Although most attorneys would advise against an unmarried couple purchasing real property together, a common issue we see is how to deal with a property purchased by an unmarried couple.
Ohio property law recognizes two groups of people: married people and unmarried people. With no laws protecting unmarried, cohabitating individuals, going through a split with your partner may become an extremely complex, confusing, and frustrating situation.
When faced with this situation, there are essentially three options:
One Party Purchases the Other Party’s Interest
One party can transfer their interest in the property to the other party via a quitclaim deed. If there is no mortgage, this process is relatively easy and potentially only costs the amount for the preparation of documents and recording fees. However, even without a mortgage, things can get complicated when the party leaving feels they are entitled to something for handing over the property- either from the time spent to care for or improve the home or actual monetary contributions made to the home. The parties may have to agree to an amount to be paid to the party leaving in exchange for signing the deed to the staying party.
If both parties are responsible for the mortgage, the party who plans to remain in the property can refinance the loan solely into his/her own name, releasing the other party from any obligation. The party leaving the property would then sign the deed, transferring his/her interest to the other party. You should always contact your mortgage company before prior to taking this action to make sure that you can refinance adequately and also to get their approval for the quitclaim deed. Many mortgages have clauses in them that can bring the entire amount due and owing if a party quitclaims their interest without approval.
The setback we often see with this option is that the party that intends to stay does not qualify for the mortgage amount on their own and thus cannot refinance the loan into his/her name as the sole borrower. Furthermore, we are now seeing parties that want to keep and remain in the property, but do not want to refinance because of the increase of interest rates in the past few years. Those that purchased property while the interest rates were historically low do not want to now refinance at a much higher rate.
Sell the Property
If neither of you wants to stay in the house, or neither qualify for a mortgage on your own (eliminating refinancing as an option), you can agree to jointly sell the property. This is often the least complicated solution. If there is equity in the house, there can be contention on how to split this equity. We often see this issue arise when there were improvements made to the property and one party has put much of their own time or money into making the improvements. This often leads to one party wanting a bigger percentage of the equity. So long as you can agree on a percentage split of the proceeds after the sale of the house, this can allow you to have an easy split not only from the property, but also from your partner.
Partition
The only other option is to petition a court to partition the property. Partitioning a property is the process of determining which owner owes how much of a property, and then either forcing one owner to buy the other out, or selling the property and splitting the proceeds based on ownership.
This option is often considered the last resort because it can be costly, complicated, and time consuming as the courts sort out the facts and make determinations. The property will ultimately be sold judicially, and the court will determine how any proceeds will be split between the parties.
Because of the lack of protections for unmarried people purchasing property together, we highly advise against the purchasing of property between unmarried people, with both being on the deed and mortgage. However, if you do find yourself in this situation, and the relationship has ended, please reach out to our firm to discuss your situation and the options. You have options and we are here to help.
