The ins and outs of shared property ownership

While many people are interested in getting onto the property ladder, it can be difficult to be able to afford to buy your first property. For this reason, an increasing number are considering shared ownership houses – also known as co-ownership.

First things first: what is shared ownership and how does it work

Simply put, a shared property is a property owned by two or more people. To provide a basic example, let’s consider three friends who decide to jointly purchase a property as a way of getting onto the property ladder. None of the parties will be the exclusive owner of any area of the property. However, one person can own a higher percentage of the property as a whole. If one person pays 40% of the bond, while the other two each pay 30%, then the first person will own 40% of the property, while the other two own 30% each. If the parties decide to sell their investment property, the proceeds must be split accordingly.

The pros and potential challenges of shared ownership

The main advantage or “pro” of shared property ownership is the opportunity for people to get onto the property ladder if they might otherwise have been unable to afford it. Going from being a tenant to being a co-owner of a property enables people to invest in their futures.

Many of the potential challenges of shared ownership can be alleviated by signing a co-ownership agreement. If a lawyer helps you in this regard, the document will be legally binding and can provide clear guidelines as to how much each party needs to pay, what happens if you decide to sell the property and what happens if one of the co-owners suddenly finds themselves unable to pay their share.

What are the requirements for buying a shared property?

As with any property purchase, the main requirement for buying a shared property is that the parties involved can afford it. If one person has fewer financial resources than the other, then one person can buy 70% of the property while the other person buys the remaining 30% share. This breakdown must be stipulated in the co-ownership agreement. All parties must understand how shared ownership works and that they realise the importance of harmonious living.

From a record-keeping point of view, the financial contribution that each party made towards the purchase must be clearly recorded. This includes who paid the transfer costs, deposit and bond registration fees.

Shared property ownership FAQs

1. Can you make a profit on shared ownership?

Absolutely! As with any good property investment, the asset that you partly own will appreciate in value over time. This means that when you sell the property, you will get a return on your investment.

2. Can I buy another property if I am part owner of a shared property?

This will depend on your finances. If you can afford to either buy another property with cash while meeting your obligations towards the shared property, or to finance another bond, then you are absolutely free to purchase another property.

3. How do I get out of a shared ownership property?

If both or all parties want to get out of the shared ownership arrangement, it is a simple matter of selling the property and dividing the proceeds according to the percentage of ownership that each party had. The contract that you sign should stipulate what happens if certain parties want to sell and others don’t. Typically, the owner who wishes to remain would have first option to buy the other party out.

4. What are your rights as the joint owner of a property?

As the joint owner of a property, you are entitled to use all the features that the property has to offer. You would also have the responsibility to establish and maintain an amicable relationship with your co-owner/s in terms of the day-to-day running of the joint household. 

If you are interested in getting onto the property ladder through shared property ownership, the Seeff team is available to guide and advise you through every step of the process. Contact us today for more information.