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Co-ownership of property: what you need to know

Co-ownership is when two or more people jointly hold all the entitlements of ownership at the same time in one or more movable or immovable properties. Classically, these entitlements include: the right to use the property (ius utendi), the right to draw the natural and civil fruits of the property (ius fruendi), the ability to change the property (ius abutendi), the right to possess the property (ius possidendi), the right of the owner to prevent others from violating his/her rights (ius negandi), and the right of the owner to vindicate the property where it is found (ius vindicandi). Each co-owner obtains an undivided co-ownership share (communion pro indivisio) in the co-owned property. In general, this concept of an undivided co-ownership share means that: the commonly-held property may not be divided for as long as the co-ownership endures, and that no co-owner can encumber or alienate the property without the consent of the other co-owners.

General elements and classes of common law co-ownership

Bound co-ownership is where some underlying relationship – like a marriage in community of property or a partnership – binds the co-owners separately from their relationship as co-owners. The main consequences of this form of co-ownership is that the co-owners cannot encumber or alienate their undivided co-ownership share for as long as the underlying relationship endures and that the co-ownership cannot be terminated unilaterally.

Bound co-ownership is where some underlying relationship – like a marriage in community of property or a partnership – binds the co-owners separately from their relationship as co-owners. The main consequences of this form of co-ownership is that the co-owners cannot encumber or alienate their undivided co-ownership share for as long as the underlying relationship endures and that the co-ownership cannot be terminated unilaterally. It must be noted that there is no mention of an undivided co-ownership share for purposes of bound co-ownership because the value of such a share will only become relevant when the underlying relationship is dissolved. Readers who are interested in bound co-ownership should consult resources on family law, the law of succession and administration of estates, and business structures.

Free co-ownership, on the other hand, comes into exist if it is the only relationship between the co-owners. This fact has a significant influence on the consequences of this form of co-ownership because: the co-owners may encumber (for instance, by granting a real security right over his/her undivided share) or alienate their undivided co-ownership share, the relationship may be terminated unilaterally, and the content and the way in which co-ownership operates is not dependent on the underlying relationship. However, the co-owners will be well advised to reduce their agreement into writing. This will ensure that there is clarity about what they agreed upon and should assist with any disputes that may arise in future, or if they need to dissolve the co-ownership. Such an agreement can regulate the allocation of particular portions of the property to each co-owner depending on the nature of the property and if it is divisible. If the property is not physically divisible, then the agreement may organise the use of the property with reference to another method – like time. It should be noted, however, that the content of such an agreement only creates a personal right for each of the co-owners and will only be binding on them inter partes.

The concept of co-ownership leads to the introduction of a new concept – the so-called undivided co-ownership share in the property.  The undivided co-ownership share in the co-owned property must be distinguished from the property itself. If one fails to do this conceptually, you will just get confused about what may be done in a particular circumstance. The undivided co-ownership share reflects each co-owner’s interest in the co-owned property. The undivided co-ownership share entitles a co-owner to reasonable use of the co-owned property in proportion to his/her co-ownership share. However, this does not mean that the property itself is divided into proportionate shares and that each co-owner is restricted to the use of his/her divided part of the property. Herein lies the distinction between the property itself and the undivided co-ownership share in the property.

The practical difficulties that flow from the rights and duties of co-ownership are captured by the expression communio est mater rixarum or “co-ownership is the mother of disputes”. It is therefore important that, when the agreement the co-owners entered into does not help them solve disputes, certain remedies are available to them.

While co-owners may freely dispose of their undivided co-ownership share, the same does not hold true for the co-owned property. Flowing from the agreement – formal or informal – that they enter into with each other, they must decide how and for what purpose the co-owned property must be used. The use of the property will more often than not be determined by the purpose for which the property was destined. Unreasonable use may include a change in the use and enjoyment of the co-owned property by one co-owner, unilaterally granting use rights to a third party without the consent of the other co-owners, or exercising ownership entitlements to the prejudice of the other co-owners. In Swart v Taljaard one co-owner insisted on using grazing land to cultivate a garden. In Botha v Kinnear one co-owner felled trees indiscriminately and in Scheepers and Nolte v Pate one co-owner used building material for his personal use that was purchase to develop the property.

Remedies

The practical difficulties that flow from the rights and duties of co-ownership are captured by the expression communio est mater rixarum or “co-ownership is the mother of disputes”. It is therefore important that, when the agreement the co-owners entered into does not help them solve disputes, certain remedies are available to them. If a co-owner is making unreasonable use of the commonly owned property, the other co-owner(s) should first seek a prohibitory interdict that will stop the former co-owner from using the property contrary to the agreement between the co-owners. In Erasmus v Afrikander Proprietary Mines Ltd the court set out the requirements for an interdict in the context of co-ownership as follows:

“In the event of any dispute about conduct of a co-owner and the manner in which he has made use of the joint property, the Court would have to consider whether the conduct complained of constitutes an unreasonable use, inconsistent with the use to which the property was destined and to the detriment of the rights of the other co-owner…”

The co-owners may also claim for damages if they suffered quantifiable patrimonial loss. However, there may be circumstances where the relationship between the co-owners have deteriorated to a point where an interdict or a claim for damages may not help and more serious intervention is needed to terminate the co-ownership. This can be done in terms of the common law action of the action communi dividundo. The action requires: the commonly owned property to be divided if it is divisible, a final calculation of expenses and losses, and the dissolution of the undivided co-ownership share. The co-owners may approach a court for relief if they failed to regulate how the co-ownership should be dissolved in their agreement. However, it is desirable that they provide the court with options that are acceptable to them which may include that one or two of the co-owners buys the undivided shares of the other co-owners.  The court may in extreme circumstances, and only if the property is divisible, order that the property be divided subject to the provisions of the Subdivision of Agricultural Land Act. This proposal requires careful consideration from the court because it will effectively take co-owners with irreconcilable differences (or at least bad blood) and make then neighbours! Alternatively, the court may postpone the division of the property until the parties have reached some agreement or can order that the property be sold so that the proceeds of the sale can be divided proportionately amongst the former co-owners.

 

http://www.property24.com/articles/co-ownership-of-property-what-you-need-to-know/21947 – Property 24

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