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As with any business transaction, it is important to carefully consider the advantages and potential drawbacks of the arrangement, as well as come to a transparent agreement (in writing!) with the co-owner(s).
The benefits of property co-ownership is somewhat obvious. You’re only responsible for an agreed-upon percentage of the monthly bond repayments. Similarly, the cost of maintaining the property is also shared. Decide on the split, both in terms of ownership and financial responsibility, as soon as a suitable purchase has been decided on.
Do note though that while the purchasers decide on their respective share of the property, and which will be recorded as such in the title deeds and registered at the Deeds Office, the institution that grants the loan will expect that all parties sign to be ‘jointly and severally’ liable for the repayment of the loan. This means that the mortgagee is entitled to recover the whole amount from any one of the co-owners if there is a default on the regular payments.
Disputes and pitfalls usually arise as a result of one of two major factors; when one of the owners default on their monthly bond repayments, or cannot afford to contribute their share to the routine maintenance of the property. Another common reason for tension and disagreements is when one of the partners wants to sell their share in the property.
It is essential to seek legal counsel around these matters, but even more important to have a co-ownership agreement drawn up when entering into such a transaction. While a lawyer needs to draw up the contract, a trusted property advisor can guide and advise you on how to structure the agreement to protect and promote the interest of all parties involved.
While it’s up to the owners to stipulate the contents and scope of the agreement, it’s rather essential that the contract makes provision for the following factors and eventualities:
It is best to come to an agreement on these considerations before purchasing the property as a roadmap for the way forward, rather than trying to navigate murky waters once you’ve left the safety of the shore.
Property investments should not be taken lightly. The backlash of an investment gone wrong can be very expensive and best avoided. But, approached with open and reasonable expectations, it can be a very worthy and rewarding investment.