splitting a joint mortgage - one owner in home

Question

Background - My ex and I split very amicably. We refinanced the home after this and are in a 50/50 partnership. I live in the house and pay half the mortgage and a tenant pays the other half. My ex lives elsewhere. The questions:

1. Is this agreement set up correctly for a 50/50 split? Some advisors have said that my ex and I should be splitting the balance of the mortgage less what the tenant pays despite him not living in the home.

2. Given our current arrangement, where he pays nothing toward the mortgage, if he performs renovation work on the home, should he be paid for the labor?

3. If the arrangement changed to what was suggested in question 1, I would then assume that he should be paid for labor where applicable though either equity or wages.

I'm aware that in many ways these are semantics to be agreed upon by both parties. I'm seeking what is most common and generally known to be most fair.

Thank you! Sarah

Answer 1

Get a lawyer to put this in contract form, with everything spelled out explicitly. What is fair is what the two of you agree upon.

My own suggestion: Divide the property into things which are yours, his, and shared, then have each of you be responsible for all your costs plus half the shared costs, but get all the benefits of your half. That would mean that if he rents out his half, all the rental income is his; if you decide to live in your half, all the savings of not paying rent are yours. Each of you pays your half of mortgage, insurance, and other shared costs.

Repairs to shared infrastructure should be done by someone both of you trust. If you agree the work is needed and he does it rather than your hiring someone, you owe him the appropriate percentage of the costs; the two of you will need to agree on whether you owe him for that percentage of his time as well.

Make sure you agree on some mechanism for one person offering to buy the other out, or to sell their half to the other party... or potentially to someone else entirely. (Personally, I would try to do that at soonest opportunity, to avoid some of the ways this can go wrong -- see past comments about the hazards of guaranteeing a loan; this works or doesn't work similarly.)

Does that address your question?

Answer 2

Definitely get a lawyer to write up all the details of the partnership in a formal agreement.

If your ex does not want to do this, that is a bad sign. You both need to be clear about expectations and responsibilities in this partnership, and define an exit strategy in the case one of you wants out. This is the most fair to both parties.

Generally, what is common is that property is split cleanly when the relationship ends.

I would strongly recommend you both work towards a clean split with no joint property ownership. How this looks depends on your unique situation.

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To address your questions 2 and 3:

You have two roles here - tenant and owner.

As a 50% owner, you are running a business with a partner.

That business will have assets (home), income, expenses, and profit. You basically need to run this partnership as a simple business.

All the rent income (your rent and the other tenant's) should go into a separate account. The mortgage and all other housing expenses are then paid from only this account. Any excess is then profit that may be split 50/50. All expenses should be agreed upon by both of you, either by contract or by direct communication. You should see a financial professional to make sure accounting and taxes are set up properly.

Under this system, your ex could do work on the house and be paid from the business income. However, they are responsible to you to provide an estimate and scope of work, just like any other contractor. If you as a joint owner agree to his price, he then could be paid out of the business income. This reduces the business cash flow for the year accordingly.

You can probably see how this can get very complicated very fast. There is really no right or wrong answer on what both of you decide is fair and best. For the sake of simplicity and the least chance of a disaster, the usual and recommended action is to cleanly split all property.

Good Luck!