Buying house before marriage can be risky

Thursday, May 15, 2008

Q: I live in California and plan on getting married. However, my boyfriend wants me to sign a prenuptial agreement. At the present time we're also looking into buying a home.

His credit is awful while mine is very high. We have both signed the loan papers for a preapproved bank loan but now I'm having doubts about going through with the purchase. He obviously makes more money than I do and if he decides to leave me I don't want to be stuck with a high mortgage I can't afford.

Is it better to take my name off the loan and still be on the title? Or should I just remove myself entirely?

A: In general, prenuptial agreements come into play when one person has a lot more assets (money, stocks, real estate, jewelry, etc.) than the person he or she is marrying. You have to decide first if you want to sign an agreement that will decide now how to divide all of the assets you accumulate together after your marriage.

I'm not opposed to prenuptial agreements, and in fact I think they can be very helpful, particularly in the case of a second marriage where each person has his or her own children. I do think you should consult with an attorney who can advise you on whether the agreement protects you as well as your fiancé.

Whether or not you eventually marry, you should be cautious about buying property as an unmarried partner (which is what you are now) unless you have created a legal partnership that governs the financial aspects of the purchase.

This partnership agreement will describe what each of you is bringing to the table, and lay out the financial workings of the relationship, including what expenses each of you are responsible for, and what share of the equity each of you will be entitled to in case the partnership doesn't work out. A real estate or family planning attorney can draft a partnership agreement for you, and I strongly recommend you execute this sort of agreement before you go ahead with the purchase.

If you and your fiancé do ultimately decide to get married, your partnership agreement can contain a clause that specifies what will happen to the property and your financial relationship.

Because you live in California, you may have some extra protections if you and your boyfriend live together for a certain number of years. Your first move is to sit down with an attorney who can go through the prenup, and help make sure that you're protected down the line.

Q: My husband signed a quitclaim deed four years ago while living in another state. Now, we're finally getting divorced. I have been paying the mortgage, which has been refinanced twice in my name only. Is the house a marital asset?

Please help me. I am so afraid I'm going to lose my home. I live in Massachusetts.

A: If you purchase a piece of real estate while you're married, that property is typically considered part of the marital estate. An exception would be if you purchase property using funds that are excluded from the marital estate, such as an inheritance that you have kept separate from your other assets.

In your case, your husband signed over a quitclaim deed, which should have turned over to you any financial interest he had in the property. While this property might have originally been part of the marital estate, you've got a good claim that it no longer is.

That doesn't mean your ex might not try to get a piece of it. You should immediately consult with a divorce attorney who can advise you of your rights, and how to protect your home.

Q: A property that was rented to a school has been sold and the school is moving to a new location. There is playground equipment that was purchased by the school that is cemented into the ground.

Can the school dig that up and take it with them or did it become a fixture and therefore goes with the property?

A: It depends on what the contract says about this sort of equipment. In a typical residential purchase contract, fixtures (items that are permanently attached to the property, like light fixtures and bookshelves) are typically left with the property. If you want to take a fixture with you when you move, then you would typically exclude those items from the contract.

When it comes to commercial property, fixtures sometimes belong to the tenants of the property and they are able to do with them what they want. The disposition of fixtures would depend on what the contract between the landlord and tenant says.

For example, if a restaurant leases out a space and then goes out of business, and the restaurant equipment, bar and light fixtures were all purchased by the restaurant owners, they may be entitled to remove these items even if they were attached to the rental space.

In your situation, if the school and the former owner of the property agreed that the school could take the playground equipment with them, then they'd be entitled to dig it up and move it. If the contract was silent on the specifics of which fixtures could be removed, then the school might not have been able to take the equipment. In that case, and for more precise answers to your question, you should talk to a real estate attorney.

If local residents are unhappy that a really nice playground has been removed, then you should talk to your local municipality about creating a new playground that features similar equipment. Many communities have raised private funds to create these kinds of child-friendly playgrounds, which help stabilize areas and provide a safe and fun environment for their children.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

Back to Industry News