Co-ownership Agreement

A Co-ownership Agreement is a legally binding contract between two or more co-owners of residential real property. It establishes the rights, responsibilities, financial obligations, and exit terms that govern the co-ownership arrangement. Without a Co-ownership Agreement, co-owners are subject to default state law — which varies by jurisdiction, rarely accounts for the parties' actual intentions, and often produces outcomes that are costly, slow, and unfavorable to everyone involved.

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Why It Matters

Unlike legally married spouses, co-owners who are not married do not benefit from statutory spousal default rules governing survivorship, inheritance rights, and marital property allocation. Those protections must be created contractually. Co-ownership also creates two distinct layers of obligation. On the asset side, co-owners hold title to the property — recorded on the deed — and each party's ownership share determines their financial stake in the home. On the liability side, co-owners who are on the mortgage and promissory note bear joint and several liability: each borrower is legally responsible for the full loan amount, regardless of their ownership percentage. A Co-ownership Agreement bridges these two layers by defining how contributions, obligations, and equity are allocated among the parties.

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What It Covers

A comprehensive Co-ownership Agreement typically addresses the following areas:

• Ownership structure. How title is held (Tenants in Common, Joint Tenancy, or other forms), each party's ownership percentage, and the rationale behind the allocation.
• Capital contributions. Initial contributions such as the down payment, closing costs, and earnest money, along with how contributions are documented and credited over time.
• Shared expenses. Allocation of ongoing costs including mortgage payments, property taxes, insurance, maintenance, repairs, and capital improvements.
• Governance and occupancy. Decision-making processes, communication protocols, property use and occupancy terms, written notice procedures, and processes for amending the agreement as circumstances change.
• Exit mechanics. Conditions and procedures for a co-owner's departure, including buyout terms, right of first refusal, forced sale provisions, and what happens in the event of death, disability, or other triggering events.
• Default handling. What constitutes a default (e.g., failure to pay, unauthorized transfer, material breach), notice and cure periods, and remedies available to non-defaulting co-owners.
• Dispute resolution. Agreed-upon processes — typically mediation followed by binding arbitration — to resolve disagreements without resorting to a partition action or other litigation.
• Governing law and contingencies. Which state's law governs the agreement, and contingency plans for foreseeable scenarios such as job loss, relocation, or relationship changes.

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Making It Official

A Co-ownership Agreement must be properly executed to be enforceable. All co-owners should review, sign, and date the agreement. Depending on jurisdictional requirements and best practices, notarization or digital signatures may add an additional layer of legitimacy. Co-owners should also create a Memorandum of Agreement — a shorter companion document summarizing the basic terms — and record it with the local County recorder's office to establish constructive notice on the public record.

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What Happens Without One

Absent a Co-ownership Agreement, state property law and general contract principles govern the relationship by default. In most jurisdictions, this means any co-owner can file a partition action to force the sale of the property at any time. There are no pre-agreed buyout terms, no defined process for handling a co-owner's departure, and no mechanism for resolving disputes short of litigation. The cost of unwinding a co-ownership arrangement without an agreement regularly reaches tens of thousands of dollars in legal fees alone.

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Key Points

• A Co-ownership Agreement is a legally binding contract — not a template or informal understanding
• Co-owners who are not legally married do not benefit from statutory spousal default rules governing survivorship, inheritance rights, and marital property allocation — those protections must be created contractually
• It bridges the asset side (title and ownership interest) and liability side (mortgage and promissory note obligations)
• Covers ownership structure, finances, governance, exit mechanics, default handling, and dispute resolution
• Must be properly executed and paired with a recorded Memorandum of Agreement
• Without one, default state law governs — which rarely reflects co-owners' actual intentions

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A Co-ownership Agreement is not a one-time document. It should be reviewed and updated as circumstances change — new jobs, relationship shifts, financial milestones, or changes in occupancy. Co-owners who treat their agreement as a living framework rather than a static contract achieve better financial outcomes and preserve their relationships.