Cohabitation agreements and promissory notes for unequal down payments – how the arrangement works

Short answer: If cohabiting partners purchase a home for common use, the property can become "samboegendom" (joint cohabitation property) even if one partner has paid a larger portion of the down payment. A cohabitation agreement can specify that the property should be wholly or partially excluded from equal division, while a promissory note can document that one partner has a claim against the other.

Why does the problem arise?

In the division of property, the Cohabitation Act is based on the net value of joint cohabitation property, and the main rule is equal division. A larger down payment therefore does not automatically produce the same financial result that many cohabitants intuitively expect.

Cohabitation agreements and promissory notes have different functions

The cohabitation agreement affects what is to be included in a future division of property. The promissory note documents an actual debt between the cohabitants. Thus, the documents do not replace each other.

Example

If two cohabitants buy a home together but one pays a significantly larger down payment, the parties may want to agree on how that difference should be handled. A common setup is for the debt to be documented separately and for the cohabitation agreement to be adjusted so that the property division rules do not produce a result that contradicts the financial agreement.

What should the promissory note regulate?

• the amount of the debt
• whether interest should be charged
• when the debt should be paid
• what happens upon the sale of the home
• what applies in the event of separation or death
• whether installment payments should be made on an ongoing basis

What should the cohabitation agreement regulate?

According to Section 9 of the Cohabitation Act, cohabitants may agree in writing that a division of property shall not take place or that certain property shall not be included in the division. The agreement must be signed by both cohabitants.

Ownership share and cohabitation agreement are not the same thing

Ownership shares in the home, for example 50/50 or 70/30, are a separate issue from what the Cohabitation Act implies regarding property division. Ownership share, financing, promissory notes, and cohabitation agreements should therefore be viewed as a whole.

Common mistakes

• only writing a promissory note but not analyzing the Cohabitation Act
• only writing a cohabitation agreement but not documenting the debt
• that the ownership shares do not match the parties' financial intention
• that the agreement is not updated after major amortization or changes

See the Mallbutiken package with cohabitation agreements and promissory notes.

FAQ

Are different ownership shares in the tenant-owned apartment enough?

Not always. The Cohabitation Act's property division rules and property rights are two different issues.

Must the promissory note include interest?

No. The parties can agree on an interest-free debt, but the terms should be clear.

Can a cohabitation agreement be registered?

No. Cohabitation agreements are not registered with any authority.

The article provides general information and does not replace legal advice.