Owning property is a significant milestone in one's life, often seen as a mark of success and stability. However, property ownership doesn't always have to be a solo endeavour. Co-ownership of property is a unique arrangement where two or more individuals jointly own a property, sharing the rights and responsibilities that come with it. These rights can be equal or unequal, and are usually defined by a legal agreement called a co-ownership agreement.
Types of co-ownership of property
Co-ownership of property can be structured in various ways, and it's crucial to establish clear guidelines and agreements to avoid conflicts in the future. Understanding these different types of co-ownership empowers you to choose the most suitable option for your specific needs and goals.
Joint tenancy
In joint tenancy, each owner has an equal and undivided interest in the property. Should one owner pass away, their share automatically transfers to the surviving owners, outside of the deceased's estate. This principle is known as the "right of survivorship."
Tenancy in common
With tenancy in common, each owner has a distinct, separate share of the property. The shares can be unequal, and if an owner passes away, their share is distributed according to their will or applicable inheritance laws. There is no "right of survivorship" in tenancy in common.
Partnership property
As the name suggests, this type applies when a property is acquired for the specific purpose of running a business partnership. Ownership rights and responsibilities are not governed by standard co-ownership of property rules, but rather by the terms outlined in the partnership agreement. This agreement serves as a roadmap, specifying profit-sharing ratios, decision-making mechanisms, and procedures for handling dissolution if the partnership ceases. While offering flexibility, partnership property can become intricate, especially when navigating disagreements or winding down the venture.
Sectional title co-ownership
Sectional title co-ownership arises when purchasing a unit within a larger development, like an apartment complex or townhouse estate. Here, you own both your specific unit and a proportionate share of the common property, such as gardens, swimming pools, and hallways. This shared ownership translates to shared maintenance expenses and responsibility for upkeep. Additionally, rules and regulations specific to the development apply, governing everything from noise levels to pet ownership.
Leasehold co-ownership
While not technically full ownership, co-ownership of a leasehold property can be a viable option in certain situations. This involves jointly obtaining a long-term lease on a property from the owner, granting temporary possession and usage rights. Though offering lower upfront costs compared to freehold property, leasehold co-ownership of property comes with limitations. Renewing the lease, subletting, and alterations usually require the approval from the landowner, and lease expiry ultimately means relinquishing the property.
Co-ownership trusts
In some cases, a trust might be established as the legal owner of a property, with multiple beneficiaries acting as co-owners. This structure can offer increased flexibility and estate planning advantages, but complexities arise with managing the trust and ensuring beneficiary rights are clearly defined.
Laws regarding co-ownership
Co-ownership of property in South Africa is governed by a combination of common law principles and statutory provisions, such as the Deeds Registries Act 47 of 1937, National Credit Act 34 of 2005 and the Prevention of Illegal Eviction and Unlawful Occupation of Land Act 19 of 1998.
Undivided rights and responsibilities
This principle states that even though ownership is divided, the rights and responsibilities associated with the property remain undivided. Each co-owner has full rights and obligations towards the entire property, not just their specific share. For example, if the property is a house, each co-owner has the right to reside in it, but they also share the responsibility for maintenance and repairs. This principle ensures that the property is managed and maintained in the best interests of all co-owners.
Proportional sharing
This principle dictates that costs and benefits associated with the property are shared in proportion to each co-owner's share. This includes expenses like maintenance, utilities, and taxes, as well as any income generated from the property, such as rent. For example, if one co-owner owns 60% of the property, they would be responsible for 60% of the expenses and entitled to 60% of any income. This principle ensures fairness and prevents any one co-owner from bearing a disproportionate burden.
Right to possession and use
Each co-owner has the right to occupy and use the property based on their share. However, this right cannot be exercised in a way that interferes with the enjoyment of other co-owners or restricts their access to their own share. For example, if one co-owner lives on the property full-time, they cannot exclude other co-owners from using it at reasonable times. This principle ensures that all co-owners can enjoy the property without being unfairly restricted.
Mutual consent for major decisions
Any significant decisions regarding the property, such as selling, leasing, or making major alterations, require the consent of all co-owners. This protects the interests of all co-owners and prevents any one person from making decisions that could negatively impact the others. For example, one co-owner cannot unilaterally decide to sell the property without the consent of the other co-owners. This principle ensures that all co-owners have a say in important decisions that affect the property.
Dispute resolution
If co-ownership becomes untenable, any co-owner can initiate a partition action. This can involve physically dividing the property into separate portions or selling it and distributing the proceeds. The court will consider factors like the value of the property, the wishes of the co-owners, and any potential hardship caused by the partition. This principle provides a way to exit a co-ownership arrangement if it is no longer working for one or more of the co-owners.
Advantages of co-ownership
Co-ownership of property can be a rewarding and strategic path to owning a property. Below are some of the advantages of co-ownership of property:
Shared financial burden
One of the primary advantages of co-ownership is the ability to share the financial burden of purchasing and maintaining property. Co-owners can pool their resources, making property ownership more affordable and manageable.
Increased buying power
Co-owning a property allows individuals to invest in larger and potentially more valuable properties than they could afford individually. This can provide access to better locations and amenities.
Flexible use of property
Co-owners can agree on the usage of the property, whether it's for personal use, rental income, or a combination of both. This flexibility opens possibilities for maximising returns and shared enjoyment.
Disadvantages of co-ownership
While co-ownership of property comes with a bouquet of advantages, it also has its disadvantages:
Potential conflicts
Co-owning property can lead to disagreements and conflicts, particularly when it comes to decision-making, usage restrictions, or financial obligations. It's crucial to establish clear communication and legal agreements to mitigate these risks.
Dependency on co-owners
The actions and decisions of co-owners can directly impact all parties involved. If one co-owner fails to fulfil their responsibilities or decides to sell their share, it can create challenges for the other owners.
Legal complications
In the absence of proper legal documentation, conflicts can arise when co-owners with to sell or transfer their shares. Clear agreements and legal advice are essential to navigate legal complexities and protect each owner's rights.
Conclusion
Co-ownership of property offers benefits such as shared financial burden and incerased buying power, but it also comes with potential conflicts and legal complexities. To learn more about co-ownership of property, enrol for the Course in conveyancing at the Gawie le Roux Institute of Law. Conveyancing will equip you with the necessary knowledge to overcome the legal complexities of co-ownership of property.
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