The Sale of Immovable Property. Agreement of Sale – a written agreement, in which the Purchaser, the Seller and the immovable property as well as the purchase price are specified, is essential to constitute a binding agreement of sale. A Deed of Sale must be signed by both the Purchaser and the Seller or a person who is authorized by such party in terms of a written Power of Attorney. A verbal contract for the sale of immovable property is unenforceable.
Transfer of the property – on receipt of the Agreement of Sale the conveyancer takes the necessary steps to effect registration of transfer of the immovable property in the relevant Deeds Office. The Purchaser and the Seller will be required to call at the offices of the Conveyancer to sign the transfer documents which have been prepared by the Conveyancer and which will enable him to do the transfer.
The Conveyancer requires the following:
- From the Seller
- Particulars in respect of marital and solvency status
- Particulars of bond holder
- Valid electrical wiring certificate
- FICA documents – see section on FICA for more information
- From the Purchaser
- Particulars in respect of marital and solvency status
- Particulars concerning the identity of the attorney transferring the Purchasers Property (if applicable)
- Particulars of the bond granted (if any)
- FICA documents – see section on FICA for more information
- From the existing Bondholder
- Cancellation figures and Title Deed
- Particulars of 2nd or further bond holders
- Particular of attorneys attending to the bond cancellation
- From the Purchaser's transferring attorney
- Confirmation that the transaction is proceeding
- Particulars of estimated amount available
- Feasibility of linking matters in the Deeds Office for simultaneous registration
- From the Estate Agent
- Confirmation of payment of the deposit, the bond grant and relevant information.
- Upon receipt of the documents referred to above
- Transfer and / or bond documents are drawn
- Accounts prepared for both Seller and Purchaser
- Both Seller and Purchaser telephoned to arrange appointment for signature
- The Purchaser is requested to pay the balance of the purchase price, costs and disbursements.
- Guarantees are requested from the bond attorney
- After signature of documents by both Seller and Purchaser and payment made of disbursements by Purchaser
- Obtain transfer duty receipt
- Obtain rates clearance certificate
- After receipt of guarantees
- Forward guarantees plus payment of bond cancellation costs to the existing bondholder's attorneys
- After receipt of clearance certificate and transfer duty receipt
- Liaise with the relevant parties to arrange lodgement in the Deeds Office
- Transfer is effected in the Deeds Office
- After Registration
- Advise all parties of registration
- Present guarantees for payment
- Obtain payment of balance of deposit (if applicable)
- Do final account
- Upon receipt of payment i.t.o. guarantee presented
- Finalise the accounts of the Seller and Purchaser
- Effect payment to parties
- Upon receipt of documents from Deeds Office
- Forward Title Deeds to bondholders for safekeeping, or if no bond, arrange with
- Purchaser to collect documents
What Causes Registration Delays?
- Lost Title Deeds
- Delay in receiving instructions from the bank.
- When client neglects to sign documents and pay costs when requested to do so.
- Where shortfalls occurs on either side or the parties neglects to pay such shortfall on request.
Who is responsible for the Electrical Compliance Certificate?
It is the Seller's responsibility to hand a valid Electrical Compliance Certificate to the Purchaser, unless otherwise agreed between the parties.
Will I get a refund from the Local Authority after registration?
This is a lengthy process at best but after registration the Local Authority will furnish the Seller with a refund.
Why should a Rates and Taxes Clearance Certificate be obtained?
Legislation requires a Clearance Certificate from the Local Authority needs to be lodged simultaneously with Transfer Documents, to prove that the Rates and Taxes have been paid.
What is Capital Gains Tax?
When is CGT levied – with effect from the 1st October 2001, liability for CGT occurs when an affected capital assets is disposed of, for example the sale of an immovable property. No CGT liability arises unless such a disposal occurs.
What is an affected capital asset – an affected capital asset is property of any kind, including movable and immovable, tangible or intangible assets, excluding trading stock and mining assets qualifying for an income tax deduction as capital expenditure.
Primary Residence and CGT – There is a primary residence exclusion of a gain of up to R1 000 000.
A primary residence must be a structure, including a boat, caravan or mobile home, which is used as a place of residence by a natural person.
A natural person, or special trust, must own an interest in the residence, and the natural person with an interest in the residence, beneficiary of the special trust, or spouse of that person / beneficiary must ordinarily reside in the home and must use it mainly for domestic purposes as his / her ordinary residence.
Where the primary residence, together with the land it is situated on (including unconsolidated adjacent land) is disposed of, the R1 500 000 exclusion will only apply to land:
- To the extent that it does not exceed 2 (two) hectares
- Used mainly for domestic and private purposes together with the residence, and disposed of simultaneously and to the same person as the residence.
Criteria for the Primary Residence exclusion – The exclusion of Capital Gains Tax will not apply to:
- Any capital gain in excess of R1 500 000
- Property used for domestic or private purposes, in excess of 2 (two hectares)
- Any capital gain for the period on or after the valuation date when the person was not ordinarily resident in the primary residence
- A residence held through a company, closed corporation or trust
A CC or private company is therefore not entitled to ay deduction or exemption.
Calculation of CGT or losses – Capital Gain or –loss is the consideration realized (or deemed to have been realized) upon the disposal of an affected asset/s LESS the base cost of that same asset.
Base cost – The base costs will be the sum of the valuation date value and qualifying costs incurred after the valuation date (for assets acquired before 1 October 2001). The valuation date value, depending on the information and records available, can be determined by using anyone of the following methods:
- Market value of the asset on 1 October 2001, e.g. valuation by an estate agent. This valuation must have been done on or before 30 September 2003.
- The time-apportionment base method
- 20% of the proceeds from the disposal
For assets acquired on or after 1 October 2001 -The base costs is the price paid for the asset, plus certain other costs incurred that are directly related to buying it, selling it or improving it. The following can be included in the calculation of an asset's base cost:
- Acquisition costs
- Incidental acquisition and disposal costs
- Capital costs to maintain title and rights in and to an asset
- Improvement and enhancement costs
- Costs of ownership of – assets used exclusively for business purposes, listed shares and units in a unit trust scheme.
Costs that can not be added – borrowing costs, raising fees, rates and taxed, insurance and costs of repairs and maintenance.
What is Fica?
The Financial Intelligence Centre Act aims to combat money laundering in particular by establishing a statutory body (Financial Intelligence Centre) and imposing a number of duties on certain institutions and professions (Accountable Institutions) such as attorneys, banks, public accountants, investment advisors and estate agents.
Certain of the duties imposed are:
- Proof of Identity
- Proof of Residential Address
Money laundering is a serious problem worldwide, involving vast sums of money. It has been a statutory offence for just over ten years in South Africa, but not much is known about the phenomenon and even less about the methods employed in South Africa to launder ill-gotten gains.
Contravention of the Act constitutes an offence for which stiff penalties are imposed, ie. 15 years imprisonment and fines up to R10 million can be imposed on accountable institutions that fail to comply with their duties under the Act.
To whom is Transfer Duty Payable and How Much?
Transfer Duty is not to be confused with Transfer Costs or Fees. Transfer Duty is a tax payable to the government by the Purchaser, prior to transfer.
Transfer Duty will be exempted if the purchase price / value is under R500 000 or when the Seller is a registered Vat Vendor and the property is being sold as part of a going concern.
Penalty Transfer Duty is payable if same is not paid to the Receiver of Revenue within 6 months after the date of acquisition of the immovable property.
Transfer Duty is calculated on the value of an immovable property (purchase price or market value whichever is the highest).
Transfer Duty is calculated as follows:
When the purchaser is a LEGAL ENTITY (i.e. Trust, Close Corporation and / or Company)
8% of the Purchase Price
When the purchaser is a NATURAL PERSON
0% up to R500 000
5% on the balance between R500 001 and R1 000 000
8% on the balance above R1 000 001
What kinds of costs are involved in a normal transaction?
The costs relating to the transfer of fixed property fall into the following categories:
Transfer Fees
Bond Fees
Transfer Duty or VAT
Rates and Levies
Deeds Office Levies
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