Thump…. Thump…. thump…your heart is thumping, you know it’s coming…he’s about to pop the big questions. You know it. It’s been long enough. You. Are. Ready.
He leans in and pops the question…”So…wanna live together?”
So you are moving in together, congratulations! That is such a huge step for couples of all ages, especially couples in love.
Selfishly, I enjoy working with first time home buyers the most! They are happy, excited, and eager to listen to make sure the job is done right, and always have a smile on their face.
But even with all the excitement and love (that is so strong you can smell from blocks away) there are practical issues that all couples need to discuss when buying a home together. And as your REALTOR®, a women, and an educated buyer I feel it’s important I give you my two square feet…I mean my two cents.
I have seen this often over my eight years in real estate:
A couple will go to purchase a home but because one party makes more Money than the other they are the ones with the down payment and they are the ones legally buying the home. Don’t get me wrong, I believe that’s fair! My concern lies when the other party is paying the same monthly costs to keep the home running and believes he/she has legal stake in the home. For example they are paying for utilities, home repairs, groceries, furniture, etc. If this sounds like you then keep reading!
It’s important to know your options and to understand what the best route is for you, to do this you must understand the fundamentals.
What is A Title?
The title is a legal document that tells us who and what type of legal ownership someone has to the land. It is provided by the Government of Alberta Registries Office and states who owns the land, if there are any caveats, liens, mortgages, etc. on the property.
How does purchasing a home work?
Once you have found that dream home with a REALTOR® you trust it is time to write an offer. Once the offer is accepted you proceed with your conditions (financing, a home inspection, and if buying a condo you must review the condo documents) if you are satisfied with your conditions you can go ahead and close the deal. About two weeks before possession day you meet with your lawyer to transfer title. Meaning that on the day you move in the title will have your name on it instead of the old owners.
It’s important to know that whoever signs the offer to purchase and the mortgage documents is who’s name will be on title.
What is common law and how does it work?
A common law relationship, aka an Adult Interdependent Relationship, is a committed personal relationships between people that are not married to each other, where they agree to share emotional and economic responsibilities. Almost all boyfriend and girlfriend relationships will fall in to this category.
To legally be considered as an interdependent relationship when it comes to real estate you have to have been living with the other person for three years or have both chosen to enter in to an agreement and put it in writing.
For the sake of this blog I am only speaking about the matter of adult interdependent relationships and its relation to real property aka your home!
Janet and Ben moved in together four years ago. Janet was a student and didn’t have funds for a down payment, but Ben did. So together they found a house and put it in Ben’s name. Ben paid for the down payment, mortgage and property taxes while Janet paid for all the house hold repairs, groceries, and utility bills. Now they are breaking up and Janet has to move out. How is Janet protected now that Ben has asked her to leave? She just spend $44,000 on household bills over four years and now she has moved out…she has no equity and no claim to the property she just spent four years paying towards!
Sure, Janet can sue Ben but lawyers are extremely expensive with typical retainers of $3,000 to $10,000 (not including hourly costs).
Here are two easy ways Janet could have secured some claim to the home she just spend four years building.
- Ben and Janet could have discussed the terms of an adult interdependent relationship in regards to the house and what happens if the relationship goes sour. A lawyer will help you write one together so all parties are happy for only an hourly fee.
- They could have added Janet to the title, giving her legal right to the property, a year after they took possession of the home. After a year of ownership you can add or take someone off title as long as both parties agree.
Here are the three common types of ownership:
- Sole Ownership – either a person or a registered company is the sole owner of the land
- Tenancy-in-Common – in this type of ownership there are two or more owners called tenants-in-common; when a tenant-in-common dies, that person’s share in the land goes to his or her estate, not automatically to the other co-owner(s)
- Joint Tenancy – this type of ownership also involves two or more owners but each owner has the right of survivor-ship; when one owner dies, that person’s interest automatically passes to the other owner(s)
How can you prevent yourself from getting in to a similar situation as Janet?
- Saving up for your own down payment and buy the home legally with your partner or purchase your home and rent it out – this gives you a backup plan.
- Entering in to an adult interdependent relationship agreement with your partner.
- Talking to your partner about what they see the living situation being? Is it a landlord tenant situation? If so outline a rental agreement so both parties know what is expected.
- It is always a good idea to keep receipts for money spent on the house whether its house hold repairs, utility bills, and even groceries/furniture! This is the only way to prove what you have actually spend on the home.
Talking about the nitty gritty topics like this can be tough. But when it comes to one of the biggest investment you may ever make it has to be done.
It is also important to work with an experienced and knowledgeable team that understand your situation inside and out. I often joke that I am half councilor-half REALTOR®. I ask my clients what their plan is and where they see themselves in five years. This may change the style of home we look at and what type of mortgage agreement they sign. A good lawyer will also ask these questions and recommend signing an adult independent relationship agreement if they feel it is needed. Of course, the decision is always up to you, but choice wisely.
Got questions, let’s chat!