Property co-ownership: The good, the bad and the paperwork

For many buyers looking to enter the market for the first time the question around affordability is a very real concern. Co-ownership could offer a means of doing so as the burden of the monthly bond repayments is shared.

"Property co-ownership - whether it's with a friend, family member or acquaintance - is a great way to get onto the property ladder, and if it's done with the necessary transparency and with the right agreement in place, all parties will benefit," says Steven van Rooyen, Principal at Leapfrog Milnerton. 

The good 

"A burden shared is a burden halved" the famous saying goes, and this is certainly the case with property co-ownership. 

As co-owner you're only responsible for an agreed-upon percentage of the monthly bond repayments. The percentage each party will pay should be agreed upon at the start of the transaction and be clearly stipulated in the agreement. "There is no rule or law that says each party has an equal responsibility towards the bond - it could be a 50/50 split or a 80/20 split, or whatever configuration suits those involved," Van Rooyen explains. 

Similarly, there is no limit to the number of people who can jointly own a property though the more cooks - metaphorically speaking - the more complex things become in the kitchen (or on the agreement!). 

Beyond the cost of servicing the bond the owners would, theoretically anyway, be jointly responsible for costs like levies, rates and taxes, and the maintenance of the property.

Van Rooyen notes 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) will expect that all parties sign to be "jointly and severally" liable for the repayment of the loan. This means that the bank is entitled to recover the whole amount from any one of the co-owners if there is a default on the regular payments. 

The less good

As with any financial and/or legal transaction, disputes may arise. In the case of property co-ownership there are typically two scenarios that cause issues. The first is when one of the owners defaults 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. 

This is why it is crucial to have a co-ownership agreement in place from the start. Work with a property professional and seek legal advice in drawing up the agreement. If disputes or disagreements arise the agreement serves as the guidelines for resolving any issues. 

The paperwork 

Make sure the agreement is watertight and addresses the following points - a property professional will also be able to offer further guidance and advice in this regard. 

• 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? 

"Property co-ownership, when thoroughly considered and with the right agreement in place, is a great way for more buyers to enter the market and should thus be encouraged," Van Rooyen concludes.