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FINANCES WHEN PURCHASING A PROPERTY

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The costs associated with the purchase of a new property are more than just the prescribed conveyancing fees for the registration of the transfer. Prospective buyers must make absolutely sure they are fully informed of any hidden and advance costs when purchasing a property. They should also take note at which point during the transfer process they are liable to pay any deposits as well as the balance of the purchase price to ensure that they fully comply with the provisions of the purchase agreement.

When buying a property the Purchaser is normally responsible for payment of the following costs:

 1.    The payment of a deposit within the period specified in the purchase agreement. 

Buyers should note that the payment of a deposit (usually within the first seven days after signature of the agreement) is often required by the seller to confirm the buyer’s willingness to purchase the property in good faith.  The purpose of the deposit is an advance payment of the amount shortly after signing said agreement. If the contract stipulates that a deposit is payable upon the sale of the buyers’ existing property , it will strictly speaking not constitute the payment of a deposit as the latter payment is subject to a condition precedent, and does not serve as evidence of the buyer’s good faith to proceed with the property purchase.

  1. Conveyancing fees, equal to a prescribed tariff fee payable to the conveyancers who oversee the registration of the property into the name of the Purchaser.

Said tariff fee, as well as any transfer duty amount payable to SARS, is calculated on the value of the purchase price of the property. Normally the transfer duty payable to SARS is also included in the statement of account of the conveyancers provided to the buyer during the course of the transfer.

The amount of transfer duty payable when purchasing a property is reviewed annually and calculated according to a sliding scale. For example, all properties purchased at a purchase price of R 750 000 or less, are exempt from the payment of transfer duty. If the purchase price of the property is R750 001 or more, the payment of transfer duty to SARS are compulsory before registration of the property can take place. (your estate agent and/or conveyancer will be able to inform you of the exact amount of transfer duty and conveyancing fees payable on your transaction).

It is important to note that the transfer duty amount is normally payable shortly after signature of the deed of sale in order to obtain a transfer duty receipt from SARS.  Lodgement and registration of the transfer in the Deeds Office is not possible unless the full amount of transfer duty was duly paid to SARS, and a transfer duty receipt has been issued for it.

Sometimes buyers are under a misconception that the payment of transfer duty are only due upon registration of the transfer, which is not the case. Buyers also often confuse the conveyancing fees (payable to the transferring attorney as a fee for attending to the registration of transfer of the property) with the transfer duty (payable to SARS). Accordingly buyers often mistakenly assume that no conveyancing fees are payable to the conveyancers if there is no transfer duty payable to SARS  (due to the fact that the purchase price of the property is R750 000 or less). However, this is not the case, and the prescribed tariff fee remains payable to the conveyancers for attending to the registration of transfer.

  1. The costs for the issuing of a levy clearance certificate.

Often the property purchased forms part of a homeowner’s association.  After registration of the property, the buyer will be responsible for the payment of levies to the homeowner’s association of which it became a member upon transfer.

If the Purchaser bought a sectional title unit, levies will automatically become payable to the body corporate of the scheme subsequent to transfer.  Upon the registration of a property the homeowner’s association or body corporate of the sectional title scheme must issue a levy clearance certificate confirming that the current registered owner of the property is up to date with the payment of all levies in respect of said property.  The cost of issuing such levy clearance certificate under normal circumstances may vary between R500 and R1 500, and is usually payable by the Purchaser.

  1. Occupational rent, if the buyer decides to take occupation of the property prior to registration thereof in its name.

It is important that the buyer take notice of the provisions of the purchase agreement, which will stipulate whether the buyer will only be liable for the payment of occupational rent to the Seller once it occupies the property, or whether the buyer will also be responsible for the payment of other expenses applicable to the property (such as rates, levies, water and electricity).

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).