Buying a Duplex With a Sibling, Friend, or Partner in Minneapolis? Get This in Writing First

Every now and then I have buyers who want to buy a duplex together. Sometimes it’s an unmarried couple, sometimes it’s friends or siblings, and recently, it’s multiple generations who want to live separately at the yet together.

For countless reasons, splitting a mortgage instead of splitting rent is a great idea; until it isn’t. Life and its changes happen. Someone wants to relocate. Couples breakup. Mom or dad need their equity to cover healthcare expenses or to settle their estate.

When that happens, the deed tells you who owns what percentage on paper, but it doesn’t tell you who’s owed what, who has to buy whom out, or what happens if nobody can agree.

That’s why it’s a great idea to have a detailed written understanding before you buy a property together. Fair warning. If you don’t, Minnesota state laws differ according to the type of relationship the parties had.

Minnesota has an actual statute governing agreements between unmarried couples living together (Minn. Stat. § 513.075) and it’s narrower than most people assume. It applies specifically to a contract between people who are living together, or about to live together, “in contemplation of sexual relations,” out of wedlock. In plain terms: it’s built for romantic couples, not for roommates, siblings, or business partners.

For that category of relationship, the statute is blunt about what it takes to enforce a property or financial agreement. The contract must be written and signed by both parties, and enforcement sought after the relationship ends. Its companion statute (Minn. Stat. § 513.076), goes further. It states if there’s no written, signed contract meeting those requirements, courts are instructed to dismiss a claim to the other person’s earnings or property if it’s  based on the fact that the two of you lived together.

Siblings and friends buying together aren’t covered by those statutes, which are triggered by a romantic relationship. That doesn’t mean an unwritten agreement between siblings or friends is automatically enforceable, though. Ordinary Minnesota contract law still applies, and the state has required written real estate contracts for a very long time.

The solution, whether you call it a cohabitation agreement, a co-ownership agreement, or a tenancy-in-common agreement, has the same substance. It’s a separate contract that spells out the financial reality between the people buying the duplex that isn’t reflected on the title.

A written understanding, or cohabitation agreement, should spell out the following:

• Joint tenancy or tenants in common. At closing, buyers are asked if they want to be joint tenants, which means if one person passes away their share is automatically granted to the other, or tenants in common, which allows each person to sell or leave their share to an outside party.
• Who made the down payment, covered closing costs, and how much those original amounts were. Was the down payment a gift or a loan? Is the contributing party entitled to 100% of their money back in the event of a parting or sale?
• Who is responsible for what portion of the mortgage?
• How are the maintenance and home improvement costs split?
• How will the equity be split in the event of a sale?
• If one party wants to sell and the other doesn’t, what is the resolution?
• If one person wants to buy the other out, how much time will they have to do so?
• How is the value determined in the event of a buyout?
• If this is an investment property, how is the rent, or more specifically, cash flow allocated? How much needs to be held in reserves before there are distributions?
• Where and how holds security deposits?
• Who is responsible for repair requests? And if one person is handy and doing all the repairs, what if any kind of credit do they receive?
• What happens if one person dies?

Whether you have an attorney draft a cohabitation agreement, or simply write something up yourselves, the important thing is to have something in writing somewhere.

If nothing’s in writing, everyone is exposed.

A friendship or sibling relationship can fracture over money just like a romantic one can. Courts don’t award sympathy points for “we’ve known each other since college.”

Agreements save relationships. And in the end, those are what matter most in life.