Q: My husband and I are considering buying a property jointly with our daughter, just to help her get onto the property ladder. We are a very close family and trust each other but we keep getting told to draw up legal agreements. Is this really necessary? And what should the agreement contain?
A: Money matters can easily cause family rifts, so however well you get on, get legal advice on the route you choose towards helping your child become a first-time homeowner.
A written agreement should be drawn up outlining the details of the arrangement.
All terms must be agreed on in this legally binding contract to avoid any potential issues or confusion down the line.
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The co-ownership agreement should cover:
• Who will live in the property.
• Who will pay or contribute towards deposits and initial payments for the property.
• How ownership will be shared (it is automatically equal if not stated otherwise).
• Who will be allowed to draw funds from the bond.
• What will happen in the event of the death or incapacitation of one of the co-owners.
• What will happen if one or more parties in the contract wishes to part ways or sell the property.
• How profits or losses on the property will be split.
• Anything else that might result in potential disputes.
The biggest downside of buying a property together is that, if your child defaults on her share of the payments, you’re still liable for the whole bond payment.
If you are at all concerned about this, it may be less risky overall to give your daughter a helping hand towards raising her own deposit. – Carl Coetzee, chief executive of BetterBond