The Ins and Outs of a Cohabitation Agreement

Sharing a home is a huge responsibility. When one or more people live together, particularly if they own the home, it is a good idea to put the rules of the road in writing. This is known as a cohabitation agreement. Couples, roommates, even family can enter into a cohabitation agreement to cover the essential issues that might become difficult if the living arrangement falters.

Ownership Interests

Real property law is a complex bundle of rights and obligations. A cohabitation agreement can bring clarity to the parties by spelling out who owns how much of the home in terms of percentage interests or some other metric. This is particularly useful in situations where the parties make different financial contributions to the home.

Example: Jeff and Marie decide to buy a home. Marie has more cash to put down on the house. What happens at the sale of the house? Do they each get paid back for the cash down and split any additional profits equally? Or do they split the entire profits according to their respective cash contribution? Or do they come up with another formula that they agree is a fair allocation at the time of sale?

When the time comes to sell the home, a cohabitation agreement will make it easy to divide the proceeds. In drafting the agreement, a good family law attorney will have seen many possible solutions and can work with the parties to find the formula that they each feel is a fair division.

Contributions

In addition to money down, home ownership involves a range of monthly expenses. Mortgage, utilities, maintenance, and occasional additional expenses are another area where the parties may want to have a written agreement about how to cover these ongoing expenses. This will help at the time of sale, but, more importantly, it is an agreement about responsibilities that will make living together simpler. This is a useful agreement to reach when there is an income disparity, and the parties agree that one of them can contribute by doing more labor.

Example: Andrew owns a condo, and Claire moves in. Because the mortgage is in Andrew’s name, the two agree that Claire will give Andrew a check to cover part of the mortgage payment, they will put the utilities in Claire’s name and Andrew will give Claire a check for half of the utilities. The parties draw up a cohabitation agreement that spells out these terms, as well as Andrew’s interest in the condo before Claire moved in, and clarifies that she is gaining an interest in the condo from the date of the move-in.

There are a lot of financial parts to home ownership, including some intangible ones. A good cohabitation agreement comes together when the parties think through these various issues before they become a problem. Putting them in writing with the help of a family law attorney is the best way to make an agreement and stick to it.

Personal Property

In addition to real property, the furnishings of the home are going to be shared. A cohabitation agreement can identify who owns what items at the outset and make provisions for what to do with new purchases in the event the relationship dissolves. 

When Things Change

The whole point of a cohabitation agreement is to anticipate what might happen when things change. The Agreement can set out what circumstances can trigger the sale of the house, provide for the right of first refusal for a buy-out or otherwise make sure that each party understands what might happen to ownership interests at the time of sale. But, in the case of couples, a marriage might occur, which could change the nature of an unwritten co-ownership agreement. For that matter, if the parties orally agreed that only one of them was the owner of the home, marriage would give the other person potential rights that weren’t intended. Like a pre-nuptial agreement, a cohabitation agreement can clarify important issues from the outset.

It is rare that people who live together are exactly equal in all respects. Different contributions have value, and a cohabitation agreement can help spell this out. Are you interested in a cohabitation agreement? Contact us here to set up a consultation.

DISCLAIMER. The material contained on this Website is not offered, nor should it be construed, as legal advice. The material on our Website has been prepared and published for informational purposes only. You should not act or rely upon information contained in these materials without specifically seeking professional legal advice.

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