Conveyancing Perspectives

788 275 Prevance - Bridging Finance South Africa

Transfer Duty. No Surprises. Part I

Transfer duty is a duty levied for the benefit of the National Revenue Fund on the value of any property acquired by any person by way of a transaction or in any other way, or on the amount by which the value of any property is enhanced by the renunciation of an interest or restriction upon the use or a disposal of that property.  The value of the duty is determined by the Minister of Finance and is based on a sliding scale relative to the value of the property.

Property is defined in the Act  to mean land in the Republic of South Africa and any fixtures thereon. It includes any real right to land, for example: a right of usufruct; any right to minerals and a lease of such right; a share or member interest in a residential property company; a contingent right to any residential property held by a discretionary trust. The acquisition which is a consequence of an agreement for consideration with respect to property held by that trust accompanied by any substitution of variation of the trust’s loan creditors or a substitution or addition of any mortgage bond or accompanied by the change of any trustees of that trust, and finally a share in a share block company.

Residential property is in turn defined as any dwelling-house, holiday home, apartment, or similar abode, as well as improved or unimproved land zoned for residential use in the RSA, including any real right thereto. Excluded from this definition is an apartment complex, hotel, guesthouse, or similar structure consisting of five or more units held by a person and used for renting to 5 or more persons, who are not connected persons, as defined in the Income Tax Act  and finally, the fixed property of a vendor forming part of an enterprise as defined in the Value Added Tax Act .

A residential property company is a company that holds property that is residential property, or a contemplated contingent right held by a discretionary trust. In turn, it is qualified that the fair value of the property or contingent right must comprise more than 50% of the aggregate fair market value of all the assets of the company or trust.

Finally, a transaction in respect of land is defined as an agreement whereby one party agrees to sell, grant, waive, donate, exchange, lease, or otherwise dispose of the land to another person. Similarly, in relation to shares, an agreement whereby one party agrees to sell, waive, grant, donate, cede, exchange, issue, buy back, convert, cancel, or otherwise dispose of the shares to another party will constitute a transaction. In respect of a discretionary trust, the substitution or addition of any beneficiaries with a contingent right to any property of the trust, which constitutes residential property will also constitute a transaction or transfer.

It is therefore clear that the sale of shares constitutes a transaction. The company in question is a residential property company whose sole asset is the house, and therefore transfer duty will be payable and will be paid on the fair market value of the property/land.

200 150 Prevance - Bridging Finance South Africa

Buying and Selling Property: Who Pays What Costs?

“Risk comes from not knowing what you’re doing” (Warren Buffett)

Businessman Calculating Tax By Model House And Coins

Don’t risk not knowing what you’re doing when you either sell or buy property. Avoid nasty shocks by budgeting properly for the costs you will incur – some of them can be substantial, and some are less obvious than others.

The checklists below are of necessity not exhaustive and you would do well to take specific professional advice and to get cost quotes before you finalise your financial planning.

The costs you will pay as buyer

In the excitement of buying a house (particularly if it’s your first one!) it’s easy to underbudget and forget all the amounts of money you will have to pay over and above the purchase price.

One suggestion is to budget for costs totaling up to about 10% of the purchase price, but here’s a list to help you with your own calculations (ignore any items that don’t apply to your purchase) –

  • Transfer duty (a government tax payable to the state via SARS unless the sale is subject to vat). You will pay on a sliding scale depending on the purchase price and beware – this can be a substantial cost!
  • The applicable transfer fees that the conveyancers will charge for their services in handling the transfer (you must pay these before transfer)
  • Deeds Office fees
  • Bond registration fees charged by the bank’s attorney
  • Bond/Home Loan initiation fee payable to the bank (the bank may also require you to take out a home loan protection life policy)
  • Occupational interest, if payable when you move in before the transfer takes place
  • Pro-rata rates, municipal charges and levies (some payable in advance)
  • If you are buying into a complex (sectional title or Homeowners Association) you may be liable for body corporate or HOA levy clearance fees in addition to pro-rata levies
  • Don’t forget other costs like moving costs, redecorating, telephone and internet connections, water and electricity deposits etc
  • Also remember to budget for your ongoing monthly costs of property ownership – rates, levies, municipal services, insurance (building and contents), security, building maintenance and the like.

 

“This article originally appeared in LawDotNews and is reproduced with the permission of Gerings Attorneys, Tel: (011) 440 1282/admin@gerings.co.za and DotNews”

1024 684 Prevance - Bridging Finance South Africa

Can your neighbour object to building plans?

Nothing can disrupt a person’s life as much as a dispute between neighbours and even more so when there are building works and renovations involved. Disputes of this nature tend to escalate where one owner decides to build on their property and the neighbouring owner is of the opinion that the renovations will interfere with his property rights. As a result, neighbours who are of the opinion that their rights are being violated by either obstruction of views, the aesthetics of the renovations or even excessive noise, may want to address the problem by preventing the approval of building works by the Local Authority.

Although the application for approval of building plans is lodged with the Local Authority, they are required to adhere to the requirements set out in the National Building Regulations and Building Standards Act.  It is therefore important to note that this Act does not create a legal obligation for any owner to notify their neighbours of their intent to apply for building plans nor does it create a right for the neighbours to object.

The Local Authority have a duty in terms of section 7 of the National Building Regulations and Building Standards Act to consider the rights of neighbouring properties and can therefore, within their discretion, request that the neighbour be informed and consent to the prospective building works in terms of their By-Laws.  A neighbour must be informed of building plans where the application for building plans is made simultaneous to an application to rezone the property or where an application is made to remove a restrictive condition (e.g. application for the relaxation of a building line).

During the approval process the Local Authority must also objectively determine if the interference of building works will be reasonable by taking into account various factors listed in the Act:

  • The measure or extent of the interference
  • The suitability of the plaintiff’s use
  • The duration of the interference
  • The time the interference took place
  • The sensitivity of the plaintiff to the harm; and
  • The possibility of avoiding or mitigating the harm.

In conclusion, if an objection is submitted, the objection itself does not necessarily prevent the Local Authority from approving the building plans. The Local Authority will within its discretion apply the factors and weigh up the rights of the different parties prior to making a decision regarding the approval.

If the aggrieved neighbour does not agree with the approval, they will have the option to object to the approval and follow the internal procedure available for such objections.  Only after they have exhausted all other remedies and are of the opinion that the owner did not follow the correct procedure, will they be able to apply for setting aside of the approval in terms of the Promotion of Administrative Justice Act.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Source: https://smutsco.co.za/

800 301 Prevance - Bridging Finance South Africa

Is a Seller held liable to repair a leaking roof after the property is sold?

Is a Seller held liable to repair a leaking roof after the property is sold?

To understand which party is liable, one must appreciate the difference between latent and patent defects. A latent defect is not visible or can be discovered when inspecting the property. This type of defect impairs the use and enjoyment of the property. Typical examples of latent defects are leaking roofs, dampness and/or structural defects in the foundation, to name but a few.

On the other hand, a patent defect is visible when inspecting the property. Hence, the parties can discuss the options of who will attend to the repairs. The same may be negotiated between the parties, be it the Seller who repairs the patent defect or reduces the purchase price for the Purchaser to repair.

Thus, it is the latent defect matter that triggers the dispute between the parties should it arise. The common law position is as follows;

If the Seller gives the purchaser an express written warranty that the property is sold free from any defects, and after the sale is concluded, the purchaser confirms that there is a defect, the Seller can be held liable for the repairs. For example, if the Seller declared in the agreement of sale that the roof does not leak and after the sale the Purchaser experiences leaks in the roof, the Seller is held liable as there has been a breach of contract.

If the Seller misrepresents to the Purchaser regarding the property’s condition, the Seller can be held liable. For example, if the Seller is aware that the roof leaks and does not declare the same to the Purchaser, the Seller can be held liable, and the sale can be set aside, or the Purchaser may proceed with the sale and claim a reduction in the price for the damages.

One may ask, but what if the Seller did not know about the latent defect? The answer is yes, the Seller can be held liable if the latent defect existed when the sale was concluded between the parties.

But why is there a voetstoots clause in the sale agreement, which is supposed to protect the Seller by informing the Purchaser that he/she/they are purchasing the property as-is (voetstoots)? The voetstoots clause does not protect the Seller and does not exclude the Seller’s liability if the misrepresentation is proven; hence if the Seller was aware of the latent defect and did not disclose same to the Purchaser, the Seller can be held liable.

The Consumer Protection Act, which came into effect on the 1st of April 2011, states the Purchaser has to be informed of all details regarding the property that he/she/they are purchasing. Once the Seller expressly states what condition the property is in and the Purchaser expressly accepts the current state of condition of the property before purchasing the property, the implied warranty of the property’s condition falls away. The effect of the CPA has been that the voetstoots clause does little to protect the Seller when it is tomes to defects; hence the Seller is urged to declare all defects of the property to the Purchaser before concluding a sale agreement.

 

Reference List:

PRACTITIONERS GUIDE CONVEYANCING & NOTARIAL PRACTICE BY ALLEN WEST

CONSUMER PROTECTION ACT 68 OF 2008

 Source: Miller- Bosman- Le Roux

800 300 Prevance - Bridging Finance South Africa

The Seller passed away during the transaction. What now?

While concluding the sale of an immovable property, the seller will sign a power of attorney, which gives the attorney the obligation and authority to attend to the transfer of a certain property, which has been sold for a certain amount on behalf of the said seller.

Each power of attorney will differ in its content and the terms contained therein, but the basics will remain.

When the seller dies any power of attorney that may have been executed will automatically lapse. The legal principle behind it is that you, as the authorized person, can not act on behalf of a person that can not act for himself, which is common sense.

The same principle applies when a person becomes insolvent, or is so incapacitated that they can not make their own decisions.

In the latter case the Court may grant an order declaring the patient to be of unsound mind and as such incapable of managing his affairs and following this, to have a curator bonis appointed to administer the patient’s financial affairs.

The curatorship application is usually brought by a member of the patient’s family. However, any person who can show sufficient interest can also do so, for example, a friend or business partner.

It is important to keep your family up to date on powers of attorneys signed, so that someone can let the attorney know who is holding a power of attorney on your behalf.  If a transaction is registered after date of death on a power of attorney that has lapsed,  it can have far reaching consequences for the estate and the finalization thereof.

Source is Neuwmann Van Rooyen. https://www.nvrlaw.co.za/Home.aspx

600 400 Prevance - Bridging Finance South Africa

Selling property out of a deceased estate

 

If an agreement for the sale of immovable property is concluded and the seller dies before the property is transferred, the sale can still proceed.

Upon the seller’s death, his/her estate vests in the Master of the High Court until an executor is appointed.

Once appointed, the executor is enabled to sign the transfer documents. The power of attorney to pass transfer is then sent to the Master for approval and is then endorsed by him/her in terms of section 42(2) of the Administration of Estates Act 66 of 1965.

The heirs, who usually need to consent to a sale out of a deceased estate, need not give their consent, as the property was sold by the deceased during his/her lifetime. The property can then be transferred to the purchaser in terms of the Deeds Registries Act 47 of 1937.

Contact me should you wish to discuss the sale of property out of a deceased estate further.

Source: Miller Bosman Le Roux en die Phatshoane Henny Group

1024 682 Prevance - Bridging Finance South Africa

Property Sellers: Why, How and When to Choose Your Own Conveyancer

“A great deal is at stake in the transfer of 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” (Law Society of South Africa)

For many of us, our home is our most important asset so when it comes time for us to sell, do everything possible to ensure that your interests are fully protected, that the sale goes through quickly and smoothly, and that you are paid without unnecessary delay.

Appointing the right conveyancer is key here. Let’s have a look at the “Why, Who, How and When” of it…

Why do I need a conveyancing attorney?

Legal ownership in “immovable” or “fixed” property (that is, land and permanent attachments such as buildings) can only be transferred from seller to buyer through a formal registration process in the Deeds Office. This is carried out by specialist attorneys who have been admitted to practice as conveyancers.

Who appoints the conveyancer, and how?

As the seller, it is your right to choose which conveyancer will carry out the transfer.

The agreement of sale (it may be called an “Offer to Purchase”, “Deed of Sale” or similar) should contain a clause specifying the conveyancing (or “transferring”) attorney. Make sure you fill in your chosen attorney’s name and details in the space provided, and do not allow anyone else to dictate to you who to use!

You may occasionally come across an offeror/buyer wanting to appoint their own attorney for one reason or another, perhaps with the argument that because they are paying the transfer costs (which include the conveyancer’s fees), the choice should be theirs.  But the fact is that you carry more risk, and there is nothing to stop the buyer from employing another attorney to monitor the transfer on their behalf if they really feel this necessary.

Bottom line – stick to your guns! This is your house at stake, so the choice is yours, and yours alone.

How to choose the right conveyancer

Your choice here is critical. You need to appoint someone you can trust to handle the process with the utmost professionalism –

  • Speed will be important to you (“time is money”!), and whilst a certain amount of delay is inevitable (there are lots of formalities and red-tape requirements involved), a pro-active and committed conveyancer will keep delays to a minimum.
  • Communication: Progress updates should be regular and timely, keeping you in the loop at every step of the process.
  • Attention to detail is also vital. Conveyancing is a specialised field, calling for meticulous compliance with a host of rules and regulations. Moreover every sale agreement will be different, and its precise terms and conditions must be complied with.
  • Cybersecurity has become a major issue in recent years, particularly around the question of email integrity. You will need to play your part here too (to take just one example, don’t ever take at face value an email purporting to come from your attorneys “advising you of our new banking details”), but knowing that your chosen firm of attorneys has security protocols in place is critical to resting easy that the purchase price will indeed end up in your account.
  • The need for scrupulous integrity goes without saying – a lot of your money will be at stake here!

When should I bring my attorney into the sale process?

Ideally, from the very start. When you first decide to sell, you will find it invaluable to have your attorney’s advice on how to go about it, whether you should speak to an estate agency, how best to market your property, what pitfalls to avoid and so on.

When it comes to the agreement of sale itself, a myriad of things can go wrong if the contract isn’t professionally drawn to be clear, concise, legally enforceable and configured to protect your interests. So if you are presented with an offer or agreement drawn by someone else, take legal advice before you agree to anything!

Source: Lawdotnews en Tanners & Associates. 

1024 684 Prevance - Bridging Finance South Africa

Cancelling Your Bond What You Need to know

Most homeowners selling their properties have a registered bond that needs to be cancelled with the financial institution that originally financed their purchase. What most homeowners do not realise is the implication of early termination of the bond and the amount of penalties imposed by financial institutions for the early termination. The cost for cancellation and early termination is for the account of the seller and therefore it is important for the seller to understand exactly what is required to reduce his or her risk.

In terms of the National Credit Act, financial institutions are entitled to charge an early termination penalty should the seller wish to cancel their bond prior to the completion of the term of the bond. The aforementioned charge or penalty depends on the specific terms of the credit agreement between the seller and the specific financial institution.

It is important for homeowners to remember that giving notice to the bank of your intention to cancel and the actual cancellation of the bond are 2 different things. Giving notice only starts the process of calculating the penalty interest but the bond must physically still be cancelled in the Deeds Office. This process will be initiated by the bank giving instruction to a conveyancer to attend to the cancellation.

If registration takes place after the 90 day notice period, the penalty will fall away.  If registration of the transfer of the property falls within the 90 day time period, the penalty will be reduced pro-rata to the time left on the notice period.

WHAT STEPS DO YOU NEED TO TAKE TO CANCEL YOUR BOND?

  1. The moment you put your property up for sale proceed to give written notice to your bank of your intention to sell and to cancel your bond. The notice can be done telephonically but we advise clients to have written confirmation of same in case the date of notice is disputed at a later stage.
  2. Confirm with your bank what their exact process is regarding notice i.e. do you give a once off notice and after the 90 days no penalties are charged or do you need to give notice every 3 months if the property hasn’t sold yet?
  3. Check whether your original credit agreement corresponds with the process indicated by the bank.
  4. The bank will instruct an attorney to attend to the cancellation of the bond. If the bond is on a R0,00 balance and not linked to a transaction, the attorneys will contact you and proceed with the cancellation.  If there is still a balance outstanding and the cancellation is linked to the sale of your property, the attorneys will be in contact with the attorneys attending to your sale.
  5. Remember that once you give notice to the bank, most banks put a hold on your access facility (if applicable). So it is advisable to withdraw any access funds that you may need prior to cancellation of the bond before same are frozen.

Contact our office should you require any assistance to cancel your bond and we will notify the relevant bank accordingly – 021 824 2020 or info@smutsco.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Source: Smuts and Co Attorneys
https://smutsco.co.za/2021/09/01/cancelling-your-bond-what-you-need-to-know/

1024 576 Prevance - Bridging Finance South Africa

The facts of property auctions

Buying and selling properties through auction has always been a staple of the real estate market. And to this day, it remains one of the best ways to purchase properties at bargain prices. Unfortunately, numerous misconceptions around properties that go up for auction also exist, some of which are entirely unfounded and can be easily dispelled.

“Only properties that have been repossessed by the bank go on auction.” 

Voluntary auctions are events where the seller puts their property on auction themselves in the hopes of increasing the selling price when prospective buyers are pitted against one another. These auctions aim to benefit the seller and offer buyers a more exclusive, hands-on arena in which to bid for the property they want.

Often, the market for a specific property is so exclusive, that listing it publicly will simply be a waste of time. In such cases, voluntary auctions provide sellers with a quicker turnaround time on the sale when only parties who have already shown interest in similar properties are invited to the auction.

“Properties on auction are usually falling apart and require extensive maintenance.” 

With voluntary auctions, the state of the property rarely needs scrutinising, as the demand for the property is what brought the auction about. With bank and sheriff auctions, though, where homeowners have fallen in arrears with their bond repayments, or properties have been repossessed, the current state of the property may be of concern.

However, even while abandoned and derelict properties do go on auction regularly, most of the properties sold on auctions are there simply because of the homeowner’s financial situation, and not the property’s unsellable structural state.

“Your bid is blind and you never know what you’re really getting yourself into.” 

A big concern for many buyers is that bids are final and cannot be reneged upon. That doesn’t have to mean you buy something you’ll regret, though. With property auctions, potential buyers are still able to request viewings of the properties on auction beforehand, as with regular properties on the market, so they do not enter the auction blindly.

“As a seller, you have to take what you get when the final bid comes in.” 

Due to the discounted prices of properties sold on sheriff auctions (often going for less than 50% of the property’s value), sellers may be concerned that their property will be sold for less than they would have been able to get with a regular marketing approach, and that they will be forced to accept whatever bids they get on the day. But this is not the case. Auctions usually come with a ‘subject to confirmation’ clause, which allows the seller to accept or reject the final bidding offer. Sellers are also guided through the process by auction brokers who will advise them on realistic prices and help them create a competitive platform that will benefit them.

“Only people with enough cash on hand can partake in auctions.” 

For buyers, the notion that they must have the money on hand is also one that needs to be dispelled. As with regular property purchases, financing can be used to purchase many properties on auction. The only catch is that the financing needs to be approved before you place your first bid to avoid placing a winning bid and not being able to commit to it. That said, there are auctions that demand payment immediately after the auction — the terms of such an auction will be disclosed beforehand, however.

Auctions can be hugely beneficial platforms for both buyers and sellers, as long as they are aware of the processes and the potential pitfalls. If you have your eye on a property on auction, or simply want to know more about the benefits that auctions may hold for you, get in touch us and let us help you navigate your way to the auction floor.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Source: https://ngllaw.co.za/the-facts-of-property-auctions/

150 150 Prevance - Bridging Finance South Africa

Why a Fidelity Fund Certificate is important for you and your estate agent

“I’ve finally received my qualification to practise as an estate agent, but am still waiting for my Fidelity Fund Certificate. Some people say I can start practising as an estate agent as long as I’ve applied for my Fidelity Fund Certificate. Is this correct, and can I already practise as an estate agent?”

In terms of the Estate Agency Affairs Act (“Act”) an estate agent must have a valid Fidelity Fund Certificate (FFC) in order to receive any payment or commission arising from his or her duties as an estate agent.

In clarifying this provision it has been held by our courts that even if a FFC has been applied for, if a valid FFC was not held by the estate agent at the time of the transaction in terms of which he or she is claiming a commission or payment, the estate agent is not entitled to any commission or payment for such transaction.

The purpose of the requirement for an estate agent to have a FFC is to ensure that the public is not misled and as such the FFC is an important control measure to help reduce the risk to the public against corrupt agents.

Accordingly, a FFC will not be issued to any estate agent that, among other things:

(1) has been dismissed from a position of trust due to improper conduct;
(2) has at any time been convicted of an offence involving dishonesty;
(3) is an unrehabilitated insolvent;
(4) is of unsound mind;
(5) does not comply with the prescribed standard of training; or
(6) does not have the prescribed practical experience.

When the new Property Practitioners Bill is enacted, conveyancers may also not pay out commission, unless the estate agent has provided the conveyancer with a certified copy of his/her valid FFC. It would therefore be wise/prudent for buyers and sellers to request proof of a valid FFC before associating themselves with an estate agent or agency.

See original article.

Head Office : 011-274-1700