Why You Want a Cohabitation Agreement If You Buy Property with a Partner
Suppose you and your significant other aren’t married, but you’re in a long-term relationship. The two of you are tired of renting so you decide to look for a house to purchase together. Since one of you is working and the other is currently unemployed, it made sense to put only the employed partner on the loan application. After finding a home you like, you made an offer (signed by both), and it was accepted. You put 20 percent down on the home – one contributed more than the other – and both of your names were listed on the closing documents and the deed.
After the purchase, you move in and proceed to each make half of the mortgage payment each month and spend money on home improvements and upkeep. A year-and-a-half later, you and your partner decide to sell the home and net a healthy profit. At the closing, all the proceeds were wired to the partner listed on the loan application.
After a few months, however, your relationship has hit a rough patch and your partner refuses to give you your share of the proceeds. Since you were both on the deed and each had a 50 percent share of the property, the law should be on your side, right?
Technically yes, but you should be prepared to take legal action if your partner continues to refuse to split the proceeds fairly. One way this difficult and expensive situation could have been avoided in North Carolina would have been to sign a legal contract known as a
cohabitation agreement. We have successfully represented clients in cases like these, and we can tell you from experience: not having a cohabitation agreement can cost you thousands of dollars more in the long run, than if you had one in place.
What is the definition of cohabitation?
Under North Carolina law, cohabitation is:
…the act of two adults dwelling together continuously and habitually in a private heterosexual relationship, even if this relationship is not solemnized by marriage, or a private homosexual relationship. Cohabitation is evidenced by the voluntary mutual assumption of those marital rights, duties, and obligations which are usually manifested by married people, and which include, but are not necessarily dependent on, sexual relations.
In North Carolina, it was illegal to live with a partner if you were unmarried until 2006, when the state ruled that the rarely enforced cohabitation law was unconstitutional.
What is a cohabitation agreement?
Although certain North Carolina cities and counties recognize domestic partnerships, the state does not universally recognize civil unions, domestic partnerships, or common law marriage. As a result, when unmarried partners break up, there is no legal recourse for the division of property other than what applies to any two individuals who live together as roommates.
In the absence of a binding contract between two unmarried individuals, state law provides that assets be divided based upon who is named on the title of ownership, or the party that can prove that they paid for the property, with limited exceptions.
A cohabitation agreement is a legally binding contract made between two unmarried people who are living together as romantic partners that provides them with the same property rights that married couples have. You can enter into a cohabitation agreement even if you currently live with your partner; however, the agreement typically must be put into place before the parties end the relationship.
How do I know if I need a cohabitation agreement?
Married couples have certain rights under the law, as marriage is a legal contract that ensures certain protections to both parties, including how to divide property, handle alimony, and determine child custody and support. In North Carolina, unmarried couples are usually under no such contract unless they sign a cohabitation agreement. This means they have no comparable protections as to property and income, either during the relationship or after it ends, no matter how long they lived together. However, North Carolina’s child custody and child support laws still apply, whether a couple was married or not.
If you are cohabitating with another person, there are certain circumstances when you should consider signing a cohabitation agreement with an unmarried partner. These include:
- You own property
- You share property with your partner
- You are considering purchasing property with your partner
- You are in business with your partner
- You have children from a previous relationship or with your current partner
- You have made plans to have children with your partner while unmarried
- You have made agreements with your partner about who will work and pay for what while together but unmarried, and whether any assistance will be made to a partner should you separate
No matter the status of your relationship, a cohabitation agreement will ensure that you are legally protected if the arrangement ends.
What should I include in my cohabitation agreement?
A legally enforceable cohabitation agreement will commonly include the following:
- The date the parties entered into the agreement
- The date the agreement went into effect
- A complete listing of the assets and debts held by each party
- Which assets will remain in the hands of the original owners
- How the parties’ contributions for joint purchases will be handled
- How assets may be distributed in the event of the death of one of the parties
If the parties decide to get married, the cohabitation agreement will no longer remain in effect. However, if the provisions regarding assets and debt outlined in the agreement are still applicable and agreeable to both partners, they can become the basis for a premarital agreement made between the parties.
If you have questions about property division and cohabitation agreements and are unsure whether you and your partner should consider entering into one, the family law attorneys at Epperson Law Group, PLLC have decades of experience and knowledge of local courts. We’ll help you consider all the potential ramifications of cohabitation agreements and provide solid legal advice regarding whether you and your partner should consider one. Contact our firm by completing our contact form or call 704-321-0031 to schedule an initial consultation at one of our Charlotte, Weddington, Boone, or Concord offices today.
Steven B. Ockerman is a graduate of the U.S. Naval Academy and Washington University School of Law. He has practiced law for over 25 years, concentrating on family law matters for over 16 years, and is a Board Certified Specialist in Family Law since 2009.
Find out more about Steven B. Ockerman