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Right Beside You

You’re buying a house with your common-law partner. How should you take title to the house?

If the two of you take title as tenants in common, then each of you owns part of the house. You can set up “tenants in common” in unequal shares, something other than 50/50, depending upon who contributes more to the down payment for the house. On the death of one of you, and subject to other claims, your interest in the house will go to your own estate for distribution to your beneficiaries in accordance with your will.

 If the two of you take title jointly, then one of you may be relying upon the presumption each of you owns 50% of the house. The presumption that by “right of survivorship” on the death of one of you the property rolls entirely to the other.

But: not always. Supposing at the time you purchased the house, you contributed $200,000 to the down payment and your partner contributed $20,000 but the title was taken joint. At the time of the purchase, did you intend to make a gift to your partner of your $200,000? Or, did you intend that your initial down payment would return to you: “result back” for your benefit in the event that the two of you separate? Or “result back” to your estate if you predecease?

What counts is your intention at the time of the purchase. Best to have evidence. It’s true the onus of proof that there was an intention to make a gift is on the person who’s claiming that gift. There is a rebuttable presumption of resulting trust: that the unequal down payment will be returned to the person who made the bigger contribution.

There may also be an argument for the smaller contributor in “joint venture”, which can be the basis for a claim against the proceeds. That’s especially true if the value of the house has increased substantially during the cohabitation prior to its sale and the parties have both contributed to the carrying costs of the house during the relationship. But the benefits received by that partner will also be taken into consideration : the living expenses that would have been incurred as a single person paying rent.  And “joint venture” doesn’t presume “equal sharing” of the net proceeds of sale.

Long story short? Many cohabiting couples split. Cohabiting couples should have a serious discussion with their real estate lawyer about how they wish to take title to the property: joint title, with or without resulting trust reimbursing the bigger contributor, or tenants in common, whether in equal or unequal shares. Cohabiting partners who buy real estate together should have a cohabitation agreement which provides evidence of their intentions at the time of the purchase. Failing to do so often “results” in expensive litigation down the road: and the costs and stresses of that litigation will quite likely exceed the cost of the cohabitation agreement up front.

Of course without a cohabitation agreement in place there may also be claims in support. Best for your cohab to address those issues too, prior to cohabitation.

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