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PROPERTY LAW - FAQ's             Back to home page

 

Generally, there is only one way in which the ownership of property can be transferred from the seller to the buyer: by the execution of a deed of transfer before the relevant Registrar of Deeds. There are deeds registries in Cape Town, King William’s Town, Kimberley, Vryburg, Pietermaritzburg, Pretoria, Johannesburg and Bloemfontein. The documents that have to be lodged to secure registration of transfer must be prepared and signed by an attorney admitted as a conveyancer. The drawing up of deeds of transfer is a complicated and technical task making conveyancing work of a highly specialized nature.

Buying or selling property for many people will be one of the biggest financial decisions that person will make in their lifetime, and consulting with an attorney before signing on the bottom line could prove to be one of the best investments you can make. Avoid scams, illegally built structures, possible servitudes running through your back garden and bankrupt body corporates!

What is not well known is that as a first time home buyer, you may qualify for a subsidy, and you can read more here.

  1. What are the main steps in buying a home?
  2. What are some of the points to consider when selling property to non-residents in SA?
  3. Calculator: What will my attorney, bond and registration costs amount to?
  4. Calculator: What will my monthly bond repayment be?
  5. Calculator: What size mortgage bond can I afford?
  6. Calculator: What is my net monthly disposable income required to qualify for a bond?
  7. Calculator: How much interest can I save by increasing my monthly instalments?
  8. Calculator: Can I have a comprehensive analysis of bond repayments, interest charges, capital repayments and outstanding bond balances over the entire period?
  9. Calculator: Can I calculate the interest savings that result from making bi-weekly bond repayments instead of making monthly repayments?
  10. What is contained in a deed of transfer?
  11. When is estate agency commission payable?
  12. What guidelines should I follow when buying a house?
  13. What guidelines should I follow when selling a house?
  14. What is meant by Sectional Title and how does it differ from freehold property?
  15. How is a sectional title scheme established?
  16. What is the function of the body corporate?
  17. How is the body corporate controlled?
  18. What are the functions of trustees?
  19. What are the duties of the owners in a sectional title scheme?
  20. What are the rights of existing tenants in the event a developer decides to have their block divided into units and sold by sectional title?
  21. Who must pay for damp or water problems in sectional title (ST) schemes?
  22. What is a Share-Block Scheme and how does it differ from Sectional Title?
  23. How are servitudes created and where are they registered?
  24. What are the different real and personal servitudes and how are servitudes terminated?
  25. Transfer Duty or VAT – which is payable?
  26. To enable property transfer, who has the duty to supply a Bore beetle Certificate and Building Plans for improvements done?
  27. Is compliance to FICA requirements compulsory for bond registration?
  28. Is an Electrical Wiring Certificate still a pre requisite for property transfer?
  29. What is the Electrical Fence System Certificate of Compliance (EFC)?  
  30. Can I be held liable for historic municipal debts on my property?

 

1. What are the main steps in buying a home?

 

Steps in buying a home

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2. What are some of the points to consider when selling property to non-residents in SA?

 

  • A new country

Coming to a new country is a daunting prospect for the visitor, with foreign customs, language and an unfamiliar legal framework that can be intimidating to someone who wants to purchase property here for the first time. “Being aware of a few basic points can make the property purchase much easier,” says Wilhelm van der Vyver, practicing attorney and principal of Van der Vyver Properties.

  • Illegal aliens

A person who is illegally in South Africa may not acquire property. This does not prohibit someone with a valid visa or residence permit from acquiring property; neither does it prohibit someone from acquiring a property while outside the borders of South Africa.

  • Moving and repatriation of funds
    • Moving money into the country for purpose of acquiring a property is normally done via the trust account of (preferably) the attorneys attending to the transfer or the estate agent facilitating the sale. Monies can be invested for the buyer’s benefit in an interest bearing bank account until date of registration of transfer of ownership should the buyer request the same.
    • Taking the money out of the country again should the property be sold is not a problem, as long as the documentation when the money was brought in (in particular the “Deal Receipt” issued by the recipient bank) was kept and can be supplied.
    • Note that non-residents may take out a loan from a South African banking institution for up to 50% of the purchase price, subject to the bank’s normal lending criteria.
  • Capital Gains Tax (CGT)

The profit of property in South Africa is subject to CGT, and this is levied in the tax year of sale. The non-resident will therefore have to register with SA Revenue Service (Sars) as taxpayer.

Should the selling price be greater than R2-million the conveyance has to withhold 5%of the selling price and pay same over to Sars as pre-estimated CGT. The non-resident can avoid this by registering with Sars before registration of transfer and obtaining a directive for CGT.

  • Signing documentation

Signing documentation outside the country can prove to be problematic, as documents signed outside the country to be submitted to the Deeds Offices have to be signed at either a South African Embassy or consulate or a notary (this can be quite expensive). Giving a relative or friend in South Africa or the transferring attorney power of attorney to sign on the purchaser’s behalf may be a prudent course of action.

  • Financial Intelligence Centre Act (FICA)

In terms of South African anti-money laundering legislation a prospective buyer of property will be required to furnish proof of identity and address to the estate agent and transferring attorney involved. The buyer will also have to declare the source of the funds used to purchase the property, e.g. savings, pension or inheritance.

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3. What will my attorney, bond and registration costs amount to?

 

Bond and Transfer costs

This calculator enables you to calculate an accurate estimate of the transfer and bond costs that will be incurred when buying a property. The calculation is based on the property purchase price and bond amount (property purchase price less bond amount) that is specified by you and includes: transfer duties, transfer fees, deeds office levies, bond registration fees and other transfer and bond related costs. Note that the costs that are calculated should be seen as estimates and actual charges may therefore differ.

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 4. What will my monthly bond repayment be?

 

Monthly Bond Repayments

This bond calculator enables you to calculate the monthly bond repayment that is required based on a user defined bond amount (property purchase price less deposit amount) , annual interest rate percentage and a bond period in years. The calculated results also include the total bond repayments over the entire bond period, the total interest that is incurred over the entire bond period as well as the monthly bond repayments based on a 15 and 30 year bond period and annual interest rates that are 1% more and 1% less than the specified bond interest rate.

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5. What size mortgage bond can I afford?

 

Bond Affordability

This bond calculator enables you to calculate an estimated bond qualification demand based on what you can afford. Bond affordability is determined by the estimated monthly disposable income (as required by the National Credit Act) which is defined by specifying a monthly combined gross remuneration and income from other source less total salary deductions, total monthly expenses and monthly finance costs. Note that if the net disposable income that is calculated is more than 30% of the total gross remuneration, the bond qualification amount is based on a 30% repayment to income ratio (as apllied by most financial institutions) The annual bond interest rate and bond period also affect the calculation of the bond qualification amount and the calculator includes an interest buffer percentage which is used to measure the sensitivity of the bond affordability calculation to interest rate charges.  

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 6. What is my net monthly disposal income required to qualify for a bond?

 

Minimum net disposable income

This bond calculator enables you to calculate the minimum monthly net disposable income that is required in order to qualify for a user defined bond amount. The calculation is based on the bond amount (property purchase price less deposit amount) annual bond interest rate and bond period that are specified by you. A net disposable income can also be entered in order to calculate the required gross monthly income amount. The minimum net disposable income that is calculated is based on the monthly required bond payment.

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 7. How much interest can I save by increasing my monthly instalments?

 

Monthly Instalment

This bond calculator enables you to calculate the amount of interest that can be saved by increasing the monthly required bond payment by a user defined additional repayment amount. The calculation is based on the bond amount (property purchase price less deposit amount) annual bond interest rate, bond period and the additional payment amount. An average annual inflation can also be specified in order to calculate the present value of the interest saving. The calculated results include the adjusted bond period in months and years, the total bond repayments and interest over the original and adjusted bond periods and the interest savings amount and present value.

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 8. Can I have a comprehensive analysis of bond repayments, interest charges, capital repayments and outstanding bond balances over the entire period?

 

Amortisation Table

This bond amortisation table enables users to view a comprehensive analysis of bond repayments, interest charges, capital repayments, and outstanding bond balances over the entire bond period. The table is calculated based on the bond amount (property purchase price less deposit amount), annual bond interest rate and bond period that is specified by the user and includes the monthly bond repayments, interest charges, capital repayments and outstanding bond balances. The percentage capital that is outstanding after each monthly bond repayment is also included in a separate column and indicates how the outstanding capital amount is reduced over the bond period.

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 9. Can I calculate the interest savings that result from making bi-weekly bond repayments instead of making monthly repayments?

 

Bi-Weekly Bond Repayments

This bond calculator enables users to calculate the interest rate savings that result by making bi-weekly bond repayments, instead of making monthly bond repayments. The calculation is based on the bond amount (property purchase price less deposit amount annual bond interest rate and bond period that is specified by the user and indicates the total bond repayments and total interest over the original and adjusted bond periods as well as the total interest savings. For the purpose of the calculation, it is assumed that the original required a bond repayment amount remains unchanged and that the additional bi-weekly bond repayment is allocated against the outstanding capital balance of the bond.

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 10. What is a contained in a Deed of Transfer?

 

  • The deed of transfer begins by recording the name of the conveyancer and the person for who he/she appears, as well as authorization for the conveyancer to appear.
  • Next comes the name of the person to whom transfer is to be passed (the transferee), followed by an accurate description of the transferred property. The transfer does not necessarily need to have a diagram of the property attached, but will have a reference to the original deed of transfer that had a diagram annexed to it or a reference to a general plan of the township in which the property is situated.
  • Thereafter, the deed of transfer will record the various conditions of title that govern the use of the property. These conditions will usually place restrictions on the uses to which the land may be put. There are often other conditions of title that differ from one property to another. For example, there may be a servitude granting the Municipality the right to construct a drain across your property.
  • Once the deed of transfer has been executed before the Registrar of Deeds, the buyer becomes the owner of the property.

 

 11. When is estate agency commission payable?

 

A problem that frequently occurs in practice and which is not easy to solve is whether an agent was in fact instrumental in bringing about the sale of property. It could happen that an agent introduces a prospective buyer, that negotiations for the sale do not succeed and that another agent succeeds in concluding the agreement. It is common practice for more than one agent to be instructed to find a purchaser. It could even happen that the seller is held responsible for paying commission to two agents.

An estate agent is not an agent in the strict sense of the word. His “mandate” is normally to find a suitable purchaser for the seller’s property and not to sell on behalf of the seller. This is, however, not a contract in the usual sense where parties undertake reciprocal obligations. In fact, the agent is not obliged to perform his mandate. An estate agent will only be entitled to commission if he has a mandate from the seller; without the mandate he is not entitled to commission even though he might have been the effective cause of the transaction.

An estate agent will be considered to be the effective cause of the transaction when:

- He has introduced a willing and financially able buyer to the seller;
- A binding contract has been concluded between the parties; and
- The transaction takes place at the stipulated price or at a price acceptable to the seller.
-When several estates agents are involved in introducing the buyer to the seller it might be difficult for the court to determine which agent was the effective cause. For instance, when the estate agent A introduces the buyer to the seller but the buyer later purchases the property through estate agent B after B has persuaded the seller to drop the price. Estate agent A may have a sole mandate, but estate agent B introduced a willing and able buyer. The seller could then be liable for both estate agents’ commission. A sole mandate usually stipulates that the agent is entitled to commission if the property is sold during the currency of the agreement, even if another agent introduced the buyer.

In another matter a prospective buyer was introduced and the house was inspected. The price was considered too high. A few months later the purchaser noticed that the house was still in the market. He then bought the property without any intervention from the agent at a slightly lower price than the he had rejected earlier. The estate agent was held to be entitled to his commission.

How much commission is an estate entitled to? The average commission ranges up to 7.5%, however there are no regulations as to how much commission an estate agent should be paid per sale. The commission should be discussed by the parties when negotiating the mandate.

Sole mandates that are given to the estate agents are regulated by the Consumer Protection Act. The duration of the agreement may not exceed 24 months. The seller has the right to cancel the agreement by giving 20 business days’ notice in writing. If the mandate is not terminated by the seller on the expiry date it will automatically continue on a month-to-month basis.

Seller, be wary of these pitfalls when selling your property – they could be very costly.

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 12. What guidelines should I follow when buying a house?

 

When you do find a house you wish to buy and before you sign any deed of sale (sometimes called ‘Offer to purchase’) follow these simple guidelines:

  • Examine the house thoroughly. Enquire about the roof; enquire about the roof, gutters, electrical wiring, foundations etc. Should you have any doubts at all, consult an expert to examine the house. Should there be any defects provide the deed of sale for their correction by the seller at his cost.
  • Before you sign a deed of sale, give the document to your attorney to examine. Ask about anything that is not clear.
  • Enquire about any additional costs, such as rates and transfer costs. Your attorney will have the answers. All provisions and promises must form part of the written contract. Verbal agreements are not enforceable. A document signed by you and then accepted by the buyer could become a binding agreement.
  • Ensure that your finances are sound. Should you need a bond also make provision for the costs or valuation of the property and or registration. Your attorney can tell you about this.
  • If you are not certain whether you will be able to obtain a loan to provide for the purchase price and other costs, make the sale subject to the obtaining of a loan.
  • Ensure that the deed of sale provides for the issue of beetle-free certificate the expense of the seller in the Cape Provinces and KwaZulu Natal, and for certificate of compliance in respect of the electrical installation in all provinces.
  • Does the seller require a deposit on the selling price?
  • Should his be the case, arrange or payment in trust to any attorney pending transfer and for safekeeping in a special savings account until the house is in your name.
  • With the consent of both parties the attorney may invest these monies subject to the condition that the interest earned will be for your own account.
  • Take note of the date of occupation on the deed of sale. Should you move in before the house is in your name you would be expected to pay rent. Make sure who is responsible for the payment of taxes, levies and insurance premiums during this. Should the sale fall through after you have moved in, you would naturally have to move again with the attendant expense and inconvenience.
  • If the seller wants to remove any items such as plants, cupboards etc, this needs to be explicitly set out in the contract. Any loose items (such as curtain, swimming pool equipment etc) must also be specified.

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 13. What guidelines should I follow when selling a house?

 

  • Property is a major asset and the seller, buyer and estate agent all have important but different and potentially conflicting interests to consider when concluding a sale.
  • So it makes sense for the seller to consult and appoint his/her own attorney (rather than the agent’s attorney) before signing the contract so hat the property s transferred.
  • Should you be planning to sell your house, do not lose he money earned by this investment by not knowing about the legal aspects involved.
  • Keep our house and the premises eat and clean so that it is attractive to prospective buyers.
  • Consult your attorney concerning our rights and obligations. As the seller you have he right o appoint your attorney to handle the transfer. Do not allow an estate agent to convince you otherwise.
  • Approach one or ore estate gents of our choice to list your property. Do not give sole rights to sell the property to one agency without considering it very carefully.
  • Your attorney will be able to advise you about this.

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 14. What is meant by Sectional Title and how does it differ from freehold property?

 

  • One of the principles of South African law of property is that the owner of land on which a building stands is also the owner of the building. Because of this, it used to be impossible for anyone to own a single flat unless he/she was prepared to buy the whole block. This position was changed with the passing of the Sectional Titles Act, 1986. In terms of the act you can now own a part or section of a building, together with joint ownership of the land on which the building stands as well as common parts of the building that have been set aside for your exclusive use (in partnership with the other owners in the block)
  • Your sectional title flat guarantees you security of occupation and investment in property. It also offers you the convenience of being close to schools, shops and places of employment. A sectional title flat - and other forms of high-density housing, such as cluster housing, duplexes and maisonettes – are attractive alternatives to free-standing homes.
  • When you buy a home under sectional title, it is just as important to check over the whole building as it is to check over your particular part of it. As an owner you will be jointly liable for the upkeep of the building. It would therefore be unwise to buy a flat in a block clearly in need of major repair. A serious defect affecting the entire building could be very expensive to repair and your levy would probably be increased to meet the cost of renovations. In some cases ‘special levies’ are raised to carry out particular improvements or repairs.
  • Always ask to inspect the financial statements of the body corporate to ensure it is financially sound before investing in sectional title property.

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 15. How is a sectional title scheme established?

 

  • Before a developer can establish a sectional title scheme, he/she must first get approval from the local authority, who will not approve a sectional title scheme unless it is completely satisfied that the scheme does not conflict with any proposed or approved town-planning scheme.
  • Once a sectional title scheme has been approved, a draft sectional plan prepared by a land surveyor must be submitted for approval by the Surveyor General. If permission is subsequently given the developer must apply to the Registrar of Deeds for the registration of the sectional title plan.
  • The developer, when applying for the opening of the sectional title register, can impose a condition conferring rights to the use of exclusive common property on the owner(s) of a particular section or sections in the block.
  • Once the scheme has been approved and the sectional title register opened in the Deeds Registry, the buildings on the land are deemed to be divided into sections and common property as shown on the sectional plan.
  • The owner of a particular section has exclusive rights to this section-that is, the dwelling unit in which he/she actually lives. In the case of the corridors, parking lots , driveways and gardens , which also form part of the block (even though they are not part of the individual dwelling sections), each owner of an integrated dwelling section has an undivided share in that common property.
  • The Act refers to a section, together with its undivided share in the common property, as a ‘unit’. Ownership of the unit can be transferred from one person to another by an endorsement made by the Registrar of Deeds on a sectional title

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 16. What is the function of a body corporate?

 

The Act creates what is known as a body corporate to control and manage the property, and to attend to matters of common interest to all flat owners. Mangement of Sectional Title schemes are governed by the Sectional Title Management Act.

  • When a person other than the developer buys a unit in a scheme, they become part of the body corporate as soon as the unit they have bought is registered in their name. In fact, a body corporate is simply the representative of all the registered owners. The developer is a member of the body corporate until the last unit is sold (unless of course the developer retains one or more units for themselves or repurchase any of the units )
  • In law, a body corporate is viewed as a ‘separate person’ capable of suing and being sued in its own name. The Act specifies certain duties that the body corporate must perform as regards the management, administration and maintenance of the common property, and the insuring of the entire building against fire and other risks.
  • In terms of the Act, a body corporate must establish a fund big enough to pay for the repairs, upkeep, control, management and administration of the common property. Reasonable provision must also be made for future maintenance and repairs as well as for the payment of other expenses.

In addition to this the body corporate can:

  • Employ agents to carry out its duties
  • Employ a person or persons to look after the property
  • Maintain lawns, gardens and other facilities on the common property
  • Ensure that the building is cared for in the mutual interest of the unit owners
  • Purchase extra land, and
  • Designate part or parts of the common property to an owner or owners – provided the whole body unanimously agrees.

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 17. How is the body corporate controlled?

 

Participation Quota

  • The size of flats in a block often differ considerably. Some people have large, spacious flats and others tiny apartments. It is for this reason that the Act provides for unequal votes among members of the body corporate. •
  • Members with bigger units have greater voting powers than those with small apartments. This demarcation is known as the participation quota and it determines the value of the vote of the owner of his/her section and his/her share in the undivided common property.
  • The participation quota also determines how large a share of the administration and maintenance expenses each owner must bear and, if the body corporate cannot pay its debts when it is called upon to do so, each owner’s share of the debt.
  • The rules for determining the participation quota can be changed by a unanimous decision of the body corporate.

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 18. What are the functions of the trustees in a body corporate?

 

  • The number of trustees for a sectional title block is decided upon by the body corporate at a general meeting at which no fewer than 2 trustees should be present. Nominations must be in writing and must include the written consent of the person nominated.
  • Trustees hold office until the annual meeting, at which point they must vacate their positions. They may however stand for re-election. A managing agent may not serve as a trustee.
  • Generally, a trustee, agent or other representative of the body corporate is indemnified against all costs, losses, expenses, and claims that may be incurred whilst performing their duties – provided that these are not incurred through negligence.
  • A trustee of a sectional title scheme has similar duties as, say, a director of a company - they control the day-to-day running of the business and are vested with certain powers of decision-making by the body corporate.
  • Any documents of the body corporate must be signed by a trustee or managing agent, or, alternatively, by two trustees when a certificate is issued in respect of monies paid to the body corporate on the transfer of a unit.

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 19. What are the duties of the owners in a sectional title scheme?

 

Because the owners of the various units live closer to each other than they would have had they been living in free-standing homes, certain limits have been placed on their rights. For instance, the body corporate can force an owner of a unit to comply with its rules – by application of a High Court interdict if necessary.

Other rules that an owner may have to observe include:

  • Allowing any person authorized in writing by the body corporate to inspect his/her section at reasonable hours and enter it for maintenance purposes
  • Maintaining their section and using the common property without unreasonably interfering with the use and enjoyment of it by other owners or persons lawfully on the premises
  • Not using their section or permitting it to be used in a manner that creates a nuisance for the occupier of another section

The body corporate can make other rules governing the conduct of owners of units. Generally in terms of the rules in the Act, an owner of the unit is bound to heed the instructions of the trustees in various circumstances:

  • He/she cannot keep or do anything on the common property after being instructed not to do so by the trustees. For instance, not keeping an animal in his/her section or on common property if asked not to do so.
  • He/she cannot use their section for any other purpose for which it is intended. For example, you cannot open a shop in a residential section.
  • He/she cannot allow their section to be used for any purpose that may be injurious to the reputation of the building.

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 20. What are the rights of existing tenants in the vent a developer decides to have their block divided into units and sold by sectional title?

 

  • The Act stipulates that flat tenants must be given time to find a place to stay. Furthermore the developer must give the tenants written notice of a meeting at which either he or his agent must inform them of the particulars of the scheme and their rights. All reasonable questions put by the tenants must be answered at this meeting.
  • These conditions are there to ensure that the developer does not offer a flat for sale while it is occupied by a tenant – unless of course, the developer has made a written offer to sell it to the tenant and the tenant has refused the offer within 90 days, or has not accepted the offer at the end of that period.
  • Even if the tenant refuses the offer or the period in which he can accept has expired, the developer must wait another 180 days before he can offer to sell the flat to another person for a lower price. If however, he offers it to the tenant at the lower price and the tenant refuses, he need wait only 60 days before offering it to someone else.

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 21. Who must pay for damp or water problems in sectional title schemes?

 

  • Water can usually only get into ST units and cause damp or mould problems through the roof, the foundations or the outside walls and as all of these are parts of the common property, the responsibility for fixing them lies with the body corporate. Any section owner who suffers damage to the inside of his or her section as a result of water seeping in from common property is thus entitled to claim the costs of repairs from the body corporate-or more usually from its insurers.
  • On the other hand if a leak that causes damage originates in another unit, the owner of that unit will be responsible for the costs of repair. Common sense also dictates that a leak originating inside a ST unit, or damage caused by such a leak, is the sole responsibility of the unit owner.
  • But sometimes the source of the leak is not obvious. It could for example, be from a pipe in the slab that forms the floor of one section and the ceiling of another, or in a wall between two sections. In such cases, if the pipe is in ‘transit’ from one part of the building to another, or if one pipe serves more than one section, the body corporate may be responsible for the cost of repairs.
  • If the pipe contains hot water, however. The owner of the section being served by the hot water is responsible for repair of the pipe as well as any damage caused by the leak.

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 22. What is a Share Block Scheme and how does it differ from Sectional Title?

 

Long before the introduction of the Sectional Title Act in 1971 attempts were made to give flatdwellers a legal right to own their flats, of which the best known example is the ‘share block’ system, which gives a shareholder in the company owning a block of flats the right to occupy a specific section of the building.

Under this scheme, however, the shareholder does not actually take ownership of the section of the building he/she occupies: the owner of the property retains ownership.

Another major weakness of the scheme is that, should the company go insolvent, the shareholders will be left with just worthless shares in an insolvent company.

Unless it was stated as an intention at the time the shares were offered, a share-block company may not increase its loan obligation without the approval of at least 75% of the shareholders holding at least 76% of the number of votes.

Under the Share Blocks Control Act, provision is made for the conversion of rights under the share-block system to sectional title – only by converting the scheme to sectional title can a member of a share-block company acquire title to the unit.

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 23. How are servitudes created and where are they registered?

 

A servitude is a right that one person has to use or enjoy the property of another person –other than by means of a lease or similar disposition.

  • A real servitude always involves two pieces of land that are separately owned. A personal servitude grants certain rights to an individual for a specified period of time (at the longest, for hi/her lifetime) If you have the right of servitude to drive your cattle across a neighbouring farm that does not belong to you, your farm is the ‘dominant tenement’ and the other is the ‘servient tenemant’.
  • Servitudes are registered against the title deeds of the properties in the Deeds Registry, and unless this is done will not be binding on subsequent owners of the property unless they were aware of it.
  • Personal servitudes usually come into being as a result of a will or contract. Real servitudes may also be created by the state, as in the case of land on which a road or railway line is built. Most real servitudes are the result of an agreement between two parties on the extent of the servitudal rights, the amount to be paid by the dominant party to the servient party in consideration for allowing the creation of the servitude, and the period for which the servitude is to remain valid. The servitude comes into existence as a right only when it is registered against the title deeds of the servient property.
  • A servitude may be acquired by prescription: for instance, a landowner may show that for a period of 30 years he has openly used his neighbour’s land – say by driving cattle across it – without a dispute. He would then be entitled to have the servitude registered against the title deeds of the servient property.
  • Either party is entitled to sue the other for damages if it is considered that the rights of the agreement have been exceeded or if one has suffered loss. If no actual loss can be proved, an interdict may be obtained to prevent further breaches of the agreement. Either party may apply to court for a declaration of rights.

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 24. What are the different real and personal servitudes and how are servitudes terminated?

 

  • Although many rights can be registered as restrictions against title deeds, there are restrictions – the most important being that the servient owner cannot be obliged to do anything, such as erecting or maintaining a building, for the benefit of the dominant owner. All positive action must be on the side of the dominant owner.
  • Real servitudes can be divided into rural and urban servitudes although this distinction simply reflects the different activities with which the servitude is concerned and they are basically the same.
  • Important rural servitudes are those relating to right of way – such as the right of a farmer to cross the property of another. The dominant owner must exercise his right in a reasonable way and not, for instance, drive cattle through a field on the servient farm simply because this is the shortest route. A right of way used by a dominant owner is also open to his family, employees and visitors and neither party may change the right of way without the other’s consent.
  • Another form of right of way is the ‘way of necessity’ which does not require the consent of the servient owner, but will be granted if ‘absolutely necessary’. If a farmer has no reasonable access to a public road other than by crossing the property of another landowner, he may claim a way of necessity.
  • Water servitudes permit the dominant owner to draw water from the servient property and to lead it across that land by means of furrows or pipes. He may also have the right to water livestock on the servient property and to build a dam there. It all depends on what is registered against the title deeds.
  • Grazing servitudes may provide that a certain number of cattle may graze within a particular area of the servient property. Other examples of rural servitudes include the right to gather or cut wood, to outspan cattle and to discharge water into the servient property.
  • Urban servitudes – window right is probably the most typical urban servitude giving the dominant owner the right to have a window or opening in a wall which is on the servient owner’s boundary. Other servitudes prohibit or restrict buildings or ‘any actions’ on the servient property that would obstruct the view from, or interfere with lighting reaching the property. The right of support of buildings allows the owner of the dominant property to build a wall on the servient property or to rest a structural beam on it, and the servient owner is obliged to keep this wall in good order.
  • Restrictive covenants are a form of servitude regulating the use to which land in developing townships may be put. It might be stipulated that the area should be solely residential, or there may be restrictions on businesses.
  • Personal servitudes apply to a specific person and are constituted for a fixed period – until a future happening or for the lifetime of the beneficiary.
  • Usufruct or ‘use of the fruits’ is the most common personal servitude. It is frequently granted in the terms of the will allowing, for instance, a surviving spouse full use and occupation of a house or farm for the remainder of his or her life, although the actual ownership has been bequeathed to another. A good example would be if a father left his farm to an eldest son, but gave his widow the right to live on at the farm. Usufruct may be over movable property or even money. In this case the usufructuary is entitled to receive interest on an investment but not make use of the capital which will revert to the owner. A servitude of habitation allows only personal occupation.
  • A personal servitude ends with the time specified and the parties to a real or personal servitude may end it by mutual agreement by any time. A real servitude is ended by the destruction of one of the properties, or when the need to exercise it no longer exists. If the owner of the dominant property buys the servient property, the servitude ends and does not automatically come back into being if one of the properties is later sold.

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25. Transfer Duty or VAT – which is payable?

 

Very often the question arises as to whether the purchaser must pay transfer duty on a particular transaction or whether there is no transfer duty payable as the transaction is in fact a VAT transaction. This question can arise where:

  • the seller is registered for VAT but the purchaser is not • the seller is not registered for VAT and the purchaser is registered for VAT
  • or both parties are registered for VAT or neither party is registered for VAT.

The answer is usually easily determined by looking at the status of the seller.

  • As a general rule, if the seller is in fact registered for VAT purposes, VAT is payable on the transaction and no transfer duty is payable by the purchaser in the transaction.
  • If the seller is not registered for VAT purposes, then transfer duty is payable on the transaction by the purchaser.
  • There are a few technical exceptions to the general rule but an exception to the general rule happens so seldom that it does not serve any purpose in discussing such exemptions in an article of this nature.

The other question which arises is whether VAT is included in the purchase price or not.

  • As a general rule in South Africa, any purchase price must be VAT inclusive. Accordingly, if the transaction is a VAT transaction, then the purchase price will be inclusive of VAT unless the contract specifies that VAT is excluded from the purchase price. One must therefore be very careful in calculating the purchase price where the seller is a VAT vendor as very often the VAT vendor does not take into account that the selling price of the property includes VAT and the seller is upset when the seller discovers that a portion of the purchase price which the seller has received from the purchaser must be paid to the Receiver of Revenue by way of a VAT payment.
  • From the purchaser’s point of view, the fact that the purchase price includes VAT and the purchaser does not have to pay transfer duty should mean that the purchaser should be willing to pay a higher price for the property being purchased as effectively the purchaser is getting the amount which the purchaser would have paid as transfer duty as a discount on the purchase price for the property.
  • If the sale of the property is one which is a VAT transaction and the purchaser is registered for VAT purposes, the purchaser is entitled to claim the VAT which forms part of the purchase price of the property as a VAT input. This effectively means that the purchaser will get a credit for this amount from the Receiver of Revenue on the purchaser’s VAT when the purchaser submits the purchaser’s next VAT return. The Receiver of Revenue may conduct a VAT audit on the purchaser before allowing the input particularly if any monies are to be paid by the Receiver of Revenue to the purchaser. Sometimes the audit does not take place if there is no actual payment of monies from the Receiver of Revenue to the purchaser.
  • If the purchaser is a VAT vendor but the seller is not registered for VAT, the purchaser is entitled to claim the transfer duty which the purchaser has paid on the transfer of the property as a VAT input. Effectively therefore the purchaser will recover the amount of the transfer duty from the Receiver of Revenue. Again the same will be by way of a claim for a VAT input on the purchaser’s next VAT return and again the Receiver of Revenue may decide to audit the same prior to allowing the claim or paying a refund. Normally the Receiver of Revenue will not allow the claim unless he has received proof that the transfer has actually taken place and would normally require a copy of the transfer duty receipt as proof that the actual transfer duty was paid. One should therefore make arrangements with the conveyancing attorneys to expedite the relevant documentation after the transfer has been registered in order that the purchaser can obtain the relevant documentation as soon as possible to support a claim for the return of the transfer duty in the form of a VAT input.
  • In the event that the property forms part of a business and the business is sold as a going concern, if both the purchaser and the seller are registered for VAT purposes, then VAT will still be payable but the transaction would be zero rated. In other words effectively no VAT or transfer duty would be payable on the transaction. To qualify however the assets which are necessary to carry on the enterprise must be disposed of by the seller to the purchaser and the enterprise must be an income earning activity on the relevant effective date.

It should be emphasized that if one is in doubt one should always first discuss the matter with an attorney as incorrect advice could be harmful for the parties involved. (see the Transfer Duty Act, 1949).

 

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26. To enable property transfer, who must supply a Bore beetle Certificate and Building Plans for any improvements done?

 

Bore beetle Certificate

  • Banking institutions, with regards to beetle borer certificates, now tend to render beetle certificates to be a prerequisite, suspensive condition to be furnished to the bank before bond registration proceedings will be resumed.
  • If the furnishing by the seller of a bore beetle certificate is not a condition of the Deed of sale then it is the purchaser’s responsibility to obtain the same & the purchaser bears the costs thereof.
  • The reason being that the suspensive condition was duly fulfilled upon the purchaser qualifying for the same & the final bond grant being issued. The specific terms & conditions of such bond grant are irrelevant to the seller unless specifically provided for in the Deed of sale.
  • See infra (below) a proposed clause which clearly sets out that the purchaser is responsible for any conditions that need to be fulfilled in terms of his/her bond grant

"This entire agreement is conditional upon the Purchaser or the Agent on behalf of the Purchaser being issued with a quotation (as referred to in the National Credit Act 34 of 2005) by a Financial Institution for a loan in the sum of R.......... or such lesser amount as the Purchaser agrees to in writing, on or before the ........ Such loan is to be secured by a mortgage bond to be registered over the property or any other property as indicated by the Purchaser simultaneously (or before in the case of another property being the subject of the mortgage bond) with transfer. This condition shall be deemed to be fulfilled upon notification by the Financial Institution to the Purchaser or his Agent of a quotation having been issued regardless of any conditions attaching to such quotation or attaching to the loan agreement that follows the quotation between the Purchaser and the financial institution, the purchaser undertakes & accepts liability for any conditions that need to fulfilled in terms of such quotation. The purchaser undertakes and agrees to do all such acts that may be necessary to obtain such loan and in particular to complete the necessary application for such a loan."

Building plans – recently the High Court ruled that a purchaser can expect that all improvements are in accordance with approved building plans. In terms of this decision the court held that Sellers give an implied warranty that improvements are in accordance with approved plans - in other words even if the deed of sale is silent on this point, approved plans must be in place. Should the bank call for approved plans the seller will be obliged to give his co-operation to obtain the same and if necessary do whatever is required to have the said plans approved. It is therefore important that a seller ensures that approved plans are in place when marketing his property.

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27. Is compliance to FICA requirements compulsory for bond registration?

 

  • It is essential to remember that the acceptance criteria of the banking institutions in terms of FICA are more stringent & non-fulfilment of the same will result in lodgement not taking place.
  • Before the bond registration Attorney can lodge, all the signed documents & FICA must be submitted to the bank for approval. Should documents be incorrectly signed and or FICA documents are outstanding, the bond attorney will not be able to lodge therein resulting in a delay in registration of transfer.
  • Copies of id’s, marriage certificates, proof of address & anti nuptial contracts must be made by making a copy from the original Id document (no faxed copies are permissible).
  • Estate agents are independently required to call for FICA documents at the outset of marketing the said property and or liaising with prospective purchasers’.
  • All related parties (i.e. the banks. Estate agents & attorneys) are all required to obtain the said FICA documentation. The legislation regulating the FICA requirements render the duty & responsibility thereof as independently being fulfilled. In other words the estate agent, mortgage consultant & Attorney need to have attended to obtaining the FICA documentation.

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28. EWC: Is an Electrical Wiring Certificate still a pre requisite for property transfer?

 

  • In terms of the new Electrical Compliance Certificate regulation, which came into effect on the 1st of May 2009, the previous transferring of EWC from seller to purchaser (provided that no alterations had taken place) has fallen away
  • The onus remains on a property owner to have a valid EWC. The only exemption is, for an owner of a property, where the property existed prior to 23 October 1992 and where there was no change of ownership since 1 March 1994. Remember however that such an owner will still have to furnish the purchaser with a valid certificate should the owner decide to sell.
  • The owner can now contract with a lessee that the latter takes responsibility for the certificate, provided this issue is clearly dealt with in terms of the lease agreement.
  • The certificate will remain valid for an indefinite period but with the important change that, should an owner decide to sell, the certificate may not be older than two years.
  • The certificate will also lose its validity once any change or addition has been effected to the property. A new certificate incorporating the changes will have to be issued.
  • The test certificate now has to accompany any new EWC.
  • The purchaser (or bondholder) cannot demand a new certificate. Remember however that parties remain free to contract in this regard. In other words, a purchaser can still make it a condition of his/her offer that the seller has to provide a new certificate (even if a valid certificate is in place).

In summary then ensure when you market your property that:

  • a valid certificate not older than two years is in place covering the whole installation
  • a test certificate accompanies a new certificate
  • it is clearly stipulated in the deed of sale if a new certificate needs to be issued.

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 29. What is the Electric Fence System of Compliance (EFC)?

 

It is common knowledge that a seller must provide the purchaser with an electrical certificate of compliance, before the property can be transferred. What is less known that since 1 October 2012 that if the property being sold has an electrical fence system, then a separate electric fence system certificate of compliance must be issued to the purchaser by the seller – if therefore you intend purchasing a property with an electric fence, include reference to the electric fence certificate of compliance in the Offer to Purchase.

In terms of the legislation, an electric fence certificate of compliance will be required where:

  • a new system is installed, an upgrade or repair is effected to the system or
  • there is a change of ownership of the property on which the system exists and
  • the new installation, upgrades, repair or change of ownership takes place after 1 October 2012.
  • it is not required that a new certificate be issued each time the property subsequently changes ownership, unless an upgrade or repair has been effected to the electric fence system since the issue of the previous electric fence system certificate.
  • Body Corporates can do inspections on behalf of the owners and issue certificates to all the owners, who can then transfer the certificate to the purchaser, provided that the Body Corporate confirms that no upgrade or alteration has been made since the issue of the certificate.

 

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30. Can I be held liable for historic municipal debts on my property?

 

Yes, according to a recent Supreme Court of Appeal decision property owners can be held liable for historical municipal debts dating back 30 years. A local authority can now take legal action against the current owner of any property for any municipal debt incurred by any previous owner over the last 30 years with respect to property rates, refuse and sanitation charges, and 3 years in respect of electricity and water supply charges.

This legal action can go as far as attaching the property and selling it to recover the debt that is being claimed. Legal commentators have expressed the hope that this decision by the SCA that this ruling wil be overturned by the Constitutional Court. Consult with a lawyer to find out whether there are any historical municipal debts associated with the property you may be considering buying – and indemnify yourself (as the purchaser) against any historical municipal debts before taking transfer.

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