Cohabitation ends with house split stand-off

[DayzeB]

WA
My daughter and her boyfriend have cohabitated for just under 7 years. They recently split up and she moved out as he has a home business and needed to remain in the house. The house is titled jointly, purchased from the sale of a previous home that was in her name only. The house currently is morgaged to the maximum and if they sold it, they wouldn't get any money from the sale. He wants my daughter to sign over her claim (title) to the house, he'll remain sole owner of the house, and they'll call it a "draw". He isn't offering her any settlement or money for her to sign over the property. What are her options? She invested $80,000 from the previous property and the money was used to purchase some business equipment for him, with the rest put into renovated the home. Isn't she at least entitled to half of that, if not all of it? The house needs further renovations to increase it's value, but once renovated (in the next year), the house should sell for at least a profit of $100,000. She really doesn't want to stay on the title with him, and has proposed that he buy her out for $40,000. He insists that the house has no value and he doesn't owe her anything, and if she remains on the title, she'll have to pay him 1/2 of the rent. Not sure what is the best advice or direction in this matter. Need advice.

[nextwife]

IS there equity in the house? What it will sell for after a chunk of money is invested at some future point is not the issue: TODAY is there equity?

Or Does the equipment have a cash value? The business?

Who is on the MORTGAGE?

[DayzeB]

There is no equity in the house. I'm looking into getting an appraisal to be sure. Since they were only living together, the business is all in his name so I don't think they'd be able to use any of that for cash value. The house is jointly owned, both names are on the title.

[nextwife]

So if they sold it today- they'd walk away from the closing with virtually ZERO in their respective pockets? If so the sale price is irrelevant. If I own a one million dollar house for which I owe one million, I have an asset worth zero to my net worth.

One needs to refinance the other off the mortgage in exchange for a quit claim. Which of them is able to do that? Can she put the money INTO the renovations that will, once spent by someone, allegedly bring the equity up $100,000? What sort of money needs to be spent to create this equity?

Obviously, they did not only put the money into the house, but spent it in other ways. Else there WOULD be equity. Not knowing what all they spent the money on, one can't say that he owes her $40,000. How do you know she didn't spend some of that in other ways that don't benefit the real estate? That maybe some went to supporting lifestyle choices? Perhaps they used some for vacations, for decorating that doesn't increase value, improvements that one does for their personal taste that doesn't increase value, debt reduction etc. For example: were they paying equally into the mortgage?

[IndyDad1on1]

I would still, as you stated, get an appraisal on the house. Based on the appraisal and the loan amount she'll know where she stands.

If the appraisal is more than the loan amount, she has the option to be "bought out". Either way it sounds like he is looking for a way to get out of refi. Refi is a sure way to insure financial relief on your daughters behalf.

I would run all this by an attorney in your state. Consultations should not be much. You can call around and see who has a reasonable consultation fee.

This is a long shot but I would also ask an attorney about the possibilities of her financial contributions to the business placing her as a potential investor. If so ask what she might be entitled to for her contributions.

If not small claims court is another option provided she has record of the contribution to the business.

She could be out that money either way which is a the risk you take in a situation like this.

[nextwife]

Was there any sort of agreements regarding the money spent?

[DayzeB]

There are no written agreements, that I know of. Money she had from the sale of the first house was put into a joint account, which was strictly used against home renovations, and from what I understand a portion towards purchasing his business equipment. She has record of that statement from the bank which I've asked her to provide to me so we can review it with an attorney. Otherwise he pretty much controlled how money was spent in the relationship. They both had their own personal accounts, but typically she gave him most of her paychecks to pay for half of the household expenses again, from what I understand. She is basically out of the house with nothing more than a bed and couch while he remains in the house, with his business, new appliances, etc. We had to lend her money so she could rent her own place. There is several $M left in the joint "house" account, but he won't release that money, saying that he needs it to use to finish renovating the house. What I'm understanding is that if there is no equity in the house, and he's unable to refinance the house in order to buy her out of her half of the house, and we don't want to go thru a lengthy fight in court, our only alternatives may be to take it to court, or agree out of court to sell the house in order to settle the matter.

[IndyDad1on1]

If the joint account is truly "Joint" it will have both names on it. He can not remove her from the account without her consent. His only option is to close the account which any sole person of the account can do.

With that being said she herself has the option to withdrawl from that account and close the account without his consent.

She has all rights as "joint" party of the account to obtain all financial records of the account including receiving a duplicate statement every month.

The only exception to this is if the account is coded as "two signatures required" which still leaves room for one of the parties to close or withdrawl from the account under certain conditions. Most banks only code an account this way on minor accounts and business accounts. The odds of this coding being placed upon the account is slim, very slim.

Just some helpful information for your daughter.