A reader, who bought a house with her partner, finds herself in a predicament as a result of the relationship having broken down.
Her former partner now wishes for her to take full ownership of the property.
Lucille Geldenhuysenhuys from Lucille Geldenhuys Attorneys in Stellenbosch says there are various aspects the reader has to consider when making a decision regarding this problem.
“One must first look at how she will acquire full ownership. There has to be an underlying transaction, that is, either a sale or a donation.”
In other words, says Geldenhuys, her partner has the option to sell or donate his half share in the property to her.
“Should she choose to buy her partner’s share, a fair market value must be determined and she will have to pay him out.
Should her partner however choose to donate his share to the reader, he may be liable for donations tax, according to Geldenhuys.
“Currently an individual may only donate R100 000 per year free of donations tax. If the value of the half share exceeds this amount, he will be liable for donations tax at the rate of 20% of the value exceeding R100 000.”
Geldenhuys says either option may have transfer duty implications for the reader, who will be seen as the party acquiring the half share. “Transfer duty is calculated on the market value of the full property and divided by two.”
Schalk van der Merwe from Rawson Properties Helderberg says there are various financial implications for her to consider.
“It appears that there is a bond registered over the property. If the reader wishes to take ownership of the whole property, a new bond will have to be registered.”
Before this can happen, says Van der Merwe, her ability to pay the instalments in respect of the new bond will be considered all over again.
“Whereas before she would have had the benefit of her partner contributing, she will now carry the full responsibility.”
If her partner decides to sell his share to her, Van der Merwe says she should also not lose sight of the fact that she will have to pay him out somehow.
“She may choose to increase the bond facility to do so, but this will place additional demands on her ability to obtain such bond.”
This prompts the question whether it is not possible to draft a contract whereby her partner acknowledges that he no longer has any rights to the property, says Van der Merwe.
“Unfortunately, this may pose problems. One’s ownership, and therefore rights, to a property can only be changed via a formal transfer process.
“Broadly speaking (there are contracts creating limited rights), a mere contract will not change the parties’ rights of ownership and interest in the property.”
Van der Merwe says an option she may consider is to “rent” his half.
“This may be a temporary solution until she can pay him out. It will be advisable that a proper rental agreement is entered into to protect both parties.”
Send your property related questions to coetzee[at]fullstopcom.com.
