Our firm often deals with difficult situations created by a homeowner placing the name of another person on the deed to their home. This usually happens with good intentions. The parties are romantically involved, the homeowner wants to make sure the home goes to a specific person should he or she die, or a co-signor is needed to purchase or refinance a home. Lenders often require a co-signor to also be on the deed to the home.
It also means that if the co-owner has financial troubles, these problems can attach as liens to the home. If the co-owner gets a divorce, a spouse may make a claim against the home. If the co-owner dies, his or her estate may claim an interest in the home.
Depending upon the circumstances, the homeowner’s remedy is likely to be a quiet title lawsuit or a partition lawsuit. In such a case the Court will determine the rights of each party and, in a partition lawsuit, can order the home sold and the net equity divided per court order.
This can be a disaster for the homeowner. It may be impossible to replace the home with only a portion of its equity to work with. Prices have appreciated so quickly in Arizona that many homeowners can no longer afford to purchase the homes they are living in.
Instead of spending thousands of dollars to recover a half interest in your former home, it would be better to prevent the situation from occurring.
Persons romantically involved should have a domestic partnership agreement that sets forth clearly what happens to the home should their relationship terminate.
Persons wishing to make sure a specific person obtains their home upon death should consider using a beneficiary deed which transfers the home upon death without need of a probate or a Will. If circumstances change, a homeowner can revoke the beneficiary deed at any time.
When confronted with the need for a co-signor to purchase or refinance a home, the homeowner should create a basic agreement as to what, if any, the rights of the new co-owner are and set forth the reason the co-owner was put on the deed. The agreement should also require the co-owner to deed to the homeowner his or her interest upon closing of the loan or at an agreed upon later date. The actual deed should be prepared, signed and delivered in advance to the homeowner for recording when needed. This will protect the homeowner in the event of the co-owner’s death.
The take-away is to never put another person’s name on the deed to your home or other real property without first consulting with your lawyer. We also recommend consultation with your accountant to learn of any tax issues that may be created.