The Most Dangerous Words In Real Estate: “We’ll Figure It Out Later

Why Every Co-Owner Needs a Written Agreement Before Closing

By: Eric A. Gravink

More people are buying real estate with someone they are not married to. Two friends buy a starter home together because neither can afford to buy alone. Siblings inherit a property and decide to keep it. Parents help an adult child buy a home. An unmarried couple buys a house before the wedding because waiting no longer makes sense in this market.

Most of these buyers spend hundreds of thousands of dollars, sometimes millions, without ever signing a co-ownership agreement. They assume the relationship will carry them through. Everyone is getting along on closing day, so nobody thinks to write down what happens if that changes.

It always changes. One owner wants to sell. The other wants to keep it. One person loses a job and stops paying their share. One owner pays for a new roof and expects to be paid back. Someone gets married, divorced, or dies. Someone moves out but keeps their name on title. A boyfriend or girlfriend moves in and starts making decisions about a house they do not own.

That is when people find out they never actually agreed on anything. They talked about it. They just never wrote it down. The law does not fill that gap fairly. If co-owners have no written agreement, courts apply default rules, and those rules are slow, expensive, and unpredictable.

A tenancy in common agreement is a contract between co-owners. It spells out ownership rights, financial obligations, who manages the property, how someone gets out, and what happens when circumstances change.

Putting two names on a deed does not do any of that. Title says who owns the property. It says nothing about who paid the down payment, whether that money was a gift or an investment, who pays for repairs, or whether one owner can force a sale.

That last part matters more than most people realize. California law gives every co-owner the right to file a partition action. That means one owner can force the sale of the property in court, even if the other owner wants to keep it.

I have handled these cases, and the fight over whether to sell is usually the smallest part of it. The real fight is over mortgage payments, repairs, who lived there rent free, and how to divide what is left. Legal fees, appraisers, and forensic accountants eat into the equity everyone spent years building. I have seen sales where the professionals walked away with more than either owner did.

Reconstructing years of unwritten understanding is not clean work. It runs on old text messages, Venmo receipts, and two people who now remember the same conversation completely differently. A judge has to decide who is telling the truth based on scraps like that.

Part of the problem is timing. After the down payment, the closing costs, and the moving truck, spending more money on a legal document feels like the last thing anyone wants to do. Some people also worry that asking for an agreement makes them look distrustful of a friend, a sibling, or a fiancé.

But skipping the conversation does not remove the risk. It just moves the fight to later, when the relationship is already broken and the money at stake is much higher. A modest fee for a clear agreement now is almost always cheaper than years of litigation later.

This is becoming more common with friends because two incomes are often the only way to qualify for a loan in this market. It feels simple at first. Then life happens. One friend gets engaged and wants out. One wants to hold the property for the long run while the other wants to cash out. One person starts paying more of the mortgage and starts to feel the ownership split is no longer fair.

Unmarried couples have it worse, because many assume being engaged gives them some of the same protections as marriage. It does not. California is not a common-law marriage state. If the couple splits up before the wedding, the dispute is decided under property and contract law, not family law. One partner may have covered the down payment while the other paid the mortgage every month. One may have turned down a job in another city because they thought they were building a life together. None of that is protected unless it is written down.

It gets more complicated when parents help. Parents cover part of the down payment, co-sign the loan, or go on title, usually with no plan to ever live in the house. At first, everyone treats it informally. The parents think of it as a loan or a temporary gift. The kids assume marriage will sort it out eventually. Nobody wants to bring a lawyer into a family purchase.

Then the couple marries. Mortgage payments come out of joint income. The house gets refinanced. Improvements get made. Years later, the marriage ends, and the parents find out the house they helped buy is now part of a community property fight, with reimbursement claims and tracing arguments about what the money was supposed to be in the first place.

I have seen parents who thought they made an investment get told the money was a gift. I have seen the opposite too, where a gift is claimed to be a loan that has to be repaid. Sometimes it was never written down at all, and the outcome depends on whose memory the judge believes.

These cases are hard because they are not just about money. It is a divorce and a family conflict happening at the same time. What started as parents trying to help a child buy a home turns into a fight over who owns the appreciation, who owes what, and whether the parents’ contribution was ever protected at all.

Professional real estate investors do not buy this way. When LLCs, trusts, or partnerships buy property together, they negotiate a tenancy in common agreement before the deal closes. They spell out who contributes what, who manages the property, how a sale happens, and how someone exits. Ordinary buyers skip all of that, even on a house worth more than most small businesses.

There is another risk layered on top of everything above, and it is exactly the kind of thing a written agreement is built to prevent. If co-owners stop acting like passive investors and start actively managing the property together, splitting expenses and income like a business, California law can treat that as a general partnership, whether anyone meant to form one or not. That means each owner becomes personally liable for the debts of the arrangement, not just their share of the mortgage. A contractor’s unpaid invoice or a bad decision one owner makes without telling the others can reach every owner’s personal assets, not just the property.

This is where the agreement itself does real work. Revenue Procedure 2002-22, the IRS’s guidance for co-owners doing 1031 exchanges, lays out the specific structure that keeps a group of co-owners from crossing into partnership territory, and it is a useful blueprint even outside the exchange context. A lot of it comes down to voting. The agreement should require unanimous approval for the decisions that matter most: selling the property, leasing it, hiring a manager, and refinancing or modifying any debt secured by the property. Day to day decisions can be handled by majority vote instead. The agreement should also keep revenue and expenses tied strictly to ownership percentage, keep the co-owners’ activities limited to ordinary maintenance and repair, and make clear the group is not filing as a partnership or holding itself out as one. Building those provisions into the agreement up front is what keeps a hands-off investment from drifting into active, hands-on management that starts to look like a business, which is exactly how I see these situations unfold.

A good agreement covers ownership percentages, occupancy rights, expense sharing, reimbursement, sale procedures, buyout rights, refinancing, dispute resolution, how the property will be managed, and what happens if an owner dies or becomes incapacitated. If a parent or family member is contributing money, the agreement should say plainly whether that money is a gift, a loan, or an investment, and how future appreciation will be split.

A tenancy in common agreement will not stop people from disagreeing. It stops the disagreement from turning into a lawsuit. If you are buying property with anyone you are not married to, a friend, a sibling, a partner, or with help from your parents, get the agreement in writing before you close.

I draft these agreements for a living, and I would much rather spend an afternoon with you now than represent you in a partition lawsuit five years from now. If you are in the middle of buying property with someone else, reach out and let’s get it done right the first time.