CO-OWNERSHIP: OWNERS WITH RESTRICTIONS

“The ache for home lives in all of us. The safe place where we can go as we are and not be questioned.” – quote by Maya Angelou.

 Private ownership of property is vital to both our freedom and our prosperity. Economic depression has caused many to be forced to select the option of co-ownership. 

Co-ownership has enabled those to acquire property that they could possibly not have afforded to purchase on their own. The idea of co-owning is much more appealing than co-renting from some people, as one can be paying for their own bond instead of investing in a fixed asset for someone else.

To be a co-owner of a property, you do not have to be married. Two or more people can also jointly own property. When you co-own a property with someone, the property as a whole is co-owned. No particular part of the property is solely owned by one of the co-owners.

Co-ownership

Respective co-owner acquires an undivided co-ownership portion in the co-owned property. This notion of an undivided co-ownership share means that the commonly-held property may not be alienated for as long as the co-ownership exists, and that no co-owner can alienate the property without the permission of the other co-owners.

A co-ownership of property does not only apply to unmarried couples and couples married out of community of property but it also applies to co-owners such as partners in a property joint venture or the joint owners of a holiday home.

If two individuals own property together in undivided portions it is prudent to enter into a contract, it will assist to resolve future problems and control the parties’ privileges and responsibilities if they decide to cancel the “contract”.

In co-ownership, “nothing is yours, it is to use, it is to share. If you will not share it, you cannot use it.” (quote by Ursula K. Le Guin). If no agreement is entered certain problems may arise which will be clearly explained below.

Problems in co-owned properties?

1.      SELLING PROPERTY

Disputes arise when one co-owner wants to sell the property while the other person does not. A percentage of the shared property may only be sold or rented out with the permission of all the co-owners.

2.      JOINTLY LIABLE

If one of the co-owners fails to pay their share of the liabilities, for example bond installments, rates, electricity, water, improvements and maintenance etc., the remaining co-owners remain wholly equally and individually accountable for the liabilities. This means that the other co-owners may have to pay debts even if they previously paid their share.

It is therefore important that when entering into purchasing a property as a co-owner:

·        that one ensures that the choice of the other co-owner is taken very carefully, and

·        Secondly, that the co-owners enter into a contract from the beginning that lays out the basic standings and conduct rubrics for all co-owners.

3.      MAINTENANCE

When a property is co-owned, no portion of the property can be upgraded or altered without the consent of the other owner/s.

The owners have to approve and consent:

·        on the day to day running of the property and

·        to contribute to the expenditures sustained in preserving the property in direct share to their ownership fraction .

CONTENTS OF CO-OWNERSHIP CONTRACT?

Through ensuring that there is no fight and misinterpretation, a suitable contract should be in place to ensure that the co-owners have a right of recourse to settle any disputes if any arise.

"An express declaration of trust conclusively defined the parties' respective beneficial interests." (Goodman v Gallant [1986]). In modern day relationship of trust mixed with money, the lines do get blurred and therefore a contract entered between co-owners is essential to ensure that "trust" is guaranteed.

A co-ownership contract is to protect all the probable co-owners before signing the purchase agreement.

A co-ownership contract should mention some of the following:

·        That should one owner wishes to sell his or her portion of the property, the remaining co-owners may have pre-emptive right to buy the property, but if on no account the market-related proposals are made by them, the property as a whole needs to be sold and the profits must be distributed according to the degree of each co-owners’ pro-rata share.

·        If the payments to the buying price or costs of transfer were unequal, the contract ought to be stated and provision must be made for the disparity when division of the profits should the property be sold.

·        The contract should mention what takes place in the instance of the death of one of the owners.

·        As co-ownership a share or a percentage of the total, he co-owners also have co-liability or joint liability and have obligations towards the entire the property, not just the section that the individual owner occupies. The contract needs to provide clarity to avoid future problems.

CONCLUSION

Constantly preserve the notion that individuals and their notions change and that you should not place yourself in circumstances that resolve in a complicated situation that you struggle to get out of.  

It is important to ensure that you enter into a co-ownership agreement. Remember that you cannot play the victim for circumstances you created. So rather avoid being the victim and enter a co-ownership contract.

(NOTE: this article is for information purposes only. Each case depends on merits of matter and should be consulted with an attorney)