How do property rights work for unmarried couples?
Applying for a mortgage loan is separate from the right of ownership. So whether you produce jointly or individually, you can always hold the title as you see fit. This means you can choose to have one person on the title or both. When registering your title as an unmarried couple, you can divide ownership rights in any of the following ways.
Solely owned, only one person will be on title and retain ownership rights. If a married couple opts for sole ownership, the non-owning spouse is often required to legally relinquish their ownership rights by signing a quit claim. If an unmarried couple opts for sole proprietorship, this is not necessary.
Advantages: Transactions like selling the house or refinancing are easy to complete because there will be no friction of dissenting opinions. If one person in the relationship does not want the financial obligation of ownership, they do not need to be legally bound to it.
The inconvenients: If the sole proprietor dies without placing the home in a will, transferring ownership can be extremely difficult. He has to go to probate, which can be long and frustrating for surviving partners. Also, even though both people in the partnership are contributing to the monthly mortgage payments, only one will constitute capital.
In joint ownership, two or more people are listed on the title. All parties receive equal rights and shares in the equity of ownership. In the event of death, ownership automatically passes to the surviving co-owner(s).
Advantages: The financial burden is shared equitably and all parties build equity. In the event of death, there is no need to go through probate, ownership is automatically transferred to the surviving co-owner(s).
The inconvenients: All transactions such as refinancing or sale must be approved by all parties. The property cannot be bequeathed to a third party, ownership automatically passing to the surviving co-owner(s). Additionally, if a party is facing a legal judgment for debt collection, a creditor can ask the court to force the sale of a home in order to pay the debt.
In a joint tenancy, two or more people may have a vested financial interest in the dwelling, although it need not be equal. Each party individually holds title to a part of the house. For example, one partner may own 60% of the house and the other 40%. Each individual could transfer their individual title to the person of their choice, who would then hold 60% or 40% respectively.
This type of ownership refers only to financial gain, not living space. With joint tenancy, both parties have equal rights to the habitat of the whole house.
Advantages: If a partner pays more on the monthly mortgage, the equity can be divided accordingly. Each party can use their share of the property’s wealth as they see fit. Individuals are not threatened for their part if a creditor places a lien on another owner’s share. Since each party holds their own title, the transfer of ownership is simpler than in a condominium.
The inconvenients: Automatic survivor rights are not in place, so if one of the parties dies, their part of the house will face the same lengthy probate process as a single-ownership property. All parties are responsible for the debts associated with the property, so if one party fails to pay their share of property taxes, for example, the other parties would be financially liable.