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I am buying a house with a colleague in California.

I am paying 80% and he is paying 20%.

He is going to live in the house, and pay rent for my 80% stakes in the house.

  1. Is it at all legal?

  2. Can I protect myself in a legally binding contract, that in case he defaults on rent for certain amount of months, I get to evict him and give him his shares back after deducting the over due rent?

  3. Who pays the property tax?
  4. Who pays the insurance?
  5. At a later time, can I decide to sell parts or whole of my share in the house without consent or informing my colleague?

OR

Can I simply set this up in our contract and it is legally binding?

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    Owners cannot be evicted: law.stackexchange.com/questions/35436/… – Greendrake Dec 20 '18 at 22:04
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    Your contract is automatically void if you contract for something that is illegal. – BlueDogRanch Dec 20 '18 at 22:32
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    Please rephrase this question, so that it is more of a general question of what is possible, and does not sound like a request for specific legal advice. – David Siegel Dec 20 '18 at 23:10
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    @Marci-man A mortgage is a loan secured by the house, such that the lender can take ownership of the house if the payments are sufficiently late. After foreclosure, the people taking out the mortgage no longer own the house. Non-owners can be evicted. – David Thornley Dec 21 '18 at 0:17
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    "I am buying a house with a colleague in California." I highly suggest you do not do that. Either buy 100% of the house on your own, or don't. You don't want to be a pseudo-landlord and a party to a property with an unrelated individual. If you really do want to go forward with this (and can somehow convince a mortgage company of your plan), please visit a reputable property lawyer so that you have all your "edge cases" covered. You don't want to be 10 years down the line and have your credit destroyed over your partners bankruptcy for example... – Ron Beyer Dec 21 '18 at 3:11
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  1. Yes such an arrangement can be made legally.
  2. Owners cannot be evicted. But a contract could provide for regular payments (rent) and that the right to use/occupy the property is contingent on those payments being made. It could even provide that if the payments are sufficiently behind, that a portion of that party's share would be forfeit to cover the amount due. It should probably not reduce the minor partner's equity by more than the amount of payments due. All this would need to be spelled out in detail in your contract.
  3. Property tax is a joint obligation of the owners. Your contract could specify who pays it or from what source it would be paid. One option would be for each party to pay into a fund (similar to an escrow account for a mortgage) from which the tax would be paid. Your contract should specify such an arrangement if it is wanted, and what happens if one party does not pay or is late. The government will not care about your agreement, they will want their tax money in full and on time, or they will charge penalties and/or seize the property, in accord with local law. Either owner could be liable for the full amount.
  4. Much the same applies to insurance, and to any utilities. All are joint obligations of the owners, and a contract may specify who is to pay and how, or how payment is to be divided, and what happens if someone does not pay as agreed.
  5. If you want the right to sell off parts of your share, your contract should cover this, and what notification , if any, is required. It may be that the law will require you to get your partner's consent, I am not sure. Will any new owner become a party to the contract? If so that probably needs the consent of existing parties but it may be possible to specify that such consent "shall not be unreasonably withheld".

I strongly suggest that you discuss with your partner in detail what options you both want, or are willing to agree to. Be sure that you have a "meeting of the minds". Having done that, take it to a local lawyer with knowledge of both real-estate law and partnership law, and ask that lawyer to draft a contract that implements your desires, as closely as the local law allows. Also ask for advice if any of your choices are legally inadvisable or impossible..

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Sorry this isn't a strict legal reply but: I foresee many problems with this arrangement. Avoid many of them by keeping 100% ownership, renting to your friend in a proper manner. No need for a complex, legally ambiguous and potentially disastrous situation. Good luck

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    Could you please give examples for the problems you foresee, please excuse my naïveté. – Marci-man Dec 21 '18 at 10:42
  • If the resident partner fails to make payments as agreed, you will either have to accept the loss or sue the partner, and have to front lawyer's fees and other costs, which you may not get back, even if you win. If the partner does not properly maintain the hosue, you would need to sue to try to force him to do so, again with costs and risk of loss. If he goes bankrupt, you will not be able to collect, and may have trouble and expense reclaiming possession so the house can be rented or sold. – David Siegel Dec 21 '18 at 17:56
  • Oh, if the resident partner (RP) dies, is his heir bound by the contract? If the RP wants to move out, what notice must be given? What must the RP pay if s/he is no longer resident? If the house is then rented to another, what part of the rent does the former RP get? what part of the expense3s must the former RP pay? – David Siegel Dec 22 '18 at 3:18

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