Are you a buyer or seller navigating the intricacies of a property transaction? If so, you may know about the Offer to Purchase (OTP), one of the most important documents. However, within an OTP, three key terms hold significant weight: transfer date, occupation date, and occupational rental.
According to Gauteng real estate specialist Audrey Luyt, Co-Franchisee of Property.CoZa Benoni, Boksburg and Kempton Park ensuring a comprehensive understanding of these terms is essential for property buyers and sellers to navigate the transaction process smoothly. She unpacks each term and its importance in an Offer to Purchase (OTP), what buyers and sellers need to know and the risks of being ill-informed.

1. TRANSFER DATE

What is it?
The transfer date refers to the date on which legal ownership of the property is officially transferred from the seller to the buyer. It marks the conclusion of the sales process and typically follows the finalisation of various administrative and legal procedures.

Why it’s important in an OTP

The transfer date is a pivotal milestone in the property transaction timeline. It signifies the point at which the buyer assumes full ownership rights and responsibilities for the property.

Both buyers and sellers must know the agreed-upon transfer date specified in the OTP.
“Buyers should ensure adequate funds for the transfer process, including transfer duties and registration fees. Sellers need to prepare for vacating the property and completing any outstanding obligations before the transfer date,” Luyt advises.

Stay informed

Not being well-informed about the transfer date can lead to logistical challenges and financial implications. Luyt explains that delays in meeting transfer obligations may result in penalties or even the cancellation of the sale agreement, causing frustration and potential legal disputes.

2. OCCUPATION DATE

What is it?

The occupation date signifies the date on which the buyer takes physical possession and occupation of the property. It may coincide with or differ from the transfer date based on the terms negotiated in the OTP. Luyt says it’s critical to choose an achievable date based on the possibility of external factors causing a delay. She adds that it’s common practice to nominate the date of transfer as the occupation date.

Importance in an OTP

The occupation date is crucial for coordinating the logistics of moving in and out of the property. It clarifies when the buyer can start residing in the property and when the seller must vacate.

Buyers should confirm the occupation date to plan their relocation and accommodation arrangements accordingly. For sellers, it’s essential to vacate the property by the agreed-upon occupation date to avoid potential disputes with the buyer.

Ignorance risk

Failure to adhere to the agreed occupation date can disrupt the transition process for both parties.
“Sellers overstaying their occupancy can inconvenience buyers, while buyers moving in prematurely may encounter legal issues or delays in completing necessary preparations,” cautions Luyt.

3. OCCUPATIONAL RENTAL

What is it?

Occupational rental refers to the compensation that one party pays the other for occupying the property before the transfer of ownership is finalised. It is typically stipulated in the OTP and balances both parties’ interests during the transition period.
Luyt points out that in Gauteng, recent delays have occurred due to the inability of certain councils to issue clearance figures and certificates because system upgrades have taken longer than anticipated.
“This has resulted in sellers or buyers having to move out or into a property. In these situations, it’s advisable to discuss this possibility upfront and agree on what should happen in case of a delay,” she comments.

Importance in an OTP

Occupational rental provides a mechanism for addressing the financial implications of early occupation or delayed transfer, ensuring fair compensation for the occupying party and mitigating potential disputes.
Luyt reiterates the importance of establishing the occupational rental amount when signing an OTP if circumstances change and early occupation is required.

The general standard in the real estate industry is that occupational rent should be between 0.8 – 1.% of the sale price.

In addition, Luyt says a good guide is to set the occupational rental in line with the purchaser’s mortgage repayments.
“This will prevent a purchaser from delaying the process due to paying a lower occupational rent than is otherwise required from their mortgage bond,” she points out.

What you need to know

Buyers should know their financial obligations regarding occupational rental if they wish to occupy the property before transfer.
Sellers need to include explicit provisions for occupational rental in the OTP to avoid ambiguity and ensure timely payment by adding a simple clause worded “Occupational Rental.”

Why you need to know

Failure to address occupational rental terms in the OTP can lead to disagreements on compensation and financial liabilities. Without a clear understanding of these terms, both parties may face unexpected costs or delays in the property transaction process.

OTP insight matters

Luyt stresses the importance of buyers and sellers thoroughly understanding the transfer date, occupation date, and occupational rental in an OTP.

“Good communication between the transferring attorney and the agent will ensure that buyers and sellers understand these terms, but ultimately, the agent should shoulder the responsibility of making sure to update both parties as this is an essential part of service delivery and relationship building.”

Luyt says it’s vital for real estate agents to clearly explain the clauses in the OTP document and how they apply to buyers and sellers.

She ends by stating that when buyers and sellers are well-informed and proactive in addressing these terms in the OTP, they can alleviate potential risks and facilitate a smooth and mutually beneficial transaction process.