Property co-ownership: Go for it but put an agreement in place

Co-ownership is a great way to afford property, particularly for first-time buyers looking to enter the market. For owners it may make it possible to grow an existing property portfolio. 

"Make sure to carefully consider the advantages and potential drawbacks of the arrangement, and to draw up a written agreement," says Silvana dos reis Marques, Principal at Leapfrog Pretoria East. 

Yes, go for it

The benefits of property co-ownership are obvious. You're only responsible for an agreed-upon percentage of the monthly bond repayments and the cost of maintaining the property is also (typically) shared. Decide on the split, both in terms of ownership and financial responsibility, as soon as a suitable purchase has been decided on. 

Dos reis Marques says to note 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 (the bank, for example) 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. 

But bear in mind 

Disputes typically 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. 

"With any property dispute it is advisable to seek advice from a trusted property professional and/or seek legal counsel," Dos reis Marques advises. More importantly, make sure you have a co-ownership agreement in place from the beginning. 

And heed the law 

It is the responsibility of th co-owners to stipulate the contents and scope of the agreement, but the following points should be addressed:

• Which of the owners will be occupying the property?

• What happens in the case of the death of one of the partners?

• What if one of the parties wants to sell the property and the other doesn't?

• What happens in a case where one of the co-owners default on the monthly bond repayments?

• Should the property be sold, how will the potential profits or losses be divided?

• Who is responsible for securing financing for the property?

• What happens if one party is able to contribute to a deposit and the other can't?

• How is the responsibility of property maintenance to be divided?

• Are either of the co-owners allowed to use the property as collateral for another loan, or permitted to draw from the access loan?