In today’s economic climate, co-ownership of immovable property is increasingly common. Whether it is investing in property with a business partner to generate rental income or purchasing a home with one’s significant other, co-ownership is often financially expedient. While it may offer economic and practical benefits, co-ownership also has significant implications in the context of estate and succession planning.
Under South African law, co-owners own an undivided share in the property as opposed to holding a separate title to specific portions. If one of the co-owners passes away, their share in the property becomes part of their deceased estate and is distributed according to their wishes – or the laws of intestate succession absent a valid will. Accordingly, the surviving co-owner does not automatically inherit the deceased’s share, unless this has been explicitly provided for in the will or another legal arrangement, such as a right of survivorship clause in a co-ownership agreement.
If the deceased’s share in the property is bequeathed to their heirs or beneficiaries, this may lead to conflicts with the surviving co-owners. For example, the parties may not agree on major property-related decisions, such as selling, leasing, or renovating the property. Naturally, reaching consensus becomes more complicated in instances where there are multiple heirs and surviving co-owners. Additionally, if a co-owner dies without a valid will, their intestate heirs may be unprepared to co-own and manage property, further complicating matters.
To prevent these and other unwanted impediments, co-owners should plan ahead by concluding a comprehensive co-ownership agreement that expressly regulates how their shares will be dealt with in the event of their untimely deaths, among other things. Similarly, it is essential for all co-owners to execute a will and update it regularly to reflect this arrangement.
While transfer duty is not payable when property is inherited and transferred, there are other costs to consider, including the conveyancer’s fee for attending to the transfer and the cost of obtaining rates clearance certificates. If the property is bonded, bond cancellation costs or substitution of debtor fees will also be payable. For these and other reasons, it is imperative for co-owners to both ensure that their estates will have sufficient liquidity to cover these costs and to expressly delineate how liabilities are apportioned between them.
At STBB, our estate planning experts have the skills and experience to draft and structure comprehensive co-ownership agreements with succession planning in mind to ensure your intentions are clear and protected.
Contact us at estates@stbb.co.za and let our team of experts handle all the legal intricacies from start to finish.
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