When people co-own a piece of land, they might be under the impression that each person owns a specific area, i.e. if they live in a cottage and use the surrounding hectares, it might be assumed that section is theirs, but this is not usually how it works.
This is according to Lanice Steward, managing director of Knight Frank Residential South Africa, who says co-ownership is usually a share or a percentage of the total, and this means that they are also “co-liable”, and have obligations towards the whole of the property, not just the section that they occupy.
Steward says it is advisable for the co-owners of a property to have a separate agreement that states the terms and conditions of their ownership.
When a property is co-owned, no portion can be improved or changed without the permission of the other owners, and all the owners have to agree to the way the land will be used. They have to agree on the day-to-day running of the property, whether trees will be cut down, what buildings will be constructed, whether cattle will graze the property and what sections to use, and so on.
All the co-owners will have to contribute, in direct proportion to their ownership, to the expenses incurred in running and maintaining the property. These would include rates and taxes and all the maintenance costs. Steward says if a perimeter fence needs to be repaired, for instance, the co-owners would split the entire cost proportionately and not just pay for their section to be done.
“Co-ownership is a good way to get yourself on the property owning ladder, and possibly own something that you could not afford to buy on your own. It is important, however, to choose your co-owners carefully, and be sure to draw up an agreement from the outset with regard to portions of bond repayments, rates, running expenses and conduct rules for all involved.”
Steward says it is also best to discuss beforehand, what future plans each co-owner has for his share, in case their intention is not to hold onto the investment for the same period of time as the other co-owners. She says buying and selling property is expensive, and investments should always be seen as long term, for no shorter than ten years at a time.
Discover how to build your wealth with property investment Get free training videos & resources on the secrets of property investment in South Africa. Fill out the form below to gain instant access to our training resources.