Find out how your property rights are affected by the different types of marital contracts.
There are a few major events that characterise life’s journey. These include, amongst others, graduations, birthdays, the birth of a child, funerals, religious celebrations and of course weddings and property purchases.
Generally speaking, marriages and property purchases go hand in hand. Two partners meet and decide to settle down which typically entails marriage and a property purchase. Getting married and buying a property both represent major commitments and shouldn’t be taken lightly, particularly given that the nature of a marriage plays a direct role in how a property is owned, enjoyed and even sold.
In South Africa, a person can get married in terms of civil law, a civil union, customary law or in terms of a culture or religion. Not all marriages are deemed ‘official’ though as there are certain requirements which need to be met in order for it to be recognised by South Africa’s courts. With this in mind, it’s important to make sure that your marriage meets the necessary requirements if you want it to be recognised.
In South Africa, there are two main types of marital contracts: In community of property and out of community of property which is commonly referred to as an ante-nuptial contract. If you don’t have an ante-nuptial contract drawn up before the marriage, then the marriage will automatically be deemed as being in community of property. Both types of contract present advantages and disadvantages.
Marriage in community of property
If you get married in community of property, all property owned by you and your partner at the time of the marriage will be grouped together under the banner of a joint estate which is co-owned, regardless of whose name is on the title deed. In other words, your partner will automatically share half of everything you own and vice versa.
The plus side to this arrangement is that both partners enjoy an equal share of the property and any shared assets. Both partners are also entitled to an equal share of the profit stemming from the sale of a property. Should one partner inherit a property, the other partner will automatically become a half-share owner of the inherited property too.
The downside is that both partners are also jointly liable for any debt incurred. Property held in either partner’s names can be attached by a creditor and sold to offset any debt owing. Both partners also require the consent of the other to purchase, finance or sell a property which can be irksome depending on the nature of the relationship.
Getting married in community of property can also be problematic later down the line should there be a divorce. If the marriage ends, the joint estate has to be divided and distributed equally between both partners despite the fact that one partner might have paid the bulk of the costs or owned the property before getting married.
Given these issues, many couples choose not to get married in community of property and opt for an ante-nuptial contract with or without accrual instead. Typically, as per ante-nuptial contracts, property bought before the marriage remains the sole property of the owner. Ante-nuptial contracts can also be useful in that assets are essentially kept separate.
An ante-nuptial contract with accrual means that only property or assets purchased during a marriage can be divided equally between both partners should the marriage end unless specifically stated otherwise in the contract. Ante-nuptial contracts without accrual means that there is no shared ownership of any pre-marital or marital assets of any kind. Unsurprisingly this may not sit well with a partner/s depending on the situation which is why it is so important to discuss such matters in depth before agreeing to anything.
Although not a terribly romantic way of doing things, ante-nuptial contracts are practical and can be useful for ‘sheltering’ a couple from financial ruin should one partner end up in financial trouble. Marriages arranged along these lines also allow for greater flexibility as each partner can purchase, finance or sell a property without the consent of the other.
With these points in mind, it is imperative to engage the services of a trusted, unbiased lawyer who will draw up a fair contract before you get married and/ or buy a property with your partner. It’s important to keep in mind that there are variations of these contracts and they can be drafted to suit your individual circumstances.