Safeguarding your joint property purchase: A how-to guide for buyers

In today’s current economic climate, it can be advantageous for both young entrants into the property market, as well as more elderly house buyers to consider pooling resources to buy a property together. Buying a home is one of the biggest purchases you will ever make and so to ensure that your purchase, and your relationship, stand the test of time, it is advisable to draw up a legally binding contract between all parties. The agreement should set out the nature of the partnership and who is responsible for things like improvements, maintenance, and even Ts & Cs around its occupation and usage, as well as an exit strategy for when one party wishes to sell.

You wouldn’t buy a house on a handshake so why would you neglect to formalise a purchase agreement between a partner, friends, or relatives? An attorney can assist with the specifics of your agreement, but broadly speaking here are some headings to consider.

Financing the purchase. Whilst banks are happy to grant home loans to multiple parties in respect of a single property, they do hold buyers jointly and severally liable for repayments.  This means that no matter what is agreed between the parties in terms of who pays for what, you are equally responsible in the eyes of the bondholder for the full balance of the loan amount owing to the bank and may therefore be held liable for the full balance should repayments fall behind.

Sharing the costs. Don’t forget the costs associated with the purchase of the property and ongoing costs to maintain the same thereafter. Who will pay the deposit and transfer fees and in what proportion? What about running costs including rates, taxes, homeowners insurance, and maintenance? Make sure that clauses relating to all these line items are included in your agreement.

Moveable assets. It is a good idea to consider including the current and future ownership of moveable assets in the house – furniture, white goods, etc. to save any complications down the line and to assist in any dispute resolution.

Exiting the agreement. At some point, you and your partner/s – or perhaps only one of you – will want or need to sell their share of the property. It is essential, therefore, in drawing up your co-purchasing agreement, to include a provision for the eventual sale of the property. How do you manage a forced sale by one party, or what happens in the event of the death of one of the co-owners?  How are the proceeds of the sale split, or how is any shortfall in the sales price versus amounts outstanding on the bond managed?

 

Without a proper, legal document that includes all aspects of buying, owning, and selling a home with another person/s, matters relating to the financial aspects as well as the occupation of the property can quickly sour. What should be a happy and possibly even profitable process for all parties should never come to this and so drawing up an agreement that is fair and equitable for everyone and which covers all eventualities is essential for a satisfactory outcome.

For more information, contact Hammond Pole attorneys:

Brendan Michie – BrendanM@hammondpole.co.za