More unmarried couples are purchasing houses together than ever, but there can be some dangerous legal implications if they decide to go their separate ways, an expert told Newsweek.
As companies institute return-to-office policies, many couples find themselves needing to live in different locations, complicating the home purchase and mortgage they signed on for.
Millennials and Gen Z (those aged 12-43) are turning away from marriage at higher rates, often preferring a situation that will amount to a common law marriage instead of a wedding and legal document. Those unmarried couples are increasingly buying homes together in part due to rising house prices across the country, making up 18 percent of first-time home buyers in 2022—a massive surge since 1985 when the rate was 5 percent, according to the National Association of Realtors.
Buying a home with your unmarried partner might make financial sense at the time, but some lawyers warn of a troubling trend they see popping up today. It's called a "real estate hostage."
Often, one party in the couple will want out of the house due to their career while the other one wants to stay planted in their home.
Because of this, one or both parties feel trapped. Unlike divorce, which has a clear legal procedure that can divide any estate asset, these couples find themselves in "real estate hostage situations," said Eli Underwood, the founder of Underwood Law Firm.
When this happens, couples generally have to turn to partition actions. These are legal options for people who own real estate jointly and cannot agree on one path forward.
Underwood said over the past year, he's witnessed a surging number of coronavirus-related unmarried couples in bad real estate relationships where there doesn't seem to be one easy answer.
"There is a lot of emotional turmoil for those who feel trapped, and then relief when they realize there is a relatively simple legal solution," Underwood told Newsweek. "Otherwise, they can be very detrimental to a person's credit rating, which can affect their ability to buy the next property with their ultimate spouse."
Why Move In?
The financial benefits of sharing homebuying expenses and monthly costs may be tempting, especially as the housing market remains out of reach for many Americans.
Homeownership rates among 25- to 45-year-olds have fallen the most of all age groups since 1980, according to the Terner Center for Housing Innovation at UC Berkeley.
And among younger generations, the struggle is even more pronounced.
A report from Intuit Credit Karma discovered roughly 31 percent of adult Gen Z-ers live with their parents and 27 percent say they can't afford their rent.
Still, that doesn't mean you should necessarily immediately dive into a joint homeownership deal with your partner just to save money at the moment.
"While many couples enjoy the financial and relational stability this step brings, it's not without its risks," Colorado-based attorney Steven Mandelaris told Newsweek. "Without the legal safety net that marriage provides, disputes over property rights, mortgage responsibilities, and equity can turn complicated if the relationship sours."
Many couples who purchased homes initially assuming they could work remotely are now making tough choices. Deciding whether to sell the house, who should stay, and how to handle all of those financial implications can be a significant headache for even the strongest of couples.
If couples do find themselves in this situation without an exit strategy, they can see hits to their credit and lose equity, experts added.
"This arrangement frequently falls apart, though, and people end up in bankruptcy when they are suddenly paying to live in two places," Louisiana-based attorney Scott Smith, who founded DebtReduction101.com, told Newsweek.
Marisa Simonetti, the founder of the Simonetti Real Estate Team in Minnesota, knows from purchasing a property with her ex-fiance herself that buying a house with her partner should be treated very carefully.
"Lack of clarity upfront can lead to disaster after closing," Simonetti told Newsweek. "When purchasing any property, the goal is to position yourself with the most possible positive options. Co-buying as an unmarried couple is not a terrible plan but does add relational complications. This is a business decision that two people are making together and needs to be treated as such."
Still, there are steps you can take to avoid being in a real estate hostage situation, Mandelaris said.
Drafting a cohabitation agreement beforehand often provides greater clarity and protection in these circumstances, defining explicitly what would happen to the property and its financial responsibilities if things changed.
"It's also crucial for both partners to have a transparent understanding of their financial commitments and to consider potential exit strategies, such as buyout clauses, in case of relocation," Mandelaris said.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Suzanne Blake is a Newsweek reporter based in New York. Her focus is reporting on consumer and social trends, spanning ... Read more
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