The purchase of immovable property in South Africa will, in the great majority of cases, be effected by obtaining ownership under freehold title. Ownership can only be conveyed by a seller to a purchaser by the Registrar of Deeds in whose area of jurisdiction the property is situated. Only attorneys who are also conveyancers are entitled to execute a Deed of Transfer before the relevant Registrar of Deeds.

Agreements for the sale of an immovable property must be in writing and be signed by the parties or their agents under their written authority. The written deed of sale must reflect all of the material terms of the agreement. A verbal sale agreement in respect of immovable property is unenforceable and void in South Africa.

Sales and purchases of property in South Africa are normally negotiated by estate agents - acting on behalf of their client, who may be either the seller or the purchaser. Once the sale has been finalised, the seller's conveyancer is duly instructed to pass transfer of the property to the purchaser. The purchaser may, but is not obliged to, nominate a conveyancer of his or her choice to act on his or her behalf and supervise the conveyance of the property.
The registration procedure normally takes 2 to 3 months, depending on the circumstances of the case. If all parties are readily available to sign documentation, registration can be effected in as little as one month.

An alien who is residing in South Africa illegally is not allowed to purchase property. There are no restrictions against non-South African citizens resident abroad purchasing property.

What Are The Costs For The Seller And The Purchaser
Non-Residents
What Are The Options For Registering The Property
What Happens When We Have Sold

What Are The Costs For The Seller And The Purchaser

The costs payable by the purchaser in acquiring the property are as follows:

1. Transfer duty to the SA Revenue Services in the form of a once-off real estate tax. If the property purchased is to be registered in the name of a close corporation, company or inter vivos trust, transfer duty at a rate of 10% of the gross purchase price will be payable. If the purchaser is a natural person, he or she will pay 0% on the first R150 000 of the purchase price, 5% on the amount between R150 001 and R320 000, and 8% on the amount exceeding R320 000. Should the seller be a registered vendor for Value Added Tax purposes, VAT at a rate of 14% will be built into the purchase price and the purchaser will not pay transfer duty.

2. The transfer costs of the seller's conveyancer, may vary slightly according to the rates set by the conveyancer who attends to the transfer, and are based on tariffs from the law society.

When purchasing a property, a purchaser is normally required to pay the purchase price and costs in three stages:

1. A 10% deposit of the gross purchase price to the real estate company on signature of the deed of sale by both parties. This amount is held by the real estate company in their trust account, pending registration of transfer, and interest thereon accrues to the purchaser.
2. The balance of the purchase price is lodged with the conveyancer just prior to the registration of the transfer.
3. The transfer costs are payable about 4 weeks prior to the date of transfer so that lodgement can be effected in the deeds registry of the relevant transfer documents for examination. The balance of the purchase price together with any occupational rental and the share of the current year's rates and taxes (levied by the local authority) will be payable against registration of transfer.

The seller is responsible for the payment of the estate agent's commission. The tariff commission recommended by the Institute of Estate Agents is set at 7.5% of the gross purchase price. These commission amounts attract VAT at a rate of 14% and commission rates may vary from region to region.  ...Top

Non-Residents

At present there are no restrictions in the Exchange Control regulations against non-residents introducing capital into South Africa for the purpose of purchasing property. Funds can be transferred into South Africa in several ways, including:

1. By telegraphic transfer from outside South Africa. Upon arrival of the funds at a local bank, a non-resident account is opened in the client's name.
2. By cash being introduced to a local bank. The cash must be converted into South African rands at the bank and a non-resident account is opened in the client's name.

It should be noted that the banks charge lower commission for transferred funds cash conversions.
The bank should be notified of the purposes for which the funds are being introduced so as to set up a record of their transfer from outside South Africa and to endorse the deed of transfer or share certificate "non-resident". Should the non-resident decide to sell the property at a later stage, the full proceeds can then be freely transferred out of the country merely by exhibiting the deed of transfer of the property and the subsequent deed of sale in respect of the re-sale, which will serve as proof of the amount originally introduced from outside South Africa and the amount realised on re-sale.  ...Top

What Are The Options For Registering The Property

After defining the objective for which a property is being acquired, an appropriate vehicle must be chosen to take transfer of the property.
An individual purchaser can acquire a property alone or jointly with other parties. Two or more persons may act as joint purchasers and will be collectively and jointly liable pro rata for the purchase price, unless specified to the contrary in the contract.  Properties can also be registered in partnerships, private companies, external companies, close corporations, inter vivos trusts or joint ventures. Your attorney or financial adviser will be able to advise you more fully on the most appropriate vehicle.
When entering into a deed of sale, the purchaser might not yet have decided on the vehicle to be used to acquire the property. In this event, the purchaser may enter into the deed of sale in his or her own name and incorporate a provision whereby he or she has the right to nominate a third party as purchaser within a specified period of usually about 1 month. Should such nomination not be made and accepted by the third party within the prescribed time period, the purchaser will be obliged to acquire the property in his or her own name.
An offshore trust can hold an immovable property by owning the shares in a company registered in South Africa in whose name the property is registered. The assets in the trust will not form part of the estate of the person who transferred them into the trust, thus providing the security of knowing that they will be held for the benefit of the person's heirs independently of any legal considerations in South Africa.  ...Top

What Happens When We Have Sold

The transfer process
The term "conveyancing" describes the legal process whereby a person becomes the registered and lawful owner of fixed property and ensures that his ownership cannot be challenged. "Fixed property" is any land, whether improved or not, such as a house, farm or flat. Formal conveyancing is also required for sectional title ownership, mortgage bond registration and other rights in fixed property such as servitudes. This pamphlet deals with the sale of fixed property. The procedures are similar for other forms of transfer of fixed property such as when transfer is necessary by reason of the receipt of the property when it was donated, inherited, exchanged or received out of a divorce and so forth. A conveyancing transaction involves a chain of steps which begins with a deed of sale and which continues through to the ultimate registration of ownership and the reconciliation of finances and payment.

Who appoints a conveyancer?
In South Africa, the usual practice is for the seller to appoint a conveyancer for a property transaction. A conveyancer is an attorney who has acquired the additional qualification of "conveyancer". To become a "conveyancer" a person must first be admitted by the Supreme Court to practise as an attorney. If the attorney wishes to practise in the highly technical branch of the law dealing with fixed property, he or she has to do intensive study of a large number of acts of Parliament, regulations, Supreme Court cases and rulings by Registrars of Deeds relating to fixed property. Then he or she has to pass an extensive examination. Only after passing this examination will the Supreme Court allow the attorney to practise as a conveyancer. This qualifies him or her to attend to the registration in the deeds office of various transactions involving fixed property. The purchaser may also appoint a conveyancer to advise him or her, but these charges will be over and above the conveyancing costs submitted by the seller's conveyancer, who will be doing the actual transfer.

What is the first step in the sale of fixed property?
The first prerequisite is the deed of sale. This must be a written agreement which is signed by both the purchaser and the seller (and by the seller's spouse and the purchaser's spouse in some cases). A written "offer to purchase" signed by a purchaser and accepted by a seller also constitutes a deed of sale. A verbal contract for the sale of fixed property is invalid.

The deed of sale is an important document which must be carefully examined. The parties (with the assistance of a conveyancer) must check that the total amount payable by the purchaser is what has been agreed on, that the terms of payment are acceptable to both parties, that all verbal promises made by the seller or his estate agents are incorporated in the document and that nothing mentioned in the document is contrary to any legal provision. Occupancy of the property does not necessarily have to coincide with registration of transfer. If occupation takes place prior to registration, the deed of sale must provide what rent is payable until the registration. Risk in the property in such cases passes to the purchaser on occupation, although this consequence can be (and often is) changed in the deed of sale itself. The purchaser must, therefore, take out insurance in inappropriate cases.
The purchaser is usually responsible for payment of transfer costs. These are fixed by the law society and the purchaser will be able to know in advance, to within a few rands, what the costs will be. Finally, if the sale is subject to the granting of a bond, this must be specified in the deed of sale. It should also be specified as to what the amount of the bond must be, how long the purchaser will have to obtain the bond, who will apply for the bond and so forth. It must also be specified that if the purchaser is unable to obtain the required bond in time, then the whole deal is to fall through. At this stage the property still does not legally belong to the purchaser although he has the right to require the seller to transfer the property to him.

What happens next?
The property must be registered in the Deeds office. This is a lengthy and complex process.
Both the seller and the purchaser will be required to call at the office of the conveyancer to sign certain documents which have been prepared by the conveyancer to effect the transfer. The documents, which have to be signed, are the following:

· A Power of Attorney
This must be signed by the seller and it authorizes the conveyancer to attend to the transfer on the seller's behalf.

· Declaration in respect of status
In this document the purchaser declares his or her marital status. This deals with such questions as to whether he or she is married in or out of community of property (which determines whether the property is to be registered in his or her name or in the name of both spouses). Unmarried adult persons, whether never married, divorced or widowed, are granted sole rights of ownership.

· Transfer duty and Value Added Tax (VAT) declaration
Transfer duty is a form of tax payable to the State and is calculated on the value of the property. If the deed of sale is signed by either the seller or the purchaser after 30 September 1991 then Value Added tax may be payable on the transaction. This tax will be payable on the estate agent's commission, on the conveyancer's fees and on portions of some municipal levies. In certain instances this tax will also be payable on the purchase price. If VAT is payable on the purchase price, no transfer duty will be payable. The conveyancer will require the parties to sign lengthy declarations about these taxes. With these declarations in hand he will be able to finalise the matter with the Receiver of Revenue and either pay the transfer duty (after he has been put in funds to do so) or to obtain a transfer duty exemption. Without a transfer duty receipt or a transfer duty exemption being placed before him, the Registrar of Deeds will not register the transaction.

· Mortgage or bond documents
If the purchaser obtains a loan from a financial institution (bank or building society) or from his or her employer, the lender will insist that the purchaser registers a mortgage over the property to secure the loan.
To enable the bond to be registered, the purchaser will be required to sign a written authorisation for the conveyancer to do so.

To enable the conveyancer to draw up all this documentation correctly, the purchaser must submit his or her identity document, marriage certificate and if applicable, antenuptial contract to the conveyancer.

What are the costs involved?
The costs relating to the transfer of fixed property fall in to three main categories:

· Transfer duty or Value added tax - where transfer duty is payable to the government it is calculated as follows: 0% on the first R150 000.00 of the purchase price - 5% on R150 001 to R320 000.00 and thereafter 8% in the case of natural persons and 10% where the purchaser is a company, close corporation or Trust. Where V.A.T. is payable the standard rate is 14% of the purchase price at present.

· A portion of the rates is payable on the property to the relevant local authority in advance (or a portion of the levies payable to the Body Corporate in the case of a Sectional Title Unit (plus Value Added Tax where applicable). A formal application has to be made to the Local Authority for the rates clearance together with a small fee. Unfortunately this often causes delays as the Local Authorities may take up to 6 weeks to provide a rates clearance.

· The conveyancer's fee which is calculated on a sliding scale based on the purchase price.
Where a bond is to be registered, the purchaser will have to pay the stamp duty payable on the bond (0,2% of the amount secured by the bond) an amount charged by the institution for the inspection of the property, provisional interest and insurance premiums and the conveyancer's fee (also prescribed and calculated on a sliding scale based on the amount of the bond).
Where the existing bond over the property has to be cancelled there is also a small fee charged for cancellation based on the amount of the bond.

Who arranges these transactions?
Having carried out the necessary searches in the Deeds Office and having checked all the details of the property and parties to the transaction, the conveyancer prepares the title deed and other necessary documents and on behalf of the purchaser pays the Receiver of Revenue and the local authority. Once the documents have been signed by the purchaser and the seller and the purchaser has paid the costs and made satisfactory provision for the payment of the purchase price, the conveyancer can proceed with the registration of transfer of property. (He will only do so, however, once the purchase price has been paid or secured).

What happens with trust monies held by the Estate Agent?
This money is held in an interest bearing trust account for the benefit of the Purchaser. The deposit cannot be used for the Purchaser's costs unless the Seller consents thereto in writing. The Purchaser does not forfeit the deposit unless the contract has been cancelled due to his breach of contract. If there is a dispute the Estate Agents keep the deposit in trust until the dispute has been resolved. On transfer the Estate Agent pays the attorneys the portion of the deposit they require to make up the purchase price and retains the portion of their commission. This does not mean that the Purchaser pays the commission. It just avoids the extra administrative work of Estate Agent having to pay the attorney and then the attorney to have to pay them back immediately.

What happens at the Deeds Office?
The conveyancer will lodge the documents that he has prepared in the Deeds Office for registration. The Deeds Office is a government registry of all fixed property and rights in fixed property. If there is a bond to be registered the conveyancer attending to the bond (who is usually not the conveyancer attending to the transfer) will also lodge the bond documents in the deeds office for registration simultaneously with the transfer documents. The examiners in the Deeds Office scrutinise the documents to ensure that they comply with all relevant legislation and regulations.
When they are satisfied, they inform the conveyancer that the transaction is ready for registration and thereupon, in the presence of the conveyancer and the Registrar of Deeds, the property is registered in the name of the purchaser. The bond is registered simultaneously. On registration, the purchaser becomes the lawful owner of the property and his title cannot be upset by any person unless it has been obtained by fraud. The title deed reflecting his ownership will be released by the Deeds Office after the registration and will be handed to him by the conveyancer unless a bond has been registered, in which case the title deed is retained by the bondholder. How long does the process take?
In the usual conveyancing transaction there are a number of parties involved such as:

• The seller (and spouse)
• The purchaser (and spouse)
• The institution who previously granted a bond to the seller (and the conveyancer acting on its behalf)
• The Receiver of Revenue
• The municipality or local authority
• The institution who grants the new bond to the purchaser (and the conveyancer acting on its behalf)

More often than not the following additional parties are also involved:

• The buyer of the purchaser's previous property (which the purchaser had to sell to obtain the cash portion of the purchase price)
• The conveyancer acting for the purchaser in that transaction
• The institutions who granted and are granting the loans in that transaction (and their conveyancers and so forth).

Very often there are whole chains of transactions linked up in this fashion. The conveyancer has to complete the arrangements with all these parties. Because human beings are involved in each instance, delays are possible at any stage of the transaction. The conveyancer (also being an attorney) knows exactly when and how to use legal methods to compel parties to act more expeditiously. It is important, therefore, that the purchaser should sign the documents and pay the required amounts as soon as the conveyancer calls on him or her to do so; this helps to ensure that there are no unnecessary delays. The length of time it takes to get the transaction into the Deeds Office is dependent on the reaction time taken by each and everyone of the mentioned parties. The usual time taken by the Deeds Office to inspect all the documents lodged by the different conveyancers for a specific transaction is seven to ten days. On average, the time taken to register the transfer of property, where a bond is involved, will be two or three months from the date the conveyancer is instructed. Unforeseen circumstances such as the death of one of the parties, attachment of the property by a creditor of the seller and so forth may cause the period to be extended.

Why is a conveyancer necessary?
Most people are accustomed to doing much of their personal business without the need of a legal or other adviser. However, a great deal is at stake in the transfer of a fixed property. It is generally the largest single asset that a person owns and the transaction for the purchase or sale of a fixed property is probably the most important contract undertaken by individuals. The law therefore provides that only qualified conveyancers may attend to the transfer of fixed property and related transactions. This is not only to give proper protection to the rights and interests of the public, but also to safeguard the integrity of the South African land registration system, which is universally regarded as one of the best in the world. When all the checks have been made, all the procedures followed by the conveyancer and the property has been registered in the name of the purchaser, he can be assured that he has a good and unassailable title to his property.  ...Top

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