Joint Ownership (also called co-ownership) exists where two or more persons jointly own the same property. Legally they own the property in undivided shares, meaning that no joint owner is the sole owner of any particular portion of the property: the joint owners, together, own the property as a whole.
In order for joint ownership of immovable property to be legally recognised, the undivided shares of the joint owners must be registered in their names, as per the Deeds Registries Act 47 of 1937. However, if joint ownership arises from a marriage under the community of property regime, registration may not be necessary if the property is registered in one of the spouses’ names.
The undivided shares held by the joint owners do not have to be equal. The percentages of ownership determine matters such as profit distribution, shared expenses, purchase price payments, and the rights and obligations of the parties in case of termination of the joint ownership arrangement.
Important considerations in a co-ownership agreement include:
- Clear Ownership and Contributions: Define the percentage of ownership for each party and record it in the offer to purchase and on the title deeds. Specify financial contributions, including the deposit, mortgage repayments, running costs, and other expenses. Furniture brought into the property should also be accounted for.
- Financial Arrangements: Agree on how financial aspects will be managed. Opening a joint bank account for property-related costs simplifies tracking expenses and ensures fair cost-sharing, including bond repayments, insurance, rates, and taxes.
- Joint and Several Liability: Understand that both parties are equally responsible for the full repayment of the monthly bond instalment, regardless of the percentage of ownership. Financial institutions require joint and several liability.
- Dissolution of the Agreement: Plan for the eventual sale of the property and define how the partnership will be dissolved. Consider scenarios such as one party meeting someone, needing to relocate, facing financial challenges, or in the event of death. Establish a fair method for dividing proceeds from the sale and create an equitable exit strategy.
- Decision Making: Determine how major decisions regarding the property will be made during the ownership period. Establish a process for decision-making and resolving disputes, including property upgrades, decorating choices, and rules around shared spaces.
When entering into joint ownership, careful consideration and thorough planning are essential. By addressing these key factors and drafting a comprehensive agreement, potential issues can be minimised, and all parties can benefit from shared property ownership.
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