No one enjoys a breakup. For unmarried couples who own real estate together, these breakups can be even more complicated. Fortunately, there are several options for handling the situation. The best approach will likely depend on whether a party wants to keep the house and how contentious the breakup is.
1. Buy out Your Ex’s Interest
If one of you wants to stay in the house, your first option is for your ex to buy out your interest. This process typically involves calculating the value of your respective contributions and any equity in the house. If there is a mortgage, your “buy-out price” doesn’t even have to be monetary. Instead, your ex could continue living there and assume responsibility for paying off the mortgage.
The downside of taking over the mortgage is that it will stay in both parties’ names (at least on paper) unless you can refinance. Unless that happens, it would be risky to sign a quitclaim deed transferring your interest because it could leave you on the hook for the loan while no longer legally owning the property. It is also essential to check with your mortgage lender ahead of time because there might be a clause that requires immediate payment of the entire loan balance if you transfer your interest without approval.
But if your ex has decent credit and the financial means to qualify for the loan on their own, then refinancing in exchange for a quitclaim deed could help ensure you get a “clean break” from the property itself in addition to your ex.
2. Sell the Property/Divide the Proceeds
A more straightforward option is to sell the house, assuming that neither of your plan to keep living there. If there is equity in the home, you could divide the proceeds in proportion to your respective shares and contributions to your joint investment.
However, this option is sometimes much easier said than done. For example, you may have trouble agreeing on the more minor things like the realtor, paying expenses, a list price, or similar matters, especially if your relationship with your ex is contentious. Even if you get through the sale, it could be challenging to decide how to divide the sale proceeds afterward, especially if you don’t get along. Or, in the rare case that the home is worth less than what you owe on the mortgage, this move could be more trouble than it’s worth.
3. Attend Mediation
Finally, it may be worth getting a mediator involved if you and your ex cannot agree. Mediation is also an effective tool if the breakup is particularly contentious because you can resolve the issues without even being in the same room. The mediator would help determine how to split the property equitably based on the finances, contributions, personal preferences, property itself, and other considerations.
4. Initiate Court Proceedings
If all else fails, you can file a partition action and request a court to determine your interests in the property. In a partition action, the court will typically hear the evidence and (a) require a party to buy out the other’s interest or (b) order the property sold. Or, if you want to recover the value of your investment instead, you can also bring claims for breach of contract, joint venture, and unjust enrichment, among others. Even if the dispute results in legal proceedings, courts will look at the circumstances as a whole to determine the fairest outcome moving forward.
No matter how you choose to divide the property, there is ample time to ensure the process is no more challenging than necessary. Even the most amicable breakups usually sting. So prepare ahead of time, get your finances in order, do your research, gather relevant documents, and maintain your civility as best you can. Because if you do, you’ll soon look back and thank yourself.
Kim Newton is an Associate Attorney at Griffiths Law PC. Kim focuses her practice on both civil litigation and family law. She works in several fields, such as real estate disputes, insurance bad faith, construction defects, commercial litigation, and other business torts.