What Happens When One Owner Wants to Leave?
Buying property with a spouse, partner, family member or friend can be an excellent way to enter the property market. However, while co-ownership often begins with shared goals and good intentions, circumstances can change.
Relationships end, financial situations change, or one owner simply wants to move on. When that happens, understanding your legal rights and obligations is essential to avoid unnecessary stress, financial loss and costly disputes.
Co-Ownership Comes with Shared Responsibility
When two or more people purchase property together, they usually also share responsibility for the home loan.
Many people mistakenly believe that moving out of the property or no longer contributing financially automatically removes their liability. Unfortunately, this is not the case.
As long as your name remains on the bond and the title deed, you remain legally responsible for the loan. If repayments are missed, the bank may recover the debt from whichever owner is in the best financial position, regardless of who still lives in the property.
Buying property with friends or family
Why It’s Important to Act Quickly
If your circumstances change and you no longer wish to remain a co-owner, it is generally advisable to resolve the matter promptly.
If your co-owner experiences financial difficulties, is declared insolvent, accumulates significant debt or has judgments taken against them, your financial position may also be affected because of the joint home loan.
Removing your name from both the bond and the title deed helps minimise future financial risk.
Transfer Duty & Property Transfer Costs
Step 1: Review the Title Deed and Home Loan Agreement
The first step is to determine:
- Who is registered as the legal owner of the property?
- What the title deed records.
- Whether there is a written co-ownership agreement.
- What the mortgage loan agreement says about joint ownership and liability.
These documents will determine the legal options available to each owner.
Step 2: Speak to the Bank
A co-owner cannot simply be removed from an existing home loan.
The bank must approve any changes to the mortgage. This usually involves:
- A new affordability and credit assessment.
- Approval of the remaining owner’s ability to carry the bond independently.
- Submission of supporting documentation.
Depending on the circumstances, the bank may:
- Approve a substitution of debtor, allowing one owner to take over the existing bond; or
- Require the existing bond to be cancelled and a new bond to be registered.
If neither option is possible, selling the property may be the most practical solution.
Step 3: Transfer Ownership
Where one co-owner buys the other’s share, the property ownership must be legally transferred.
This transfer is registered at the Deeds Office by a conveyancer.
To begin the process, the conveyancer will generally require:
- Identity documents of all parties.
- Personal and contact details.
- Proof of residence.
- The latest municipal rates account.
- The title deed.
- A current market valuation of the property.
The conveyancer will also prepare the necessary sale agreement and attend to the transfer of ownership and the release of the exiting owner’s obligations, where approved by the bank.
Step 4: Understand the Costs Involved
Changing ownership of a property involves several legal and registration costs.
Depending on the transaction, these may include:
- Transfer costs.
- Bond registration costs.
- Bond cancellation costs.
- Transfer duty payable to SARS (where applicable).
- Conveyancing fees.
Where one owner purchases the other’s share, the buyer is usually responsible for these costs.
Step 5: Consider Other Financial Implications
Before transferring ownership, it is important to consider additional financial obligations.
These may include:
- Municipal rates and taxes.
- Building insurance.
- Homeowners’ association or body corporate levies.
- Capital Gains Tax, particularly where the property’s value has increased significantly over time.
Obtaining professional legal and tax advice can help avoid unexpected costs.
Protect Yourself with a Co-Ownership Agreement
One of the biggest mistakes co-owners make is failing to put a written agreement in place before purchasing the property.
A well-drafted co-ownership agreement should address questions such as:
- What happens if one owner wants to sell?
- What if someone loses their job?
- How will maintenance and expenses be shared?
- What happens if one owner stops contributing financially?
- How will the property’s value be determined if one party wants to buy out the other?
Having these discussions early can prevent lengthy legal disputes later.
When Selling May Be the Best Option
Sometimes neither owner can afford to take over the home loan alone.
In these cases, selling the property may be the most practical solution. While this can be an emotional decision, delaying the process often makes matters worse.
Bond arrears continue to accumulate, credit records may be affected, and disagreements can become increasingly difficult to resolve.
The goal should always be to help both parties exit the arrangement with as little financial and emotional hardship as possible.
Co-Ownership Should Be Treated Like a Business Partnership
Buying property together is one of the biggest financial commitments most people will ever make.
Whether you’re purchasing with a spouse, partner, sibling, friend or investment partner, co-ownership should be approached with careful planning, clear communication and sound legal advice.
By understanding your legal obligations from the outset and putting the right agreements in place, you can protect your investment and significantly reduce the risk of future disputes.
Article courtesy of property24