TIPS TO SPEED-UP THE TRANSFER PROCESS     

Every contract is only as good as the parties to it. If everyone cooperates and does what is required from them, the transfer process can usually be a speedy and painless one.  Our firm has recently managed to register a few transfers of properties within as little as 4 weeks. This was done with the full cooperation of all parties involved. However, as soon as one of the parties (usually the purchaser, but sometimes also the seller) delays an aspect of the process, considerable delays usually result.

Prospective sellers and purchasers should keep the following in mind:

• A transfer duty issued by SARS is required on transfer of every property even if the transaction if exempt from transfer duty due to its price. If either the seller’s or the purchaser’s tax matters are not in order, SARS will not issue a transfer duty receipt. Depending on the amount of applications received by SARS on its e-filling system, it could take up to 2 weeks to get a transfer duty receipt – even if every party’s tax matters are in order.
•  A clearance certificate proving that municipal rates and taxes have been paid in advance and issued by the local authority within whose area the property is situated, must be lodged with every transfer. Depending on the municipality involved, it could take up to 30 days to obtain figures.
• If the property is a sectional title property or if it is situated within a secure estate a clearance certificate is required from the body corporate or the home owner’s association. Sellers should supply the Conveyancer with contact details of the body corporate and/or home owner’s association to eliminate delays.
•  Our firm mostly attends to transactions at the Deeds Office in Pretoria. The turn-around time in the Pretoria Deeds Office is currently between 8-12 workdays. I have it on good authority that this is also the case in other Deeds Offices in South Africa. However, this can change in an instant. The Pretoria Deeds Office recently experienced a staff shortage which resulted in enormous delays causing deeds to take up to a month to register.

For most clients the process is foreign and unfriendly. Here are a few tips which could contribute to speed-up the process and not cause further unnecessary delays:

1.   When the Sale Agreement (Offer to Purchase) is concluded, supply the estate agent and the Conveyancer with copies of identity documents, SARS Personal Income Tax numbers and copies of a recent (not more than 3 months old) utility bill which indicates your present physical address.

2.    Sellers should supply the estate agent and the Conveyancer with the bond account number and details of the financial institution in whose favour the property is mortgaged. The Conveyancer will then apply for cancellation figures from the financial institution. If an incorrect bond account number is supplied, this may cause serious delays. * See note below re notice to banks

3. If the transaction is subject to mortgage finance, Purchasers should assist banks or mortgage originators such as BetterBond to the fullest in supplying them with required documents such as proof of income, copies of bank statements and the like. It seems that in the present economic climate, banks prefer salaried clients and mortgage loans are usually granted to these clients within two weeks. Self-employed purchasers have to supply banks with tons of supporting documents (including audited financial statements) and the approval period often takes more than a month.

4.  Sellers and purchasers should attempt to sign transfer documents at the transferring attorney as soon as suspensive conditions (granting of a bond etc) have been fulfilled.

5. Purchasers will on signature of the transfer documents be presented with a pro forma account from the transferring attorney. This should be paid as soon as possible by EFT.

6.   Purchasers should sign bond documents at the bank’s bond attorneys as soon as possible when requested to do so. Guarantees cannot be issued until this is done. Purchasers should also note that they will also be required to pay a bond account supplied by these attorneys. Failure to pay my result in the bond attorneys refusing to lodge their deeds in the relevant deeds office.

*Notice to mortgage bank

Owners of property are usually not aware of the fact that all mortgage bonds require that owners give 90 days’ notice of their intention to cancel the bond. If notice is not given, the bank is entitled to 90 days’ additional interest calculated on the capital amount due.

It is advisable that as soon as owners consider selling their property, that notice is given in writing to the bank. Ensure that written acknowledgement of the notice is received and kept as proof. Should the property not sell, no harm would have been done except that the bond may not be accessed during the notice period.

Conveyancer’s fees to increase from 1 March 2013

Conveyancer’s fees to increase from 1 March 2013

Who gains the most – Attorneys or the State?

With the imminent increase in transfer-and bond fees (transfer fees will increase by about 10% and bond fees by between 20%-25%), the public is bound to get upset about yet another increase.

This prompted me to calculate the percentages of fees and expenses the transfer of properties in three price ranges with the aim of establishing who stands to gain more from property deals: The State or Attorneys.

The calculation below presumes that a client registers a bond for the same amount as the purchase price. In practise this seldom happens as financial institutions are usually only prepared to grant 100% bonds up to R1 500 000,00. Expenses paid to third parties such as local authorities, service providers to attorneys and financial institutions (who charge an initiation fee of R5 700 (VAT incl) for every bond) were disregarded for purposes of the calculation.

Purchase price/ Amount of bond	Transfer duty (SARS)	VAT SARS	Transfer Deeds Office Levy	Transfer fee (T Att)	Postages & Petties (T Att)	Bond Deeds Office Levy	VAT on bond fee & expenses	Bond Fee (B Att)	Postages & Petties (B Att)	Total all	% to State	% to Attorneys
800 000	6 000	1 694	750	11 550	550	750	1 380.40	9 360	500	32 534	32.50%	67.50%
1 500 000	37 000	2 387	850	16 500	550	850	2 018.80	13 920	500	74 576	57.80%	42.20%
3 500 000	197 000	5 327	950	37 500	550	950	3 497.20	24 480	500	270 754	76.72%	23.28&

The table above speaks volumes. It is thought that at present the average property in South Africa sells for R850 000,00. At that price Attorneys obviously gain the most. But from approximately R1 500 000,00, the State earns close to 60% and more of the total fees and expenses bill. And remember, as attorney’s fees increase, so does VAT.

The reason for this is that Transfer Duty was reduced a few years ago to assist entry level purchasers of property. The formula to calculate Transfer Duty is at present the following:

Value of property	Transfer duty
R0-R600 000                        R600 001-R1 000 000        R1 000 001-R1 500 000 R1 500 001 and above	0% 3% of value exceeding R600 000 R12 000 + 5% of value exceeding R1 000 000 R37 000 + 8% of value exceeding R1 500 000

ELECTRIC FENCE SYSTEM CERTIFICATE OF COMPLIANCE & OTHER ISSUES

Please read this article if the property you sold or is in the process of selling has an electrical fence.

 

On 1 October 2012 Health and Safety Regulations (the “regulations”) issued in terms of the Occupational Health and Safety Act (1993) became enforceable.

In terms of the regulations the seller of any property transferred on/after 1 October 2012 and which has an installed electrical fence, is obliged to supply the purchaser with an Electrical Fence System Certificate of Compliance (“EFCOC”).

An EFCOC must be issued by a person with sufficient knowledge of safety standards applicable to electrical fences and he/she must be issued with a certificate of registration by the Department of Labour.

I made contact with various electricians who in the past few weeks attempted to obtain certification from the Department of Labour. They were unable to do so. I was informed that the Department of Labour does not have forms available, does not have knowledge of the process and no staff members have been assigned to deal with certification.

I then consulted with the CEO of the Electrical Contracting Board of South Africa (Mr Tony McDonald) who informed him that at present neither a registered electrician nor anyone else is able to register with the Department of Labour and it is therefore impossible to obtain a valid EFCOC.

This however does not mean that the legal obligation of a seller to supply an EFCOC to a purchaser lapses. This clearly creates an untenable situation for which there is presently no solution.

As this issue develops and unfolds, I shall endeavour to keep you informed on this blog.

There seem to be other issues regarding electricians as well in that the duty to govern electricians and manage the process of their registrations has been taken away from the Electrical Contracting Board of South Africa and given to the Department of Labour. Obviously the Department is not able to manage this process either and the country may itself in 2013 without any registered electricians. The story is presently being investigated by the major news groups and should break within the next few days.

Extending a sectional title unit

Although we live in an age of total access to all kinds of information, it would seem that most owners of sectional title unit choose to ignore or are totally ignorant of any process required when they enlarge their sectional title units.

One of the effects of an “unofficial extension” is that if the property is sold, the transaction could be delayed by between 3 to 6 months, causing financial losses or even cancellation of the transaction.

What are the processes involved to ensure that an extension is legal?

1.     Obtain written consent from the body corporate to the extension.

Different body corporates have different requirements. Owners could be asked to supply draft building plans, written consents of neighbours and possibly payment of an application fee.

2.     Instruct an architect or draughtsman to draw building plans

Fees and expenses relating to the drawing of building plans vary greatly from firm to firm and even from area to area. Remember that there is also a plan approval fee payable to the local authority.

3.     Have the plans approved by the local authority

Note that this process could take as long as 6 months and depends on the effectiveness of the local authority.

4.     Construct the improvements

Many owners neglect to enter into a written building agreement with a builder.  There are many free samples of building contracts available on the web and owners would be well advised to have one completed and signed.

Keep it in mind that the one golden rule of dealing with building contractors is that you  should always owe the contractor money – not vice versa!

5.     Have the improvements inspected by a building inspector of the local authority

Please read elsewhere in this blog the article about building plan approval and the inspection thereof.

6.     Appoint a land survey or architect to draw sectional title plans of extension

In terms of the Sectional Titles Act, a land surveyor or architect must draw the sectional plans of extension. He/she will lodge it for approval at the Surveyor General’s office and the cost will vary according to the complexity of the task. The costs & fees may vary between R8 000 and R25 000.

Note that the approval process may be expedited but generally takes about 6 weeks.

7.     Instruct a conveyancer to register the extension in the Deeds Office

This is may be done simultaneously with the transfer of the property and the cost is approximately R2 500.

Determining fair value of a home

Sellers (and some estate agents) are often faced with a conundrum when sellers decide to sell: How to determine fair value in the present market.

During the property boom, this was really a difficult task. Values increased so rapidly that even the experienced professionals could not do it. The one positive result of the recession is that prices have rationalized.

So how do you determine fair value? Most estate agents have access to various web-based systems such as SAPTG and Lightstone which can assist. These systems, which are not always as accurate as one could wish for, simply attempt to compare similar properties recently sold with the property about to be sold. However, is South Africa we have very limited data available about size and features of homes. Therefore the data offered by these portals have a lot to be desired. 

Despite this, most commercial banks rely heavily on data supplied by the likes of Lightstone to determine risk and will often refuse to do a real valuation by a real person unless the purchase price is close to the value indicated by a portal.

This is even truer with sectional title complex units. No matter how much the unit has been improved, most banks will simply determine the average value per square metre in a complex and simply grant bonds at this rate. Owners of sectional title units are therefore well advised to guard against over capitalizing.

The bottom line still is that the value of a property is the price that a willing and able purchaser is prepared to pay at a given date. Unless a seller is actively involved in the property market, it would therefore always be advisable to obtain the assistance of an experienced estate agent who is successful in the area within the property is situated, to assist with determining value.

The inserted diagram indicates the importance of determining the correct value of a property and to enter the market at the correct price. The more urgent the sale, the more important it is to get this right - first time.

Whatever happened to Voetstoots?

The term Voetstoots, a legal animal inherited by us from the Dutch, has never been more contentious than right now. After the Consumer Protection Act (“CPA”) came into effect and with the broadcast on an insert on Carte Blance about a badly defective house (and the trouble it caused for its new owners), many people seem to think that Voetstoots has disappeared from our property horizon. In my opinion (and that of 99% of all lawyers in South Africa), this is not the case.

Voetstoots simply means that a purchaser buys an immovable property as it lies-warts and all. The seller is protected against any legal claims by the purchaser after transfer related to any patent (clearly visible/easily ascertainable) defects and latent defects in the property that he was not aware of. A problem which aggrieved purchasers often face, is to prove that a seller knew of latent defects. I was once involved in a case where the roof started leaking like a sieve once the rains came in October. When we inspected the roof, it was found that under every hole in the roof, the owner had placed a container to catch rain. Proof was a walk in the park!

Has Voetstoots been removed from our legal system by the CPA?

·         New properties purchased from developers or sellers who sell property in the ordinary course of their business: YES - the CPA is applicable and purchasers are afforded protection in terms of the CPA

·         Secondhand properties privately purchased: NO. If the Voetstoots (or a similar) clause is inserted in the deed of sale, Voetstoots  is applicable

·         Secondhand properties purchased with the assistance of an estate agent: NO. The arguments to justify this are that the CPA is not applicable to professions which are governed by their own acts of parliament (such as attorneys, medical professionals and estate agents) and that estate agents are simply go-betweens between sellers and purchasers and that the only parties to the sale of property are them. It goes without saying that the Voetstoots (or a similar) clause must be inserted in the deed of sale.

However, the jury is still out on this issue. Until the matter is decided in court, the above is simply an opinion.

Buying a retirement unit

Most of us fail to properly plan for our retirements. Then one day, we realize that our currents homes are no longer suitable and then start looking in a panicked state for something suitable to buy. Start planning today and hopefully this article may assist you with your decisions.

There are two types of retirement ownership.

Usually the cheaper option if to purchase the “life right” in a unit. This is not ownership and the right to occupy lapses on the death of the purchaser. This option merely enables a person to occupy a property during his/her lifetime and cannot be bequeathed to heirs.

The second type is traditional property ownership (either sectional- or full title). Obviously these units are more expensive, but are much more sought-after. Ownership does not lapse on the death of the owner and have in the recent past proofed to be excellent investment opportunities.

Issues to consider when choosing a a retirement unit:

• Will you be able to raise a loan?

Generally speaking, once you reach sixty years of age, it becomes more difficult to raise a bank loan and if a loan is granted, the repayment term is usually significantly reduced to 10 years or less. Cash therefore is king and saving well in advance is advisable.

• Position Position Position

As with any other property, position is of tantamount importance. Is the property easily accessible, is it close to hospitals, shopping centres etc

• Amenities such a frail care unit, sport facilities

The more useful and senior-friendly facilities a retirement complex has, the more demand is created for it which increases price.

• Financial well-being of the body corporate

As for certified copies of the latest financial statements and if necessary, let an accountant have a look at them.  A well-managed complex will have sound financial statements.

• Running costs

Determine what the monthly levy is and how often and with what percentage it is increased. Also find out what the municipal rates are and what the average consumption charges are.

• Security

Some retirement complexes are simply safer than others. Do your homework and buy in a safe environment.