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Few married people think about who will keep the property after buying the house together, but it is an important aspect of your life to consider.
Never say never, the saying goes, and it is better to be prepared than try to come to an agreement afterwards.
“If you own or intend to buy property to live in, operate a business or as an investment, you must consider the implications before tying the knot,” says Renier Kriek, managing director at Sentinel Homes.
Who keeps the property depends on the type of marriage: in community of property, out of community of property without accrual or out of community of property with accrual.
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By law, without an antenuptial agreement, South Africans are automatically considered to be married in community of property, Kriek says.
“Any properties you owned before marriage or acquired afterwards belong equally to you and your spouse. Your spouse can also be attached to pay off your spouse’s debt and you cannot sell the property or buy more property without your partner’s consent.”
When you divorce, any properties and other assets are divided equally and if one of you dies, the surviving spouse can inherit the property if it is bequeathed in the deceased spouse’s will.
Kriek points out it does not matter who was responsible for paying the bond, as this form of marriage determines who gets what in the end. Who paid for the home or other assets is irrelevant.
“I do not know an attorney who would recommend this model of marriage to their clients. It is impractical to have the parties bound at the waist as neither can act commercially without the other’s consent. In addition, it is poor risk management because all the assets are exposed to either party’s actions.”
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Historically, the growth of antenuptial contracts threatened to leave financially inactive spouses with nothing when they divorce. Therefore, by default, South African law imposes an accrual system on marriages out of community of property, Kriek says.
“For total financial independence, your antenuptial must explicitly state that accrual is excluded. This is called the ‘cold exclusion’.”
If you are married with the cold exclusion, all the assets you acquired before and during marriage remain yours and cannot be attached to your spouse’s debts. You can also buy and sell property without your spouse’s consent and engage in commercial activity unfettered by the bonds of matrimony, Kriek says.
If you get divorced, you leave with all your assets and just have to worry about disposing of jointly purchased property. When one of you dies, the surviving partner gets only what was bequeathed to them.
Kriek says this model is ideal for couples who want to retain their financial freedom, grow their wealth independently and protect their assets from each other’s creditors. “Just remember that maintenance claims are potentially open to all spouses on the dissolution of the marriage, even if the parties chose the cold exclusion.
“For entrepreneurs and investors, it protects their business portfolio while sparing their partners the financial risks they willingly take on.”
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Without an accrual exclusion clause in your antenuptial agreement, the accrual system automatically applies, Kriek points out. “Assets you owned before and those acquired after marrying remain yours alone, cannot be attached to pay creditors and you are free to buy and sell property at will.”
However, he points out, that at divorce or death, your spouse can claim half of the difference between their estate and their spouse’s higher-valued estate. In effect, it is ‘in community of property’ at the end without all the restrictions during the marriage, he says.
“It ensures both come away equal and allows for one spouse to take time off to rear the children, or for one to work to put the other one through school or university, although they are married out of community of property.
“This is because, in the end, there will be a divvying up of assets. However, it could still mean losing the property you owned separately, because assets may be sold to cover the accrual payment due on the dissolution of the marriage.”
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Kriek warns consumers must never assume there is no such thing as a common-law spouse in South Africa, even a life partner may gain ownership of your assets, without any formal ceremony or registration.
If you are buying a property with a life partner or other romantic interest, he says you must ensure that you have a partnership agreement drawn up by an attorney.
“Do the smart thing and get advice from your attorney on the best way to proceed. A contract may seem unromantic when wedding bells are ringing but it will protect you both in the long run. It is just the sensible thing to do.”
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