Q: I am divorced with two children. I am in the process of buying a house with a friend, although I will be putting up most of the down payment. My friend suggested that title should be held in both of our names as joint tenants. Is this the right way to proceed?
A: Absolutely not. Under a joint tenancy arrangement, both of you would own the entire property. In the event you died first, your entire interest in the property would go by operation of law to your friend, as the joint tenant. Your children would be left out in the cold.
If you are putting up most of the proceeds, why is your friend's name listed on the deed at all? Why not treat your friend's money as a loan to you, which conceivably can be secrured by a promissory note and a deed of trust (a mortgage) on the property.
If you want your friend on the title, the two of you can take it as tenants in common. Under this arrangement, you each have a divisible interest in the property, and your share automatically will go to your heirs in the event of your death. If you and your friend cannot get along in the future, it will also make a division of the property much easier.
And, under a tenants-in-common arrangement, you need not hold the property on a 50-50 basis. For example, if you are putting up two-thirds of the money, the title can be held by you and your friend, with you holding a two-thirds interest and your friend holding a one-third interest, as tenants in common.
You should also consider two other matters. First, if you do not already have a will, make sure that you prepare one as soon as possible.We all have a tendency to procrastinate on our will writing, and serious complications can arise if you do not have a proper will.
Second, if you are going to share property with a friend, enter into a contract spelling out the terms and conditions of your arrangement. There should be a right of first refusal to buy the property in the event you split up, and there should be an agreement as to how the various mortgage and maintenance costs will be allocated.