MY PARTNER AND I WANT TO PURCHASE PROPERTY TOGETHER
BUT WE ARE NOT MARRIED.
WHAT SHOULD WE DO TO PROTECT OURSELVES?
Co-ownership of property in Louisiana by an unmarried couple or two or more friends/business partners can be a very rewarding venture, but it can also be fraught with problems if not executed properly. Louisiana law contains several provisions that dictate how co-owned property can be acquired, used, managed, and ultimately disposed of. Learning how to protect your property interest should your romantic or business relationship turn sour is the first step in ensuring you won’t be left high and dry. Preparing a Co-Ownership Agreement will give you peace of mind in knowing your assets are protected. Let’s discuss the basics:
Acquiring, Managing, Dividing and Disposing of Co-owned Property
The Louisiana Civil Code defines co-ownership as existing when “two or more persons … own the same thing in indivision, each having an undivided share.” (La. Civ. Code art. 480). Individuals may become co-owners of property in a variety of ways, including through a joint-purchase or through inheritance.
Any property may be co-owned, whether it’s a home, empty land, a business, or a piece of jewelry, and co-owners may decide on ownership percentages and shares in whatever manner they choose. However, Louisiana recognizes a presumption that the shares of all co-owners are equal, unless specified otherwise, so if you and your partner would not like to co-own your property in equal portions, it is critical that you specify your ownership allotments. (La. Civ. Code art. 797). This may be done in a Co-Ownership Agreement.
In the absence of a Co-Ownership Agreement, the following default rules of co-ownership will apply:
Once you and your co-owner have decided what percentage of the property you each own, you must decide how to manage your co-owned property. The general management and use of co-owned property is governed by an agreement between you and your co-owners(s). It is important to note, however, that despite each co-owner’s percent ownership interest, the general default rule is that each co-owner is entitled to use of the entire property. (See La. Civ. Code arts. 797 et seq.).
One co-owner cannot alienate or restrict another co-owner’s use of any or all of the property. If there is a dispute over the use and management of the co-owned thing, in the absence of a Co-Ownership Agreement the court may determine both use and management. (La. Civ. Code art. 803). Avoiding court involvement is one of the many reasons why it is smart to have a Co-Ownership Agreement already in place if and when a dispute arises.
Who Gets to Keep the Revenue Derived from the Property?
If the property produces fruits or products, you will share these fruits and products in proportion to your ownership shares, unless you dictate otherwise by agreement. (La. Civ. Code art. 798). A “fruit” is something produced by or derived from another thing, without diminishing the substance of that underlying thing. (La. Civ. Code art. 551). For example, rental income, interest from an investment account, and flowers from a garden are all considered fruits and would be divided among co-owners by their ownership shares.
Who Has to Pay for Maintenance and Repairs?
In the absence of a Co-Ownership Agreement, if your property requires maintenance and one co-owner incurs necessary expenses for ordinary maintenance or repairs, or pays management fees to an outside party, the default rule in Louisiana entitles that co-owner to reimbursement from the other co-owners in an amount proportional to each of their ownership shares. (La. Civ. Code art. 806). However, if the co-owner who incurred such maintenance expenses also enjoyed the use of the co-owned property, the amount of the reimbursement may be reduced proportionately by the value of that use. Id.
To avoid complexities and complications in getting reimbursed for fees you have spent maintaining your property, it is simple to designate responsibilities in a Co-Ownership Agreement so that you and your partner are clear on who will be responsible for what, and in what proportions.
Who is Liable for Damage to the Property?
Under Louisiana law, if a co-owner causes damage to the co-owned thing as a result of his own fault, he is liable to his co-owner for the damage incurred. (La. Civ. Code art. 799).
Can I lease or sell my share?
Yes. A co-owner may lease or sell his own share of the co-owned thing, without the consent of all the other co-owners. However, one co-owner may not lease or sell the entire co-owned thing without the consent of all the co-owners. (La. Civ. Code art. 805)
Under Louisiana law, any co-owner has a right to demand a partition of co-owned property. (La. Civ. Code art. 807). Unless stipulated by agreement, a co-owner cannot be compelled to own property in indivision with another co-owner. In the event that you decide to stipulate in an agreement that neither you nor your co-owner may partition the co-owned property, the general rule is that you may only be prohibited from partitioning for a period of up to fifteen (15) years.
How to Avoid Co-Ownership Disputes
To avoid these and other potential problems that may arise in a co-ownership situation, co-owners may want a Co-Ownership Agreement, which is a written agreement that can be prepared by an attorney and formally executed by all parties. Such an agreement can lay out terms and conditions of the co-ownership exactly as you and your co-owner would like, rather than relying on the default rules of the Louisiana Civil Code.
For example, if you and your co-owner are purchasing a home prior to marriage, a Co-Ownership Agreement can dictate who pays the purchase price, who makes the mortgage payments, who pays the taxes and insurance, who pays the utility bills, and in what proportions. You may make decisions based on income, ability, need or desire, it’s up to you both.
A Co-Ownership Agreement can also clearly explain what will happen to the property in the event of a divorce or death of one or both co-owners. If either co-owner decides they no longer want to co-own the property, a Co-Ownership Agreement can also dictate terms surrounding the exit of a co-owner from the co-owner relationship. The agreement can stipulate terms and conditions for a sale of the property, either to the other co-owner or to a third party.
For the reasons explained above and many more, if you are thinking about purchasing property together with a person to whom you are not married, it is smart to protect yourself and your assets by having an attorney prepare a Co-Ownership Agreement according to your specific needs. Without a written contract governing your joint ownership, if a dispute arises that you are unable to resolve, you may find yourself in Court, with decision-making powers no longer in your hands.
Dutel Law Firm can assist you in drafting a Co-Ownership Agreement tailored to your situation. Call us today to schedule a consultation at (985) 892-6474, and let our attorneys guide you through the process.
** Disclaimer: Viewing and/or use of the information contained in this blog post does not establish an attorney/client relationship and should not be considered legal advice. This post is meant to provide general information on certain legal topics and is not to be construed as creating any sort of attorney-client relationship.