By Broderick Perkins
With housing appreciating faster than their marriage plans could gel, Sunnyvale, CA-residents Julie Chancerelle and Eric Ziemelis wisely decided to beat the clock and purchase a home before they wed.
Furniture designer Ziemelis, was temporarily income-poor but cash-rich, with enough savings for a hefty down payment. Cash-poor Chancerelle, with her income-rich public relations career, paid the bulk of the mortgage payments as well as home improvement costs.
Should the now-married couple ever separate, their tenants-in-common title agreement gives Chancerelle a half stake in any sales profit, but only after Ziemelis recovers his down payment -- or so the couple thinks.
Like so many others who choose to live together either for economic or personal reasons, the couple overlooked a key issue to holding title to a home they both own -- it should come with a detailed agreement that spells out how to handle unforeseen events.
"In California, getting married would mean that appreciation or equity prior to marriage would be handled under the tenancy in common agreement. Appreciation after the marriage would be handled under community property law," says Frederick Hertz, Oakland, CA-based real estate attorney.
Ziemelis could get less than he bargained for, Chancerelle could get more, unless a clearer contract stipulates otherwise.
"I recommend putting in any tenancy-in-common agreement that if the parties get married the agreement will continue and community law will not apply. Otherwise, you have a very confusing situation," said Hertz, also co-author of "The Living Together Kit: A Legal Guide For Unmarried Couples" (Nolo Press, $29.95).
Because two or more people often approach the purchase of a home on unequal financial footing, the tenants-in-common approach is the most popular way to hold title.
Tenants-in-common agreements allow couples to own property unequally -- one person can own 75 percent, the other only 25 percent, provided the division is specified on the deed or in an separate written agreement. Otherwise, the law presumes ownership is 50-50.
In addition to complications that could arise after marriage, tenancy in common titles don't come with the right to survivorship. If one person dies, his or her share of ownership goes to whomever was specified in a will or living trust. Without a will, trust or other contract, a death of one owner could trigger what's called "interstate succession.” State laws vary, but generally, without contractual stipulation otherwise, the share of the deceased party goes to a close relative.
"Every couple eventually will face either death or dissolution. If you don't work out an agreement on this issue, you will surely face conflict, since you are not protected by the rules of traditional marriage," said Hertz.
Holding a joint tenant title, however, does give the surviving owner rights to the deceased owner's share without probate proceedings. Some states require you to add to the title the words "with right of survivorship" to assure that the surviving owner becomes sole owner.
As joint tenants, you both own the property equally, but that means either party can sell his or her share or take other steps -- without notifying the other.
"Check the law in your state as to whether any one joint tenant can sell or borrow money against or use as security, their status as a joint tenant, upon their signature alone," suggests Paul Joseph Joyner, broker-owner of Sommers-Ethan Properties in Santa Clara, CA.
Experts advise against ever putting the title in one name, say to save on taxes or avoid creditors. If one person dies or the sole owner flees, the other party faces a legal nightmare to recover his or her share.
Unmarried couples should also consider the tax implications should they decide to marry or split up and need to make title changes. Transferring title without doing so at fair market value could make the transfer a taxable gift, subject to federal and state tax laws.
"Then they often find that the lender won't allow this and whoever is to be the remaining sole owner must refinance to get the other party off the note, which is an unexpected cost and an added source of conflict between the parties," says Wayne, PA-based mortgage expert Jack Guttentag, who operates the MtgProfessor.Com Web site.
Broderick Perkins, has been a consumer journalist for 20 years. Experienced in print, electronic, and consulting journalism, he is chief executive editor of San Jose, CA-based, DeadlineNews.Com, an editorial content and consulting firm.
© Copyright 2000 by Broderick Perkins. All Rights Reserved.