Although applying for a joint bond with a partner to whom one is not married or a friend may be a viable option to enable persons to enter into the property market, it may become a costly and complicated exercise if the relationship ends or circumstances change. If one of the partners wishes to be free from the bond and agrees to be removed from the bond, the remaining partner will have to apply to the bank to be substituted as debtor. The bank will only approve such a substitution if the remaining partner qualifies for the loan as a whole. The partner being removed from the bond will also be required to sell his/ her share in the property to the remaining partner. Alternatively the property should be sold as a whole to a new owner and the bond should be cancelled. All of these options will result in the parties incurring costs and expenses for instance the costs to register a substitution of a debtor, transfer costs relating to sale of a share in the property, transfer duty and rates and taxes for clearance purposes. It is recommended that advice be obtained on the legal, tax and cost implications before entering into such an arrangement.
At Goldberg & de Villiers Inc, our Property Law Department, will gladly assist you with any of your Property Law related matters. Please contact us on 041-5019800.