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Dubs v Dubs

1 November 2012

Couples (married and unmarried) often decide to buy their home and/or other property jointly. It may seem like the common sense thing to do, but there are many pitfalls for the unwary. Take advice upfront on the various advantages and disadvantages to be considered – depending on your particular circumstances, these could range from tax and estate planning considerations, to practical issues of control and rights of usage.

When the going gets tough
Things will really come to a head if and when things go wrong and your relationship comes to an end.  

You may think for example that as co-owners you are automatically entitled to 50% of the net proceeds on break-up. Not so! A recent High Court judgment illustrates the danger of making this assumption – 

  • A couple had registered two properties in their names jointly,
  • Then on divorce, they fought over whether the proceeds should be split either
    • 50/50 (per the wife’s claim that her husband had donated half shares to her), or
    • Pro rata to their respective contributions (per the husband’s claim that the properties were “joint ventures”),
  • The Court held for the husband in regard to one of the properties, and for the wife on the other, ordering that they each pay their own legal costs. 

All the uncertainty, acrimony, delay and legal expense of a case like that can be avoided simply and easily. 

How? The remedy  
Before you sign any sale agreement, and before you decide in whose name/s you are going to buy the property – 

1. Take advice on whether to hold the property in one name, both names jointly, or in another legal entity altogether

2. If you are going to own the property jointly, have an agreement drawn up to cover all possible contingencies, such as - 

  1. Will you hold equal 50/50 undivided shares in the property, or will you apply some other ratio?
  2. Who will pay for what? Cover all possible costs -
    1. The purchase price
    2. Bond instalments
    3. Rates, repairs, maintenance, other running expenses, etc
    4. Any other costs?
  3. What happens if you divorce or part company? Will you jointly sell the property and split the net proceeds? Can one of you sell his/her share and if so how is the other protected from landing up with a stranger as co-owner? Will you each have first right to buy out the other’s share, and if so at what price?
  4. What happens if one of you dies? 
  5. How will you resolve any disputes over cost contributions, whether or not to sell, whether to raise a second bond, etc?

Our courts are called upon daily to resolve disputes over property ownership.  Disputes which should have been avoided by obtaining legal assistance before signing any sale agreement.  

Jack Crook (LLB Lond, LLB Rhod) is the author of LawDotNews, a monthly newsletter which is personalised and e-mailed to your firm's clients compliments of your firm. Readers are welcome to contact Jack, or visit his web site at http://www.dotnews.co.za for further details.

Full judgment

Reader Comments: 1
Robert Krautkramer 27/02/2013:

Update on DUBS – Application for Leave to Appeal at the Court a quo and at the SCA was refused. As such the WC HC’s judgment stands. Let this be a loud and clear warning to all people (whether unmarried or married out of community of property, whether with or without accrual) who register property jointly in their names, but then don’t have a proper record in place as to what happens with the proceeds of the property upon dissolution of the marriage / relationship.

It should always be recorded in writing what the intention is upon termination of the relationship / marriage, should the intention ever be anything other than that they both share equally in the net proceeds: More so and specifically where it is foreseen that one party may contribute more to the property than the other. A partnership / joint venture where such a pro rata distribution could be argued, is not assumed, simply because one party happened to contribute more than the other. It may be an important factor but just that one element on its own is not enough. Not even, as in this case, where the contribution was more than 90% of the acquisition and maintenance costs over the years.

The lesson is simple: Don’t be a generous, good Samaritan for 20 years and then when things go pear shaped, expect a reciprocal attitude. Protect yourself just in case.

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