Buying property as an unmarried couple – what you need to know
When buying a home, unmarried couples have three forms of ownership to choose from: sole ownership, co-ownership and joint ownership. Comparis explains the three models and shows how to protect your interests in the event of separation or death.
22.04.2022
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1. What are the financing options for unmarried couples when buying a property?
When buying property, unmarried couples have three different forms of ownership to choose from: sole ownership, co-ownership and joint ownership. It is worth setting all agreements down in writing in a cohabitation agreement, so that you are covered in the event of separation or the death of your partner.
2. Sole ownership for clarity
If only one of the two partners purchases the property, the situation is clear. Only the buyer is entered in the land register, and they bear full financial and legal responsibility for the property.
Settle costs with a tenancy agreement
You can set up a tenancy agreement that governs the non-owner partner's contribution to housing costs. This gives the partner concerned rights as a tenant, and also means that you have a clear arrangement for who pays what costs. In this case, the set notice periods must be observed if this partner separates from the property owner, or the property owner dies.
Couples who live together but are not married or in a registered partnership are described under the law as cohabiting. Cohabiting partners are treated as individuals by the state. This means, for example, that they pay less tax and receive a higher state (AHV) pension.
At the same time, cohabiting partners have fewer rights than married couples or registered partners. They themselves must take action to protect each other in the event of death, for example.
Careful with inheritance law
During their lifetime the buyer may name their partner as a beneficiary in a will or inheritance contract, thereby enabling them to stay in the property even after the buyer's death. However, if the deceased partner has other heirs, they may be entitled to compulsory portions of the estate.
Cohabiting couples should therefore decide where the surviving partner will get the money to pay these other heirs what they are due. In most cantons the estate will also be reduced by high rates of inheritance tax, because the reduced rate usually applies only to close relatives, not to cohabiting couples.
3. Co-ownership – partners provide different shares of the deposit
Often, sole ownership is out of the question for financial reasons. If both partners contribute different shares of the deposit for the property, co-ownership (tenancy in common under Anglo-Saxon law) is the recommended option. The property then belongs to both partners, according to their percentage of the total capital invested.
The two partners are listed separately in the land register and may do as they wish with their share of the property. If one partner wishes to sell their share, they must by law give their co-owner the right of first refusal. The two partners also deduct mortgage interest from their own income on a pro rata basis.
Same ratio for maintenance and investments
Co-ownership requires discipline, however. The partners must also stick to their percentage shares when it comes to investments and property maintenance. It is worth noting that both partners are still jointly and severally liable for the mortgage debt, despite the different levels of capital they supplied.
Legal right of first refusal
Ownership shares remain unaffected by separation or the death of one of the partners. However, the co-owner has a legal right of first refusal to purchase their partner's share of the property in such cases. Despite this right it is worth setting up a cohabitation or inheritance agreement in advance that states exactly what should happen if the couple breaks up or one partner dies.
4. Joint ownership – equal shares
In the case of joint ownership both partners hold equal shares of the property and its increase in value. This would be a joint tenancy under Anglo-Saxon law. It applies irrespective of what share of the financing each partner supplied. Both partners are entered as equal partners in the land register and the property can only be sold if both agree.
If they split up, each partner gets half of the property. However, the partner who has paid less toward the property will be subject to gift taxes. Should one partner die, their half goes to their heirs. Any financial imbalance or potential dispute can be avoided by concluding a partnership or loan agreement, but you must do so in good time during your lifetime.
Couples often pay 50:50
In a joint ownership arrangement, many couples each pay half of the property expenses. In this case, it is advisable to protect the other partner by taking out life insurance. This is especially worthwhile if you are planning a family or already have children.
It means that the surviving partner can still afford to live in the property if one partner should die. The children's inheritance in such cases is administered by the KESB child and adult protection authority until they turn 18.
5. A cohabitation agreement avoids dispute
Unlike married couples, unmarried couples must decide for themselves who gets what if they separate or one partner dies. Living together and thinking of buying a home? Then you'll need to sort out the financial implications yourself at an early stage.
There are various ways of doing this. You can name each other as beneficiaries in your will, or draw up an inheritance contract. However, any heirs will still be entitled under the law to their compulsory portions of the estate. They can waive this with an inheritance waiver agreement. Special rules also apply to pension provision for cohabiting couples.
Cohabitation agreements
You can summarize all of your arrangements in a cohabitation agreement. Having it certified by a notary is optional, although it makes it easier to verify the authenticity of signatures in the event of a dispute. In more complicated situations especially – for example when buying a home together as an unmarried couple – it pays to get expert help with your cohabitation agreement.
This article was first published on 12.07.2014