When two unrelated owners wish to join together in the ownership of a property without there being any implied or ostensible partnership, a mortgage is an excellent way to arrange this, and to divide both title interests and profits. For many years I've shared ownership in a valuable property in Texas that also carries considerable risks in today's litigious environment. Neither party wants to bear the financial risks of holding title, but each wants to share in the eventual profits.
To resolve the dilemma, one party formed a corporation, the entire assets of which are this property. Each party loaned a share of the purchase price to the corporation on a “shared appreciation” mortgage. Neither actually owns the property insofar as title law is concerned, but both of them share ownership when one considers the “badges of ownership” that the Internal Revenue Code uses to establish ownership. Each individually pays a proportionate share of the taxes and upkeep on the property. Decisions concerning it are made jointly as to how it will be managed, and when it will eventually be sold and financed; and for how much.
Together, they are the defacto owners of the property. But the title holding corporation bears all financial liability for the property. Since the property is fully encumbered with mortgage debt, no judgment lien will precede the existing loans held by the defacto owners. Thus, the mortgage not only protects the owners and their share of the profits, but it also protects the property itself.
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