Co- or common ownership: the share of ownership doesn’t have to reflect the actual financing
This is the simplest but far from the most common form of cohabitation in an owned property. If both partners wish to contribute towards payment for the property, a choice must be made between co-ownership and common ownership. In the case of co-ownership, which is the most common option, the apartment or house belongs to both partners based on an agreed share, usually 50 percent each.
Married couples declare the value of their property as an asset in their joint tax return, while cohabiting couples do so based on their share of ownership. This share doesn’t have to reflect the actual financing arrangements: for example, cohabiting partners each owning half of a co-owned property can agree to distribute the mortgage debt 20:80. They then make the debt interest deduction from income tax based on the actual situation.
The drawback of this rule: 50 percent co-ownership still applies in the event of divorce or separation. If the property’s value has risen in the meantime, the party contributing less financially stands to benefit. Conversely, if its value drops, the financially weaker party still has to bear half of the loss. The party contributing more financially benefits from what’s called a nominal value guarantee on part of their investment (the share exceeding 50 percent, which would be 30 percent in this example). They can demand this share in full from the other party.
However, if a couple opts for common ownership, they can agree between themselves the extent to which both partners benefit from or bear any rise or fall in value if the shared household breaks up. This requires the prior set-up of a simple partnership.