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What Happens to Your Joint Purchase Property When You Break up With Your Partner?

Updated 19 Oct 2018 – By Loanstreet


A joint purchase property can be a great solution for people who want to own a home, especially for first-time buyers. In fact, more and more people are beginning to seriously consider that this may be a viable alternative.

According to Chris Tan, Managing Partner of Chur Associates, buying homes through joint ownership has become a trend in Malaysia with homebuyers preferring to hunt in packs instead of lone wolves.

But wait! Before you start making calls, it's worth noting that every endeavour worth pursuing can also come with risks. First, let’s take a look at some of the benefits and challenges for a joint purchase property summarised from the EdgeProp.

 

Benefits and Challenges of Joint Purchase Property

 

i) Married Couples

Benefits Challenges
  • Have bigger budgets for property purchase.
  • Easier loan approval.
  • A smooth succession of the property.
  • Have strong relationship ties and trust.
  • The joint owner may lose their second chance to exercise Real Property Gain Tax (RPGT) exemption.
  • Higher risks when one of the joint owners faces financial difficulties.
  • Hard to set penalising system without hurting the relationship.

 

 

ii) Unmarried Couples

Benefits Challenges
  • Have bigger budgets for property purchase.
  • Able to share property taxes and other expenses equally.
  • Promising long-term relationship (aww...).
  • Not easy to get loan approval.
  • Will have an inheritance issue (if the unmarried couple doesn’t have a will).
  • Face a higher risk when one of the joint owners faces financial difficulties.

 

 

iii) Friends or Investment Partners

Benefits Challenges
  • Lower entry cost.
  • Able to share property taxes and other expenses equally.
  • Able to set properly and clearer agreements and legal consultation without being judged.
  • Not easy to get loan approval.
  • Difficulty in achieving mutual understanding.
  • Higher risks when one of the joint owners faces financial difficulties.
  • Trust issues.

 

 

iv) Family Members

Benefits Challenges
  • Have bigger budgets for property purchase.
  • Easier loan approval.
  • A smooth succession of the property.
  • Have strong relationship ties and trust.
  • Difficulty in achieving mutual understanding.
  • Higher risks when one of the joint owners faces financial difficulties.
  • Hard to set penalising system without hurting the relationship.

 

 

Have a Good Co-Ownership Agreement Before Purchasing the Property to Avoid Disaster Situations

Below are some examples of situations that can be avoided if you and partner(s) enter into a solid agreement before purchasing the property:

 

Situation 1

Two young ladies purchased an investment apartment in the Klang Valley on a 50-50 basis without making any co-ownership agreement between themselves. Everything went pretty well until they got tired of living with each other and had other issues.

Due to this dispute, both wanted to become the exclusive owner of the property, as well as the exclusive occupant. Since none of them agreed to give in to other, the whole property had to be sold on the open market. And because of this, each of them could only realise 50% of the proceeds, without either earning the right to retain ownership and occupation of the apartment.

 

Situation 2

Three co-owners purchased a property for an investment and acquired a home loan from the local bank. When one of them fell into debt, the bank was entitled to sell the property at an auction in order to recover its loan and the remaining two co-owners couldn’t do anything to stop the sale in execution because there was no agreement on this matter.

 

Situation 3

A person was registered on the title deed for only owning 2/3rd share for the property. However, an issue emerged when his partner neglected to pay his 1/3rd share of the home loan instalment. And because of this, the bank drew the full monthly payment from his bank account after realising that it could not cover the 1/3rd share of the defaulting owner.

 

 

You Broke Up With Your Partner. What Happens to Your Joint Purchase Property?

When this situation happens, be it with your loved ones, friends or investment partners, measures should be put in place as soon as possible to help make sure the process is as seamless and painless as possible.

Here are some of the ways to tackle this issue:

●       You can opt to sell the property and clear the loan, with remaining amounts free to be divided among partners.

●       One party could take over the property owner if he/she is willing, by taking on the contribution of the other party. The property can always be refinanced based on capability.

●       Another option includes clearing one party's name from the bank’s loan account. The institution can then assess the possibility of doing so and the loan amount outstanding by examining the other party's repayment capacity.

 

 

It’s Important to Carefully Consider Your Decision

Always keep in mind that people and their ideas change and that you should not put yourself in a situation that will be tricky to get out of. So don’t get too caught up in the excitement of purchasing a property together, whether it's with a spouse or your badminton partner.

Make sure that you draft a solid agreement that clearly records what co-owners have agreed to i.e. the term of yield, the responsibilities and contributions, settlement of quit rent, mortgage, loan assessments and so on. This is to protect yourself and your partners against things going south due to situations like break-ups, unexpected deaths or even the selling of the property in the future.

That aside, if you’re certain about venturing into joint property purchase and are looking for the best home loan offering, do check out Loanstreet’s comparison tool to help you make the best decision.

 

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