A Guide To Property Transfer In South Africa

1. WHAT IS CONVEYANCING?

Conveyancing is the legal process whereby ownership in immovable South African property is transferred from one party to another and related aspects such as the registration of mortgage bonds and real rights in respect of immovable property.

Immovable property is any land (whether improved or not) such as a dwelling, a house, a farm, a vacant erf or a sectional title unit.

A conveyancing transaction involves a number of steps which normally begins with a Deed of Sale and continues through to the registration of transfer of ownership or the registration of the mortgage bond in the Deeds Office, the reconciliation of finances and the ultimate payment of the purchase price to the Seller.

2. WHAT IS A PROPERTY CONVEYANCER?

A conveyancer is an attorney with a post-graduate qualification who by law is the only person who can register property transactions in the Deeds Offices. This is necessary to ensure the protection of the interest of the parties to the transaction and to maintain the high standard of land registrations.

3. THE SALE OF IMMOVABLE PROPERTY: STEP BY STEP

3.1 Agreement of sale – a written agreement in which the Purchaser, the Seller and the immovable property as well as the purchase price is specified, is essential to constitute a binding agreement of sale. A Deed of Sale must be signed by both the Purchaser and the Seller or a person who has been authorized by such party in terms of a written Power of Attorney. A verbal contract for the sale of immovable property is unenforceable.

3.2 Transfer of the property – On receipt of the Agreement of Sale the conveyancer takes the necessary steps to effect registration of transfer of the immovable property in the relevant Deeds Office. Both the Purchaser and the Seller will be required to call at the offices of the Conveyancer to sign the necessary transfer documents which have been prepared by the Conveyancer and which will enable him to effect transfer. The Conveyancer requires the following:-

A. From the Seller:

• A Power of Attorney to pass transfer
• Declaration in respect of marital and solvency status
• Particulars of Bond Holder
• Valid Electrical Wiring Certificate
• Valid Electrical Fencing Compliance Certificates (if relevant)
• Valid Gas Compliance Certificates (if relevant)
• VAT Declaration (if applicable)

B. From the Purchaser

• Declaration in respect of marital & solvency status
• Particulars concerning the identity of the attorney transferring the Purchasers property if the Purchaser is utilising the proceeds to pay for his purchase
• Particulars of the bond granted
• Transfer duty and/or VAT declaration (if applicable)

C. From the existing bondholder

• Cancellation figures and Title Deed
• Particulars of second or further bond holders
• Identity of attorney’s attending to the bond cancellation

D. From the Purchasers Transferring Attorney in the event of a subject to offer:

• Confirmation that the transaction is proceeding
• Particulars of estimated amount available
• Feasibility of linking matters at the Deeds office for simultaneous registration.

E. From the Estate Agent

• Confirmation of payment of the deposit, the bond grant and relevant information.
• SARS information from estate agency/ies and estate agent/s
• 3.3 Upon receipt of the documents referred to in A – E:-
• Transfer and/or bond documents are drawn;
• Accounts prepared for both seller and purchaser;
• Both Seller and Purchaser telephoned to arrange appointment for signature;
• The Purchaser is requested to pay the balance of the purchase price, costs and disbursements;
• Guarantees are requested from the Bond Attorneys.

3.4 After signature of documents by both Seller and Purchaser and payment of disbursements by Purchaser:-

• Obtain transfer duty receipt;
• Obtain rates clearance certificate.

3.5 After receipt of guarantees:-

• Forward guarantees plus payment of bond cancellation costs to the existing bondholder’s attorneys.

3.6 After receipt of clearance certificate and transfer duty receipt:-

• Liaise with the relevant parties to arrange lodgement.

3.7 Transfer is effected in the Deeds Office.

3.8 After Registration:-

• Advise all parties of registration;
• Present guarantees for payment;
• Obtain payment of balance of deposit (if applicable)
• Do final account;
• Request refund of overpayment (if any) from local authority and bond holder.

3.9 Upon receipt of payment i.t.o. guarantee presented:-

• Finalize the accounts of the Seller and Purchaser;
• Arrange for parties to collect payment;
• Request refund of overpayment of rates, etc.

3.10 Upon receipt of documents from Deeds Office:-

• Forward Title Deeds to bondholders for safekeeping, or if no bond, arrange with Purchaser to collect documents.

4. COSTS INVOLVED IN A PROPERTY TRANSFER

The costs relating to the transfer of fixed property fall into the following categories:-

• Transfer Fees;
• Bond fees;
• Transfer duty or VAT;
• Rates and Levies;
• Deeds Office levy;
• Stamp duty on bond.

5. HOW LONG DOES THE PROPERTY TRANSFER PROCESS TAKE?

The period of time it takes to lodge a transaction in the Deeds Office depends on the co-operation of the parties and their contractual arrangements. After the documents are completed and the rates and taxes an the transfer duty paid, the documents are lodged at the Deeds Office. The usual time taken by the Deeds Office to examine the documents lodged by the different conveyancers for a specific transaction is 7 – 14 days.

6. NECESSITY OF A CONVEYANCER

In terms of the present legislation, only qualified conveyancers may attend to the transfer of fixed properties and related transactions. This protects the rights and interest of the public and also safeguards the integrity of the South African Land Registration System, which is universally regarded as one of the best in the world. Only an attorney can qualify as a conveyancer.

7. STEPS TAKEN TO EFFECT THE TRANSFER OF A PROPERTY

1. Receive instructions to attend to the transfer.

2. Immediately request the original title deed, original mortgage bond and the cancellation figures form the existing bondholder. The cancellation figure is the amount which the existing bondholder requires to be paid before it will cancel the bond over the property.

3. Immediately request a statement from the local authority setting out the rates and taxes payable for a period of approximately five months in advance. No transfer can be effected until the Registrar of Deeds is satisfied that the rates and taxes have been paid up to date of transfer.

4. Immediately obtain the relevant information from either the purchaser or the agent or the mortgage originator regarding where the bond has been granted.

5. Obtain payment of the deposit in terms of the Agreement of Sale (if applicable).

6. Once the purchaser’s bond has been granted, one then has to request guarantees from the attorneys attending to the registration of the bond and draw the transfer documents. The guarantees are letters from the financial institution concerned guaranteeing that payment of certain monies will be made on registration of the property. One of the guarantees is utilized to guarantee the payment to the existing bondholder in respect of the cancellation figures. See example of a guarantee. A second guarantee is normally issued in favour of the transferring attorney and represents the seller's proceeds.

7. Call upon the purchaser and seller to sign the documents drafted to give effect to the transfer of the property. The purchaser is required to pay the transfer duty, the transfer fees and other costs upon signature of the documents.

8. The transfer duty is then paid to the Receiver of Revenue in order to obtain a transfer duty receipt as proof of such payment. See example of transfer duty receipt.

9. Payment is made to the Local Authority for the rates and taxes as per the statement in order to obtain a clearance certificate as proof of payment. See example of clearance certificate.

10. Upon receipt of the guarantees from the bond attorneys, the guarantee required to cancel the existing bond is sent to the attorneys attending to the cancellation of the bond.

11. Once the transfer duty receipt and the clearance certificate have been obtained, arrangements are made with the attorneys involved to have all the documents lodged simultaneously in the deeds office.

12. After examination of the documents by the deeds office (which takes approximately 7-10 working days) the transfer will be registered. See example of diagram once documents have been lodged.

13. Upon registration of the transfer the purchaser then becomes the owner of the property.

14. The guarantees are then presented at the various financial institutions and after the guarantees have been cashed, the seller receives payment of the balance of the purchase price after payment of the monies which have to be paid on behalf of the seller. This normally takes place on the first working day after the registration date.

The above is only a brief guide and should not be interpreted as being an extensive lay-out of all the steps to be taken to effect transfer of a property.

8. STEPS TO EFFECT REGISTRATION OF A MORTGAGE BOND

1. Receive instructions to attend to registration of mortgage bond.

2. Obtain details of the existing bondholder.

3. Request the cancellation figures and title deed from the existing bondholder.

4. Draft the necessary bond documents

5. Call upon client to attend to signature of the bond documents drafted.

6. Forward the guarantees to the attorneys attending to the bond cancellation and request bank’s permission to proceed with lodgement.

7. Liaise with the bond cancellation attorneys to arrange for the documents to be lodged simultaneously at the deeds office.

Information Kindly Supplied by Dykes Van Heerden Inc Attorneys

SARS REQUIREMENTS FOR PROPERTY TRANSFER DUTY

On the 14th of April 2005 SARS issued a statement entitled 'SARS LAUNCHES A NEW ELECTRONIC TRANSFER DUTY SYSTEM'.

According to SARS this new transfer duty system will improve client service and will ensure that all parties comply with South African tax law. New transfer duty forms will be used for all transactions concluded after the 1st of May 2005. Effectively SARS will only issue the relevant transfer duty receipt on condition that all parties concerned are not only registered but that all their tax returns and taxes are up to date.

In essence now, SARS will use all property transactions in South Africa to monitor everyone’s tax status, not only in relation to the property purchased or sold but in relation to their tax status in general.

As such, the following additional information will now have to be obtained from all parties concerned:-

• VAT registration numbers of both Purchaser or Seller (if applicable)
• Details of directors, shareholders, members etc (if either party is a legal entity)
• Details of the original purchase price paid by the Seller and the actual date of acquisition of the property
• Method of payment of the purchase price by the Purchaser i.e. details of bond grant and institution granting bond
• Income Tax numbers of both Seller and Purchaser
• VAT registration number of estate agency (if applicable)

Regrettably it now takes a few days longer to obtain a transfer duty receipt from SARS due to the fact that they now proceed to check all details and the tax status of all parties concerned before SARS will issue the necessary transfer duty receipt. This places an additional burden on conveyancers and could potentially delay transfers where for instance either the Seller or the Purchaser is deemed to have outstanding tax issues with SARS. These outstanding tax issues will first have to be resolved and only thereafter will SARS provide the necessary transfer duty receipt.

SOLUTION

As transferring attorneys we, without delay and immediately after obtaining payment of the transfer costs which will include the transfer duty, approach SARS with a request to provide the necessary transfer duty receipt. If there is a problem in regard to the tax status of either party, this will be detected at an early stage which will then provide the relevant party the necessary opportunity to approach SARS and correct any outstanding issues.

Estates agents should at an early stage advise their sellers and buyers of the above and inform them that should they not be tax compliant the registration process will be delayed due to the fact that the Receiver of Revenue will refuse to issue the necessary transfer duty receipt. This will give both parties ample opportunity to resolve any outstanding issues with SARS. We suggest you add the following clause in your agreement:-

“As a result of the South African Revenue Services (SARS) doing risk analysis on both the transferor and the transferee on all property transactions both the Seller and the Purchaser warrant to each other and the agent that all tax issues (whether personal or otherwise) including but not limited to tax returns and tax payments are current and up to date. The defaulting party will be liable for all costs incurred and damages suffered by the aggrieved party as a result of a breach of this warranty. The aggrieved party shall also be entitled to place the defaulting party on terms and thereafter cancel the agreement if this warranty is breached. These remedies are in addition to all rights which the parties have in terms of this agreement or in Law.”

The above should be seen as a brief comment and our interpretation thereof and should not be seen as an extensive guideline. Please obtain a full legal opinion if you wish to act on any aspect hereof as the guideline is not fully comprehensive.