Patty,
I'm speaking her academically, and I'm not getting legal counsel. I'm a lawyer in real life, but I'm really not too terribly interested in playing one on ARFCOM.
That being said, in most states the arrangement you described could be construed as a "common law" partnership.
A partnership is a common undertaking by two or more persons each of who contribute to the venture in various and different respects for a mutual gain.
If a court finds a partnership exists, all assets of the partnerships are owned in the eyes of the law by the partnership, i.e., in common, regardless of how they are formerly titled.
Example: I did a business divorce a few years back for a very cute couple of women (and yes they were a _coulple_) who purchased and renovated houses together. One gal had a rich father, the other gal had skills. The gal with the money purchased the properties in her name, and titled them in her name. The other gal did the architecture, construction management, and city developement approval work, as well as basically managing the selection, purchase, loan flips, and eventual sales of the properties. When their relationship went to hell, I represented the "working" partner. The court found a partnership existed and that the properties were partnership properties, despite the fact they were titled only in the name of one person.
I'd get a lawyer where you are and run the facts and the question of "partnership" under a common law unwritten general partnership framework by him. The "other side" of your transaction has clearly contributed value to the mutual venture, and if I were in your shoes I would want some direct legal advice as to whether the course of action you outline might get you in hot water.
By the way, when a partnership doesn't work out, the end game is dissolution of the relationship, and judicially supervised sale of the assets, with distribution first to creditors of the venture then to the partners. In my state, the absence of a written partnership contract puts the spoils at a 50:50 split by default.
Again, you've got enough money and exposure tied up in this thing (as well as a looney on the other side) that its probably good to lawyer up and have a letter sent to these folks re: dissolving the relationship and getting bought out, or buying out, as the case may be.