Can my home be repossessed in a joint bond because of the other owner’s debts?
Hi, I got a joint bond with my nephew back in 2008. I am the one repaying the bond debt, but he helped me secure the bond because I could not afford it back then. Now I have noticed that he made loans at the same bank that borrowed us money to buy the property. He put up my property as surety and is now heavily indebted, and is unable to repay his other loans. My fear is that his defaulting may result in my house being repossessed and sold so that the financial institution gets its money back. He has his own house in the northern suburbs of Pretoria and he has nothing to lose in this case. What are my rights in this regard? Can I remove him from the joint ownership of the house? – Reneilwe
Hi Reneilwe, while I have had little opportunity to consider this matter in any detail, except to state that at this stage your enquiry lacks certain relevant information in order for us to formulate a more comprehensive response.
I will, however, make the following comments:
- It appears clear from the context that you and your nephew acquired the property jointly as you were unable to qualify for and procure a bond of the extent required to buy the property. This is not apparently a case where your nephew simply stood surety for your bond repayments.
- It would, however, appear that this was done with the intent that notwithstanding that the property would had to have been registered in both your names jointly as joint bondholders, the reality was that you would pay the bond and as between you and your nephew you would in effect be the “owner” of the property (albeit not in legal terms as your joint ownership would be reflected in the deeds office and be apparent to the world at large on any investigation).
- Over time and depending how much of the bond has been repaid since 2008, sufficient equity could have been created in the property resulting in your nephew’s half-share in the property having some value, which could be used to secure other loans with the same bank which granted you the bond. I say this generally without any specific knowledge as the whether the property has any equity (it having been registered in your joint names some seven to eight years ago).
I do not understand how your nephew could have “put my property as surety(sic)…” without your consent. This matter would have to be addressed through an enquiry to the bank. As a customer of the bank and a joint-owner of the property which has potentially been put at risk without your knowledge, I see no reason why the bank should not provide this information. The nature of any surety granted would also need to be disclosed before we could properly comment hereon. Your nephew could simply have signed a suretyship with the bank but have indicated on a balance sheet presented in support of the new loan application that he owned a share in the property. So there is indeed a risk that his half share in the property, if worth anything, could be attached by the bank if he cannot pay his debts and this will obviously impact on your half share in the asset.
- The bottom line is that you will not simply be able to “remove him from joint ownership of the house…”, without your nephew and the bank agreeing to this. The bank sees your nephew as part of their security so if your nephew’s joint ownership were to be changed, the bank would in all likelihood require some form of “release consideration”. This means that in order for you to become sole owner a certain amount of money would have to be paid to the bank to reduce their exposure in respect of the property as they are reducing the number of persons who are in effect liable for the bond payment. This would also in effect be a transfer of the property of your nephew’s half-share to you which may have transfer duty and capital gains tax implications, depending upon the value of the half-share being transferred.
- This further begs the question as to why your nephew did not use his own property in Pretoria as security/surety for the further debt incurred.
- As stated at the outset, you essentially need to get more information together as to the background facts which, at this stage, are scant at best.
Answered by Johnny Henkes, commercial and litigation attorney, at Henkes Nolte-Joubert Attorneys