Even though statistics reveal that more and more unmarried couples are buying property together, few of them are aware of the legalities around it.
Says Adrian Goslett, CEO of RE/MAX of Southern Africa: “The law does not regard partners that live together as spouses. Therefore, it is best to register the property in both partners’ names to prove ownership, should the couple decide to separate one day.” It will also make it easier for the couple to divide their assets and/or to claim compensation from one another as Partner X can buy Partner Y out for example, and transfer the once jointly owned property into his/her name after termination of the relationship. But what if Partner X does not earn the same income as Partner Y and therefore cannot contribute the same amount on the monthly mortgage payment of their home? “Then the couple should ensure that the bond is registered according to the financial contribution each partner will make,” notes Goslett. “A bond can be registered 50:50, 70:30 or even 80:20. Your estate agent, bond originator or conveyancing attorney will be able to advise you on this.” He adds however, that in the case of property that’s jointly owned, banks usually hold both parties liable (jointly and/or individually) for the full amount outstanding, should monthly instalments fall behind.
“Find out what the bank’s policy is with regards to home loan accounts that are in arrears before you commit to buying property together as you cannot predict what the future will hold. Always prepare for the worst case scenario and come to an agreement on what will be done with the property in the event of separation, financial difficulty and/or death before making a commitment.” This is where a cohabitation agreement comes in handy. To summarise, a cohabitation agreement is an agreement in which both parties stipulate how all property and/or assets will be divided upon termination of the relationship among others. “Seeing that this agreement is recognised by South African law, I strongly suggest that all couples who intend to live and/or buy property together get a family lawyer to draw one up before they move in,” advises Goslett. He adds that a cohabitation agreement should be regarded as the absolute minimum contract to have in place and that it should preferably be signed and sealed while both parties are still happy together “as they will more than likely be objective and fair in the decisions they’ll make,” notes Goslett.
A good cohabitation agreement will distinguish between separately owned, jointly owned and commingled property while noting jointly approved living expenses and the division thereof as well as each party’s contribution towards monthly household/property/home loan expenses. It will also stipulate how the couple will deal with the selling / market evaluation / bond transfer process of the jointly owned property, should one party want to retain the property at the time of the relationship coming to an end and/or should they both decide to sell the property and divide the profit among themselves. Aspects to discuss before investing in a home together therefore include:
Whether or not the property will be registered in both partners’ names
Who will draft your cohabitation agreement
How much each partner will contribute towards the down payment of the property
Who will be responsible for the rates and taxes, water and electricity, insurance, cleaning, gardening and the overall maintenance of the property inside and out as well as the telephone bill and groceries
How you will go about when buying moveable property such as furniture etc.
How moveable property will be divided, should the relationship come to an end / at the time of death
How you will handle cash flow issues e.g. when Partner Y needs to pay Partner X back after he couldn’t contribute to the down payment of the property for a few months
What will be done with the jointly owned property when the relationship ends / at the time of death / should one partner become permanently disabled and cannot contribute financially anymore A good contract is one that addresses both parties’ individual needs in a fair manner. Lastly, it is imperative that both partners note their intentions in their wills. “In life, only written agreements count. The last thing you want is other people making decisions over the future of your partner when you aren’t around anymore,” Goslett concludes.