Contract Law

Author: Melanie Coetzee
Legal Consultant
25 February 2021

Joint property ownership:  the agreement

Following our previous article [Tread carefully with shared ownership] which summarised the dangers of jointly buying property with someone else without a proper agreement between the buyers setting out the practicalities, costs and possibility of dissolution, we will now look at the particular provisions which are suggested within such a joint ownership agreement.

Rights and responsibilities
The real financial contribution towards the purchase must be recorded clearly. In this regard, each and every amount paid by each of the joint buyers will be summarised: who paid the transfer costs, who paid the transfer duty, who paid the bond costs and whether either of the parties paid cash towards the purchase price (like a deposit).

The responsibilities of each party will then be defined: from garden services to payment of council utilities, domestic services, who pays towards the bond instalment and who pays towards the maintenance of the property. Because life is never stationery, it is worth agreeing that an annual review would be done on a specific date in respect of all the costs and responsibilities and that an addendum is attached once agreement is reached for the upcoming year.

In the event that one of the joint owners in the joint ownership agreement is not being reflected on the title deed (such as a parent who assisted with the purchase price on behalf of a child), then in such a situation it is best to provide for the rights to use the property and who will enjoy such rights.

Dividing the spoils
Provision for the eventual profit or loss and how the split will be determined must be agreed upfront or if it changes during the ownership, within a written addendum to the joint ownership agreement. If the agreement regarding the split of profits or losses is not evident from the joint ownership agreement or any other agreement for that matter, then an assumption exists that the parties are entitled to the 50/50% shown on the title deed and in the alternative, if a dispute regarding the equal split occurs, an order issued by a court.

Prepare for the end to the agreement
One of the most important clauses is the termination clause. If the relationship between the joint owners comes to an end for whatever reason, rules must be agreed upon upfront in order to guide both the parties on “what to do next”.

  1. Usually, an option is created in favour of both parties to offer to buy out the other party’s share at a market-related price which, in terms of the agreement, must be obtained from two independent estate agents instructed by the person wishing to buy out the other.
  2. Should the buy-out option be rejected, then provision is usually made for the property to be sold on the open market and that the property practitioner is to be appointed jointly by the parties, and failing this, by an attorney nominated in the agreement.
  3. If the property is not sold by the property practitioner within a certain period of time agreed upon in the joint ownership agreement or any addendum thereto, then the property will be placed on auction and an auction agency is nominated within the agreement. Again, provisions related to professionals being appointed are often contentious once the relationship has crumbled and it is best to make stipulations in this regard when the relationship is still peachy.
  4. Should the auction option fail, then the property is placed back on the open market until it is sold.

During the course of these options mentioned above, again the usage of the property must be agreed upon upfront. You can imagine the chaos that could ensue when a couple splits up and children are involved… Where would either of the parties go if both refuse to move out? What happens when a third party gets involved in the relationship and moves into the communal property? The examples of disaster are endless.

It is also important to mention the possibility of insolvency of either party in the agreement and the steps which will need to be taken then and how an insolvency of the one party could affect the other party’s credit profile.

To avoid the necessity to refer an unresolved dispute to court, especially where one party feels aggrieved and acts out of spite, it is advisable to allow for mediation or arbitration specifically in the joint ownership agreement in the event of a breach of the agreement or should terms within the agreement be disputed. This saves both parties the immense costs of legal action and allows for specific rules to be followed by both parties in the event of a dispute.

It is a fact that all joint owners dream of the perfect relationship with an expectation that any disagreements between them will be dealt with reasonably which is why the decision was made to enter into the joint arrangement in the first place. In real life however, expectations are rarely fulfilled when the honeymoon period ends, and financial and socio-economic pressures start taking its toll.

Joint ownership agreements allow for both parties to feel comforted knowing that each of their responsibilities and contributions are recorded in writing and this allows for direction and clarity.

Be sure to contact a qualified legal professional to assist with the drafting of a property joint ownership agreement.

The original article can be viewed here:

About the author: Melanie Coetzee started her own legal consultancy Melanie Coetzee Law in October 2021 after more than 20 years in corporate law firms. She specialises in property law and in particular foreign investors, exchange control and all elements compliance related, including FICAA, Privacy Laws and Covid 19.