Contemplating buying an apartment with a significant other when you are not yet married or don't ever intend to be? This should be a breeze in this cosmopolitan metropolis that eschews outdated customs, right? Au contraire.
There's hardly a more NYC-esque date than going apartment shopping after work, then wining and dining night after night until you reach that pinnacle of cohabitation. I'm not even kidding. But actually closing the deal can become an adventure filled with unexpected pitfalls and complications.
Going Off the Deep End?
My relationship advice usually consists of imploring our 13-year-old not to text the boy back in 0.003 seconds, but recently I unintentionally added couple’s counselor to my arsenal of real estate services. Just this year I have assisted three separate couples pursuing home ownership well in advance of wedding vows: two of which are just starting out, and the others are empty nesters on their way to a second marriage. So as a newly minted relationship coach, let me share with you some best practices for keeping a joint purchase from becoming a deal breaker (both the house AND the relationship).
Showing your hand
This may well be the first occasion for the couple to discuss finances in complete detail, and it can be a great impetus to do so as the relationship gets more serious. It can also be a minefield all on its own and reveal more than just numbers in a bank account. If only one party is making the down payment and taking on the mortgage (or paying in cash), he or she can choose whether to
"lift their skirts" to their partner at this time or not. When buying a co-op, the board will do their requisite financial strip-search regardless, but since the board application is assembled by your discreet and savvy agent (moi), it can remain as confidential from the non-purchasing partner as they like. I know, buying an apartment jointly without revealing financial details to one’s partner may seem unconventional, but I can assure you it happens. *NOTE: Even the non-purchasing occupant will likely have to submit an abridged board package to the co-op as well.
The most common way for a couple to hold title to a property is as Joint Tenants, which means they are equal owners and that if one partner passes away, the title passes to the other automatically. A disadvantage of joint tenancy for a relationship that may turn out to be (dare I say) less permanent, is that a joint tenant can sell or give her or
his property interest to a new owner without permission of the other joint tenant, if they have not set up protection against it. It is also not ideal if the couple has different heirs who are accounted for in an existing will or estate plan.
Tenants in Common is another option for holding title where each party has a designated ownership interest and right to alienate, or transfer their share of ownership - which may or may not be 50/50. However regardless of title, a mortgage note dictates that two parties own a property jointly and severally - both are on the hook. So if the couple is buying together but not contributing equally to the purchase, they will want to have an outside purchase agreement between them to specify the details, more on this below.
What happens if the relationship doesn't work out? While it feels like a buzzkill in the midst of a romantic milestone, the wisest course of action is to draft an outside, joint ownership agreement between the parties in advance which governs every aspect of co-ownership.
Manhattan Real estate attorney extraordinaire Sharon Yehoshua says "The purpose of this agreement is not just to outline the co-purchasers' joint and
respective rights concerning the ownership, enjoyment, and the ultimate division of the property in the event of a breakup, but also the division of costs and benefits incident to their ownership of the property - such as upgrades and repairs, rental income and tax benefits. It can also prevent one party from selling or encumbering the property without the consent/right of first refusal of the other occupant." Think of it as a real estate-specific pre-nuptial!
Co-op ownership is more complex in many ways: qualifying, renovating, subletting, and even breaking up. While quitclaiming a co-owner from the title of a house is simple enough, in a co-op, the process of removing one party involves the execution of a new stock certificate which requires another "closing" with the building’s managing agent. The owners must furnish the original stock and lease (which will be in the possession of the mortgage lender, if financed), have it canceled, and then reissued to the new single shareholder. The board also has to approve the new stock and lease. A tedious and costly process.
Notes From the Psychiatrist's Couch
Buying jointly outside of a marriage happens all the time – business partners, siblings, parent and child. But when entered into as a couple, there is an extralegal element with massive emotional stakes and the potential for serious drama. So how can you co-purchase when you are unhitched without unhinging your relationship?
Broach these practical topics before you begin seriously shopping, so you keep the cart behind the horse and don’t build up unnecessary pressures on a budding relationship.
Let the experts be the bad guys. Your broker and attorney can lay down the law that certain legal and practical hurdles must be addressed in advance.
Collaborative Law is a valuable tool where the couple meets with attorneys along with a therapist who can help them communicate effectively and hash out agreements while things are still rosy.
So remember, on your next real estate date night - two’s company, but I will gladly join you…and you don’t even need to buy me flowers.
53 Jane Street
5 Bed | 3.5 Bath | $7,600,000
This month's featured property is my exclusive listing at 53 Jane Street- a landmarked Greek Revival townhouse in prime West Village.
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