Buying a property with a partner? Make sure you have a contract

Many people today choose not to get married but to live with their partners and buy their home jointly. With so many people depending on both their incomes to purchase a house, it is vitally important for the two parties to draw up and sign a valid contract to protect their respective interests regarding the asset, says Lanice Steward, managing director of Knight Frank Residential SA.

In some cases, one partner might have stopped working in order, say, to look after children, and so would not have contributed financially to repaying the bond. So, in the case of a split, how would this intangible contribution be factored in to working out how to fairly share the profit?

A recent court case, published in a Smith Tabata Buchanan Boyes newsletter, Claassen v Quenstedt, highlights the point. They bought a home together but never stipulated in writing the conditions of their agreement in a contract, particularly whether they were joint owners or partners in the ownership of the property as this would have determined when each party becomes responsible for any debts incurred. If buying the property as partners, the debt responsibility only starts once the partnership is dissolved whereas buying as joint owners, the prescription period starts when the debt was incurred.

In this case, a mortgage was registered over the property, Quenstedt paid the deposit and the property was registered in both their names. After several years the relationship came to an end and Claassen claimed that each party should be fully accountable to the other with regards to all expenses incurred as well as any profit. This would be extended to the settlement of the outstanding bond, the estate agent's commission, payment of all the municipal accounts still due, any other direct expenses and the reconciliation of the amounts paid to either party.

Quenstedt argued that the parties would share the profit and share the expenses to maintain the property, as well as the bond repayments and rates and taxes. Claassen was claiming monies due before November 2011, which was three years before the issue of the summons, claiming that the joint ownership amounts were due. The response from Quenstedt was that there was an extension in cases of partnership, which they had entered into when they bought the property together.

The court ruled that Quenstedt was responsible for the maintenance of the property as he was living in it and he did not owe Claassen any rent for the time he has lived there in addition to paying the bond repayments. Claassen, as co-owner of the property was responsible for the outstanding share of rates and taxes and the bond repayments which have not yet prescribed.

The property was ordered to be sold and the payments of the outstanding bond made as well as commission to the estate agent and all municipal amounts due. The profit that remained was to be split between the two parties.

'Had this couple entered into a contract before buying the property,' said Steward, 'they could have avoided the expense of taking this matter to court as well as the unnecessary time delays in coming to an agreement. Parties buying property together need to break down all the expenses and profit and be sure that they have an agreed percentage share in their contract as well as who is responsible for what aspects of the ongoing ownership.'