Everything you need to know about property co-ownership

Many people want to invest in property, but not everyone can afford to purchase a house, apartment or piece of land. Co-ownership for investment purposes is a good way to get onto the property ownership ladder, but it’s not something to jump into blindly. Owning property with a friend, sibling or other close family friends can be tricky. Here’s what you need to know about property co-ownership in South Africa.

What is property co-ownership? 

Property co-ownership is when two or more people own a property together. This applies to the entire unit and property. One person cannot, for example, solely own certain parts or areas of the property. As a whole, the property is owned by everyone involved. You can, however, have larger or smaller share amounts of a property. For example, one owner could have a 70% share, while another has 30%. This means that one owner pays 70% of the bond and the other 30%, and in the event of the sale, the profit will be divided up in that split, too.

Skoko Sebola, Principal at Leapfrog Midrand, notes that this is becoming a popular way for younger people to get into the market. 

“It’s becoming increasingly more difficult for young people to secure the capital needed to own their own homes,” notes Sebola. “This is why we’re seeing more of them go into co-ownership with a loved one, a friend or business partner. It’s a good starting point and, after the initial payments and fees, often works out the same as co-renting a place together.” 

“But you absolutely need to sign a co-ownership contact if this is the route you are going,” Sebola advises. “A lawyer will be able to assist in this regard. This will detail payment arrangements, what happens in the event of a sale, what happens if one owner dies or is unable to pay their part? This is just a snippet of what needs to go into a co-ownership agreement.” 

Is there a limit to the number of people who can jointly own a property?

Sebola notes that two or more people can own a property together. 

“Of course, the more people you have involved, the less profit you get in a sale and the more admin there will be in the ownership process and when making decisions on what to do on the property.”

What are the pros and cons of co-ownership? 

“The pros outweigh the cons in this regard, but it’s important to make a note of all of these.” 

Pros include shared costs of maintenance, co-manage tenants if you are renting it out, and of course, the big help this is in getting you into the property market. On the other side of the coin, the cons include the fact that you can’t make any decisions without the consent of other owners. This might hold up planned renovations, upkeep and maintenance. 

Is there anything else to keep in mind? 

“It’s imperative that there is a contract in place - I cannot emphasise this enough,” says Sebola. “This contract will protect the rights of each owner and will be a clear and binding document for your co-ownership arrangement.”

“Also, be sure about who you are entering into co-ownership with. Make sure that they are reliable and that you can count on them to make their payments on time, assist with maintenance and upkeep and just generally won’t be a difficult person to own a property with.” 

“This is a big, important decision. It’s advisable to have a clear understanding of what you are getting into ahead of time,” concludes Sebola.