So your heart’s all a-twitter, it’s all you think about and suddenly, you know – you’re finally ready to take the plunge with your significant other. No, you’re not tying the knot. You’re ready to buy a place in the city together. Before you sign on the dotted line, however, stop in the name of love (sorry, couldn't resist). "I've never seen it work out if the couple isn’t at least engaged,” says Karla Saladino, co-founder of Mirador Real Estate.
Yes, you read right. Couples that say “I do” to buying an apartment before getting hitched may be asking for a world of financial trouble and legal heartache, since in the eyes of the law, they’re technically just two random people co-habitating together, no matter what their Facebook status says.
In that vein, we rounded up some expert advice on what to do if you're thinking of getting tied together, real estate-wise.
GET A REAL ESTATE PRENUP
Love may be all you need in a relationship, but when you’re potentially making one of the biggest purchases you will in your entire life, you must lawyer up, too. "In general, I wouldn’t advise [buying a place with a partner] unless each party enters into separate agreements that clearly spell out their rights and liabilities,” says Edan E. Pinkas of Friedberg Pinkas PLLC. Not exactly the most romantic proposal, but getting something similar to a prenup to protect the individual’s assets is the smartest thing to do when so much of your finances will be tied up in the property.
Here’s why: In the eyes of the law, you’re two unrelated people who own something together, meaning that in the case of a breakup, it’s much harder to say who gets what, especially if there isn’t a paper trail to say who paid for what in the apartment.
Even if you’re engaged and not legally married, you don’t have any security — again, in the eyes of the law, at least — until you draw up a formal contract.
“If you have as big an investment as buying an apartment and you don’t have a written agreement, you’re out of luck,” Saladino says.
PUT A DEED ON IT?
Another important thing to remember? Just because you’re now co-habitating in your shiny new apartment with your beau doesn’t mean you’re any closer to walking down the aisle.
Saladino says that she’s known plenty of people, men in particular, who feel that buying a home with their partner gets them a few more years of technical single-dom. “You shouldn’t buy an asset like that expecting an engagement or marriage,” she advises, adding that some couples tend to take this step as a way to cement their relationship, only to part weeks or months later.
HAVE AN EXIT PLAN
Relationships come and go, and Saladino herself had one that could have come to a more dramatic end, had she not protected her real estate assets. “My domestic partner contributed to the city property, I contributed to our second one, and we were able to work out an exit plan,” she explains.
True, some may argue that having this kind of worst-case scenario exit plan is pessimistic, and talking about the possible dissolving of a relationship in the case of sickness, loss of job, and even death is something of a mood killer. But experts contend it’s a necessary conversation to have.
The best case scenario for buying with a non-spouse is to put the deed for the house under one name and get in writing who pays for what. “Couples can agree, I’m doing the down payment, you’re paying the mortgage, and in the event of a breakup, you have documents that show how much equity you have,” Saladino says. “Two single people shouldn’t be sharing one asset.”
KNOW YOUR PARTNER
In her experience, Saladino says that most couples who've have been together for the long haul, and living together for several years, tend to last.
The problem often lies with twentysomethings who recently started dating and want to “prove” their love and commitment to each other by making the ultimate real estate purchase. Often, the parents have to contribute financially to the purchase, which Saladino says is a “recipe for disaster.”
Regardless of age, the key to having it work is an open channel of communication.
“With maturity comes the opportunity to talk business, and not get caught up in the romantic vision,” she says. A mood killer? Maybe. But at least both parties will be protected.
If you’re on the fence about buying a place with your partner and aren’t ready to get married, Pinkas says the best option is to rent, as it’s easier to get out of an apartment when you’re dealing with a one-year lease, versus a 30-year mortgage.
Co-op boards, meanwhile, all have different standards of what they're looking for in an applicant. While it's technically illegal for a board to discriminate based on marital status alone, they look at a married couple as a single applicant, while cohabiters are seen as two individuals. If one has finances that don't make the cut, that's reason enough to get passed over.
Often, a co-op board wants as much insurance as possible, so if marriage isn't on the menu, it's best to show them that you're still committed to each other and have legal documentation showing what would happen to the property in the event of a break-up.
The issue of buying a pad with your partner isn’t unique to New York, but the prices are, especially when the going rate for many starter apartments can quickly climb to $500,000, when you factor in closing costs and legal fees.
“New York is a tangled web,” Saladino says, “It’s a lot to deal with.”