Q: My friend and I intend to purchase a home in the Washington Metropolitan area. We are not married. Each of us will contribute equally to the arrangement. How should we take title to the property?
A: There are three ways in which title can be held with another person. Tenants by the entirety is reserved for a husband and wife, and under this arrangement, both parties own the property jointly, with a right of suvivorship. Thus, if one party dies, the other automatically owns the entire property, without the necessity of having to go through the probate court. Additionally, during the lifetime of both parties, if a judgment has been filed against one of the parties, the house cannot be sold to satisfy that judgment, since it is owned jointly to both husband and wife.
A second method of joint ownership is joint tenants. The elements of this interest are similar to those of a tenancy by the entirety, only the parties are not married. If one joint tenant dies, the other will receive the property automatically.
A third type of ownership is where the parties hold property as tenants in common. Here, each party has a divisible interest in the property, to the extent of their ownership. Thus, if you and your friend took title as tenants in common, each would own 50 per cent of the property, and you could each do with your interest as you saw fit, subject to the other parties equal interest. You may freely sell or mortgage your interest in the property, and your interest may be subject to any valid judgment against you.
Depending on the situation, unmarried couples may or may not want each other to have the entire property, if one should die.
Let's picture the following hypothetical John A. and Mary B. own property as joint tenants with survivorship rights. Each have contributed 50 per cent toward the purchase and upkeep of this property. John and Mary are killed in an automobile accident, and it is determined that John died five minutes before Mary. If John and Mary owned the property as joint tenants, John's interest at the time of his death would automatically pass to Mary, and upon her death the entire property would go to Mary's estate. Clearly, John did not contemplate that strangers would inherit his half interest in the property. This is how lawsuits develop, since John's brothers and sisters may file claims for their interests in John's estate.
To avoid this problem, it is recommended that John and Mary take the property as tenants in common. Each would this own 50 per cent of the property, and have absolute control on their interest.
What should John and Mary do in the event they decide to split up or sell the property at a future date? Here, it is recommended that john and mary enter into a partnership agreement, spelling out their mutual rights and responsibilities. Such an agreement should reflect the financial interests of each partner, and should outline in detail what is to occur if the parties voluntarily separate, terminate the partnership, or decide to sell out to a third person.
Such an agreement is a binding valid contract, to which each party is obligated.
Finally, we still have not answered the question of what happens if either John or Mary dies and other survives. Clearly, if John and Mary want the survivor to have the entire house, they should write a will, indicating their specific intention with respect to their property. Needless to say anyone owning property should have a will, so as to avoid those laws which are highly complex and often go against the real wishes of the individual who dies without a will.
Benny L. Kass, a Washington attorney, answers questions through this column. Write him in care of the Real Estate Section, The Washington Post, 1150 15th St. N.W., Washington 20071.