By Sanette Viljoen
Many young people in South Africa cannot afford to buy a property on their own. This is why property is often bought jointly. In this way they also save on monthly rent. What are the advantages and problems when buying property together with friends?
– It is cost-efficient:
– The mortgage is shared between friends
– Expenditure in connection with the property is shared, for instance municipal taxes and the maintenance of the house.
– It is advantageous to enter the property market at a young age.
The following problems may crop up:
It is very important to see an attorney if you are planning such a purchase. The attorney must draw up a proper contract between the friends. This contract must spell out the various contingencies and make provision for things that could go wrong. The contract must also cover any variables. The contract must be in writing.
The following are a few examples of contingencies and variables that must be covered by the contract:
– What happens when one of the friends go overseas or is transferred?
– It should also be clearly specified who pays for what regarding levies, water and electricity, maintenance of the building, etc.
– There must be a clear understanding about what happens if the property is sold. To whom is it being sold? What if only one of the friends wants to sell? Who has first option to buy? In such a case the contract may even include a formula for calculating the purchase price to prevent unnecessary profits and losses.
– There is also the matter of death. What happens if one of the friends die? Is the deceased’s family going to inherit it or will the property be sold? Does the remaining friend have first option to buy?
– What if one of the friends marry? Must he then sell his share or does it form part of his joint estate?
There are so many unforeseen things that can happen. A proper contract could make provision for most of these circumstances.