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Property.CoZa Glossary

If you're new to the industry or just need a refresher course, you've come to the right page. The Property.CoZa Real Estate glossary is your ultimate guide to commonly used jargon, terms, and words that every real estate professional should know. So grab your favorite drink and start scrolling.

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A

Absorption Rate

A ratio reflecting the number of sold properties in an area versus the number for sale.

Abstraction Method

By comparing two properties in the same property market, this method is used to estimate the value of a property.

Acceleration Clause

A term of a bond agreement allowing the bank or funding party to demand payment of the balance of the loan with immediate effect.

Addendum

An additional section added to an original sale contract including specific points agreed to by relevant parties.

Additional Principal Payment

An amount paid over and above the mandated monthly loan amount by the borrower. This payment reduces the loan amount and can shorten the period of the loan.

Adjustable Rate Mortgage (ARM)

A bond where the bank or money lender can adjust the interest rate according to a specific index (usually the Reserve Bank Repo Rate).

Administration Fee

A bank fee covering the initial costs of a home loan application.

Affordability Score

The bank’s assessment of whether a buyer can afford a property based on income (top tip: use the Property.CoZa affordability calculator and bond calculator as a starting point in assessing affordability

Agent

A property professional who has completed a qualification with the Institute of Estate Agents of South Africa. Agents receive a certificate annually that confirms their compliance with the code of conduct. Find out more about selecting an estate agent.

Agent’s Commission

A percentage of the selling price paid by the seller to the agent for services performed in selling a property.

Amortisation

The process of applying monies from monthly loan repayments to interest and payment of the capital loan amount.

Annexure

An addition or appendix to a legal document.

Annual General Meeting (AGM)

Body Corporate and Homeowner’s Associations are required to hold a yearly meeting with all homeowners, no later than four months after the financial year end, in order to present the auditor’s report, to discuss the budget for the following year as well as relevant insurance required, and to elect the trustees for the coming year.

Appraisal

A market-related assessment of the value or an estimate value of a property calculated by an estate agent. This can be requested by the seller, a buyer or a bond originator.

Asking price

The property price chosen by a seller and advertised to potential buyers.

Assessed value

A calculated value of a property which is conducted by a professional valuator for local municipalities to assess the taxes a homeowner will pay on the property. This is commonly known as a municipal valuation and may not be the same as the market-related value applied when the property is presented to the market for sale.

Auction

A sale that is open to the public and facilitated by an auctioneer. Goods or property are sold to the highest bidder. Read more about auctions.

B

Balloon Mortgage

A bond where the balance of the loan needs to be paid at an agreed point in the future.

Beetle Certificate

In some regions of South Africa, an entomologist certificate is required to check for damage of wooden structures in the house so that the buyer is aware, and any reparations can be made before transfer of a property can take place.

Bid

A specified amount offered by a prospective buyer during an auction.

Bill of Sale

A document confirming transfer of title from one party to another.

Blended Interest Rate

Where a loan is refinanced at a different interest rate to the original loan, resulting in a debt payable at an interest rate between the old and the new.

Body Corporate

The legal entity that exists to manage and control the common property, made up of all owners of units of a Sectional Title Scheme.

Body Corporate Manager

See Managing Agent.

Bond

(mortgage or home loan): A specified amount of money lent by a registered financial service provider. A defined time is given for the borrowed amount to be paid back with accrued interest. This article may provide more details on mortgage bonds.

Bond cancellation

Conveyancer’s fees paid for the cancellation of an existing bond over the property. Notice to cancel a mortgage bond requires 90 days’ notice to avoid penalties.

Bond costs

An amount payable by the buyer to the attorney registering the bond for the registration of the bond at the Deeds Office.

Bond Originator/Consultant

A mortgage broker providing service for the buyer in their application for finance to the banks.

Buyer’s market

When there is an excess in the supply of properties for sale and less demand for properties from buyers, prices become more attractive as Seller’s may be forced to lower their prices to compete in the market.

C

Cap

Under an ARM, the limitation on interest rate fluctuations that may take place at different stages during the lifespan of the loan.

Capital Gains Tax (CGT)

A tax charged on the profit earned from appreciation of a property from the time of purchase. This article may provide more details on CGT.

Carrying Charges

The amount of money it takes to maintain a property over time

Caveat

A caveat is simply a warning that is acquired by a person or organisation through a statutory injunction to protect their ownership of a property and registering this on a Title Deed in terms of the Real Property Act 1900. A caveat can prevent the registration or changes to a Title Deed unless the person or organisation who registered the caveat is made aware and agrees to these changes, e.g. a mortgage bond.

Certificate of Occupancy

Documents issued by the municipality confirming that a new building complies with relevant regulations.

Chairperson

The chairperson elected by the board of trustees and has the primary role of chairing owner and trustee meetings. He/she is elected by the trustees at their first meeting after the AGM.

Clearance Certificate

A document issued by the municipality confirming that all rates and taxes are paid at the time of transfer.

Commission

A percentage of a property transaction amount that a property professional is owed for their service surrounding a completed property transaction.

Common Use Area/Property

Undivided parts of a commonly owed property, such as stairwells, passages and walkways, parking areas, gardens, swimming pools, etc. These common use areas are maintained at a cost to all the owners of a complex via levies.

Comparative Market Analysis (CMA)

The method used by Property Professionals to calculate a market related price to present a property to the market, based on comparative properties in the same area.

Compliance Certificates

Certificates that the Seller is required to obtain prior to lodging the property for transfer at the Deeds Offices, please see other certificates required. Read more about compliance certificates in this article.

Conditions of Title

Conditions on a property that limit the rights of free ownership (e.g. servitudes).

Conveyancing

The Conveyancing process has several steps starting with a signed Offer to Purchase through to transfer of the property from the seller to the buyer via registration at the Deeds Office. This article may provide more information on the conveyancing process.

Cooling-off Clause

The five days following the signing of the Offer to Purchase, during which time the buyer is entitled to cancel, in under R250 000.

Costs

There are always costs, whether you are buying, selling, leasing or renting:

  • Seller’s Costs: Capital Gains Tax or Income Tax, agent’s commission (if applicable) and municipal rates, in advance. 
  • Buyer’s Costs: Factor in the costs of this process using a rule of thumbs of approximately 10% of the purchase price which includes transfer duty, legal costs, bond registration costs and Deeds Office Costs. The Purchase Price will also be called for well before the registration date.
  • Lessor’s Costs: The owner will incur administrative costs, Managed Fee or Procurement Fee from agency, insurance and maintenance costs, advertising costs (for private leases)
  • Lessee’s Costs: The tenant will be required to provide a deposit, rental in advance for the month, maintenance costs (i.e. repairs to the property if damaged) and lease costs (where applicable. A credit check cost may be incurred before the lease is signed.

Credit Check

A tenant will be required to provide information to an agent or landlord for them to conduct a thorough credit check to provide comfort that the rental will be paid on time and that the applicant has the financial resources to conclude the rental agreement.

D

Damage Deposit

Renters of property are normally required to provide for a damage deposit amounting to one to two month’s rental which is kept in a Trust Account by the agency or landlord to pay for any damages that may occur during their residency.

Debt Coverage Ratio

Assessing income versus loan payments on a property to ascertain if it can pay for its own debt.

Debt-to-Income Ratio

An affordability calculation reflecting a buyer’s monthly repayment amount and monthly income as a ratio.

Deeds Office

In real estate, the Deeds Office is where property is registered, and records are managed and maintained, it is the South African property registry.

Distressed Property

A steal! A property listed for sale far below its current value or value following improvements.

Domicilium

A given address of a party to a contract which will serve as the address for written legal notice.

Dual/Joint Mandate

Permission given by a seller to two different agencies to market and sell their property.

Due on Sale Clause

A provision of a bond requiring full repayment of the balance of the loan to the lender on occasion of sale.

E

Earnest Money Deposit

A deposit put down as an indicator of seriousness by the buyer.

Electrical compliance certificate

Every owner of property must be in possession of this certificate issued by a qualified electrician. This certificate confirms that all installations on the property from its supply point are safe.

Encroachment

A development that unlawfully extends on to another person’s property.

Equity

The value of a property to its owner after subtracting loans on the property from its value.

Escape Clause

A clause of the sale agreement that allows the seller the right to cancel the agreement where he receives a higher offer while the buyer waits to sell his or her property, also known as the ‘72 hour clause’.

Exchange

The point at which sale agreements are exchanged between buyer and seller – a landmark event in the binding nature of the agreement.

Exclusive Mandate

Permission given by a seller to one agency to market and sell their property exclusively and foregoing their own right to sell their own property.

Exclusive Use Areas

Relating to Sectional Title where specific areas of the common property, which is co-owned by all owners, but may only be used by the owner/owners of a given section with full usage rights, for instance, a parking bay or a balcony.

F

Fall of the Hammer

This is part of the auctioneer process where the gavel signals the end of the auction, and the sale of the item or property goes to the highest bidder.

FICA

This is the common terms for the Financial Intelligence Centre Act 38 of 2001, which requires any institution that is party to a financial transaction to gather specific information to keep on record relating to the parties, i.e. a buyer and seller are required to provide a copy of the National Identity Document or Passport and proof of residence in the form of a rate account or rental agreement.

Fixed Interest Rate

An agreement that interest rates on a loan will not fluctuate with interest rates over an agreed period.

Fixed-Period Adjustable-Rate Mortgage

An ARM with a fixed rate for an initial period, with periodic adjustments thereafter.

Floating Rate

An interest rate on a loan that varies according to a specified rate or index by a set amount.

Fluctuating Payments

Where repayment amounts are changed (according to interest rate changes on loans with variable interest rates.

Forced Sale

When a property is sold as security upon default on a loan repayment.

Foreclosure

When a bank repossesses a property for failure to repay the loan amount.

Fractional Ownership

Shared ownership of a single property on separate Title Deeds.

Freehold

Also known as Full Title, provides for undisturbed ownership of immovable property including the land and the buildings on it.

G

Gas compliance certificate

A certificate that states all relevant connections to the gas supply are up to standard and safe. This is done by an authorised and registered person.

Good Faith Estimate

The anticipated costs of transfer for the purchaser, sent by the transferring attorney.

Growing Equity Mortgage

A fixed-rate bond under which repayments increase based on a pre-agreed schedule, with additional monies being applied to the capital loan and interest amount.

H

Home Inspection

An inspection by a property professional that informs the property valuation process.

Home loan

See Bond

Home Loan Pledge

A document detailing the amount of credit a bank is willing to advance for the purpose of property purchase.

Huur Gaat Voor Koop

‘Lease Goes Before Sale’ principle, which dictates that tenants may remain in occupation of a property after sale until such time as the lease expires.

I

Income Approach

A valuation consideration that assesses the anticipated income-generating potential of a property.

Initiation Fee

An amount charged by the bank for services associated with the initial home loan application.

Inspection

When renting a property, a full inspection is usually conducted by the property professional or landlord and the tenant, to identify any defects that will not be repaired. At the end of the rental term, and outgoing inspection will be conducted to identify any further defects that the tenant will be required to repair at their own cost.

Instant Equity

The difference between a property’s value and the purchase price.

Interest Rate Ceiling

The maximum amount of interest that can be charged on an ARM.

Interest Rate Floor

The minimum amount of interest that can be charged on an ARM.

Interest-bearing accounts

Any deposit paid by a buyer will be put into a saving account, which accrues interest over time. A short-term investment can also be made. This is done by an attorney or real estate agent.

Intern Agent

An agent who is registered at the Estate Agency Affairs Board who is in the process of qualifying and therefore assigned to a Mentor Agent, who is fully qualified.

J

Joint/Dual Mandate

See Dual/Joint mandate

L

Latent Defect

A defect that is not clearly apparent when inspecting a property, and may only be discoverable at a later stage, for instance, a leak in a pool pipe or electrical issues.

Levy

A levy is a payment managed by a Body Corporate for sectional title properties and Homeowners Associations for other complexes and estates. These levies are used to cover the costs of maintenance, security, and repair to common use amenities, and potentially improving property value. Sectional Title levies are generally paid monthly and calculated on the owner’s PQ.

Lien

The retention of property until a debt has been repaid where a tenant has incurred expenses from or made improvements to a property.

Liquidation Value

The estimated value of a property in the event of forced sale or foreclosure.

Lis Pendens

Notice of impending legal action at court around property title.

Loan Plus Costs

A provision that’s especially useful for first-time homeowners, which allows the buyer to borrow more than the value of the property to cover associated purchase costs.

Loan to Value Ratio (LTV)

The percentage the bank is willing to loan for property purchase, calculated from the estimated property value and the required loan amount.

LSM

A Living Standard Measure (LSM) is used to identity the profile of people living in specific neighbourhoods in South Africa. The population is segmented into categories from 1 to 10 where 10 is the most wealth and 1 represents no measurable wealth.

M

Managing Agent/s

In terms of a Sectional Title properties, a person or company appointed to provide scheme management services to a Body Corporate for reward, including specific services to maintain the well-being of the property, the collection of levies and arranging required meetings.

Mandates

A mandate is a contract between a seller and a real estate agency to list, market and sell/rent their property for an agreed commission. There are different types of mandates, e.g. Exclusive, Sole, Joint/Dual and Open and each type of mandate is a commitment to pay commission to the agent in the event that they conclude a contract with a buyer/tenant.

See Comparative Market Analysis (CMA)

Mentor Agent

A fully qualified agent, registered with the Estate Agency Affairs Boards, who oversees the training and support of an Intern Agent who is in the process of qualifying.

Metes and Bounds

The exact boundary points of a property.

Modification

Changes made to a loan agreement without a new refinancing agreement taking effect.

Money Laundering

An illegal act of moving large amounts of money acquired from criminal activity and using legitimate sources to ‘clean’ the money, for instance, paying cash for high value assets.

Mortgage Broker

An intermediary between the buyer and the bank for purposes of securing a home loan, also known as a bond consultant.

Multi-listing System (MLS)

A multi-listing system is a platform provided by a service provider for agents to share their mandated properties with many other agents and agencies who are a part of the MLS. The MLS provides a central database for a specific fee to each agency for this service.

Municipal Land Value

The municipality’s valuation of a property.

Municipal provision for rates and taxes

The municipal rates and taxes is calculated on the location of the property and differs according to the authority of the area in accordance with the valuation of the property.

Municipal Value

Please see Assessed Value

N

National Credit Act

A statute used to oversee the standards and acceptable norms of consumer credit.

Negative Amortisation

Through a process of deferred interest, where the loan amount grows instead of decreases.

Non-Suspensive Sale

This kind of sale means that the buyer does not need to obtain a bond or first sell their existing property before purchasing a new property.

Nuisance

Where one party’s use of land interferes with a neighbour’ s use and enjoyment of his or her land.

Null and void

A legal term meaning the final cancellation or lapse of a contractual agreement. All parties involved return to the positions they were in before they signed the agreement without any further legal obligations to each other.

O

Occupational Rental

The occupation date stated on a contract of sale by be different to the registration date, i.e. a new owner may take up residence before ownership of a property. In this instance, a market related occupation rental will be agreed to be paid by the prospective owner to the owner until registration takes place at the Deeds Office.

Offer to Purchase

A formal document outlining the price the potential buyer is willing to pay for the seller’s property, as well as any other relevant terms and conditions. This written offer is submitted to the seller and the agreement becomes binding by the parties upon signature.

Open Listing

A listing where the commission is only payable if the agent produces a buyer before the seller or another agent.

Option

An offer that remains valid from a pre-determined time and date until a pre-determined expiry time and date.

Order of Sale

The designated order in which a series of lots will be presented for sale at an auction. Similar lots with varying numbers may be grouped together for convenience, so the Order of Sale will not necessarily be in numerical order.

Original Principal Balance

The initial loan amount before any repayments are made.

P

Partial Payment

Reduced loan repayment amount in times of hardship.

Participation Quotient (PQ)

A calculation, based on floor area of a section against the full floor area of the scheme, used to allocate levies in Sectional Title property. The PQ is used to calculate the levies and the owner’s voting value, e.g. the larger the section the higher the levy and voting value.

Patent Defect

A defect that is clearly apparent when inspecting a property, for instance, a cracked window or a broken tile.

Power of Attorney

Permission granted by a legal party for another party to act and make legal decisions on their behalf. This can either be comprehensive or restricted to certain acts and/or lasting only for a certain amount of time.

Pre-Approval

A non-legal term meaning that the underwriter, being a bank, has provisionally approved the borrower’s debt, income, and savings documentation submitted in the process of applying for a loan and has found everything to be in order.

Prime Interest Rate

A preferential interest rate charged by banks.

Principal Estate Agent

A duly qualified estate agent registered with the Estate Agency Affairs Board as the responsible agent required to abide by all applicable laws and regulations.

Property Transfer

When title in the property legally changes from the seller to the buyer, upon registration at the Deeds Office.

Q

Qualified Buyer

A buyer who has qualified for a home loan and has passed the bank’s affordability requirements. Find out more about the benefits of being a pre-qualified buyer.

R

Rates and Taxes

The amounts calculated by the municipality in terms of a property using the municipal valuation, as well as services to the property.

Reducing or Step-Down Rate

The provision that the interest rate will decrease by a set percentage every three to six months over an agreed period.

Registration

The legal process of registering ownership of Title Deeds of a property from one owner to another, once prepared by an attorney and lodged at the Deeds Office. The date of registration is the date on which the transfer is conclude and ownership changes hands.

Rental Housing Tribunal (RHT)

Legal aid and advice is provided for landlords and tenants who raise complains with the RHT and their cases are investigated. Mediation and arbitration are offered and the ruling of the RHT is final.

Repo Rate

The rate at which the Reserve Bank lends money to private banks which, in turn, affects the rate of interest charged to consumers on credit agreements. Read more about the Repo Rate.

Reserve fund

Also known as a sinking fund. Levies paid into this account are saved to cover future costs of capital expenses, e.g. replacing common property roofing or repainting the building.

Reserve price

Before an auction, a seller and auctioneer agree upon an absolute minimum price for the property on sale. The seller is not obliged to sell the property if the bids to not reach the reserve price.

Resolutive Condition

If a clause refers to the terms being null and void, terminate on a given date, etc. the clause will only be in effect until the time given has expired. If the requirement is not met by the given time and date, the contract will be considered terminated.

Restrictive Conditions of Title

Conditions in the Title Deed that restrict improvements or use of the property.

Right of First Refusal

An agreement binding the property owner to offer sale or lease of the property to a particular party before making this available to others.

Rules

The rules that the owners of units and occupiers of sections must follow as set out the Body Corporate or the Trustees.

S

Section

In Sectional Title, each owner is given ownership of a specific Section within a complex and this Section is registered on the Title Deeds, which will also have a copy of the sectional plans attached. These sections can be separately owned from the rest of the property under a separate Title Deed.

Sectional plan

The plans that shows the division of the land and building(s) into sections and common property. A copy of the scheme’s sectional plan will be available from the Deeds Office and should always be attached to the Title Deed of the property.

Sectional Title

Sectional Title is separate ownership of individual units, e.g. flats, apartments, townhouses, etc, in a complex or estate, governed by the Section Title Schemes Management Act 8 or 2021.

Sectional title scheme

Is a piece of land with a building(s) where individual owners own portions of the building(s) and co-own the common property. A scheme can be a vertical block of apartments or a one level row of townhouses which may be attached or detached. A scheme must have a minimum of two sections and can be used for residential or commercial purposes or a mixture of both.

Seller’s market

A seller’s market is often the dream for people looking to sell their property. In short, a seller’s market occurs when the economic conditions and related circumstances create a situation whereby property prices remain high, and demand exceeds supply.

Servitude

A limited real right over immovable property which is registered on the Title Deed and can be transferrable. A servitude gives rights to the holder of the servitude over another person’s property, which may include access right or water rights.

Sole Mandate

A sole mandate is granted by a seller to only one agent or agency to market and sell their property for commission. The seller retains the right to sell their own property with a sole mandate. Find out more about the benefits of sole mandates.

Standard Payment Calculation

The repayment rate at the same monthly amount required to repay the principal debt at the current interest rate.

Suspensive Condition/s

A clause that is included in an Offer to Purchase relating to conditions that need to be met in order to advance with to a final and binding contract. For instance, subject to the sale of the buyer’s property or the granting of a mortgage bond.

T

Title Deed

A legal document that confirms ownership of a purchased property which is registered at the Deeds Office.

Transfer duty

Transfer duty depends on the price of the property. From 2020, transfer duty is only paid by buyers of property over R1 million, and this is adjusted from time to time.

0%: up to R1,000,000

3%: R750,000–1,250,000

5%: R1,250,000–1,750,000

8%: R1,750,000–2,250,000

11%: R2,250,000+

Trustees

The persons elected by the body corporate or homeowner’s association at each AGM to represent all the owners in the complex. The trustees are responsible for the management, administration and maintenance of the common property and they must ensure that all the body corporate or homeowner’s association duties are carried out.

Two-Step Mortgage

A bond with one interest rate for the first five to seven years and another for the balance of the loan term.

U

Unencumbered Property

A property with no title deed restrictions, claims, or liens that act as an impediment to full ownership rights of the property.

Unit

A unit is what a sectional title property owner owns. This is made up of his section (generally apartment/townhouse) and his undivided share of the common property.

Usus

The right to use a property.

V

Valuation

A valuation can only be carried out by a qualified and registered member of the South African Council for the Property Valuers Profession (SACPVP), often contracted by banks or municipalities to provide for property valuations.

Variable Rate Loan

The rise and fall of interest rates payable on a home loan, linked to fluctuations in the prime interest rate.

Variation Agreement

An agreement that the bank may change the interest rate charged without notice.

Voetstoots

A Dutch expression that means “as is.” This clause refers to the condition of a property as it stands at the time of signing the contract and subject to the Title Deed conditions. The seller is cleared of liability and claims that may arise later by the purchaser for any damages that may result of latent or patent defects. Voetstoots should alert a buyer to conduct a proper and thorough inspection of the property prior to signing the contract – buyer beware!

W

Waiver

A legal document whereby the signer voluntarily surrenders or relinquishes certain contractual rights and privileges.

Y

Yield

The monetary return or interest accrued by an investment, taking into account the annual income and its current capital value.

Z

Zoning

Zoning relates to the permitted use and development of property, and the rules and regulations set out by the local authorities of cities and towns to manage the land-use rights in their areas. Zoning can include commercial and residential rights as well as building restrictions.

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