According to Liam Stack in a 2019 article for The New York Times, “the share of American adults who live with an unmarried partner has more than doubled since 1993, to 7 percent from 3 percent.” The Pew Research Center survey cited by Stack in his article found that nearly 40% of cohabitating adults choose to do so because of their financial situations. Despite an ever-growing number of cohabitating couples and a persistent concern over finances, few sign cohabitation agreements to protect themselves should their relationship dissolve. In this post, we explain how cohabitation agreements help unmarried couples who own property together and have other shared financial responsibilities. From joint tenancy to sole ownership, we define all the terms you need to know. We also outline which clauses to include in a cohabitation property agreement and answer a few frequently asked questions. Follow below to learn more!
What Is a Cohabitation Property Agreement?
A cohabitation agreement is a legal contract between two or more parties regarding the legal rights and responsibilities related to jointly owned property. In her article “Why a cohabitation agreement is essential for non-married couples” for The Guardian, Jill Papworth explains. Papworth writes that though “around one in four people living together think they have the same legal protection as married couples,” this is untrue in most cases. In the United States and in the UK, “both parties have a legal right to maintenance and their share of assets, including property and inherited property” when a marriage dissolves. Unless otherwise outlined in a prenuptial agreement, a 50/50 split of assets is the norm.
However, cohabitating couples who end their relationships “have no such rights.” This is true “regardless of the number of years they have been together and whether they have children.” Papworth explains that in both the US and the UK, “the only solution for cohabiting couples who want legal protection should they split up is either to marry or enter a civil partnership, or to draw up a cohabitation agreement.”
In general, a cohabitation property agreement “sets out who owns what and in what proportion.” The agreement “lets you document how you will split your property, its contents, personal belongings, savings and other assets should the relationship breakdown.” It also describes the financial responsibilities of each partner. This means that such an agreement will outline which partner will pay for what and when – e.g. mortgage payments, utility bills, property taxes, etc. Depending on your situation, the cohabitation agreement might “cover how you will support your children…as well as how you would deal with bank accounts, debts, and joint purchases such as a car.”
Other Terms to Know
First on our list of terms homeowners considering joint ownership of a property should know is “title.” While current and past homeowners will be familiar with the term, first-time buyers might not know what the title to a property is. Molly Grace explains in her article “House Title: What You Need To Know” for RocketMortgage. Grace writes that a house title is “not a document.” Rather, a house title “represents all of the legal rights surrounding the ownership and use of a residential property. A house title isn’t a document; it’s a concept used to establish a property owner’s “bundle of rights.” This bundle of rights encompasses all of the rights that come with being a property owner.”
If your name is on a house’s title, this means that you “have the right to: possess the property (Right of Possession); use (Right of Control) and enjoy (Right Of Enjoyment) it however you wish; sell, rent, or transfer ownership (Right Of Disposition) and limit who can enter the property (Right of Exclusion).” Keep in mind that the title is not a physical document, but the deed to your house is. Grace notes that the deed “is the physical document that proves you hold title to your home.” Without your name on the deed or tied to the title, you do not have a claim to the property in question.
Before both you and your partner draft and sign a cohabitation agreement, you must determine how ownership of your shared property will be recorded on the property’s title. Joint tenancy is one option. In his article “Tenancy in Common (TIC)” for Investopedia, James Chen explains what joint tenancy means for property owners. Chen writes that in a joint tenancy, “tenants obtain equal shares of a property with the same deed at the same time.” If one partner or signing member sells his or her interest in the property, the agreement is immediately broken. Should one partner or member pass away, other tenants with an interest in the property retain survivorship rights.
Tenants in Common
Another type of joint ownership, tenancy in common does not afford co-owners survivorship rights. When one owner passes away, their interest goes to any surviving heirs — not to the co-owners of the property. In the article “Buying a House When Unmarried? Consider These Things.” for Forbes, Kiah Treece and Rachel Witkowski outline the pros and cons of tenancy in common. Treece and Witkowski write that “tenants in common have equal rights to the entire property during their lifetimes.” Unlike a joint tenancy, tenants in common can split ownership shares however they like — “not just 50/50.” Witkowski and Treece encourage homeowners to keep in mind that a tenancy in common agreement allows one partner to force the sale of the property. They can do so “without consent” of the other romantic partner.
If you are unmarried and are preparing to buy a home with your partner, you might consider applying for a joint mortgage. For those who have not heard of this type of home loan, Bankrate writer Erik J. Martin explains in his article “Should you get a joint mortgage?.” Quoting Home Qualified’s Ralph DiBugnara, Martin writes that a “‘joint mortgage commonly involves two people, usually being spouses, joint partners, friends or family members, who pool their income and assets together to buy a home.'” Home buyers might choose a joint mortgage because it “increases your purchasing power” and “‘makes it easier to pay the mortgage due each month.'”
However, “a joint mortgage doesn’t necessarily mean joint ownership.” As outlined above, the title is what determined ownership of a home. Martin writes that “the names of those on the mortgage application and loan documents indicate the joint mortgage parties obligated to repay the debt.” Even if one partner is named in all the documents of a joint mortgage, “that party might have no ownership claim to the property” if their name is not also on the title.
Another way in which an individual might hold title to their property is through sole ownership. With sole ownership, the name of only one partner is recorded on the deed. Alicia Tuovila explains sole ownership in her article “5 Common Methods of Holding Real Property Title” for Investopedia. Tuovila writes that “the most common sole ownership is held by single men and women, and married men or women who hold property apart from their spouse.” This means that only one partner — the one whose name is on the deed — has a legal claim to the property. Even if the other partner makes equal mortgage payments or cares for the property, he or she does not have a legal right to the home.
Common Law Marriage
In some states, partners who live together and meet other criteria might enter into a common law marriage. While couples never need to sign a marriage license or file paperwork, common law marriage is a legally binding arrangement. Heidi Glenn explains in her article “No, You’re Not In A Common-Law Marriage After 7 Years Together” for NPR. Glenn writes that “common-law marriage is as real and legal as marriage gets.” Entering into a common law marriage means a couple is “eligible for all of the economic and legal goodies afforded to couples with marriage licenses — like tax breaks and inheritance rights.” If you have heard of common law marriage in the past, you might be under the false impression that living together for several years qualifies a couple.
To qualify, couples must “be eligible to be married and cohabitate in one of the places that recognize common-law marriage.” They must also “intend to be married and hold themselves out in public as a married couple.” This means the couple must “act married” — including telling their friends and family that they have tied the knot. Because there are no legal documents involved in a common law marriage, splitting assets when a couple divorces can be incredibly complicated. As such, drafting and signing a cohabitation agreement is generally recommended for couples in this type of marriage. We explain this in further detail below.
Everything You Should Address in a Cohabitation Property Agreement
The clauses included in cohabitation agreements differ significantly between couples. Some focus solely on ownership of the property and payments related to that property. Others include detailed provisions regarding other financial responsibilities. For example, a cohabitation agreement might define each partner’s right to receive child support or a percentage of the other partner’s retirement savings should the relationship dissolve. For the purpose of this post, however, we are discussing cohabitation property agreements and will focus solely on details pertinent to shared property ownership.
To that end, we turn to David McMillin’s article “6 questions every unmarried couple should ask before buying a house” for Bankrate. In this article, David McMillin recommends that homeowners include the following details in their cohabitation agreements. First, homeowners must specify the “type of ownership on the property deed” – i.e. joint tenancy, tenancy in common or sole ownership. Next, homeowners should detail the “percentage of the house each party owns” and precisely what each owner is expected to pay towards the mortgage, down payment, renovations and other household bills. In this clause, homeowners should define penalties for failure to meet these personal finance expectations. Homeowners should also draft a “buyout agreement” in the case the relationship ends or one partner accepts a job in another state. For the last two sections – “dispute process” and “exit strategy” – non married couples should consult a lawyer.
Deciding How a Breakup Will Affect Shared Ownership
As with drafting a prenuptial agreement, one of the most unpleasant parts of putting together a cohabitation agreement is considering what will happen if you and your partner break up. The NOLO resource “Contract for Equal Ownership of a House by an Unmarried Couple” recommends a few options for non married couples trying to decide how to handle this section of the agreement. After a breakup, there are three possible outcomes: “(1) One of you wants to keep the house and the other doesn’t. (2) Both of you want the house. (3) Neither of you wants the house.”
NOLO suggests including a clause in your agreement that allows one partner to buy the other out within a specified period of time after the breakup. According to NOLO, if one partner decides to buy the other out of their ownership shares, “it is extremely important to change title to the home to reflect the new ownership arrangement.” If you choose to include this clause in your agreement, you must also include a clause that “specifies the buying partner must execute the appropriate documents” to properly alter the title. Before signing a cohabitation property agreement, each party should seek independent legal advice as this is a legal document with legally enforceable consequences.
Answering FAQs About Cohabitation Agreements
#1 Do I Need a Cohabitation Agreement if I Am Already in a Common Law Marriage?
As mentioned above, very few states in the US still legally recognize common law married couples. In most US states, couples do not have community property rights if unmarried. Even if your state recognizes common law marriage, a judge or court of law in that state might not split assets the way they would with a typical marriage. As of 2022, neither Massachusetts nor California recognize common law marriages. New Hampshire recognizes these marriages under certain circumstances. Because of this, partners in a common law marriage should still draft and sign a cohabitation agreement to protect their right to shared property.
#2 Will I Need a Notary Present When I Sign My Cohabitation Agreement?
Having a notary present when you and your partner sign a cohabitation agreement is not required in every state. Some courts will even consider oral agreements when splitting assets between unmarried partners. In order to be legally enforceable, however, you must sign in the presence of a witness who is not yourself or your partner.
#3 What Are My Rights Without a Cohabitation Agreement or Common Law Marriage?
The NOLO resource “Living Together and Property Agreements” outlines legal recourse for unmarried couples who have not signed a cohabitation agreement. Referencing the California Supreme Court case Marvin v. Marvin, the NOLO writers note that the law now protects unmarried couples who own property together in certain situations. This case determined that “the court may examine the couple’s actions to decide whether an ‘implied’ contract exists…if a couple hasn’t made a written or oral contract.”
Should a judge be unable to find evidence of an implied contract, he or she could determine “that ‘the parties intend to deal fairly with each other.’” In this situation, the judge could rule that one partner “is indebted to the other by invoking well-established legal doctrines of equity and fairness.” Of course, the decision of this court case applies only to couples in California. However, other states have followed suit. Check with your state government for more information.
#4 Are Cohabitation Agreements Legally Recognized in My State?
As long as they are valid contracts, cohabitation agreements are considered legally enforceable in the states of California, New Hampshire and Massachusetts.
#5 Should I Have a Lawyer Review My Agreement?
Any person entering into a legally binding contract should consult the independent advice of a licensed attorney before signing.
#6 Will Our Cohabitation Agreement Still Stand If We Get Married?
According to the FindLaw resource “Is Your Cohabitation Agreement Valid?,” partners who enter into a cohabitation agreement dissolve that agreement upon marrying. The post notes that “if you marry your partner when you previously had a cohabitation agreement, it will not be in effect after the marriage.”