Is mortgage the new marriage?

When you own a house together and things fall apart, how do you decide who gets what?

My mother went from her parents' home to her husband's home via a white wedding, and that's the way things were in those days. In small-town South Africa in the post-war years, live-ins with boyfriends were a bit off the wall; women became teachers or nurses, secretaries or clerks until they married, and then, mainly, and if things went right, they were mothers.

A generation later, the pendulum has swung. We have turned into commitment-phobes, living and working far from home, keeping our options open even as we move in with friends or lovers.

I'm overstating it, but a generalization is possible: where our fathers looked for job security and our mothers converted their trousseau chests into nests of delicate baby layers, we job-hop, travel, look to our careers for fulfilment or embark on prolonged studies. They had pension funds and savings, we build up memories and photo albums.

But as the years pass, most of us have come to the same place: enough with the adventure; time to settle down. All around me, the conversation is happening: let's cushion ourselves for hard times, get some rainy day insurance, maybe think about a medical fund.

You're the real deal, babe, let's be together, let's – Let's what? Well, maybe let's get married. But not necessarily. Relatively speaking, it's easier to commit to a shared mortgage bond. That's a language we know: a contract that reduces the move to a financial commitment, and leaves words like 'forever' out of the equation.

The problem, of course, is that if mortgage is the new marriage, it's no more successful an institution than the old one, and mortgage-marriages are as prone to divorce. And, whereas generations of failed marriages have established how to dissolve themselves with more or less grace, the mortgagely connected all too often haven't got a clue.

So, in addition to the pain of losing your dreams along with your partner, you're vulnerable to losing your so-called investment.'For the record,' Iona Minton and Dave Welmans crisply declare in their book The Property Game (Intrepid Printers), 'we are not in favour of young unmarried couples entering into a joint property venture. There are many factors that could turn the deal sour.'

First questions
If you're thinking of hooking up over an Offer to Purchase, there are a number of material issues you need to resolve. Johannesburg firm Bregman Mitchley Attorneys make the point that it's key to get all this sorted upfront, while things between a couple are good, because 'that is when they are most likely to be fair and considerate'.

At the root of your thinking should be the knowledge that the bond is a legal agreement between the bank and you, as a couple, who the bank considers to be a unit, and thus 'jointly and severally' responsible. The bank doesn't care what happens between the two of you, as long as it gets its money back on schedule.

So if the wheels come off and one of you stops paying, the other is liable. The first questions you need to ask as you set out to buy are:

  • What can each afford? Quite a few thousand rands are added to the purchase price by stamp duty, insurance, and bond registration. If you're planning a clear percentage split on ownership (50:50, 70:30, or whatever), are you good for that?
  • Rates and taxes, lights and water, cleaning and gardening, insurance and maintenance – they're the hidden costs of ownership. Have you consid?ered the impact of these on your monthly budgets, and are they going to be divided in the same ratio?
  • Are you going to buy moveable property – a fridge, a bed, artwork – together? If things don't work out, how will you decide who gets what?
  • If one of you has a cash flow issue for a few months, will the other be in a position to shoulder the burden of the whole bond – and how will you go about reaching equity after that?
  • Are both your names going onto the title deeds of the property? It's a common scenario that one is officially the buyer, and the other pays some of the mortgage as 'rent', or pays their way by footing the other costs (shop?ping, insurances, council and telephone bills).

I know a couple who operated this way for about seven years. When they split, it became startlingly clear that the person who'd bought the house was the winner – she got to stay on, and the house had benefited from seven years of property boom. He, on the other hand, just had a drawer full of receipts, and had to start again, from scratch, without even the deposit on a new home.

If they'd been married, the divorce courts would have equal?ised things, but because no contract was in place, he had no legal claim.

Play out the scenarios
It's clear from the above that though a legal agreement isn't necessary when things are going well, it is critical should things go bad. Among the common scenarios are:

One of you doesn't fulfil their part of the deal.
If you're a good money manager and your partner isn't, and can't keep up with their share of the payments, your relationship is going to become super-strained.

It's friendly, but it's over.
And one of you would like to hang on to the property. Normally, as Minton and Welmans point out, the party leaving early is obliged to offer his or her half share to their ex.

You arrive at a price (by getting three separate quotes from estate agents and averaging them), and 'the party exiting the deal would then be paid out 50% of the capital appreciation, minus sales commission, plus their original investment.' But you would need this in writing.

Neither of you wants to stay.
There are costs in buying and selling, and received wisdom is that five years is a safe period. Less than that, and the value may not have increased to cover the costs, so you might end up losing money.

Also, it can, of course, take months for a house to sell, and you don't want to end up dropping your price in desperation (estate agent lore has it that the only bargains to be found are in the event of the three Ds – death, divorce, and departure, meaning emigration).

It's got ugly.
When we're hurt, and angry, even the gentlest person can turn savage. So maybe one of you will deal with it by moving out, cutting ties and losses, and leaving the other to clean up the mess in relation to the bank. Or both of you dig in, conducting a cold war, like Vince Vaughn and Jennifer Aniston's characters in The Break-Up.

Or you agree to sell the house, one of you moves out while the agents do the their thing, and next thing the other changes their mind and becomes a squatter, meaning the good-faith partner has to pay rent on a new place, the bond on the old place, and probably a lawyer to go through the painfully lengthy process of eviction.

One of you dies.
In Her Law: An A-Z Guide to the Law for Women (Oshun), you'll find the story of Barbara, whose boyfriend, George, died intestate: 'We ended up buying a house together, but it was in his name. We had a spoken arrangement that I would pay half of the instalments, each month, and if we ever sold the house, we'd split the profit 50/50.

"Then George died. A drunk driver crashed into his car? 'His parents were kind people, but they just thought of me as a casual girlfriend. I lost the house, or half of it, as it was in his name. His parents said I could pick out some books and small things to remember him by. They packed up all the rest? sold the house, and I had to move."

What to do
Written agreements are much easier to enforce than oral agreements (when the 'she said/he said' scenario can drive everyone mad), so a legal contract is absolutely the way to go. Check out the sample cohabitation agreement on www.roylaw.co.za.

The most suitable contract would be one tailored to your circumstances. Your conveyancing lawyer isn't likely to be best for this; better to go to a family lawyer, or a lawyer with experience of divorce. They've seen the worst that can happen, which saves you from having to spook yourselves.

And finally, it's critical that both of you register your intentions in your wills. Perhaps you're not committed enough to leave your share to your partner, but you do want to make sure they're not messed around.

As Barbara says: 'As if his death wasn't enough, the weeks that followed were living hell. It was so painful. I just had to go on with my life and try to forget the horrible after-taste of his death. 'George, I'm sure, would have hated that.'

Article by: Heather Parker - www.women24.com