What happens to joint-owned property & mortgages in the event of death? - Private Property
Channel: Private Property
Date: 2015-08-14

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VIDEO TRANSCRIPT:

Hello everyone. I'm Jose Delgado. I'm a corporate commercial attorney. Very interesting query that's been raised. Basically, what is the position or what are the ramifications or what will transpire in the event of my partner, my spouse or a family member who owns a property jointly with me, or alternatively, in the event that I'm a beneficiary or an heir who is going to inherit the property. What happens if there's a mortgage on the property and also what happens with the property? So let's tackle the first issue where there is a mortgage because that's what the question or the query is framed on specifically, and it goes as follows.

In the past, before the National Credit Act came into play, lending was quite -- not loose, but it wasn't as onerous and regulated as it is now under the National Credit Act. In the past, one party or both parties would qualify for mortgage, simple. Under the new dispensation and the National Credit Act, in the event that you jointly own a property with your spouse or partner, their demise may result in - when you are transferring their portion into your estate or into your hands, that you would have to re-qualify for the bond. And what we find in many instances is that people cannot qualify for bond on their own. So be very sure to revisit your position. In the event that you have a long-term strategy for that property, you ought to structure it correctly so that the demise of either one or both of you would not result in the persons who are going to be taking transfer of that property being in a position where they don't qualify for the mortgage, which results in the property having to be sold.

Then, just to conclude on this particular point, what happens in the event of a person passing away? There are capital gains taxes, there are executor's fees or estate duties, you may have a person who is a minor that cannot inherit the property. So just be very cautious that in the event that you intend for this property to continue in the family or as a legacy, that again it is structured to ensure that the property actually does stay within the family, and it doesn't end up getting sold because it's got to pay taxes or if there is a mortgage that the persons inheriting the property or taking over the property cannot afford it. So just be very cautious and revisit your position on a mortgage.