Partition Agreements to Transfer Jointly-Owned Land
Joint owners of a piece or pieces of land may want, or need, to redistribute the land among themselves and so become individual owners of a defined portion of that land (or of a sectional title unit) in their own names. This can be done in terms of section 26 of the Deeds Registries Act and a partition agreement.
To be able to effect a redistribution by way of a partition agreement the joint owners must each own an undivided share of the land they wish to partition. The agreement must apportion a defined piece of that land to each of the joint owners and may not simply be an agreement to redistribute their respective shares in the land among themselves. All the owners must be parties to the agreement.
There are several circumstances in which the partitioning of property may be appropriate or useful.
- If X and Y are joint owners in a property and wish to construct their own separate dwellings on the property, they may, with the local authority’s consent, sub-divide the property and transfer each subdivision into their own respective names. X and Y will thus own separate portions of the property under their own title instead of joint undivided shares in the property.
- If X, Y and Z are joint owners in a property, a partition agreement may be concluded whereby X will own a specific portion and Y and Z may own the remainder of the property jointly.
- If X and Y are joint owners of properties “P” and “Q”, a partition agreement may partition the ownership of the two properties so that property “P” will belong solely to X and property “Q” solely to Y. If, for instance, property “P” is worth R2 million and property “Q” is worth R1 million, X may make an equalisation payment to Y for the additional value received in the transaction.
- Joint owners of freehold property could erect buildings comprising more than one unit, open a sectional register and by means of a partition agreement transfer a unit to each of them individually.
The advantage of using a partition agreement is that, unlike a sale or exchange agreement, it does not attract transfer duty. The only exception to this rule is in cases where an equalisation payment, as explained above, is made. In such cases, transfer duty is payable in respect of the value of the equalisation payment.
Garlicke & Bousfield Inc.