partition resulted in the physical division of farmland, but in a modern world, the circumstances most often involve a single-family home, the division of which is impractical, and most likely, impossible.
A partition action brought in the Superior Court of the county in which the property lies, which will rely on both statute and a limited subset of existing case law, is often the sole default legal remedy for co-owners who cannot work out a split on their own. The end result of such an action is almost certainly a court-ordered sale of the property and the division of the remaining post-sale equity in the home, if any, reflecting the contributions of each party. A partition action is frequently a complex, time-consuming process that can involve the hiring of multiple appraisers and other experts, loads of pleadings, and legal fees that can run well into five-figures per side. And even should the party seeking partition prevail in a final hearing by the court, which rarely happens as both parties typically do not have the financial wherewithal or mental stamina to see a case through and ultimately settle, the reward will be the property being sold at a discount on the courthouse steps.
With unmarried couples rapidly gaining a larger share of the homebuyer market, it is safe to say the number of partition actions will continue to increase in the coming years. So how, should your relationship not stand the test of time, can you and your significant other avoid the perils of a messy legal dispute and, possibly, a court-ordered partition that could result in a serious financial setback? Here are three steps to take that may help ensure your future is protected:
Have the Hard Conversation: Before you start house hunting, there needs to be an honest conversation between partners on what happens in the event of a break-up. These are the questions nobody wants to ask, but addressing them head-on is healthy and can save you lost dollars and sleepless nights down the road. Who is going to stay in the house and who will move out? What will the timeline for refinancing a mortgage be? If you decide to sell, how will the proceeds be split? What about a job loss or economic downturn impacting one or both incomes? Does one partner want to buy out the other?
By taking an early inventory, you may come to the conclusion that buying a home together may not actually be the best option for your relationship, at least right now. If you do decide to move forward, it will be prudent to schedule a paid consultation with an attorney to have an outside set of eyes give you an honest assessment of your situation. This can bring peace of mind and helpful information well worth the price of admission.
Formalize a Property Ownership Agreement: Assuming you move forward, use the information gleaned in step one to lay the foundation for a formalized property ownership agreement. This is a legally binding contract clearly stating all of the ground rules and responsibilities for each party, as well as the resolution methods activated in the event of a split.
A legitimate property ownership agreement should establish systems and processes for how bills are paid, account for differences in earning power and how that will factor into major renovations and repairs, and create a protocol for how to resolve disputes on matters pertaining to the property. An experienced attorney can craft a comprehensive property ownership agreement at a fraction of the cost for what you would have to spend in litigation, reinforcing the old adage that an ounce of prevention is worth a pound of cure.
Double-Check the Deed: Unmarried couples buying a home together need to be aware of the rights and restrictions available under different types of deeds. A “Joint Tenancy With Rights of Survivorship” means both parties own the home equally and if one person dies, the other partner will inherit the entire property. A “Tenancy in Common” is when each partner owns an undivided one half interest in the home, with your property interest typically passed on to family members or relatives in the event of death. In Georgia, property owners cannot file any type of partition action under deed in which they hold the property as joint tenants with rights of survivorship, emphasizing the need for a thorough legal review from your own personal attorney before any documents are signed and executed. See: Vargo v. Adams, 302 Ga. 637, 805 S.E.2d 817, (2017)
Going through these steps will require potential property owners to invest some of their time and money, but in the ultimate cost-benefit analysis, what you spend in this process pales in comparison to what you could potentially lose in an emotionally charged legal battle with your ex-partner.
To learn more about how you can protect your interests during your home buying journey and have peace of mind, click here.
