Legal Talk – What you should know about Conveyancing in South Africa
WHAT IS CONVEYANCING?
The term “CONVEYANCING” describes the legal process whereby a person, company, close corporation or trust becomes the registered and lawful owner of fixed property and ensures that such ownership cannot be challenged. It also encompasses the process of the registration of mortgage bonds. (See “Mortgage Bonds.”)
WHAT IS A CONVEYANCER?
A Conveyancer is an attorney who also passed the national conveyancing examination and by law is the only person who can register fixed property transfers. This is necessary to ensure the protection of the various interests the parties have in the transaction and to maintain the high standard of land registration.
WHO APPOINTS A CONVEYANCER?
The seller usually appoints a Conveyancer to attend to the transfer of fixed property, although this, like other aspects of a sale agreement, can be varied by negotiation between the parties.
WHAT IS THE FIRST STEP IN THE SALE OF FIXED PROPERTY?
The first requirement is a valid agreement of sale. The Alienation of Land Act provides that no transaction relating to a purchase or sale of immovable property will be valid, unless it is in writing and signed by both the purchaser and seller (and by the spouses in cases where the parties are married in community of property, or account to the laws of a foreign country) or their agents who have been given written authorization to sign on their behalf. A written “Offer to Purchase” signed by a purchaser and accepted by a seller also constitutes a binding agreement.
WHAT ARE THE TERMS OF SALE TO BE CONSIDERED BY THE SELLER AND PURCHASER?
- The name, address, identity numbers and marital status of both buyer and seller, (e.g. married in or out of community of property, or by way of foreign marriage); if a legal entity is buying, the capacity of its signatory;
- A clear description of the property;
- The selling price and manner of payment. If a deposit is payable, that it be held in trust by the named Conveyancer or estate agent;
- That the buyer is to pay all transfer costs and all taxes and other municipal charges on the property from the date of possession;
- The date on which the buyer is to take possession and occupation; the date on which it is to take place;
- That the property is sold “voetstoots” or “as is” (in other words without any guarantee by the seller regarding visible or hidden faults);
- The name of the Conveyancer who will attend to the transfer;
- That commission is due to a named estate agent, and the amount thereof; that the specific agent introduced the buyer to the property; or was the cause of sale;
- That if occupation is taken before the date of transfer, the buyer will pay occupational interest or rental from that date. The amount and manner of payment must be stated;
- If a beetle-free certificate has to be obtained, who must pay for the inspection and any work required;
- Usually the seller will pay for an “electrical certificate” and any work required;
- That no amendment to the agreement of sale will be valid unless it is in writing and signed by both parties;
- Where the sale is subject to the purchaser’s obtaining a loan, the amount of such loan, the institution to whom he/she may apply and the date by which the loan must be approved;
- Where the sale is subject to the sale of the purchaser’s property, a description of the property, the amount for which it is to be sold and the date by which it must be sold.
Any special condition which has been inserted either at the instance of the buyer or the seller must be carefully checked. The seller may wish to ensure that certain items are not regarded as immovable, forming part of the property sold. He must check to see that these have been properly listed. It is usually wise to obtain legal advice on special conditions.
WHAT HAPPENS NEXT?
The Deed of Sale is handed to the appointed Conveyancer, who will draft the necessary documents. Both the seller and the purchaser will be required to call at the offices of the Conveyancer to sign the necessary documents. The documents to be signed include the following:
On Receipt of the Deed of Sale
Request cancellation figures, Title Deed from the Bank if applicable and request figures from the municipality to obtain the Rates Clearance Certificate.
A Power of Attorney to Pass Transfer
This document must be signed by the seller as it empowers the Conveyancer to transfer the property on his/her behalf.
Declaration in respect of Marital Status, Identity Number and Insolvency
Both purchaser and seller must depose to an affidavit wherein they state their marital status, identity number and confirm their solvency
Transfer Duty and Value Added Tax (VAT) Declaration
Transfer duty is a form of tax payable, normally by the purchaser, to the Government, and is calculated on the value of the property. Both the purchaser and seller have to sign transfer duty declarations to be furnished to the Receiver of Revenue in which they affirm the purchase price to be paid. VAT is not usually payable on transactions between private purchasers and sellers but will be if the seller is a registered vendor under the VAT Act. Where the seller is registered as a vendor, he will sign a VAT declaration. If VAT is payable on the purchase price no transfer duty will be payable. FICA compliance is required.
If the purchaser obtains a loan from a financial institution, the lender will require the purchaser to register a bond over the fixed property to secure the loan. To enable the Conveyancer appointed by the financial institution to prepare the necessary documentation, the purchaser must submit his/her identity document, marriage certificate and, if applicable, Antenuptial Contract to the Conveyancer concerned.
WHAT ARE THE COSTS INVOLVED?
The costs relating to the transfer of the fixed property fall into three categories:
Transfer Duty or VAT
Where transfer duty is payable, a formula is applicable based on the value of the property. Transfer duty normally constitutes the majority of the costs; sometimes 90% or more of the costs of transfer, and is payable by the purchaser.
Rates and Levies
Whilst not a cost of transfer, rates and levies must be paid in full on date of transfer. A pro rata (normally to date of possession) portion of the charges payable on the fixed property to the relevant local authority or the levies payable to the Body Corporate in the case of a sectional title unit.
The Conveyancer’s fees are prescribed by a tariff and are calculated on a sliding scale based on the purchase price. The purchaser is normally liable for payment thereof together with VAT thereon.
Bond Registration Costs
Where a bond is to be registered, stamp duty is payable to the Receiver of Revenue, the amount whereof depends on the amount of the bond. The Conveyancer’s fee is calculated on a sliding scale based on the amount of the bond and is payable by the purchaser to the Conveyancer who registers the bond together with VAT thereon.
Bond Cancellation Costs
If the seller has a bond registered over his/her property, this must be cancelled on transfer and the seller is responsible for payment of the Conveyancer’s fee for cancellation together with VAT thereon.
Once the documents have been signed by the purchaser and the seller, and the transfer costs, transfer duty and rates and levies have been paid, the Conveyancer may proceed with the registration of transfer of the property in the Deeds Office if in possession of Transfer Duty Receipts and Rate Clearance Certificate.
ELECTRICAL CERTIFICATE OF COMPLIANCE
In terms of legislation, an electrical compliance certificate must be obtained with each transfer of immovable property after 1 January 1994. The act does not stipulate whether the seller or purchaser is responsible for payment, and the parties must thus agree who will be responsible for payment. Failure to obtain such a certificate is a criminal offence.
WHAT HAPPENS AT THE DEEDS OFFICE?
The Conveyancer will lodge the prepared documents with the Deeds Office for registration. If a mortgage bond is to be registered or cancelled the Conveyancer attending to the registration thereof will lodge the documents in the Deeds Office for registration or cancellation simultaneously with the transfer documents.
Two examiners in the Deeds Office will then examine the documents to ensure they comply with all the relevant legislation and regulations. If the documents are ready for registration they are executed by the Conveyancer approximately eight working days after it has been lodged at the Deeds Office. On registration, the purchaser becomes the lawful owner of the property. After having paid such amounts as are required to cancel the existing bond and ancillary amounts the balance of the purchase price is paid to the seller. The title deed reflecting his/her ownership will be released by the Deeds Office after registration and will then be handed or posted to him/her by the Conveyancer concerned unless a mortgage bond has been registered, in which case the title deed will be retained by the bond holder as part of its security.
HOW LONG DOES THE PROCESS TAKE?
The above constitutes an outline of the normal conveyancing process. The picture can and often does become cluttered with complexities occasioned by subdivision and consolidation of properties, the registration of servitudes of use and rights of way, not to mention the fact that the sale of one property very often cannot take place until the purchaser has sold and transferred his/her property and so on. Conveyancing is in fact a complex process and requires extensive knowledge and accuracy on the part of the Conveyancer.
The period of time it takes to register a transfer depends on the co-operation of each party and to what extent they have complied with their contractual arrangements.
Unforeseen difficulties, too numerous to discuss in detail, such as the death of one of the parties or the attachment of the property concerned by a creditor of the seller, may cause delays. The above aside, on average the transaction is completed in six to eight weeks.
Courtesy: STBB Smith Tabata Buchanan Boyes
STBB Smith Tabata Buchanan Boyes is a firm of business-minded lawyers which was established in 1900. At present, the firm consists of over 100 professionals practising from 15 offices throughout South Africa.
Visit their website: www.stbb.co.za or contact them on: +27 (0) 31 583 8060
Disclaimer: The material contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. We accept no responsibility for any loss or damage which may arise from reliance on information contained in this article. © Copyright STBB Smith Tabata Buchanan Boyes 2007. All Rights reserved