First, the point of this article is not to bring business to lawyers. The point of the article is to lessen the impact of not talking to an attorney. A stitch in time saves nine or an ounce of prevention saves a pound of cure. See Poor Richard’s Almanack. It has become a common practice for people to delay marriage or decide to not marry but live together. The problem is that the law has not kept pace with the trend.. 9% of recent home buyers are unmarried couples according to the National Association of REALTORS 2019 Profile of Home Buyers and Sellers. According to the Pew Research Center, “(a)moung adults ages 18-44, approximately 59% lived as unmarried partners at some point in their lives while only 50% ever married.” According to the American Psychological Association, 41% of first-time marriages end in divorce and 50% of all marriages end in divorce.
WHY IS THIS IMPORTANT?
This article is a result of my recent experience involving unmarried couples purchasing homes together only to end their relationship and wind up in court to resolve the issues. Most people involved are surprised as to what occurs when they end up in court. The cases I have seen are a result of the title company presenting the deed to the parties as joint tenants with full rights of survivorship as opposed to tenants in common. In every one of these cases, the parties involved did not request the deed to be prepared as joint tenants and, in fact, had no idea what it meant. The language of the deed was decided by the realtor, the title company, or the attorney hired by the title company. If the property is purchased with unequal contribution between the parties and the property is titled as joint tenants, the person supplying more of the contribution is not entitled to his or her additional money back in the event the property is sold. As an example, an unmarried couple obtain title in a house with one party providing $50,000 as a down payment and the other providing $5,000. The parties then go their separate ways. The person who put down the $50,000 does not receive in the sale any more than the person who put down the $5,000. If this is what they intended, then this is okay, but that may not be the case. The party who contributed the higher amount often believes they should be receiving that share of the proceeds as reimbursement. This is why the language of the deed is so important.
TITLE TO PROPERTY
In Indiana real property, other than that held by trusts or a married couple, is held as an estate in common (commonly known as tenants in common) and not as joint tenancy unless expressed specifically as joint tenancy and to the survivor of them (commonly known as joint tenants with full rights of survivorship). See I.C. 32-17-2-1 A deed to two (2) or more people as tenants in common means they all own an undivided interest in the entire property. Unfortunately, even though the law assumes tenants in common unless expressly indicated by the language otherwise, many people end up with a title including the unintended language.
CONSEQUENCES OF TENANTS IN COMMON -vs- JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP
Each tenant is entitled to the use of the whole property but not to the exclusion of the others. This means one or more of the tenants may not exclude the other. If one excludes another, the person who excludes the other(s) can be made to account for the value or income from the property. A cotenant also must account to the other cotenant(s) for any rents, profits, or other in-kind payments. See I.C. 32-30-9-1 If one tenant makes improvements to the property, that tenant is not entitled to recover that improvement in the event the parties split. See Harry v Harry, 26 N.E. 562 (Ind., 1891). If furnishings are added to the property, that raises another issue. The division of the real and personal property, if they cannot agree, goes through a process called partition. See I.C. 32-17-4-1.
The major difference between the two (2) types of title is if you take the example above where one party puts in substantially more money than the other, if held as tenants in common, then the parties would receive their original investment back out of any sale, assuming the property did not go down in value. If the property is held as joint tenants with rights of survivorship, the parties share the proceeds equally and the party who paid the larger share of the down payment receives no more than the person who paid little or nothing.
Another situation is one where the parties intend to marry, or one promises to marry. In Indiana, a person cannot be sued for breach of promise to marry. For example, one party says I will marry you, but we need a house. The other party then purchases the home, and the title is placed in their names as joint tenants with rights of survivorship. If they do not marry, Indiana does not allow a suit for breach of promise to marry. See I.C. 34-12-2-1. Therefore, both parties are entitled to an equal division of proceeds from the sale of the home.
IF YOU MARRY
If the parties do marry what happens? The division of the house is then divided pursuant to divorce law. The court can consider the contribution of the parties and may award a majority to the person placing the down payment. The title to the property does not change to entireties property regardless of whether it is titled as tenants in common or as joint tenants.
If the property is held as tenants in common, then the person who contributes the most toward the purchase receives their contribution at the sale. You should have a written document, much like a prenuptial agreement in a marriage, which sets out how the division will occur. You should address the sale, the contribution toward improvements, what each person pays (i.e., taxes, insurance, repairs, maintenance, mortgage), and how to account for these in the event of a division. This article does not address the possibility of a suit against the realtor, title company, or the attorney who drafts the deed.
This blog does not constitute legal advice, nor does it establish an attorney client relationship. This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.
ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN