Being financially ready for a property transaction

Being financially ready for a property transaction will ensure that the process runs smoothly and that there are no monetary surprises.

During a property transaction both sellers and buyers have certain responsibilities and obligations that they need to address before the home can change ownership.

The buyer

Apart from the deposit requirements that most buyers will have to adhere to in order to obtain finance, there are several other costs that they will need to prepare for. These costs would include transfer fees and bond costs, if registering a bond with a financial provider.

The South African Government levies a tax on property transactions that is paid when a property is bought and transferred into a buyer’s name. If buying vacant land, the transfer duty is based on the value of the land. However, transfer duty on an existing home will be based on the value of the land and building. Transfer duty will not be charged on homes under R950 000.

The transfer duty levy amount is payable to the conveyancers approximately one month before transfer, so buyers will need to have the money saved up before they start looking at homes. Companies, close corporations and trusts pay the same transfer duty as natural persons.

In the instance where the seller is VAT registered and the sale forms part of the seller’s enterprise, then no transfer duty is payable. The purchase price of the property could either be recorded as VAT inclusive in the contract or VAT exclusive, depending on the contract terms.

Although dependant on the agreement between the buyer and seller, if the buyer decides to move into the property before transfer occurs, they are also likely to be liable for paying occupational rent to the seller. The occupational rent amount must be predetermined based on fair-market value and stipulated in the offer to buy.

The seller

Apart from the agent’s commission, the seller will be responsible for obtaining all clearance certificates for the property. These would include an Electrical Certificate of Compliance (ECOC) – which must cover all electrical installations – water and plumbing certificates, gas certificate, electrical fence and beetle certificates if applicable. If no repairs are required, the cost of obtaining all the certificates should not be too expensive .However; these costs depend on the service provider used.

Although it will largely depend on the agreement of sale between the buyer and seller, all other repairs around the house that need to be completed will be for the seller’s account. The costs of such repairs will be solely reliant on what needs to be done as well as the contractors that the seller chooses to use.

The seller will be required to pay a bond cancellation fee also in the region of R3 000 to R4 000, which is payable to the attorney and is applicable even if the bond is at a nil balance. It is important to note that the seller will need to provide their bondholder with written notice to cancel their bond.

As a general rule, sellers will have to pay a three months’ advance on their rates and services, as well as any arrears owing on any levies or their homeowner’s association fees.

If you are considering a property transaction and are unsure of the related costs, consult Randles Attorneys who will provide you with accurate and professional advice.

Whilst Randles Attorneys is well known for attending to property related matters, they also specialise in commercial law, contractual law, labour law, Deceased and Insolvent Estates and generally litigation. Randles Attorneys service extends to correspondents in litigation matters and lodging agents for conveyancers practising throughout South Africa.

The contact details are as follows:

  1. Litigation department: litigation@randles.co.za
  2. Conveyancing and Estates department: info@randles.co.za
  3. Agency conveyancing department: agency@randles.co.za

Our departments are just an email away and ready to assist.  We look forward to hearing from you.

By: Randles Attorneys

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