Shared own­er­ship can be a trap

Business Day - Home Front - - HOMEFRONT -

STRESSES In re­cent years when home loans have been so dif­fi­cult to come by, po­ten­tial buy­ers have of­ten been urged to pool their re­sources with friends or fam­ily mem­bers so that they can qual­ify for a bond and get on the prop­erty lad­der.

How­ever, says Berry Everitt, MD of the Chas Everitt In­ter­na­tional prop­erty group, not enough has been said about prob­lems that can arise in shared own­er­ship or part­ner­ship sit­u­a­tions, and what needs to be done pre-pur­chase in or­der to counter these.

Everitt says that the big­gest risk in joint pur­chases is that one part­ner wants to sell when an­other doesn’t, “be­cause there’s an ex­tremely lim­ited mar­ket for half-a-house when one part­ner is still liv­ing there”.

The part­ners can and should draw up an up­front le­gal agree­ment set­ting out the pro­ce­dure if this sit­u­a­tion should arise, he says, but the fact is that things will al­most in­evitably come down to the half-owner who wants to stay ei­ther hav­ing to quickly raise the money to buy out the other half-owner’s share (and pay a sec­ond lot of trans­fer costs) or be­ing forced into sell­ing (pos­si­bly at a loss) so that they can both be free.

“In ad­di­tion, it is worth not­ing that most banks are not keen any more on joint pur­chases by peo­ple who are not mar­ried or life part­ners. Cur­rently only one will ap­prove a mul­ti­ple bond ac­count, with each part­ner be­ing re­spon­si­ble for his or her share of the debt. The oth­ers will only al­low one bond­holder — one part­ner is legally re­spon­si­ble for the mort­gage debt, and will be stuck with it if for some rea­son the other part­ner can’t or won’t pay their share.”

Other fac­tors to con­sider when buy­ing a prop­erty with a friend in­clude the need for mort­gage pro­tec­tion in­sur­ance.

“Shared own­er­ship is no pic­nic, and ar­range­ments in which par­ents or other older rel­a­tives agree to sub­sidise a first pur­chase for a young buyer or cou­ple (usu­ally by pay­ing the de­posit) are on the whole a much bet­ter idea...”

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