What does joint ownership or co-ownership mean, and how can you safeguard yourself when things go wrong?
You do not have to be married to co-own property with another person
Two or more people can also jointly own property. This is becoming increasingly common with younger people today. The idea of co-owning is much more appealing than co-renting for some people. When you co-own a property with someone, the property as a whole is co-owned. No particular part of the property is solely owned by one of the co-owners.
The extent of the shares held by the co-owners does not have to be equal
Although this is not always practical. But if you for example have a 60% share, it does not mean that you own a larger part of the property. It means that you would pay 60% of the purchase price and costs of purchasing the property. You would also benefit from 60% of any profit derived from the sale or lease of the property.
A portion of the joint property can only be sold or leased with the consent of all the co-owners
Problems can and do arise when things go wrong and one person wants to sell while the other person or persons do not. A majority vote on this matter is insufficient. A share of the joint property can also only be sold (usually) with the consent of all the joint owners. This will also depend upon the agreement between the owners in this regard.
So, be careful not to get too caught up in the excitement of purchasing property together. Always keep in mind that people and their ideas change, and that you should not put yourself in a situation that will be tricky to get out of.
Insist that a co-ownership agreement is drawn up to safeguard all the potential co-owners before you sign the offer to purchase. This agreement will have to state, for example, that should one owner want to sell his share of the property, the remaining co-owners have the first option to purchase it, but if no market-related offers are made by them, the property must be sold (as a whole) and the proceeds divided according to the extent of each co-owners share.
The money that you spend on drawing up such an agreement will be money well spent.
BE WARNED! If one of the co-owners does not pay his share of the debts, like the mortgage loan, then the remaining co-owners are all jointly and severally liable for the debt. This means that the other co-owners will have to pay the debt. There is NOTHING you can do to safeguard yourself from this, as this will be one of the bank’s requirements!!!
It is advisable that you seek professional legal help when drawing up a co-ownership agreement.
This article originally appeared in Property Power 11th Edition Magazine. To order your copy at the discounted price of R120 click here.