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 Property||Rate|
|R1 – R1 000 000||0%|
|R1 000 001 – R1 375 000||3% of amount above R1 000 000|
|R1 375 000 – R1 925 000||R11 250 + 6% of the value above R1 375 000|
|R1 925 000 – R2 475 000||R44 450 + 8% of the value above R1 925 000|
|R2 475 001 – R11 000 000||R88 250 + 11% of the value above 2 475 000|
|R11 000 001 and more||R1 026 000 + 13% of the value above R11 000 000|
Parties Involved in Ownership Transfers
|Buyer||The purchasers of the immovable property|
|Seller||The seller of the immovable property|
|Estate Agent||A property professional registered with the Estate Agency Affairs Board (EAAB)|
|Conveyancing/ Transfer Attorney||A conveyancer is a professional who is qualified to draft transfer documents for the registration at a Deeds Office.|
|Bond Attorney||A bond attorney sees to the registration of a mortgage bond in a buyer’s name.|
|Cancellation Attorney||A legal professional certified to cancel mortgage bonds|
|Bank||Registered Financial Service Provider|
|Deeds Office||A property registry office that is responsible for deeds registration and management.|
|Homeowners Association||A 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)|
|SARS (South African Revenue Service)||Collection of revenue due, compliance of tax and customs legislation.|
|Local Authority||The administrative body in local government or municipality|
|Bondholder||The lender of a bond|
Property Ownership Transfer Documents
|Power of Attorney||A 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 Deed||The conveyancing attorney drafts a new title deed for the buyer. It will be submitted to the Deeds office for registration.|
|Transfer Duty Receipt||The 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 Certificate||To 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 Certificate||If 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 Documents||According 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 Guarantees||Bond 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 Certificates||Certificates 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|
Exceptions to Transfer Duty
|Inheritance||Heirs and beneficiaries who have been bequeathed a property by the deceased|
|Divorce||Determine whether a Power of Attorney must be signed|
|A cancelled transaction||Cancelling an agreement of sale|
|Marriage in community of property||Determine whether a Power of Attorney must be signed. In an instance when the heir was married out of community of property to the deceased.|
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.
- 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
- 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.
- 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