This week a married couple, who bought a house with a good friend about two years ago, is seeking advice from our panel of experts.
The bond was registered in all three’s names, but a 50/50 share was agreed on between the couple – who is married in community of property – and the friend.
They receive a rental income of R4 500 per month while the monthly repayments are an average of R6 500, which is debited in full from the husband’s account.
The problem is that the friend is making her 50 percent contribution based on the tenant’s rent being received, which has not happened for several months. She is only paying half of the difference instead of half of the full amount.
To make matters worse, the friend is currently unemployed and cannot, according to our reader, afford to pay her full portion. Buying the friend out is currently not an option.
Lucille Geldenhuys Attorneys
Lucille Geldenhuys from Lucille Geldenhuys Attorneys in Stellenbosch says buying a property with another person can be a good way to get into the property market.
“However, it is important that all parties first consult with an attorney to understand exactly what the legal implications of joint ownership are, especially if they are going to register a bond.”
Geldenhuys warns that joint ownership is a long-term commitment and that there are many factors that may cause difficulties in the future, for example if one party loses his/her job and can no longer meet his/her financial obligations.
“It is advisable that the parties establish whether they can afford their share of the bond repayments, rates and taxes, insurance and other costs irrespective of whether rental is received or not.”
In this manner, says Geldenhuys, the parties can realistically decide whether they will be able to honour their commitments, based on income received from more stable sources (like salaries).
“If a party can only afford his or her share of the monthly expenses if a projected rental income is received, he or she must rather acquire a smaller share of the property. This will reduce his or her share of the monthly expenses.”
According to Geldenhuys, it is important that the parties instruct their attorney to draw up a contract to regulate their co-ownership. “Each party’s rights and obligations should be stipulated as well as methods to deal with possible difficulties.”
Schalk van der Merwe – Rawson Properties
Schalk van der Merwe from Rawson Properties Helderberg says the agreement between the couple, who jointly own half of the property, and the friend, who owns the other half, is that they must share everything equally. “This relates to both profits and expenses, unless another split has been agreed on.”
If the friend is not paying her share of the expenses, it does not necessarily imply that she will lose her right to half of the profits when the property is sold, according to Van der Merwe. “The couple will however be able to claim compensation for everything they are currently paying on behalf of the friend, plus interest thereon.
“If they cannot afford to buy the friend out, but they can, for the time being, pay a portion of the friend’s expenses, they must draw up an agreement based on their current financial situation wherein they deviate from the current 50/50 agreement.”
Van der Merwe says the couple may agree to assume responsibility for a higher portion of the expenses, but on condition that they will be entitled to a higher portion of the income and profits. “If they cannot afford to keep paying the bond, they should sell the property rather than risk having legal action taken against them by the bank.”
The parties may also consult with the bank to see if they can come to an interim arrangement for reduced payments, according to Van der Merwe.
To ask a property related question, visit www.propertyposer.co.za.
