With the COVID-19 pandemic waging war against South Africa’s economy together with the uncertainty of many people’s financial future, more and more people are entering into discussions about how they can reduce monthly costs. Family, friends, partners and even strangers are discussing new and “exciting” ways to better themselves whilst saving themselves some much needed money. These conversations almost always involve combining the money they pay towards rental and jointly purchasing immovable property which they can call their own. The reasons advanced for this is that they “would rather put their rental money into something they jointly own”. This really does sound like the perfect idea, but is it really? Why are more people not doing this?
Purchasing immovable property is a noticeably big commitment to make. It is after all a 20 -25-year commitment for the average person to make. The following must be considered before you elect to enter this new and “exciting” commitment.
- If you purchase immovable property with a friend, family member or unmarried partner you must be prepared to share ownership of the property with that person for that duration of your joint bond, (20 – 25 years) and even longer;
- If you suddenly fall out and/or break up with your co-owner, you cannot simply walk away from your ownership responsibilities. The banks are not concerned about your personal issues with your co-owner. You may have to continue to reside at the property with the co-owner in a toxic environment or find a way to exit the bond agreement which will almost always be a very costly exercise;
- The bond account’s debit order must come from one of the co-owners banking account. As a result, you will need to ensure that there are always sufficient funds available in the nominated banking account to avoid defaulting on your monthly bond repayments. If there is a default on payment of your bond account, even though it may not be your fault, your credit record will be adversely affected and you may find yourself blacklisted;
- Should the co-owner decide to exit the bond agreement, whether for financial reasons or other, you would need to enter into a new bond application with the bank. This application may already have been affected by previous defaults on the bond account, meaning the new bond application may be refused because of the previous defaults. In this case, you may have to sell the property to avoid being drowned in sudden debt;
- Should your co-owner manage to sell his/her portion of the property you may find yourself living with a stranger who has equal ownership rights over the property; and
- You may find yourself in a situation where you simply cannot afford the bond payments any longer due to a change in your and/or your co-owner’s financial position. You may find yourself dealing with Attorneys whilst your home is being repossessed by the bank and sold on auction to cover the bond amount.
It is therefore extremely important to remember that buying a property is a big commitment and the decision to jointly buy immovable property should not be taken lightly. The parties need to work out all the eventualities before taking ownership of any immovable property as any of the abovementioned concerns could cause you irreparable financial harm.
If you are considering and/or are in the process of purchasing a property with another person(s) contact us so that we may advise you before you embark on this exciting venture.