Managing Attorney
Texas home prices have forced a lot of smart people to think creatively. The math is not complicated: plenty of buyers can handle a monthly payment, but the down payment, closing costs, and the risk of carrying a home alone create a barrier that is hard to overcome. Co-ownership is a rational response. It is also an arrangement that becomes irrational very quickly if the parties treat it like a casual roommate situation rather than what it really is, a shared investment and a shared liability.
When two unrelated people want to buy a home together in Texas, the structure I generally view as the default is simple. Title is held directly by the individuals as tenants in common, and the real work is done in a strong Co-Ownership Agreement that functions like a miniature corporate governance document for a single asset. The point is not to anticipate every possible issue. The point is to eliminate ambiguity on the issues that predictably cause disputes and to provide an exit path that works even when the relationship is strained.
This post walks through the document set and the deal architecture that make TIC co-ownership workable in Texas.
Why Tenants in Common Is Usually the Right Starting Point
Co-ownership can be structured a few ways. One person can own the property and the other can pay rent under a contract. An LLC can own the property and the individuals can own interests in the LLC. Or the parties can take title personally and rely on a contract to govern the relationship. For two strangers buying a primary residence in Texas, tenants in common is usually the cleanest baseline because title companies and lenders understand it, it avoids entity-level friction, and it gives each co-owner a defined real property interest.
The common misconception is that the deed is the deal. It is not. A Texas deed that vests title in two people as tenants in common establishes the existence of co-ownership. It does not create a workable framework for how money is handled, how decisions are made, how the parties live together, or how one party exits.
In Texas, the most important background fact is that co-owners generally have partition rights. Partition is the legal process by which a co-owner asks a court to divide or sell the property. Homes cannot meaningfully be divided, so partition often becomes a court-ordered sale. That process is public, expensive, slow, and often value-destructive. The best co-ownership agreements are designed to make partition unnecessary by giving the parties a contractual exit ramp that is faster, private, and economically predictable.
The Documents You Need, and What Each One Is Doing
The closing documents are the usual residential purchase set, but with a co-ownership overlay. You will have the purchase contract, lender documents if the transaction is financed, and the deed. The deed should reflect tenants in common vesting, and in many cases it should clearly state ownership percentages if the parties are not truly splitting equity evenly. Do not assume you will “square it up later.” Later is where deals go to die.
The centerpiece is a Co-Ownership Agreement signed before closing or at closing. Think of it as a shareholder agreement for a single property. It should be supplemented by exhibits that make it operational, usually a contribution schedule and ledger framework, and often a house rules schedule that addresses the practical realities of living together.
A sophisticated TIC arrangement also addresses death and incapacity. Two strangers do not just need a plan for what happens when someone wants to sell. They need a plan for what happens if someone dies, becomes incapacitated, or ends up in financial distress. Those events are not rare. They are inevitable over a long enough timeline, and they are exactly the kinds of events that make co-ownership hard if the contract is silent.
Step One: Align the Deed With the Actual Economics
If the parties truly contribute equally at closing and intend to share costs equally, an equal split may be fine. But strangers frequently contribute unevenly. One person has cash but not income. The other has income but not cash. One person is paying the majority of the down payment. The other is covering more of the monthly carrying costs. If your deed and agreement do not reflect the actual economics, you have built future resentment into the structure.
In practice, there are two common ways to handle uneven contributions. The first is to set ownership percentages to match the intended economics. That might mean 60/40 or 70/30 based on down payment, closing costs, and any other initial capital. The second is to keep the deed split evenly but to create a contractual ledger that treats unequal payments as advances to be repaid before any split of proceeds. The ledger method can work, but it requires discipline. If you are not going to track every payment and reconcile periodically, you are better off setting ownership percentages up front.
Financing terms must also be confronted early. If there is a mortgage and both parties are borrowers, then both parties are exposed. If only one party is on the note, but both are on title, the borrower carries disproportionate credit risk. That is not a moral issue. It is a math issue. The agreement should address how that risk is compensated, and it should provide exit rights for the borrower if the arrangement becomes unsafe.
Step Two: Treat the Co-Ownership Agreement Like Governance, Not Like a Roommate Memo
A credible Co-Ownership Agreement in this context has four pillars. It addresses money, use of the home, decision-making, and exit.
Money: Contributions, Expenses, Reserves, and the Ledger
The agreement should define, precisely, what counts as a contribution and what counts as an expense. It should state who paid what at closing and how those payments are treated. Are they equity that affects ownership percentages? Are they reimbursable advances? If reimbursable, is there interest and when does repayment occur? Vagueness here is not harmless. It is a future dispute that will feel personal because it is about fairness.
For ongoing expenses, the agreement should define “Property Expenses” broadly enough to cover real life: mortgage payments, taxes, insurance, HOA dues, utilities, ordinary maintenance, landscaping, pest control, and any recurring services that keep the home functional. Then it should specify how payment happens in a way that avoids constant interpersonal friction. The most effective approach is a joint account funded monthly in advance. Each co-owner deposits their share by a fixed date and the bills are paid from that account. That mechanism sounds mundane, and it is. Mundane systems prevent emotional conflict.
A reserve fund is equally important. Most co-ownership collapses when a predictable cost arrives and the parties have not prepared: a major appliance fails, plumbing leaks, a storm triggers an insurance claim and a deductible, or a foundation issue surfaces. The agreement should require a minimum reserve balance, define what it can be used for, and specify replenishment rules. This does not just protect the property. It protects the relationship.
Finally, the agreement should require a ledger. Each payment should be logged with category and receipt support, and the parties should reconcile periodically. Quarterly is a practical cadence. If you let the ledger drift for years, you create an accounting fight that feels like a character fight.
Use of the Home: Turn Predictable Friction Into Objective Rules
Two strangers living together need rules that are clear enough to prevent constant renegotiation. The agreement, often through a separate house rules exhibit, should address bedroom allocation, parking, storage, guests, noise, pets, smoking, and basic standards for cleanliness and shared supplies. It should also address the scenarios that change the character of the arrangement, such as a romantic partner moving in, a co-owner wanting to sublease a room, or a co-owner moving out. These are not hypothetical. They are the most common fact patterns that convert co-ownership from “we are aligned” to “we are not.”
Repairs and Improvements: Authority, Approval, and Who Gets the Benefit
The agreement should give either co-owner authority to approve emergency repairs that prevent damage or restore essential services, with a requirement to notify the other party and provide receipts. For non-emergency repairs, the agreement should create approval thresholds so small items do not become political, and larger items cannot be unilaterally imposed.
Improvements are the next level problem. One co-owner wants an upgrade. The other does not care. Someone pays. Later, the paying party feels entitled to extra value and the other party does not agree. The only way to avoid this is to decide up front how improvements are treated: whether they require unanimous approval, whether they are reimbursed at cost, reimbursed at depreciated value, or valued through appraisal, and whether they affect ownership percentages. There is no perfect rule. There is only the rule you choose in advance.
Decision-Making and Deadlocks: Two People Means Deadlock Is Not a Possibility, It Is a Feature
With two owners, unanimous consent is the natural default on major decisions: selling, refinancing, granting leases, settling insurance claims, or making material alterations. But unanimity creates deadlock risk, and deadlock is the precise moment most agreements fail.
A strong agreement treats deadlock as a solvable engineering problem. It typically requires quick mediation and then, if that fails, it triggers a defined exit mechanism. The purpose is not to punish anyone. It is to force an outcome that stops the home from becoming a hostage asset.
The Exit System: The Part That Makes or Breaks the Entire Structure
The exit provisions should be drafted with one guiding principle: they must work even when the parties do not like each other.
A functional exit system has three components. First, it must define valuation in a way that does not require negotiation. Second, it must impose a timeline that cannot be dragged out indefinitely. Third, it must include a backstop if the buyout does not occur, usually a mandatory listing and sale process, or a mandatory lease from the other party for a fair market value.
In many TIC agreements, a co-owner who wants out can deliver a formal notice that triggers an appraisal-based buyout process. The parties either agree on an appraiser or each selects one, and the values are averaged or tie-broken under a defined method. The remaining co-owner has a fixed period to elect to buy. If they elect to buy, the agreement dictates how the price is calculated, including adjustments for unequal contributions, advances, unpaid obligations, reserve balances, and agreed improvement treatment. The closing occurs at a title company on a fixed deadline, and the buyer is typically required to refinance if necessary to release the departing co-owner from the mortgage.
If the remaining co-owner cannot or will not buy, the agreement should force a sale process. The home gets listed under defined terms: broker selection, pricing method, showing access, repair authority, concession limits, and how carrying costs are handled during the listing period. The forced-sale backstop is what makes the buyout election credible. Without it, the departing co-owner can be trapped by delay.
A right of first refusal is also important if a co-owner wants to sell to a third party. Without it, you can end up living with a stranger you did not choose, which defeats the purpose of selecting a co-owner in the first place. The right of first refusal must be operational, with clear timelines and proof requirements, or it becomes a paper right.
Some sophisticated agreements also include a buy-sell mechanism, sometimes called a shotgun clause, to break deadlocks. It can be effective and fast, and it can also be unfair if one party has much more capital access. If included, it should be included thoughtfully, and often only for defined triggers.
Defaults and Bad Days: Missed Payments, Noncooperation, and the Reality of Leverage
Co-ownership agreements should be written for the scenario where someone stops paying or refuses to cooperate. That means cure periods for late payments, default interest or late fees, the right of the non-defaulting co-owner to advance funds and be reimbursed, and remedies if the behavior continues.
Noncooperation is its own problem. One party refuses to sign listing documents, refuses access for showings, blocks repairs, or otherwise tries to extract concessions by holding the process hostage. If the agreement does not address noncooperation with consequences, it incentivizes it. Strong agreements include attorney’s fees shifting for enforcement and clear remedies that allow the agreement’s processes to move forward.
Death and Incapacity: The Most Predictable Unplanned Event
If a co-owner dies, their TIC interest typically passes under their estate plan. That can make the surviving co-owner partners with an heir, an executor, or an estate administrator who has no interest in preserving the living arrangement. The agreement should address this directly by giving the surviving co-owner an option to buy the deceased owner’s interest under a defined valuation method and timeline. Longer-term arrangements sometimes use life insurance to fund that buyout, but even without insurance, the contractual right and a defined process can prevent years of uncertainty.
Incapacity is similar. If a co-owner becomes unable to manage their affairs, the mortgage still needs to be paid and decisions still need to be made. A good agreement requires cooperation and documentation to allow protective actions to be taken, and it gives the paying party reimbursement rights if they carry the property during the other party’s incapacity.
Dispute Resolution: Keep It Private, Keep It Fast, Keep It Contained
The worst co-ownership outcome is turning a shared home into ongoing public litigation. Dispute resolution provisions should push parties into fast mediation and then into a contractual outcome, typically the buyout or sale process. Arbitration can be appropriate for certain disputes, but even without arbitration, the agreement should be designed to reduce the number of issues that require a judge to solve.
The Core Message
Texas TIC co-ownership between strangers is possible, and in the current market it is often rational. The mistake is thinking it can be done with informal understanding and goodwill. Goodwill is not a legal system. A carefully drafted agreement is.
When structured correctly, tenants in common co-owners have a defined system for money, a defined system for living together, a defined system for decisions, and a defined system for exit. That combination does not just reduce conflict, it dramatically reduces the likelihood that either party will ever need to invoke Texas partition remedies.