The 101 of joint bonds and dying
We’ve written this piece in collaboration with property specialists, Araujo Attorneys.
Noah and Elethu want to buy a house. They go to the bank to borrow money together to pay for their new home. After checking their earnings, the bank gives them a thumbs up, grants them a home loan and celebrations are had! This means that Noah and Elethu have now become bond partners, having entered into a joint bond agreement with the bank. They move into their new home and life is good. Something they haven’t considered is what would happen if one of them kicked the bucket. (Fair enough - no one wants to dampen exciting life moments, like buying a first home, with death chat). That said, it’s important to go into these things with eyes wide open. We know it’s grisly, but here are some lesser asked questions about sharing a bond with someone…
What is the first thing I should do if my bond partner dies?
You need to let the bank know. They’ll ask for a copy of your bond partner’s ID document, your ID document and the death certificate. If you are the deceased’s next of kin (in other words, their closest living blood relative, including spouses and adopted family members), you’ll be responsible for reporting the death to Home Affairs and letting the bank know that they’ve died. If there is life cover available to settle the bond, you should let the bank know of the pending settlement. You can also make payment arrangements with the bank so that the bond does not go into arrears while you are sorting out the finances. The documents you’ll need for this stage of things are:
Your ID document
Your bond partner’s ID document
Your bond partner’s death certificate
A copy of the life cover policy, if there is one
Would I be responsible for letting the bank know that my bond partner has died?
Assuming you’re in the emotional position to let the bank know, you should get in touch with the bank. You could also wait for your bond partner’s executor to let the bank know about their death, but this could take a while. The bank’s website will usually have details of who to call.
What happens to my joint bond if my bond partner dies?
This next line shouldn’t come as a complete surprise but can be quite harrowing to read (deep breaths). If your bond partner dies, you are what’s called “jointly and severally liable” for the whole bond. This means that you could be held wholly responsible for 100% of the debt and not only 50% as you may have thought. Noah and Elethu might each pay R7000 towards the bond repayment but if Noah dies suddenly, Elethu would be responsible for the full R14000.
What can I do to protect myself from being responsible for paying the whole bond if my bond partner dies?
You should definitely take out life cover that will settle the bond if either bondholder dies. In fact, the bank usually insists on life cover or a bond protection plan to cover the bond in the event of death. That said, sometimes the full bond amount is not covered by insurance and you will be liable for the portion not covered by the life cover/ bond protection plan.
Would I need to re-qualify for the bond on our shared property if my bond partner dies?
Yip, because the bank needs to reassess if you are able to afford the payments on your own. Sometimes people can’t afford the bond on their own which might mean that the property has to be sold to pay off the bond. Noah and Elethu may have been able to afford their bond of R14000 / month because they both earn a salary. But R14000 a month might be too much for Noah to afford on his own if Elethu dies.
What if I don’t qualify and my bond partner didn’t have life insurance?
If Elethu died and didn’t have life insurance, he’d be leaving Noah in a situation where he’d need to re-qualify for the bond. If Noah can’t afford the full bond payment, then the property would need to be sold to cover the costs.
If I was forced to sell the property because my bond partner had died, would I get all the profit?
Nope. Your bond partner’s half of the property will need to be “wound up” formally, with any profit being distributed either to the people (or beneficiaries) in their Will or according to the State’s distribution formula if they die without a Will. So if you owned the property in equal shares you would be entitled to half of the net proceeds of sale and the deceased’s estate would be entitled to the other half which would then go to their beneficiaries.
What things can I do to reduce the risk of having to pay a full bond on a property I went in “halvies” on?
The first thing to do is make sure that you have adequate life cover, which means that your bond could be covered if either you or your bond partner die. You could also draw up a legal document, like a co-ownership agreement, which regulates the details of your co-ownership of the property, like what happens if one bond partner dies away before the bond is paid off.
Would my bond partner's half of our property automatically transfer to me if they died?
Nope. Their share in the property will pass to their heir/beneficiary in terms of their Will. If they don’t have a Will, the Intestate Succession Act will determine who in their life is entitled to their share in the property. If Noah has said in his Will that his cousin, Tam, will inherit his share in the property when he dies, then Elethu will become a joint property owner with Tam. Assuming she’s in a financial position to take on Noah’s portion of the bond and be subbed in as a debtor.
What happens if I don't want a joint bond with the person my bond partner has left their half of the property to?
If Noah leaves his half of the property to his cousin, Tam, and Elethu doesn’t want to be in a bond with Tam, he’d have two options. The first would be to sell his share of the property. This might be to a new person, or even to Tam. The second option is that both Tam and Elethu could decide together to sell the property.
What happens if my bond partner leaves their half of our property to me in their Will?
If your joint bond partner dies and you inherit their portion of the property, you are responsible for the full payment of the bond. If their portion is transferred to you, you would have to re-qualify for the bond.
Are there any costs involved in the admin of having a bond partner die?
Yip, there certainly are: transfer costs. But the good news is that these costs should normally be paid by the deceased’s estate and not by you.
What legal documents will I be asked for if my bond partner dies?
Title deed to the property (should be with the bondholder/bank if bonded or with you if not)
Death certificate
Copy of letters of executorship and contact details of the executor
Copy of Deceased’s Will
Copy of Deceased’s ID
Bond Account Number
The long and the short of it is this:
Make sure that both you and your bond partner have Wills and that you’re both aware of one another’s wishes for the property - try to do this before you enter into a joint bond to avoid surprises and uncertainty.
Make sure that you both have life insurance so that neither of you is left in a very tough financial position if either of you die.
Make sure that both you and your bond partner have got your “ducks in a row”. There’s a lot of very important documentation that will be needed to wrap up both of your estates one day when you die. Make sure it’s up to date and that your bond partner knows where to find it all.
Written in collaboration with property specialists, Araujo Attorneys.
