(By Kagiso Mahlangu, Director: Real Estate & Conveyancing, CMS)
Moving in with someone is a leap of faith and trust. It’s not just about deciding on décor, but there are loads of legal implications that come with the commitment…
Whatever reason you have for moving in with a partner, spouse, family member, or friend, it is important always to make an informed decision. It’s not only about the décor but about the financial and proprietary implications of this decision.
Having an open discussion with your new roomie will ensure that you are on the same page. Bringing up finances and legal issues might be sensitive, but it’s VERY necessary.
So, what should your discussion cover?
1. Whose name goes on the paperwork?
Buying a property
If you decide to buy a property instead of renting, one of the decisions you will have to make is whether the property will be purchased in both parties’ names or just one.
In one person’s name:
- If the property will be bought in only one person’s name, regardless of what contribution the other makes towards the property, the registered owner will be the only person who can be held liable for any bond contributions, rates and taxes, and water and electricity charges levied against the property.
In both your names:
- If you decide to buy a property in both your names, then both of you will become joint owners of the property and both of you will have to apply for the bond, if you need one.
- Unless you come to a different agreement and capture it in a contract, the property will be registered as belonging 50% to you, and 50% to your roomie, regardless of how much each of you contributes.
- If you need a bond, the banks will evaluate whether you can afford to repay it based on both your incomes and expenses, and both of your credit scores.
It is therefore vital that the two of you have an open conversation about your individual credit ratings, incomes and expenses, to determine what you can afford jointly or separately.
Renting a property
If you choose to rent a property instead, you again must decide whose name will be on the contract with the landlord – both or just one person.
The person whose name is on the contract has the official relationship with the landlord, and is the one who will be legally liable for any claims for rent, consumption charges and complying with any other terms of the contract.
If your name is not on the lease agreement, you will have no claim against the landlord if something goes wrong, but neither will the landlord have a claim against you.
2. Who gets to FICA or RICA easily?
There are certain day-to-day practical aspects to take into account when renting or buying together.
For instance, the person whose name is on the contract will also, more than likely, be the person who can open a municipal account in their name, which is used as proof of address for complying with FICA regulations at a bank, or RICA with your cellphone provider.
The person whose name is not on the contract will need to obtain an affidavit from you confirming that they reside at the address for FICA and RICA purposes, which places an administrative burden on both of you.
3. Does it matter if you’re married?
The other consideration which is crucial is your marital status. If you are not married, each of you can enter into the contract to buy or lease property jointly or separately, bearing in mind how your roomie is married (more about that later), irrespective of whether they are a family member or friend.
Who’s legally responsible?
If the relationship breaks down, or one of you passes away the courts will identify which marital regime you were under in order to determine who is legally responsible for ongoing costs.
- If you are married in community of property, the ownership or rental agreement is legally considered to be in both spouses’ names.
- If you are married out of community of property (whether with or without the accrual system), you can choose to own property together or separately because there is no joint estate.
Either way, in the case of a death, whether the deceased has a will or dies intestate will also determine how the property is dealt with.
4. Warning: “Common law marriage” isn’t an SA thing
If you and your roomie are also romantically involved and live together as if you are married, it is viewed by the law as a cohabitation or domestic partnership.
This type of relationship currently has limited legal protection and partners often face dire consequences if the relationship ends, whether by breaking up or death.
This is because our law does not recognise the individuals in this relationship as ‘spouses’ as defined in the legislation which governs intestate succession and maintenance.
Many people believe that a “common law marriage” is created by this type of relationship but, in fact, South Africa’s law does not recognise the concept of common law marriages. One way that both of you can protect yourselves is by signing a cohabitation agreement.
5. Cohabitation agreements = real care
Among other things, a cohabitation agreement can set out each of your contributions and ownership to the property, and it can even deal with what should happen to the property on termination of the relationship.
Failing to put in place a cohabitation agreement can have great financial implications, especially if the two of you are not able to decide what should happen to a property which is jointly owned.
Each individual’s expectations can be clearly set out in relation to contributions to household assets and expenses.
Buying or leasing property is a big financial decision which should be made not just with your heart but also with a rational understanding of the implications of your decision. There is no right or wrong way to buy or lease property with someone else, but getting advice from a professional can help you make an informed decision that works best for your particular circumstances.