Co-owning a home without a contract can be risky

Many people nowadays choose not to get married but will live with their partners and buy their home jointly.

In these cases it is essential that partners buying a home together sign a valid contract to protect the asset for all involved, says Lanice Steward, managing director of Knight Frank Residential SA.

“In some cases one of the partners might have stopped working to look after children and not contributed to repaying the bond, but has contributed to the household in other ways. Because of this intangible input, in the case of a split, who would get a fair share of the proceeds of the sale of the property?

“It is important to establish and stipulate whether the buyers of the property are co-owners or partners, as this determines when each party becomes responsible for any debts incurred. If buying the property as partners, the debt responsibility only starts once the partnership is dissolved, whereas when buying as joint owners, the prescription period starts when the debt was incurred.”

In a court case covered in a Smith Tabata Buchanan Boyes newsletter, Claassen v Quenstedt, the partners bought a home together but neither signed a contract nor stipulated the conditions of the agreement.

This is a typical example of how important it is, not only to have a contract between the partners, but to stipulate whether they are joint owners in the property, says Steward.

In this case, a mortgage was registered over the property, Quenstedt paid the deposit and the property was registered in the names of both parties. After several years the relationship came to an end and Claassen claimed that each party should be fully accountable to the other with regard to all expenses incurred as well as any profit. This would be extended to the settlement of the outstanding bond, the estate agent’s commission, payment of all the municipal accounts still due, any other direct expenses and the reconciliation of the amounts paid to either party.

Quenstedt argued that the parties would share the profit and share the expenses to maintain the property, as well as the bond repayments and rates and taxes.

Claassen was claiming monies due before November 2011, which was three years before the issue of the summons, claiming that the joint ownership amounts were due. The response from Quenstedt was that there was an extension in cases of partnership, which they had entered into when they bought the property together.

The court ruled that Quenstedt was responsible for the maintenance of the property as he was living in it and he did not owe Claassen any rent for the time he has lived there in addition to paying the bond repayments. Claassen, as co-owner of the property was responsible for the outstanding share of rates and taxes and the bond repayments which have not yet prescribed.

The property was ordered to be sold and the payments of the outstanding bond made, as well as commission to the estate agent and all municipal amounts due. The profit that remained was to be split between the two parties.

“Had this couple entered into a contract before buying the property,” said Steward, “they could have avoided the expense of taking this matter to court as well as the unnecessary time delays in coming to an agreement. Parties buying property together need to break down all the expenses and profit and be sure that they have an agreed percentage share in their contract as well as who is responsible for what aspects of the ongoing ownership.”

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