TERMINOLOGY USED BY ATTORNEYS IN RESPECT OF THE TRANSFER OF A PROPERTY
OFFER TO PURCHASE
The document which becomes an Agreement of Sale once signed by the Seller reflecting the terms and conditions of the sale of the property.
TRANSFER ATTORNEY
The attorney responsible for effecting the transfer of the property into the Purchaser's name.
CANCELLATION ATTORNEY
The attorney responsible for the cancellation of the existing bond registered over the property. He receives his instructions from the bank.
BOND ATTORNEY
The Attorney responsible for the registration of the new bond of the Purchaser over the property. He receives his instructions from the bank.
BOND
The loan granted by a financial institution (usually a Bank) to the Purchaser to fund the purchase price.
CLEARANCE CERTIFICATE
Certificate confirming that rates or levies have been paid up to the required date in respect of the property.
TRANSFER DUTY RECEIPT
The receipt issued by SARS upon payment of transfer duty.
CONVEYANCER
The general term for the attorney attending to the registration of transfer/ bond registration / bond cancellation.
GUARANTEE
A formal letter issued by the bank/financial institution undertaking to pay the purchase price.
TITLE DEED
The document reflecting the ownership of property (also referred to as the Deed of Transfer).
OCCUPATIONAL RENT
The rental payable by the Purchaser to the Seller when taking occupation of the property prior to the date of transfer.
LODGEMENT
The act by the conveyancer of handing in all documents relevant to the transfer at the Deeds Office for the purpose of registration.
THE CONVEYANCING PROCESS
The first requirement is a valid Agreement of Sale or Offer to Purchase.
This is a written agreement which is signed by both the Purchaser and the Seller (and by the Seller's spouse in cases where the parties are married in community of property, or account to the laws of a foreign country).
Once the Agreement of Sale has been signed by both parties and received by the appointed conveyancing attorney, a computerised Deeds Office search is done on the property.
The Purchaser and Seller are contacted and requested to provide copies of their identity documents, marriage certificates, and ante nuptial agreements where applicable.
On receipt of these documents and on fulfilment of the suspensive conditions contained in the Agreement of Sale, the conveyancer is in a position to prepare the necessary transfer documents for signature by both the Seller and Purchaser.
THE DOCUMENTS TO BE SIGNED INCLUDE:
Power of Attorney:
This is signed by the Seller and authorises the registration of transfer in the name of the Purchaser.
Declaration confirming the purchase price:
This is signed by the Seller and Purchaser to confirm the purchase price and submitted to the Receiver of Revenue.
Affidavits confirming the identity, marital status and solvency are signed by both the Seller and Purchaser as well as documentation relating to the requirements of the Financial Intelligence Centre Act.
Transfer Duty and VAT declaration:
In certain instances VAT will also be payable on the purchase price. If VAT is payable on the purchase price, no transfer duty will be payable. The conveyancer will require the parties to sign lengthy declarations about these taxes. With these declarations in hand he will be able to finalise the matter with the Receiver of Revenue and either pay the transfer duty (after he has been put in funds to do so) or to obtain a transfer duty exemption.
Without a transfer duty receipt or a transfer duty exemption the Registrar of Deeds will not register the transaction.
Mortgage or bond documents:
If the purchaser obtains a loan from a financial institution, bank or building society, the lender will insist that the purchaser
will have to sign all the necessary documents for the bond prior to lodgement and make
payment of the bond costs to the bond attorneys.
THE CONVEYANCER ALSO ENSURES THAT THE FOLLOWING ARE ATTENDED TO:
If there is an existing bond registered overt the property, the Seller will be requested to provide the bond account number and the bank will be requested to instruct its attorneys to cancel the bond simultaneously with the transfer.
- A rates or levy clearance certificate must be obtained from the Council or Body Corporate before lodging the transfer documents in the Deeds Office.
- The Seller has to furnish an electrical compliance certificate prior to transfer as or provided for in the agreement of sale.
- The Purchaser will be contacted to make payment of the transfer costs and transfer duty, which are payable on request from the conveyancer.
- A transfer duty receipt will be obtained from the Receiver of Revenue.
- The full purchase price must be secured by means of a guarantee.
If a mortgage bond has been approved in terms of the agreement of sale, the financial institution will instruct its attorneys to register the bond and the purchaser will have to sign all the necessary documents for the bond prior to lodgement and make payment of the bond costs to the bond attorneys.
Once the transfer documents are ready for lodgement in the Deeds Office the conveyancer attending to the linked transactions will be contacted to arrange simultaneous lodgement of the deeds.
Registration is effected approximately 10 - 14 working days after lodgement in the Deeds Office after which the net proceeds of the sale are paid to the Seller.
WHAT CAUSES DELAYS IN THE TRANSFER PROCESS?
- When there is a delay by the bank forwarding the bond instruction to the bond registration attorney.
- When the Title Deed is lost.
- When one of the parties delays in furnishing the requested information to the conveyancer which is required for drafting the transfer/bond documents.
- When one of the parties delays in signing the transfer/Bond documents or to pay the transfer/bond costs when requested to do so.
- When the Seller delays in the furnishing of the electrical compliance certificate to the conveyancer.
- When the Seller delays in paying for the issuing of the Rates Clearance Certificate.
- Where there develops a dispute in respect of the terms of the agreement of sale.
- Where one of the parties commits breach of contract.
- When there is a delay in the bond application and or receipt of the purchaser's bond grant.
- When the Purchaser delays in paying transfer costs to the conveyancer.
TRANSFER COSTS
The purchaser is responsible for payment of transfer costs. These are fixed by the law society and the purchaser will be able to know in advance, to within a few Rands, what the costs will be. A schedule of estimated costs is incorporated in this booklet.
CAPITAL GAINS TAX
One of the most frequent questions asked when selling a property relates to the payment of capital gains tax.
Please note the following:
- No Capital Gains Tax is payable on the sale of your primary residence. Provided you have not made a capital gain in excess of R1 500 000,00 (one million five hundred thousand rand) on the sale thereof.
- Capital Gains Tax is NOT payable on registration of transfer of your property, but has to be reflected on your income tax return for the relevant financial year and becomes payable together with your income tax for that particular year.
- The amount of Capital Tax payable depends on your tax rate. As a private individual, your Capital Gains Tax is calculated on 25% of the net capital gain made and will not exceed 10% of the actual net capital gain made on the sale of the property.
- If you purchase a property to renovate and sell within a short period of time, you must be careful that you do not en up having to pay income tax on the actual profit made as SARS may regard this as an income generating activity and an income tax rate of as much as 40% currently apply to private individuals.
- If you purchase a property as a buy to let and renovate, expenditure incurred in improving the property (e.g. a new pool) will be deductible as a capital expense and taken into consideration when calculating capital gains tax.
However, expenditure incurred in maintaining the property (e.g. repairs to an old pool) will be deductible against the RENTAL INCOME as a maintenance expense.
In other words when the property is eventually sold and provided your intention was to generate a rental income and not to speculate, you will only pay capital gains tax on the capital gain made on the sale of the property after taking into account expenditure incurred which was not claimed against the rental income of the property from 1 October 2001 or the date of acquisition if the property was acquired by you after that date.