Conveyancing Guide - Acquiring & Disposing Of Property
The following guide provides a basic guideline of the Conveyancing Procedure in South Africa and aims to equip you with the necessary information to ensure that when entering into a legal contract for the acquisition or disposal of property, you are au fair with the terms and conditions contained therein.
South Africa is deemed to have the best land registration system in the world which has proven to be wholly accurate and meticulous in detail. Every piece of property is reflected on a diagram and the ownership thereof is recorded at the provincial deeds offices concerned.
At the outset it is important to note that ownership of property can take various forms ie. property can be owned by individuals, trusts, companies and close corporations.
BUYING A PROPERTY
- When purchasing a property, either via the owner or an estate agent, you will be required to sign an Offer to Purchase or a Sale Agreement.
- This agreement will contain the names of the seller and purchaser, property address / description, purchase price , terms and conditions for payment and any other special conditions which may be relevant to the sale.
- Once signed by the seller and purchaser it constitutes a legal and binding contract.
- Although the prospect of entering into the aforesaid can be daunting to some, it is important to be aware of some of the clauses contained in these agreements which generally outline the terms and conditions of the sale and encompass the salient features of the transaction.
- The following are some of the clauses which need your attention:
- PURCHASE PRICE
This clause will stipulate the full purchase price as well as how same is to be paid. If a deposit is payable, the time period for payment thereof will be noted, with the balance to be paid at a later date. Alternatively, if no deposit is required, the clause will make provision for payment of the full purchase price, either by way of cash or a bank guarantee (obtained via a bank loan). It is important to note that the conveyancer is obliged to invest any deposit or full ourchase price (if paid in cash) in an interest bearing account for the benefit of the purchaser, unless the contrary is indicated. Ordinarily the interest earned on the deposit is accounted for in the final account presented to the purchaser on registration of transfer.
OCCUPATION OF THE PROPERTY
This clause will note the date upon which the purchaser is entitled to vacant occupation of the property. If occupation vests in the purchaser on registration of transfer, it follows that all risk of ownership passes to the purchaser on the same date.
If however the purchaser wishes to occupy the property prior to registration, the purchaser will be liable to the seller for occupational rental at an agreed amount or pecentage, which should also be noted in the sale agreement.
ELECTRICAL AND PEST CONTROL CERTIFICATE
The seller is required to furnish to the conveyancer the above certificates which needs to be issued by accredited persons, after inspection of the premises.
The submission of an electrical certificate is a requirement in law as the property needs to comply with certain safety requirements prior to change of ownership.
The submission of a pest control certificate is not a legal requirement but it has been entrenched as standard practice for the seller to attend to this as well.
VOETSTOOTS
This is a standard clause in all agreements and simply means that the property is bought as is. The seller is however obliged to notify the purchaser of all defects on the property.
BREACH
This clause provides for remedies if either the seller or the purchaser breaches the agreement by not complying with the terms and conditions thereof. The aggrieved party may give due notice to the other party to remedy the breach. Failure to do so can result in the cancellation of the sale or legal action to specifically perform in terms of the agreement.
In the event of a delay occasioned by either party, the aggrieved party can claim for MORA INTEREST. This is simply prenalty interest whichis levied on the purchase price from date of non-performance to date of compliance and is paid by the defaulting party.
FIXTURES AND FITTINGS
Properties are usually sold inclusive of all fittings and fixtures of a permament nature unless these are specifically excluded. Fixtures and Fittings are those that attach to the property. Those that can be removed and if the seller wishes to do so, may be cited in the sale agreement as such.
COSTS
Attorneys costs for the registration of the transfer are borne by the PURCHASER. This would include the fee payable to the attorney, deeds office fees, pro-rata rates and certain disbursements (eg. Deeds office search fee, FICA Admin fee, costs of obtaining rates / levy clearance certificate, postages and petties, etc). The PURCHASER is also responsible for the payment of transfer duty / VAT, which is explained hereinafter.
Transfer Duty is calculated as follows:
R0-R600 000.00 - NIL
R600 000.00-R1 000 000.00 - 5%
R1 000 000.00 AND OVER - 8%
The above rates are applicable to natural persons.
All entities (trusts, companies and close corporations will pay transfer duty at the flat rate of 8% on the full purchase price)
VAT (Value Added Tax)
VAT is payable on a transaction if the property formed a vatable asset in the estate of the seller who is a registered VAT Vendor. It is important to ascertain the VAT status of the seller and ensure that it is specifically noted if the purchase price is inclusive or exclusive of VAT.
If however the purchaser is also a VAT registered vendor and the property being purchased is an income producing activity, application may be made to the Receiver of Revenue to declare the sale vatable at a zero rate. In order to qualify for this, current leases, etc must be handed to the conveyancer who will submit copies to the Receiver of Revenue
The PURCHASER is also liable for bond registration costs if a bond is being registered simultaneously with the transfer.
The SELLER will be reponsible for the following costs :
- Fees payable to the attorney attending to the cancellation of the existing bond over the property
- Arrear rates / water / electricity
- Entomologist (Pest Control Certificate)
- Electrical Compliance Certificate
- Estate Agents Commission
- Capital Gains Tax
Capital Gains Tax (CGT)
CGT became operative on 01st Otober 2001. This is calculated by deducting the value of the property as at 01/10/01 (together with acquistion and improvement costs) from the proceeds on disposal of the property. It is only applicable to South African residents who are exempt on the first R1 500 000.00 of profit made on the disposal of their primary residence. CGT is payable in the year in which the asset is sold. 25% of the capital gain is added to the individuals income for that year and is taxed accordingly.
OBTAINING FINANCIAL ASSISTANCE (MORTGAGE BONDS)
Application may be made either personally by the purchaser (via a branch) or via a mortgage originator. A copy of the sale agreement, bank statements and salary advices must be forwarded to the banking institution who will assess the application based on affordability and a valuation of the property. If successful, the loan is granted and an attorney is appointed to secure the loan by registering a mortgage bond against the property.
FICA (FINANCIAL INTELLIGENCE CENTRE ACT)
In terms of the above act, attorneys and conveyancers require certain documentation from parties to a property transaction. You will find attached and annexure which detail these requirements.
THE TRANSFER PROCEDURE
The appointed conveyancer will attend to the preparation of the transfer and bond documentation, signature thereof, application to the Receiver of Revenue for the transfer duty / VAT certificate, application to the relevant municipality and/or body corporate for the rates and/or levy clearance certificate, application to the existing bond holder for the title deed, etc.
Once all of the above is attended to and received, the conveyancer will proceed to lodge the transfer and/or bond at the relevant Deeds Office. At the Deeds Office the documents are examined for approximately 7-10 working days whereafter it will be brought up for fees. This refers to the working day prior to registration and means that the examination of the documents are complete and the fee is now payable to the Deeds Office. At this stage, all interested parties check that all legal requirements have been complied with. If any of the attorneys linked to the transaction is not in a position to register, the matter may be “held over”. This simply means that the transaction is pended at the Deeds Office. There are however only a maximum of 3 days allowed for “hold overs” after which the matter has to either be registered or withdrawn.
Once the matter is registered, all existing bonds over the property are cancelled and transfer is passed to the purchaser, together with the registration of any new mortgage bonds that need to be registered over the property.
Final accounts are prepared the working day after registration and proceeds are then paid to the seller.
RELEASE OF THE TITLE DEED
After registration, the Deeds Office microfilms the documents and the title deed is released to the conveyancer who will either forward same to the bank (if property is bonded) or release same to the purchaser for his safe keeping.
This concludes the transfer process and we hope that our brief explanation thereof has been beneficial to you.
(This serves as a guide - any errors or ommissions are not the responsibility of Derick Funnell Properties)
