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Selling your property? There might be some costs you are not aware of

If you are selling property in South Africa, check what costs you have to pay, and if they’re applicable to you.

  1. Bond costs

Cancellation Costs: This is charged when you cancel your bond after selling your property. They total up to R3 000 or more.

Early Settlement Penalty: If your home was recently purchased and you are in the early years (approximately 3 years) of bond repayments, your bank is entitled to charge you an early settlement fee for consolidating your bond sooner than expected. Inquire this fee with your bank so that you are set for payment.

Notice Period Penalty: With so many other things to be concerned about, you are likely unaware of the need to notify the bank of your intent to sell. While this may vary with different banks, most of them require a written notice 90 days in advance before you start consolidating your bond. Failing to supply this notice on time will entitle your bank to charge you with penalty interest.

The transfer process: This process, from the date you accept a desirable offer to purchase to the registration of the home to the buyer’s name, can take anywhere between 2.5 and 3 months. In the case where you could need money from your bond to pay off any other financial obligations, then you should withdraw it before giving your notice of cancellation.

  1. Agent’s commission and VAT

Estate agents have insight on property market trends, which is beneficial to ensure you receive what you deserve for your home. They do, however, charge commission on the sale of any property, and it is usually expressed as a percentage of the purchase price, however, it excludes VAT. This is likely the biggest cost of selling, so selling privately is an option available to you.

  1. Compliance certificates

Compliance certificates ensure that any installations that could be deemed dangerous in your home are done by a professional and done correctly. As a seller, it is your responsibility to ensure they are up to date before supplying them to the buyer. These certificates cost at least R500 each, but if there are faults discovered upon inspection, then you also have to pay for the necessary work to be done before the certificate can be issued.

Electrical: The Electrical Certificate of Compliance, also referred to as an ECOC, is valid for two years from the date of issue.

Electrical Fence System Compliance Certificate: Different from an ECOC, the Electrical Fence System Compliance Certificate is required for a home with electrical fencing as a security measure.

Beetle (entomological): While not compulsory, if the home you are selling is in the Western Cape or KwaZulu-Natal regions, you will generally need to provide the purchaser with certification. This certificate indicates that the property is free from beetle infestations.

Gas: To confirm that the gas lines in the home are safe, homeowners will be required to obtain a certificate of conformity, which indicates that the installation has been done by a qualified technician.

Plumbing: Currently a requirement for Cape Town, this certificate confirms that the plumbing on the property is sound. This certificate does not confirm that the property is free from rising damp or that there are no blocked drains.

  • If the inspection results in work needing to be done to achieve compliance, then the contractor will give a quote for it.
  1. Rates, taxes and levies clearance certificate

Rates and taxes: Attorneys will require a rates and taxes clearance certificate from the local council, and the seller will need to put money upfront to get this certificate. To provide the clearance certificate, the council can ask between 2 and 6 months of future-dated payments.

  • If the home happens to be registered within a shorter time frame, the council will pay back the additional money which the seller has paid.

Levies: In the instance where the seller is in an estate or sectional title property, the homeowners’ association or body corporate may request that the seller pays for their levies a few months in advance to ensure such costs are covered until transfer takes place.

  1. Property Capital Gains Tax

This tax is not charged on all property, but if charged, it is taxable on the resale of property. This cost is the responsibility of the seller.

  1. Moving costs

This is an inevitable part of moving from the sold property, and it is often not considered until the last minute. What must be considered here is how the move from point A to B will be made and this can also vary depending on how many trips need to be made. The costs to consider are the petrol costs and the possible cost of professional movers.

  • Getting insurance for items being moved should be factored in.

Paying to Sell Infograph

Please contact us should you have any specific questions.

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)

Sectional titles: What is the role of the body corporate?

B1When it comes to sectional title schemes, there is still widespread misunderstanding of even the basics, starting with the body corporate and how it is established, as well as what its functions and powers are. This misunderstanding often gives rise to many problems and disputes in sectional title schemes which could quite easily have been avoided.

What is a sectional title?

A Sectional Title Development Scheme, usually referred to as a “scheme”, provides for separate ownership of a property, by individuals. These schemes fall under the control of the Sectional Titles Act, which came into effect on 1 June 1988.

When you buy a property that’s part of a scheme, you own the inside of the property i.e. the space contained by the inner walls, ceilings & floors of the unit. You are entitled to paint or decorate or undertake alterations as desired, providing such alterations do not infringe on municipal by-laws.

What is the body corporate?

The Body Corporate is the collective name given to all the owners of units in a scheme. Units usually refers to the townhouses or flats in a development. The body corporate comes into existence as soon as the developer of the scheme transfers a unit to a new owner. This means that all registered owners of units in a scheme are members of the Body Corporate.

  1. The Body Corporate controls and runs the Scheme.
  2. Day-to-day administration of the Scheme is vested in trustees who are appointed by the Body Corporate.
  3. Major decisions regarding the Scheme are made by the Body Corporate, usually at the annual general meeting (AGM), or at a special general meeting (SGM). At these meetings, matters, which affect the Scheme, are discussed, budgets are approved, rules can be changed and trustees are appointed. Each member of a Body Corporate is entitled to vote at these meetings, providing that the member is not in arrears with levy payments or in serious breach of the rules.

The Body Corporate exists to manage and administer the land and buildings in the scheme. This means, that the Body Corporate is required to enforce the legislation and rules in the Sectional Titles Act, the Management Rules and the Conduct Rules of the scheme. Amongst their other duties, the Trustees manage the Body Corporate’s funds, enforce the rules and resolve conflict to the best of their ability.

References:

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)

VAT increase and the effect on property transfers and the registration of transfers before and after 1 April 2018.

The increase was announced in the Minister of Finance’s Budget Speech on 21 February 2018. The standard rate of VAT will change from 14% to 15% on 1 April 2018 (the effective date). 

How will this VAT increase affect property transactions, property registrations and estate agent commissions?

Question 1: How will the rate increase work generally for fixed property transactions?

The rate of VAT for fixed property transactions will be the rate that applies on the date of registration of transfer of the property in a Deeds Registry, or the date that any payment of the purchase price is made to the seller – whichever event occurs first. (See, however, the exception in Question 2 below where registration (delivery) of the fixed property occurs on or before 23 April 2018.)

If a “deposit” is paid and held in trust by the transferring attorney, this payment will not trigger the time of supply as it is not regarded as payment of the purchase price at that point in time. Normally the sale price of a property is paid to the seller in full by the purchaser’s bank (for example, if a bond is granted) or by the purchaser’s transferring attorney.

However, if the seller allows the purchaser to pay the purchase price off over a period of time, the output tax and input tax of the parties is calculated by multiplying the tax fraction at the original time of supply by the amount of each subsequent payment, as and when those payments are made. In other words, if the time of supply was triggered before 1 April 2018, your agreed payments to the seller over time will not increase because of the increase in the VAT rate on 1 April 2018. 

Example:

A vendor sells a commercial building and issues a tax invoice to the purchaser on 10 January 2018. If the property will only be registered in the Deeds Registry on or after 1 April 2018 and payment will be made by the purchaser’s bank or transferring attorneys on the same date, then the time of supply will only be triggered at that later date. In this case, VAT must be charged at 15% as the rate increased on 1 April 2018 which would be before the time of supply. It does not matter that an invoice or a tax invoice was issued before the time of supply and before the VAT rate increased. The tax invoice in this case would also have to be corrected as it would have indicated VAT charged at the incorrect rate of 14%.

See also the next questions below for the rate specific rule that provides an exception for the purchase of “residential property” or land on which a dwelling is included as part of the deal.

Question 2: Is there a rate specific rule which is applicable to me if I signed the contract to buy residential property (for example, a dwelling) before the rate of VAT increased, but payment of the purchase price and registration will only take place on or after 1 April 2018?

Yes. You will pay VAT based on the rate that applied before the increase on 1 April 2018 (that is 14% VAT and not 15% VAT). This rate specific rule overrides the rules as discussed in Question 1, which applies for non- residential fixed property.

This rate specific rule applies only if:

  • you entered into a written agreement to buy the dwelling (that is “residential property”) before 1 April 2018;
  • both the payment of the purchase price and the registration of the property in your name will only occur on or after 1 April 2018; and
  • the VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes:

  • an existing dwelling, together with the land on which it is erected, or any other real rights associated with that property;
  • so-called plot-and-plan deals where the land is bought together with a building package for a dwelling to be erected on the land; or
  • the construction of a new dwelling by any vendor carrying on a construction business;
  • a share in a share block company which confers a right to or an interest in the use of a dwelling.

Question 3: How will the VAT increase affect the seller of the property and estate agent commission?

Two possible scenarios can apply:

Scenario 1:

Should the contract of sale read that a percentage commission plus VAT is payable, that will be calculated at 14% if transfer takes place before 1 April 2018 and at 15% when registration takes place on or after 1 April 2018.

The net result is that the seller (who sold prior to 31 March 2018) will receive a lower net amount on the selling price because of the increased VAT, should transfer take place after 31 March 2018.

Scenario 2:

Should the contract of sale refer to a fixed commission amount inclusive of VAT, the opposite will apply. The seller will receive the same amount, but the agent will receive less because of the increased VAT.

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For more information on the VAT Increase, download the SARS VAT Increase general guide and FAQs here.

Please contact us should you have any specific questions.

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)

Me, my neighbour and that tree

B1The house was just perfect – the right neighbourhood, well-established garden, beautiful trees waving in the breeze with just the right amount of shade next to your swimming pool. And as the trees belong to your neighbour, no need for pruning, said the estate agent. You and your family loved the new home.

Autumn arrived. The leaves have changed and started falling, the swimming pool pump required repairs twice due to blockage and your Saturday golf has been replaced with clearing heaps of leaves. To add to that, a thunder storm ripped a branch off, which broke your electric fence and the wall. Problems with trees from adjacent gardens is an old story.

But what can you do about it?

To merely jump over the fence and prune, or worse, cut down the tree to your satisfaction will not only constitute trespassing but also malicious damage to your neighbour’s property. The courts have carefully considered the basis on which you can approach the court, now generally considered as “nuisance”.

Firstly, you will have to prove to the court that the inconvenience caused to you by your neighbour’s tree is more than you just being sensitive. The inconvenience caused must materially interfere with your ordinary physical comfort and your experience.

The standard that the court will use is that of a normal, reasonable person. The test of reasonableness will be applied, taking into account general norms acceptable to a particular society. Actual damage to your property is not a requirement.

The court will, however, also consider the nuisance, even if the tree(s) is actually causing damage, balancing this with your responsibility to tolerate the natural consequence of the ordinary use of the land. In other words, the court will consider the dispute and the decision will involve balancing the competing interests of you and your neighbour.

Should I care about the environment?

The judgement of Judge De Vos in Vogel vs Crewe and another 2003 (4) SA 50 (T) raised a further very important aspect – the environment.

In a world where trees and nature are considered all the more important for our well-being and that of the earth, careful consideration should be taken before a demand for the cutting down of a tree is granted. Judge De Vos noted that trees form an essential part of our human environment, not only giving us aesthetic pleasure but also being functional in providing shade, food and oxygen. And, like many other living things, trees require, in return for the pleasure provided, a certain amount of effort and tolerance.

With our increasing awareness of the importance of protecting our environment, we need to become more tolerant of the inevitable problems caused by the shrinking size of properties and the greater proximity of neighbours, and consequently, the neighbours’ trees.

Solving the problem peacefully

Before you sell your property and move to another neighbourhood altogether, consider a friendly discussion with your neighbour and his pruning company of choice, from YOUR side of the fence.

Explain to your neighbour which branches of which trees are problematic or show him the cause for your concern. And be willing to reach an agreement somewhere in the middle, taking the type of tree, its form of growth and the balance of the tree into consideration. It will not suffice to demand the removal of a large branch unbalancing the tree which will then fall over during the next storm taking down your wall.

If all your efforts, including friendly letters and e-mailed correspondence fall on deaf ears, you are allowed to prune all branches as from the point that it protrudes over the wall into your property. You are not allowed to lean over the wall to cut those branches at the neighbour’s side of the wall. You will also be responsible for removing the branches from your property after you have pruned the tree in this manner.

So relax and have a good, impartial look at that “offending” tree. Must that tree go? or can you tolerate it with a little pruning?

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).

Why is the transfer of my property taking so long?

A1After signing a deed of sale, the purchasers often want to move into the property with great excitement and as soon as possible.

When they are informed of the process involved prior to the property being transferred this may place a damper on their excitement. Coupled with this there may even be delays in the transaction.

In order to avoid unnecessary frustration it is vital that parties to the transaction understand the processes involved and that delays are sometimes inevitable.  Besides possible delays there are a number of processes that need to be followed before a house can be registered in a purchaser’s name.

At the outset, it must be determined if the deed of sale is valid and binding between the parties.  If not, a valid and binding contract will first have to be concluded between the parties.

The deed of sale will normally be the starting point in a transaction for a conveyancer who has been instructed to attend to the transfer.  This conveyancer is also known as the transferring attorney and is normally the main link between the other attorneys involved the transfer transaction.  Other attorneys involved are normally a bond attorney and/or bond cancellation attorney.

A major role of the transferring attorney is informing any mortgagees, for example banks, about the transfer so that any notice periods for the cancellation of bonds can start running.  The notice period is normally up to 90 days.  If the bond is cancelled before then, there could be penalties payable.  The transfer may therefore be delayed as a result of the notice period.

If the purchaser will be registering a new mortgage bond to finance the transaction, a bond attorney will be appointed.  Since the transferring attorney will not normally be aware of whom the instructed bond attorney is, the bank will usually inform the bond attorney of who is attending to the transfer.  The bond attorney will then first make contact with the transferring attorney.

Obtaining the various certificates, receipts and consents applicable to the transaction in question also takes time.  Examples of these are rates clearance certificate, transfer duty receipt, homeowners association’s consent to the transfer, levy clearance certificate, electrical compliance certificate and plumbing certificate.

The transfer duty receipt is obtained from the Receiver of Revenue and should be lodged with all property transactions, even if no transfer duty is payable to the Receiver of Revenue.  During 2013 it took approximately seven working days from the submission of the request, until the transfer duty receipt was issued.

The rates clearance certificate is obtained from the local municipality in the area where the property in question is located.  The transferring attorney will first request the municipality to inform him of the amount they require in order to issue the certificate.  After receipt thereof the amount can be paid and the transferring attorney will then await the issued certificate.  The time this takes differs from municipality to municipality.  In the City of Cape Town, during 2013, figures were mostly issued on the same day they were requested and the receipt was issued within approximately five working days after payment.  This time frame is largely affected by whether or not the municipality works on an electronic system.

If the property is located in an area where a homeowners’ association is established, there will normally be a title deed condition in terms of which the consent of the homeowners’ association must be obtained prior to the transfer.  The time it takes for obtaining this certificate differs from one homeowners’ association to the other.

After an inspection by a plumber or electrician it may be found that certain work needs to be carried out before the certificates will be issued.  If the work that must be carried out is extensive this can cause major delays with the transaction.

If the property is being sold by an executor of a deceased estate, the consent of the Master of the High Court must first be obtained before the property can be transferred.  Major delays can be experienced if the Master of the High Court refuses to give such consent until certain requirements have been met.

Once the transferring attorney is satisfied that all relevant documents are in place he will arrange simultaneous lodgement at the Deeds Office by all attorneys involved in the transaction.  It is therefore vital that the bond attorney has by this time obtained the required approval to lodge from the mortgagee and that the bond cancellation attorney has the required consents in place to cancel the existing bond/s on the property.

Once all the documents are lodged at the Deeds Office, an internal process is followed, which has different time frames in the various Deeds Offices.  This time frame can also vary in a particular Deeds Office. It is best to enquire from your conveyancer what the Deeds Office time frame is at any given stage.

The list of possible delays in a transaction varies from one transaction to the other and the possibilities are endless.  It is advisable to contact your conveyancer for an explanation should you feel that the process is taking too long.

References: Aktebesorging, UNISA 2004, Department Private Law, Ramwell, Brink & West 

Compiled by Riëtte Nel

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.

Estate agents commission

A3Selling a home is one of the biggest financial decisions a person can make and an estate agent, to whom commission will be payable, is usually involved in this process.

A problem that frequently occurs in practice and which is not easy to solve is whether an agent was in fact instrumental in bringing about the sale of the property.

It could happen that an agent introduces a prospective buyer, that negotiations for the sale do not succeed and that another agent succeeds in concluding the agreement. It is common practice for more than one agent to be instructed to find a purchaser. It could even happen that a seller is held responsible for paying commission to two agents.

An estate agent is not an agent in the strict sense of the word.  His “mandate” is normally to find a suitable purchaser for the seller’s property and not to sell on behalf of the seller. This is, however, not a contract in the usual sense where parties undertake reciprocal obligations. In fact, the agent is not obliged to perform his mandate. An estate agent will only be entitled to commission if he has a mandate from the seller; without the mandate he is not entitled to commission, even though he might have been the effective cause of the transaction.

An estate agent will be considered to be the effective cause of the transaction when:

  • he has introduced a willing and financially able buyer to the seller;
  • a binding contract has been concluded between the parties; and
  • the transaction takes place at the stipulated price or at a price acceptable to the seller.

When several estate agents are involved in introducing the buyer to the seller it might be difficult for the court to determine which agent was the effective cause. For instance, when estate agent A introduces the buyer to the seller but the buyer later purchases the property through estate agent B after B has persuaded the seller to drop the price. Or estate agent A may have a sole mandate, but estate agent B introduced a willing and able buyer. The seller could then be liable for both estate agents’ commission. A sole mandate usually stipulates that the agent is entitled to commission if the property is sold during the currency of the agreement, even if another agent introduced the buyer.

In another matter a prospective buyer was introduced and the house was inspected. The price was considered too high. A few months later the purchaser noticed that the house was still in the market. He then bought the property without intervention from the agent at a slightly lower price than the earlier rejected price. The estate agent was held to be entitled to his commission.

How much commission is an estate agent entitled to? The average commission ranges up to 7.5%, but there are no regulations as to how much commission an estate agent should be paid per sale. The commission should be discussed by the parties when negotiating the mandate.

Sole mandates that are given to estate agents are regulated by the Consumer Protection Act. The duration of the agreement may not exceed 24 months. The seller has the right to cancel the agreement by giving 20 business days’ notice in writing. If the mandate is not terminated by the seller on the expiry date it will automatically continue on a month-to-month basis.

Seller, be wary of these pitfalls when selling your property – they could be very costly.

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.