Co-owning a home is a good way of getting onto the property ladder, but the terms of the arrangement need to be property set out and documented beforehand.
With fewer couples nowadays getting married but choosing rather to co-habit, or friends choosing to share as they cannot afford something on their own, comes the trend of co-owning property. Co-ownership is a great way to get onto the property ladder but does need careful consideration in drawing up a contract between the owners so that there is no miscommunication or misconception of how the property will be dealt with should they part or decide to sell, says Charlene Nolte-Joubert, partner at Henkes Nolte-Joubert (and a founding member of the Attorney Realtor Hub).
Once a property has been found, before signing an offer to purchase, the buyers should establish what percentage each owner will hold – if it is not stipulated in an agreement between the co-owners then it is assumed that they own equal shares in the property. The shareholding in the property can, however, also be recorded in the title deeds at the Deeds Office, to ensure that the agreement is preserved.
There are many things to consider when buying a property with another person, and the following should be included in the agreement between the co-owners:
Who will occupy the property? Will it be one person or be shared?
Who will be applying for finance, paying in cash or contributing the deposit, and in what proportion if this is to be shared?
When maintenance or repairs are needed, what percentage will each owner pay? It is assumed that the contributions are in direct ratio to the share of the property owned, unless stipulated.
If the property or share in the property is sold, how will the profits (or losses) be split?
Will the sale of a share in the property be restricted by the other owner(s)?
Is there a chance a co-owner might use this property as collateral for another loan or draw from an access bond?
What happens in the case of death of one of the co-owners, or inability to contribute to future payments?
What happens if the co-owners decide to part and is there a dispute resolution in place if they do so on unfriendly terms.
“Co-ownership is a very good way to own a property that you could possibly not afford to buy on your own. It is important, however, to choose your co-owners carefully, and be sure to draw up an agreement from the outset with the co-owners with regard to portions of bond repayments, rates, running expenses and conduct rules for all involved. It is also best to discuss before purchasing what the future plans each co-owner has for his share, in case their intention is not to hold onto the investment for the same period of time the others need. Buying and selling property is expensive, and investments should always be seen as long term, for no shorter than ten years at a time,” says Nolte-Joubert.