Real Property Division for Unmarried Cohabitants

Division of Real Property By Partition

If the parties titled their real property in joint names, either as co-tenants or as joint tenants with right of survivorship, either party can initiate an action for partition. Many states have separate rules of court specific to partition actions. Most jurisdictions permit three types of partition: partition-in-kind, partition-by-sale, and partition-by-appraisal.

Through a partition-in-kind, the property is physically divided into separate properties in proportion to each co-owner's interest. Courts generally prefer this option only where such division would not prejudice or spoil the property as a whole. Naturally, the physical attributes of many properties, such as single-family homes, would preclude this type of partition.'

In a partition-by-sale, the property is listed for sale to a third party and the court distributes the proceeds among the co-owners in proportion to their respective interests. The completed sale will dictate the amount of proceeds to divide, but the parties may argue over the plan for sale, credits for expenses paid, and the percentage of proceeds distribution.

In a partition-by-appraisal, known in some jurisdictions as a partition-by-allotment, the court assigns the property to one co-owner and directs that co-owner to purchase the other co-owner's interest in the property. The value of the property for purposes of such buy-out would be based upon either an agreed appraisal or the valuation of a court-appointed referee or arbitrator. This option also leaves plenty of room to argue over credits for payment of property-related expenses and percentage distribution.

When it comes to determining percentage interests, attorneys should not take clearly allocated titles for granted. Issues that might arise in the event of a partition often involve reimbursement for mortgages, renovations, repairs, maintenance and expenses. Although a joint tenancy creates equal interests among the tenants, a breakup may sever the joint tenancy and raise the question of ownership percentage and entitlement to credits. See e.g., Nicholson v. Johnston, 2004 Pa. Super. 279 (ending of the relationship, combined with one party's exclusive occupancy thereafter, was sufficient manifestation of parties' intent to sever the joint tenancy).

As for credits, many jurisdictions may not give a party credits for property-related expenses if that party had exclusive occupancy of the house. Instead, a court may offset the credits requested for such expenses by the rental value owed to the non-occupying party. See e.g., Cahill v. Kerins, 784 So.2d 685 (La. App. 2001) (where one party had exclusive possession of the property, the occupant's request for credits was offset by fair rental value, but no offset for payment of mortgage); Barrow v. Barrow, 527 So.2d 1373 (Fla.1988) (exclusive occupant's request for credit offset by fair rental value due to absent cotenant). In the instance of a severed joint tenancy, the court may determine whether either party should be entitled to credit ab initio with the first down payment, or simply from the date the joint tenancy was extinguished.

Partition actions may involve a request for accounting. If both parties are titled owners, but only one party paid the mortgage while the other party covered household expenses such as groceries, the house-cleaning bill, etc, the party covering household expenses may have a more difficult time recovering any credit for such expenses. The money out the door may be equal to both parties, but some jurisdictions will not recognize credits for any expenses not directly related to the property itself or its value, unless such intent to divide the expenses as such can be clearly evinced by the parties.

In the absence of such agreement, or in the event one of the parties is not on the mortgage, the party missing out on the division of the property may wish to file a suit in equity to recover his or her loss. Many courts now enforce express contracts between parties to share expenses or otherwise divide household labor under the theories of unjust enrichment or promissory estoppel. However, proving such intent, especially in the absence of any writing, can be a difficult burden to overcome.

Prevention

Attorneys understand more than most that written agreements can solve problems before they arise. Ideally, a couple venturing into a joint ownership of property or other financial partnerships will make their intentions clear with a written agreement, such as the one illustrated below, at the outset of such venture.

'SAMPLE AGREEMENT FOR UNMARRIED COHABITANTS

'

AGREEMENT

'

”' THIS AGREEMENT, made this ________ day of ________________, 2014, between”””””””””””' , also known as”””””””” , at”””” (address)”””””' , and”””””””””””” , at”””” (address)”””””' (collectively “the Parties”).

”

WHEREAS, the Parties have entered into agreements of sale for the purchase of two residential real properties (hereinafter “Properties”) with addresses at __________________________________________ and _______________________________, copies of which agreements for sale are attached hereto as Exhibit “A;”

WHEREAS, the Parties, who are not married to each other, are in the process of purchasing the Properties together;

WHEREAS, the Parties are purchasing the Properties as business partners;

WHEREAS, the Parties desire to hold title in the Properties as tenants in common, with each owning a fifty percent (50%) interest; and

WHEREAS, the Parties desire to equally divide all expenses and income derived from the rental of the Properties, subject to the terms herein.

NOW THEREFORE, the Parties hereto form this Agreement, and agree as follows:

'

1. TITLE TO PROPERTIES

The Parties agree to take and hold title to the Properties as tenants in common with no rights of survivorship, and with each party owning an equal one-half (1/2) interest in such Properties, and with each party enjoying all other rights entitled to tenants in common under the laws of Pennsylvania, including but not limited to the ability to convey, encumber and/or devise his or her interest in the Properties. In the event of a marriage between the Parties, the Parties agree that ownership of the Properties, including but not limited to the right to income derived therefrom and title thereto, shall remain as set forth under this Agreement, unless the Parties agree otherwise in writing and before a notary.

'

2. DIVISION OF PROPERTY EXPENSES AND INCOME

'

The Parties shall equally contribute to the initial down payments on the Properties, as well as all costs, expenses, and payments incurred or resulting from, among other things, taxes, maintenance, upkeep, renovations, and mortgage payment obligations (to the extent that both of the Parties are obligated under the mortgage documents). No renovations shall be made unless the Parties both agree to same.'

'

To the extent that either of the Parties contributes more than fifty percent (50%) for costs, expenses, and payments, including but not limited to taxes, maintenance, upkeep, agreed-upon renovations, and joint mortgage payment obligations, said party shall be entitled to reimbursement for the other party's share of same. To the extent that either of the Parties contributes to the payment of mortgage expenses or other expenses that have been incurred by the other party alone, the party covering such expenses shall be entitled to reimbursement from the other party for one hundred percent (100%) of said contribution.

'

Each of the Parties shall receive one-half (1/2) of all income from the Properties, net of expenses, and each shall report one-half (1/2) of the taxable income and claim one-half (1/2) of all allowable deductions on his/her income tax returns. This paragraph shall apply without limitation and without consideration of each party's managerial efforts to maintain each Property.

'

3. TERM; RIGHT OF FIRST REFUSAL”'

'

This Agreement shall be effective on the date it is executed by the last of the Parties hereto and shall continue in force and effect indefinitely and unless otherwise terminated per the terms hereunder. The obligations and rights under this Agreement shall terminate upon the disposition by either party of his or her ownership interest in either of the Properties, upon the death of either party, or otherwise by a written, signed and notarized agreement of the Parties.'

'

During the term of this Agreement, before one party may convey his or her interest in the Properties, or before such interest may pass by operation of law, such party shall first offer for purchase his or her interest in the Properties to the other party at the fair market value of such interest. The fair market value of the interest in the Properties shall be determined by appraisal, with the appraisal taking into consideration an appropriate discount for “lack of marketability” due to the ownership of the Properties as tenants in common. The Parties shall jointly select an appraiser. If the Parties are unable to agree regarding an appraiser, each shall select an appraiser, and those two (2) selected appraisers shall jointly select a third, who shall prepare the appraisal. The cost of the appraisal shall be shared equally by the parties. The party being offered the ability to purchase shall have thirty (30) days after the delivery of the appraisal to that party during which to accept such offer, and if that party does not accept such offer within that thirty (30) day period, the offering party may accept third-party offers for his or her interest in the Properties.'

'

To the extent that the Properties pass under a Will of either of the Parties or in accordance with Pennsylvania's intestacy statutes, the above provisions shall apply, and the deceased party's estate must first offer the Properties to the other party for purchase in accordance with the provisions set forth herein above prior to listing the property for sale or conveying title to the property to anyone else.

'

4. MISCELLANEOUS

'

Waiver. The failure of any party to insist in anyone or more instances upon the performance of any of the terms and conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted hereunder, or of the future performance of any such term or condition.

'

Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or agreements among the parties, whether written or oral, to the extent related to the subject matter hereof. No party hereto has relied upon any promise, representation, warranty, agreement, covenant, or undertaking, express or implied, other than those expressly set forth in this Agreement.

'

Amendment. This Agreement may not be amended, modified, or altered in any manner, except pursuant to a written instrument signed and notarized by each of the parties hereto.

'

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the _______________, without regard to conflicts of law principles and subject only to the jurisdiction of the ____________________, and the appellate courts to which appeals can be taken.

Binding Nature. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.

Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

Counterparts. This Agreement may be executed in counterparts.

”

IN WITNESS WHEREOF,”””””””””” , a/k/a”””””””””””” , and”””””””””””” have duly executed this Agreement as of the day and year first above written.

””””””””””””””””””””””””'

'

”””””””””””””' WITNESS

'

'

'

DATE: _____________________

MariaJose Delgado, a member of this newsletter's Board of Editors, practices family law exclusively as an associate of Shemtob Law, PC, Blue Bell, PA. She is an active member of the PBA Family Law Section, the Montgomery County Bar Association Family Law Section, the Doris Jonas Freed Family Law American Inn of Court, and the Hispanic Bar Association of Pennsylvania. She may be reached at [email protected].

Marriage-schmarriage, apparently. Family law practitioners, take note: According to a recent study by the National Center for Family and Marriage Research, the U.S. marriage rate is the lowest in over a century. Julissa Cruz, Marriage: More than a Century of Change, FP-13-13 (National Center for Family & Marriage Research) (2013) (available at http://bit.ly/1bv7OR6). Since 1970, the marriage rate has declined by almost 60% overall. The study details a less drastic decline among the educated, but nevertheless, a decline. Furthermore, family law attorneys in many states do not yet have the option of adding same-sex couples to their divorce practice. Same-sex couples in many states have no option but to cohabit unmarried, purchase property together, and intermingle their finances without the protections of an applicable divorce code.

Whether they cannot marry or choose not to marry, these unmarried, cohabiting couples embed themselves in years of financial entanglements only to find themselves in similar positions as our traditional family law clients: children in need of support, jointly titled property, mutual debt, and a desire to emerge from the relationship financially whole. They come to us for our expertise in child support, custody, and property division, as well as our saintly ability to maintain legal focus through the emotional minefields of the relationships' dissolution. Unlike our married clients who can opt to address custody, support, and property division under the umbrella of a divorce action in family court, unmarried cohabitants must litigate their property division through a separate, unrelated civil action.

This article outlines avenues of property division and other financial relief for unmarried couples in civil court, and provides a form agreement couples could use to prevent potential complications.

Division of Real Property By Partition

If the parties titled their real property in joint names, either as co-tenants or as joint tenants with right of survivorship, either party can initiate an action for partition. Many states have separate rules of court specific to partition actions. Most jurisdictions permit three types of partition: partition-in-kind, partition-by-sale, and partition-by-appraisal.

Through a partition-in-kind, the property is physically divided into separate properties in proportion to each co-owner's interest. Courts generally prefer this option only where such division would not prejudice or spoil the property as a whole. Naturally, the physical attributes of many properties, such as single-family homes, would preclude this type of partition.'

In a partition-by-sale, the property is listed for sale to a third party and the court distributes the proceeds among the co-owners in proportion to their respective interests. The completed sale will dictate the amount of proceeds to divide, but the parties may argue over the plan for sale, credits for expenses paid, and the percentage of proceeds distribution.

In a partition-by-appraisal, known in some jurisdictions as a partition-by-allotment, the court assigns the property to one co-owner and directs that co-owner to purchase the other co-owner's interest in the property. The value of the property for purposes of such buy-out would be based upon either an agreed appraisal or the valuation of a court-appointed referee or arbitrator. This option also leaves plenty of room to argue over credits for payment of property-related expenses and percentage distribution.

When it comes to determining percentage interests, attorneys should not take clearly allocated titles for granted. Issues that might arise in the event of a partition often involve reimbursement for mortgages, renovations, repairs, maintenance and expenses. Although a joint tenancy creates equal interests among the tenants, a breakup may sever the joint tenancy and raise the question of ownership percentage and entitlement to credits. See e.g., Nicholson v. Johnston , 2004 Pa. Super. 279 (ending of the relationship, combined with one party's exclusive occupancy thereafter, was sufficient manifestation of parties' intent to sever the joint tenancy).

As for credits, many jurisdictions may not give a party credits for property-related expenses if that party had exclusive occupancy of the house. Instead, a court may offset the credits requested for such expenses by the rental value owed to the non-occupying party. See e.g., Cahill v. Kerins , 784 So.2d 685 (La. App. 2001) (where one party had exclusive possession of the property, the occupant's request for credits was offset by fair rental value, but no offset for payment of mortgage); Barrow v. Barrow , 527 So.2d 1373 (Fla.1988) (exclusive occupant's request for credit offset by fair rental value due to absent cotenant). In the instance of a severed joint tenancy, the court may determine whether either party should be entitled to credit ab initio with the first down payment, or simply from the date the joint tenancy was extinguished.

Partition actions may involve a request for accounting. If both parties are titled owners, but only one party paid the mortgage while the other party covered household expenses such as groceries, the house-cleaning bill, etc, the party covering household expenses may have a more difficult time recovering any credit for such expenses. The money out the door may be equal to both parties, but some jurisdictions will not recognize credits for any expenses not directly related to the property itself or its value, unless such intent to divide the expenses as such can be clearly evinced by the parties.

In the absence of such agreement, or in the event one of the parties is not on the mortgage, the party missing out on the division of the property may wish to file a suit in equity to recover his or her loss. Many courts now enforce express contracts between parties to share expenses or otherwise divide household labor under the theories of unjust enrichment or promissory estoppel. However, proving such intent, especially in the absence of any writing, can be a difficult burden to overcome.

Prevention

Attorneys understand more than most that written agreements can solve problems before they arise. Ideally, a couple venturing into a joint ownership of property or other financial partnerships will make their intentions clear with a written agreement, such as the one illustrated below, at the outset of such venture.

'SAMPLE AGREEMENT FOR UNMARRIED COHABITANTS

'

AGREEMENT

'

”' THIS AGREEMENT, made this ________ day of ________________, 2014, between”””””””””””' , also known as”””””””” , at”””” (address)”””””' , and”””””””””””” , at”””” (address)”””””' (collectively “the Parties”).

”

WHEREAS, the Parties have entered into agreements of sale for the purchase of two residential real properties (hereinafter “Properties”) with addresses at __________________________________________ and _______________________________, copies of which agreements for sale are attached hereto as Exhibit “A;”

WHEREAS, the Parties, who are not married to each other, are in the process of purchasing the Properties together;

WHEREAS, the Parties are purchasing the Properties as business partners;

WHEREAS, the Parties desire to hold title in the Properties as tenants in common, with each owning a fifty percent (50%) interest; and

WHEREAS, the Parties desire to equally divide all expenses and income derived from the rental of the Properties, subject to the terms herein.

NOW THEREFORE, the Parties hereto form this Agreement, and agree as follows:

'

1. TITLE TO PROPERTIES

The Parties agree to take and hold title to the Properties as tenants in common with no rights of survivorship, and with each party owning an equal one-half (1/2) interest in such Properties, and with each party enjoying all other rights entitled to tenants in common under the laws of Pennsylvania, including but not limited to the ability to convey, encumber and/or devise his or her interest in the Properties. In the event of a marriage between the Parties, the Parties agree that ownership of the Properties, including but not limited to the right to income derived therefrom and title thereto, shall remain as set forth under this Agreement, unless the Parties agree otherwise in writing and before a notary.

'

2. DIVISION OF PROPERTY EXPENSES AND INCOME

'

The Parties shall equally contribute to the initial down payments on the Properties, as well as all costs, expenses, and payments incurred or resulting from, among other things, taxes, maintenance, upkeep, renovations, and mortgage payment obligations (to the extent that both of the Parties are obligated under the mortgage documents). No renovations shall be made unless the Parties both agree to same.'

'

To the extent that either of the Parties contributes more than fifty percent (50%) for costs, expenses, and payments, including but not limited to taxes, maintenance, upkeep, agreed-upon renovations, and joint mortgage payment obligations, said party shall be entitled to reimbursement for the other party's share of same. To the extent that either of the Parties contributes to the payment of mortgage expenses or other expenses that have been incurred by the other party alone, the party covering such expenses shall be entitled to reimbursement from the other party for one hundred percent (100%) of said contribution.

'

Each of the Parties shall receive one-half (1/2) of all income from the Properties, net of expenses, and each shall report one-half (1/2) of the taxable income and claim one-half (1/2) of all allowable deductions on his/her income tax returns. This paragraph shall apply without limitation and without consideration of each party's managerial efforts to maintain each Property.

'

3. TERM; RIGHT OF FIRST REFUSAL”'

'

This Agreement shall be effective on the date it is executed by the last of the Parties hereto and shall continue in force and effect indefinitely and unless otherwise terminated per the terms hereunder. The obligations and rights under this Agreement shall terminate upon the disposition by either party of his or her ownership interest in either of the Properties, upon the death of either party, or otherwise by a written, signed and notarized agreement of the Parties.'

'

During the term of this Agreement, before one party may convey his or her interest in the Properties, or before such interest may pass by operation of law, such party shall first offer for purchase his or her interest in the Properties to the other party at the fair market value of such interest. The fair market value of the interest in the Properties shall be determined by appraisal, with the appraisal taking into consideration an appropriate discount for “lack of marketability” due to the ownership of the Properties as tenants in common. The Parties shall jointly select an appraiser. If the Parties are unable to agree regarding an appraiser, each shall select an appraiser, and those two (2) selected appraisers shall jointly select a third, who shall prepare the appraisal. The cost of the appraisal shall be shared equally by the parties. The party being offered the ability to purchase shall have thirty (30) days after the delivery of the appraisal to that party during which to accept such offer, and if that party does not accept such offer within that thirty (30) day period, the offering party may accept third-party offers for his or her interest in the Properties.'

'

To the extent that the Properties pass under a Will of either of the Parties or in accordance with Pennsylvania's intestacy statutes, the above provisions shall apply, and the deceased party's estate must first offer the Properties to the other party for purchase in accordance with the provisions set forth herein above prior to listing the property for sale or conveying title to the property to anyone else.

'

4. MISCELLANEOUS

'

Waiver. The failure of any party to insist in anyone or more instances upon the performance of any of the terms and conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted hereunder, or of the future performance of any such term or condition.

'

Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or agreements among the parties, whether written or oral, to the extent related to the subject matter hereof. No party hereto has relied upon any promise, representation, warranty, agreement, covenant, or undertaking, express or implied, other than those expressly set forth in this Agreement.

'

Amendment. This Agreement may not be amended, modified, or altered in any manner, except pursuant to a written instrument signed and notarized by each of the parties hereto.

'

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the _______________, without regard to conflicts of law principles and subject only to the jurisdiction of the ____________________, and the appellate courts to which appeals can be taken.

Binding Nature. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.

Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

Counterparts. This Agreement may be executed in counterparts.

”

IN WITNESS WHEREOF,”””””””””” , a/k/a”””””””””””” , and”””””””””””” have duly executed this Agreement as of the day and year first above written.

””””””””””””””””””””””””'

'

”””””””””””””' WITNESS

'

'

'

DATE: _____________________

MariaJose Delgado, a member of this newsletter's Board of Editors, practices family law exclusively as an associate of Shemtob Law, PC, Blue Bell, PA. She is an active member of the PBA Family Law Section, the Montgomery County Bar Association Family Law Section, the Doris Jonas Freed Family Law American Inn of Court, and the Hispanic Bar Association of Pennsylvania. She may be reached at [email protected].