Legal Talk – Buying Property in South Africa as a Resident or Non-Resident (Part III)
Buying Property in SA as a Resident or Non-Resident
(PART 3 OF A 4 PART SERIES)
ARE THERE ANY RESTRICTIONS ON NON-RESIDENTS BUYING PROPERTY IN SOUTH AFRICA?
The answer to this is a resounding NO, save for a prohibition on illegal aliens owning immovable property in South Africa. Non-residents will of course be subject to the same laws and regulations as South Africans and it is compliance with these that ensure the efficiency of the S.A. land registration system and security of tenure.
Should the non-resident not wish to purchase the property in his or her own name but rather in the name of an entity, such an entity must be locally registered and meet the requirements inherent in registration of the chosen entity, such as those contained in the Companies Act. For example, the non-resident may decide to own the property through share ownership in a company, membership in a close corporation (unique to South Africa) or as a beneficiary in a trust. In the event of a non-resident acquiring property in the name of an entity, funds brought into the country will represent a loan to the local entity and will require Exchange Control approval.
For the most part however, property is registered in the name of the purchaser as an individual. There may be specific reasons for taking transfer in the name of an entity and for a brief overview of these, kindly consult our Purchaser’s Guide to Alternate Entities for Acquiring Ownership of Immovable Property. (As published in our May 2008 edition of Property News)
Note that purchasers will have to finalise their choice of vehicle for purchasing the property prior to signing any Offer to Purchase or Agreement of Sale, as no changes can be made at a later date without the possibility of penalties being imposed and resultant delays in the transaction.
Finally, a non-resident can purchase South African property over the internet without entering the country. However, should the prospective purchaser intend residing in the property for any length of time, he or she will need to comply with the requirements of the Immigration Act and either have a valid permit to temporarily remain in the country or be in possession of a permanent residency permit.
HOW CAN FOREIGN FUNDS BE BROUGHT INTO SA FOR A PROPERTY ACQUISITION?
Foreign funds can be paid into any nominated bank account in South Africa. This account will usually be the trust account of the estate agent or transferring attorneys into which the deposit for the property and the balance of the purchase price is paid. These funds will be invested for the non-resident’s benefit and the non-resident can rest assured that such a transfer is secure and guaranteed, as the operation of these trust accounts is regulated by the professional boards overseeing the operations of both attorneys and estate agents.
When a non-resident transfers funds from a foreign source into a South African bank account, a record known as a “deal receipt” is kept of the foreign funds received by the South African bank. This is an important document which must be retained for purposes of repatriation of the funds.
CAN MONEY BE BORROWED IN SA TO PURCHASE PROPERTY?
The South African Reserve Bank will adjudge all foreigners not having their domicile in South Africa as non-residents. This however does not include foreigners with South African work permits who will be considered to be residents for the duration of their work permit. What this means is that non-residents are restricted in their borrowing ratio to 50% of the purchase price, while the remaining 50% must be brought into the country in cash from a foreign bank. In order to qualify for a South African mortgage bond, the non-resident will need to provide proof of earnings and comply with the Financial Intelligence Centre Act, which, in simple terms, pertains to identification of the non-resident for money laundering purposes, and involves the production of certain documents such as a passport and proof of residential address.
CAN A NON-RESIDENT OPEN A BANK ACCOUNT AT A SOUTH AFRICAN BANKING INSTITUTION?
In order for a non-resident to service repayments on a mortgage bond, he or she will need to open a non-resident banking account which can either be done from abroad or from within the country. Again, certain documentation relating to the applicant’s identity will be required, ie. application form detailing name, passport number and address, certified copies of the relevant pages of the passport, and proof of source of income, such as a salary slip or pension statement. All copies will have to be originally certified. Once the bank account has been opened, foreign funds will have to be deposited immediately.
In certain circumstances, local currency can be deposited into the account, for example, rental income acquired from property belonging to the non-resident. This is dependent on the bank being in possession of a certified copy of the rental agreement. Obviously the rand value received on the sale of immovable property in South Africa can also be receipted into the non-resident account provided the necessary documentation is lodged prior to the deposit being made.
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