The Profits and Perils of Property Partnerships

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“Communio est mater rixarum” (Co-ownership is the mother of disputes)

Buying property with the right partners can be extremely profitable all round, but – no matter how well you know and how much you trust each other – be sure to have in place upfront a full partnership agreement.  If (and it happens in even the strongest partnerships) disagreements arise and spiral out of control to the extent of ending up in court, there will be no real winners.  You will all at best be in for delay, cost and acrimony – and at least one of you will be very unhappy indeed with the outcome.

Take for example a recent High Court case concerning four partners who had bought a property for R2,050,000 as a commercial investment.  After losing the property’s tenant they agreed that they had to sell it.  Although its municipal valuation was R3,000,000 the best offer they could get was R2,200,000 and whilst three of the partners accepted that, the fourth wanted to hold out for a higher offer.  The end result – the Court confirmed dissolution of the partnership and ordered that the sale at R2,200,000 proceed.

The last resort risk 

Critically, if there had been no offer on the table, the partners would almost certainly have been ordered by the Court to take their chances on a no-reserve public auction – a last resort and potentially disastrous in these hard times.

And the remedy

If you do decide to buy property jointly – with anyone and for any reason – reduce your risk of loss, and avoid dispute, delay and cost by having a full partners’ agreement in place upfront.

Ashersons Attorneys

Ashersons Attorneys

Industry news and noteworthy articles from a boutique corporate law firm in Cape Town, South Africa

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