Can I be sued by a co-owner for a loss during incurred on the sale of a house due to no fault of my own?

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Can I be sued by a co-owner for a loss during incurred on the sale of a house due to no fault of my own?

I bought a house 6 months ago with my girlfriend for $350,000. Her dad “gifted” us $180,000 for a down payment and closing costs. The remaining $200,000 loan is in mine and my girlfriend’s names. Now we have split up and want to sell the house. However the housing market is much lower than when we bought the house. If we sell it now after the $200,000loan is paid off, she thinks that she can sue me for half the difference of any loss. So if the home sells for $300,000 since her dad gave us $180000, can she hold me responsible for half of the 80,000 loss?

Asked on March 2, 2011 under Real Estate Law, Oregon

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

It depends entirely on how the transaction was structured:

1) If it was a gift legally--which includes being treated as a gift on the paperwork you signed with the bank and on tax forms--then the dad has no right to it. Once a gift is made, there is no required repayment. Possibly he'll claim that it wasn't really a gift, but a loan--but in that case, he and you may have committed fraud (vs. the bank; also, depending on how it was represented on tax forms, possibly  vs. the government as well), so this needs to be considered carefully if its the position.

2) If it was a loan, the people who "signed" for the loan (presumably you and your girlfriend) are liable for repaying it regardless of the sale price of the home. You could be sued for it, and would have grounds to sue your girlfriend for her  share...so half to each of you. Note that oral or verbal loans are in theory also enfoceable, though depending on their terms, they may run afoul of what's known as the "statute of frauds" and which requires certain transactions to be in writing. You may wish to discuss  this with an attorney.

3) If the father invested in the house, then he has no grounds to recover a loss, anymore than a business investor or stockholder can. If the house had gone up in value, he'd have shared in the equity or appreciation.


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