The pitfalls of property co-ownership

The pitfalls of property co-ownership

Private Property South Africa
Lea Jacobs

Buying a property jointly with someone else may seem like a good idea since it makes it more affordable, but it can lead to major disputes.

Much has been made about the benefits of buying a property jointly with a friend, family member or partner. On paper it's a great idea. For starters the bond repayments and costs of maintaining the home are halved. However, there can be problems and although not every friendship or relationship is destined to disintegrate, there does often come a time when one of the parties involved wants to sell up and move on to bigger and better things, resulting in a legal wrangle when it comes to splitting the assets.

“I recently consulted with a client who had bought a property with a friend some years back,” says Mark Robertson, a director and attorney with Barry, Botha and Breytenbach Inc. “The client wanted to sell the home, but the friend was adamant that he wanted to hold on to the property and refused to put the property on the market. The big question was whether the client could force the friend to sell.

“A distinctive feature of co-ownership in property when compared to other forms of co-ownership such as partnerships or associations is the fact that a co-owner may freely sell his share of the property without reference to the other co-owner.”

However, he notes that this right may only be sold if no prior agreement was concluded between the two co-owners in which they both agreed on how the disposal of their share in the property should be handled. Choosing to exercise this right to sell your share can however strain the relationship as your co-owner may feel that he is being forced into a co-ownership with someone he does not know or may not approve of.

“The competing interests here are that you cannot force your co-owner to sell his share of the property if he does not want to and neither can your co-owner force you to remain a co-owner against your will.”

However, things don't need to turn unpleasant and the quickest, least expensive option would be for the party that wants to sell to agree to sell his share to the person who wishes to retain the home. Remember, if the situation deteriorates and communication between the co-owners breaks down, decisive action needs to be taken because should you decide to litigate, the courts are going to want to know what steps have been taken to resolve the matter.

“If this is not possible, the law allows you the right to approach the Court for partition of the property. Partition of the property essentially means that the property itself will be split, with the court dividing it physically between the co-owners in accordance with the value of the property and each co-owner’s share in it.

“If the actual partition of the property is impracticable, the Court will have the freedom to decide on whatever other solution it sees fit, such as ordering that the property be sold by public auction and the proceeds shared between the co-owners according to their respective shares in the property. The Court could also, for example, order one co-owner to buy out the other. The Court will therefore, with reference to the circumstances, make an order that is just and equitable to both parties.”

Anyone who is considering entering into a co-ownership agreement should obtain legal advice in order to discuss the available structures and entities to suit their individual needs. An agreement that spells out aspects such as the sale of the property and the respective rights of the parties involved can be drafted once everything has been put on the table. This won't only help stave off bad feelings later on, but could help avoid litigation down the line.

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