Joint ownership: what to consider

BUYING a property with the one you believe you will spend the rest of your life with can be an exciting and rewarding decision but even if you feel your love is everlasting, you have to protect yourself in case the relationship fails.

There is no love lost when it comes to fighting for something with an ex-partner in a court of law.

More often than not, says property investor Ben Malapile, couples decide to buy properties together without being married or even planning to get married, and after a few years, they break up and fight for the property.

“In some cases, the couple assisted each other with paying the monthly instalment and can’t afford it individually.”

Before couples buy together they should have their affairs in order and, if they choose to buy as an unmarried couple, they should clearly stipulate what would happen to the property if they decided to part ways.

If you are not married but are contributing to the property together, the best way to protect yourself is to have it registered in both names, advises Eduan Milner, of Eduan Milner Attorneys, Notaries and Conveyancers in Cape Town. After all, having ownership is the “ultimate decision”.

“Yes, there will have to be a division (in the event of you breaking up), such as one party buying the other out, or sale of the property to a third party, but neither of the parties can deal with the property without the co-operation of the other.”

If you and your partner wish to have the property registered in one of your names, you must, at the least, conclude an agreement that regulates what would happen to the property if you split up or it was sold. However, the drawback is that it remains an agreement that must be enforced in a court of law, and this could take a long time, he says.

“By that time, the owner could have sold the property and spent the money. Such an agreement would be a far second place to ownership itself and could give a false sense of security to the one party if he/she was not aware of the procedure and time it would take to enforce his/her rights.”

Buying a property and obtaining a mortgage loan is a long-term commitment, so this decision has to be made after considering all factors, says Leonard Kondowe, the finance manager for the Rawson Property Group.

“When you buy jointly it helps improve your affordability levels which will then enable you, as buyers, to qualify for bigger mortgage bond finance.”

What happens if I am not working but have money to contribute?

Milner explains that the mortgage bond will always follow ownership, so if the property is registered in both names, the bond also has to be in both names. And the fact that one of you does not have an income will not prevent that person from becoming a mortgagor as the bank will look at the affordability of the application.

“If your contributions are going to be different, you could even register the property in a percentage that is not equal, such as 70/30, for example. However, both parties would be fully liable under the bond, irrespective of the percentage in which you hold shares in the property.

“Should you split up, the proceeds from the property would be divided according to each one’s share, unless a party could prove that it must be different, for example, if an agreement was concluded to that effect.

“Of course, the party feeling aggrieved by the split would have to bring an action in a court of law to enforce his/her rights. For example, if the parties initially decide on a 50/50 split but, during the course of the relationship, the one party contributed more than they had initially foreseen, they could either conclude an agreement to reflect that the one party has contributed more or they could transfer a further percentage to that party to reflect an increased ownership.”

However, the last-mentioned option would be costly as it would need to be registered in the Deeds Office and transfer duty would come into play, he says.

If my partner is paying the bond but I am paying for other household costs, what rights do I have to the property?

In a case like this, Milner says, both parties are effectively contributing to the property, one by paying the bond and the other by covering other expenses.

He adds: “If the property is registered in both your names, but the contributions are not equal, you should conclude a written agreement to that effect. If you split up and one party has contributed more than his/her pro rata share, he/she would be able to recover additional contributions only in a court of law.

“However, if they do not keep book of such additional contributions and have it in writing, it is going to be very difficult to prove.”

In a nutshell, how best can my partner and I protect ourselves if we buy a home together?

The best way to do this, Milner explains, is to have the ownership in the property reflect each of your respective investments in the property. If your investments are not an accurate reflection of your ownership percentage, you must reduce it to writing and even amend such documents as the situation changes over the years.

“I know, however, that very few people do it as they seldom think of the bad times while it is going well. However, what you do not put in writing is going to be very difficult to prove a couple of years down the line.”

Echoing this, Carl Coetzee, the chief executive of Better Bond, says it is advisable to have a clear agreement that sets out each party’s contribution to costs including the deposit, transfer costs, monthly bond payments, home maintenance and utility bills.

“Buying a property with someone else – whether a partner or a group of friends – involves a great deal of trust. You will need to do full property transfer if one of you decides to pull out of the partnership and exit the bond agreement.”

While there are many factors to bear in mind with joint ownership, if done properly, he says it could be an effective way of making home ownership more accessible to a couple who would otherwise be unable to afford a bond on their own.

There’s no right or wrong answer when considering buying a home alone or with a partner, but Coetzee says there are some considerations to bear in mind.

“You and your partner would both be jointly liable for the bond repayments, legal, and administrative fees associated with the buying and selling of the property and any other associated costs. Also, the credit scores of both partners would be affected if either of you default on your bond payments. Also, the others in the partnership would have to cover the defaulter’s share of the payment to avoid the risk of losing the property.”