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How do Property Transfers Work: A Step-by-step Guide

  • Latest News
  • September 23, 2021
How do Property Transfers Work: A Step-by-step Guide

A property ownership transfer refers to the legal, financial, and administrative process of changing ownership of an immovable property from one person to another – from the seller to the buyer. In South Africa, SARS (South African Revenue Service) requires a tax payment called ‘transfer duty’ when an owner transfers their property to a new owner during the process of sale. Property transfer, or conveyancing, is a necessary part of being a property owner.

The buyer of the property is responsible for payment of transfer duties, transfer fees and other costs such as conveyancing fees. Transfer fees are paid to the conveyancer. The cost of transfer duty depends on the value of the property. During the budget speech earlier this year, the minimum amount payable without transfer duties was increased from R900 000 to R1 million. Therefore, a buyer does not have to pay if the amount is under R1 million. Sellers are responsible for Estate Agents’ commission (which is a percentage of the selling price of the property), municipal rates, all compliance certificates and necessary home repairs. If a seller has a bond on their property, they are liable for bond cancellation fees.

As a homeowner, you are responsible for payment of all municipal rates and taxes on your property. In order to prove that all payments of rates and taxes are up to date, a rates clearance certificate is needed. If your property is located on an estate, a homeowner’s certificate is also needed as per the Home Owners Association. If a buyer purchases a property from a developer that is VAT approved, and not a homeowner, they will pay VAT instead of transfer fees. VAT is usually included in the property price for developments. A buyer will never have to pay both VAT and transfer duty.

 

Below is a table of current transfer rates based on the value of a property.

Value of the PropertyRate
R1 – R1 000 0000%
R1 000 001 – R1 375 0003% of amount above R1 000 000
R1 375 000 – R1 925 000R11 250 + 6% of the value above R1 375 000
R1 925 000 – R2 475 000R44 450 + 8% of the value above R1 925 000
R2 475 001 – R11 000 000R88 250 + 11% of the value above 2 475 000
R11 000 001 and moreR1 026 000 + 13% of the value above R11 000 000

 

Parties Involved in Ownership Transfers

BuyerThe purchasers of the immovable property
SellerThe seller of the immovable property
Estate AgentA property professional registered with the Estate Agency Affairs Board (EAAB)
Conveyancing/ Transfer AttorneyA conveyancer is a professional who is qualified to draft transfer documents for the registration at a Deeds Office.
Bond AttorneyA bond attorney sees to the registration of a mortgage bond in a buyer’s name.
Cancellation AttorneyA legal professional certified to cancel mortgage bonds
BankRegistered Financial Service Provider
Deeds OfficeA property registry office that is responsible for deeds registration and management.
Homeowners AssociationA HOA is a legal entity that a homeowner automatically belongs to if the property is located on an estate or in a complex. Residents elect a board of Trustees who manage it.
Compliance Officers for Occupational Health and Safety Act (OHSA)
  • Qualified and registered electrician (electrical)
  • Qualified and registered plumbing contractor (water installation certificate)
  • Qualified and registered wood borer inspectors or SAPCA (South African Pest Control Association) (Beetle-free certificate in coastal areas in SA)
  • HOAs or bodies corporate (electric fence)
  • Authorised person registered with the Liquefied Petroleum Gas Safety Association of Southern Africa (LPGAS)
SARS (South African Revenue Service)Collection of revenue due, compliance of tax and customs legislation.
Local AuthorityThe administrative body in local government or municipality
BondholderThe lender of a bond

 

Property Ownership Transfer Documents

DocumentDescription
Power of AttorneyA conveyancing attorney is given a Power of Attorney document to sign by the seller so that they can act on the seller’s behalf in the Deeds Office.

 

Draft DeedThe conveyancing attorney drafts a new title deed for the buyer. It will be submitted to the Deeds office for registration.
Transfer Duty ReceiptThe Conveyancing Attorney will apply for a VAT Clearance Certificate or Transfer Duty receipt which must be issued by SARS thereafter for the transfer.
Rates Clearance CertificateTo prove that the seller has paid their rates and taxes up to date, and all arrears are paid, a Rates Clearance Certificate is issued to the conveyancing attorney by the local authority. The certificate usually takes up to 4 days to process. Valid for 60 days.
Homeowners CertificateIf the property is located on an estate or within a complex, the Conveyancing attorney will request a Clearance Certificate and levy clearance figures are from the Home Owners Association (HOA). All costs to the HOA, etc. must be paid. The new owner will then agree to become a member of the HOA.
FICA DocumentsAccording to the Financial Intelligence Centre Act, both seller and buyer are required to submit FICA documents. The document type depends on whether the seller or buyer is a natural person, company, or trust.

 

Bond Settlement Figures and GuaranteesBond Settlement Figures: bond cancellation fees

Guarantees: that purchasing price will be paid after registration at the Deeds Office.

The Transfer Attorney will request Bond Settlement Figures from the seller’s bank or Cancelation Attorney on their behalf. The Bond Attorney will provide Guarantees to the Transfer Attorney. Once the seller’s bond has been cancelled, the buyer can have their bond documents signed – provided that they have complied with all the terms and conditions. (Timeframe 1-30 days)

Compliance CertificatesCertificates for Electrical, Electric Fence, Gas, beetle-free (coastal homes), and Water installation must be obtained by authorities before registration. The offer to purchase may specify which certificates are needed. (Timeframe 10-21 days)
Documents required from all parties

 

  • Copies of identity documents
  • Proof of residence
  • Income tax number or VAT registration number
  • Marriage certificates (property is in community of property, FICA documents for the spouse)
  • Antenuptial agreement or Divorce preparations

 

Exceptions to Transfer Duty

ExceptionDescriptionDocuments required
InheritanceHeirs and beneficiaries who have been bequeathed a property by the deceased
  • Transfer Duty Exemption Certificate
  • Proof of Inheritance
  • Section 42(1) Certificate
Divorce

Determine whether a Power of Attorney must be signed
  • Power to Transfer
A cancelled transactionCancelling an agreement of sale

Marriage in community of propertyDetermine whether a Power of Attorney must be signed. In an instance when the heir was married out of community of property to the deceased.
  • Power to Transfer

 

Property Ownership Transfer: The Steps

Step 1: Offer to Purchase/Contract of Sale/Sales Agreement

The first step in the transfer process is an agreement of sale, also known as an Offer to Purchase, a Contract of Sale or a Sales Agreement. It is a binding contract between the seller and buyer of property. An attorney or estate agent will draft an offer to purchase for the buyer. The immovable property details, the price, payment details and the terms and conditions of the sale must be stated and signed by the seller and purchaser before starting the transfer.

Seller Information/Documents:

  • Bondholder’s information
  • Power of attorney information
  • Bond Cancellation Attorney details
  • Cancellation figures and Title Deed
  • VAT Declaration (if applicable)
  • Personal Details i.e. biographical details

Buyer Information/Documents:

  • Transfer Attorney details
  • Bond information i.e. Bank/bondholder, Bond Attorney, etc.
  • Transfer duty or VAT declaration
  • Personal Details i.e. biographical details

Step 2: Appointment of Three Attorneys: Transfer, Bond, and Cancellation Attorneys

2.1 Buyer Appoints Conveyancer/Transfer Attorney

A conveyancing/transfer attorney needs to be appointed for legal, administrative and management purposes.

2.2 The Buyer Chooses a Bank/Bondholder and liaises with a Bond Attorney

The buyer needs to secure a loan/bond at a bank or registered financial service provider. The financial service provider can appoint a Bond Attorney for the buyer to facilitate the bond registration. The buyer is responsible for the Bond Attorney’s fees.

2.3 The Transfer Attorney liaises with a Cancellation Attorney to cancel the seller’s bond with bondholders, and receives settlement figures and guarantees information. The Cancellation Attorney directs the original title deed to the Transfer Attorney. The seller’s bank/bondholder cancels their bond. The Attorney requests permission for lodgment to the Deeds Office from the bank.

2.4 The Transfer Attorney liaises with the Bond Attorney to have a bond in the buyer’s name for the property.

Step 3: All outstanding documentation is collected

3.1 The Transfer Attorney collects compliances certificates from the Seller.

  • Electrical wiring certificate
  • Electrical fencing compliance certificate
  • Gas compliance certificate
  • Beetle-free certificate (if applicable)
  • Water installation certificate

3.2 Transfer Attorney pays the Home Owners Association (HOA), the body corporate or the local authority final rates and utility costs.

3.3 The Transfer Attorney requests the documents from both parties:

  • FICA for both the buyer and seller (Identity documents required)
  • Income Tax numbers

Step 4:  The Transfer Attorney drafts a deed of transfer and prepares bond documents

Step 5: The buyer pays the transfer duty, Transfer Attorney fees and other expenses

5.1 Transfer Attorney pays SARS the transfer fee – receipt can take up to 35 days.

5.2 All documents are lodged and processed at the Deeds Office (given that there are no issues, paperwork errors, and resubmission is not needed). This can take up to 15 days or more.

Step 6: Accounts are settled

6.1 The Bond Attorney advises the bank when the registrations are confirmed.

6.2 Guarantees are paid to the Transfer Attorney by Bond Attorney.

6.3 Transfer Attorney forwards funds paid by the Buyer to Seller and commission to the Property Professional.

Tip:

  • Before you look for a property for sale, be aware of the costs: Transfer fees, rates and levies clearance, stamp duty on bond, Deeds Office levy, bond fees, transfer duty or VAT.

To work out your bond affordability click here

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