Category: Banks

New revenue raising measures amount to R15 billion in 2019/20, mainly by not compensating for bracket creep, which effectively raises personal income tax and produces an additional R12.8 billion. Meanwhile, medical tax credits are not increased, which nets an additional R1 billion in tax revenue. Changes in the general fuel levy, the road accident fund levy and the introduction of a carbon tax on fuel result in a net increase of 29c per litre in the total fuel levy. Apart from increases in excise duties (which raise revenue by R1 billion) and the “sugar” tax, additional zero rating of VAT items reduces revenue by R1.1 billion. An additional R10 billion in revenue raising measures will be announced in the 2020/21 budget.

Overall, main budget revenue increases from 25.4% of GDP in 2018/19 to 25.9% in 2019/20. Consolidated revenue increases from 28.8% of GDP to 29.3% of GDP over the same period.

Main budget balances

budget19-A

Source: SA National Treasury

Note, in tandem with improvements in tax administration the revenue raising measures announced result in an increase in tax buoyancy (growth in tax revenue relative to GDP growth) from 0.98 in 2018/19 to 1.31 in 2019/20. But, tax buoyancy has surprised on the low side in recent years, suggesting an element of risk, especially if tax administration does not improve.

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unnamed (7)You sell your house/apartment/office/factory/plot of land. You instruct your conveyancer to pass transfer to the buyer, and start dreaming of what you will do with the proceeds.
But then your lawyer says “Hang on, you didn’t give me the property’s original title deed and I need it before I can pass transfer – where is it?”

Panic! 

You can’t find it. The bank doesn’t have it (bondholders normally insist on keeping the title deeds of properties bonded to them as a security measure, at least until the loan is repaid in full and the bond cancelled). You didn’t leave it with your lawyer for safekeeping (perhaps you should have). You search high and low both at home and in the office, to no avail. Your spouse has a vague memory that you may have left it with Uncle Festus to lock away in his vault; but Uncle F died 10 years ago and his house and all his worldly goods are long gone. Or perhaps it was stored in your holiday home and went up in smoke (literally) in that bush fire in ’93? Panic!

Relax. There is – for a short while longer anyway – a quick and cost-effective remedy. Have your lawyer apply for a certified copy of the Title Deed. All you need to do is attest to an affidavit, say that a “diligent search” has failed to locate the title deed, and confirm that it isn’t pledged or held as security by anyone.

All being well, a few weeks and a reasonable legal fee later, the Deeds Office issues a certified copy of the title deed and the transfer proceeds.

Act now, before it all changes

What has thrown the cat amongst the pigeons is a recent change to the applicable Regulations which will, from 25 February, require that –

  1. Your affidavit now has to be “attested by a notary public”. A Notary Public is a specialised attorney who “notarises” documents in a formal recording and certification process that carries more weight than would attach to a normal affidavit signed before a Commissioner of Oaths. That translates into extra cost and delay.
  2. Your application must now be advertised in the Government Gazette, and for 2 weeks after publication must lie open for inspection by the public at the Deeds Registry. Again, that’s more cost. And a lot more delay.

Owners, buyers and agents: Your urgent action plan

In a property transfer, time really is of the essence. The last thing any of the parties wants is delay, or extra cost. So here’s what you should do right now –

  • If you own property, and whether or not you have thoughts of selling in the near future, this is a great time to confirm that you know where your original title deed is. If you can’t find it, ask your lawyer for help.
  • If you are buying property, forward this to the seller or estate agent with a request that they confirm possession of the title deed or act to replace it immediately.
  • If you are an agent, do the same – forward this to everyone with a property on your books (you’re doing them a favour as well as yourself).

And a note for bondholders 

The new Regulations apply equally to lost mortgage bonds, notarial bonds, registered leases, holders of real rights etc, so what is said above applies equally to you.

These new requirements kick in on 25 February, so your window of opportunity here is a narrow one.

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unnamed (6) Asof eiendom-ontwikkelaars nie in die huidige swak ekonomiese toestande genoeg uitdagings in die gesig staar nie, is hulle, hul prokureurs en ouditeure, teen einde verlede jaar  begroet met die Appèlhof uitspraak in die saak Milnerton Estates Limited v Commissioner for the South African Revenue Service (1159/2017) [2018] ZASCA 155, wat vir hul verreikende kontantvloei uitdagings mag inhou.

In this matter the Appeal Court rejected the appeal of the appellant against its challenge of an income tax assessment by SARS requiring it to include the proceeds of the sales of a number of properties deemed to have accrued to the developer in terms of section 2(1) of the Income Tax Act in the year the agreements were signed despite the fact that transfer of the properties sold was only passed in the subsequent tax period.

Die uitspraak bevestig die beginsel neergelê in ‘n vroeëre uitspraak van die appèlhof in SIR v Silverglen Investments (Pty) Ltd 1969 (1)( SA 365 (A) dat waar ‘n ooreenkoms vir die verkoop van onroerende goed ‘n opskortende voorwaarde bevat waarvolgens oordrag van eienaarskap in die Aktekantoor vertraag word tot betaling van enige gedeelte van die koopprys, word die aankoopprys geag in die belastingjaar te val wat die ooreenkoms gesluit is ongeag die appellant se finale argument dat die laasgenoemde uitspraak regtens verkeerd was omdat artikel 24(1) van voormelde wet eintlik net van toepassing is op vaste eiendom wat op krediet terme verkoop was.

Property developers should therefore take note of this judgment and its interpretation of section 24(1) of the Act and ensure that where a sale agreement falls within the scope of this provision, they declare the income from the sale in the tax year that the agreement was concluded, even if payment of the purchase price and transfer of ownership only takes place in the following tax year.

Ontwikkelaars word aangeraai om kennis te neem van hierdie uitspraak vir hul beplanning vorentoe en veral ag te slaan op die kontantvloei implikasies daarvan met betrekking tot hul inkomstebelasting opgawes. Hul moet bewus wees dat die volle opbrengs van die verkoop in hul inkomstebelastingopgawes ingesluit moet word vir die jaar waarin die ooreenkoms onderteken is,  in gevalle waar die betaling van die koopprys opgeskort word in lyn met die feite in die onderhawige saak.  Steek gerus kers op by jou prokureur en of ouditeur om onaangename verassings vorentoe te vermy.

For an in-depth discussion of this judgement and in particular the reasoning of the judges please refer to the article in “The primacy of precedent” in PWC’s Synopsis for November / December 2018, by following the link hereunder.

https://www.pwc.co.za/en/assets/pdf/synopsis-nov-dec-2018.pdf

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Scam AlertCybercrime levels are surging, and it didn’t take the scammers long to figure out that when you buy and sell property you become a prime target because of course –

 

 

  • Property transactions provide rich pickings, often very rich pickings.
  • Electronic communication between attorneys and clients, which is all-pervasive these days, creates a fertile ground for interception and deception.

Consider this nightmare scenario 

You’ve sold your property for R5m, transfer to the buyer has been registered but the money doesn’t show up in your bank account (let’s call it “account A”). You phone your conveyancer only to be told “but we did pay you, we followed your instruction to pay into account B.” Of course account B was set up by a scamster and your R5m is long gone. What happened?

How the scams work

Cyber criminals are resourceful and creative so this is by no means an exhaustive list of your risk areas, but currently the two main ones seem to be –

  1. Your attorney’s payments to you: As a seller, when you give the transfer instruction to your attorney you will nominate a bank account – account A in this example – to receive the sale proceeds. Before transfer however (often at the very last minute) the firm receives a genuine-looking email “from you” changing your banking details to “my new account, account B”. Your emails to and from your attorney have been intercepted, and your details cleverly spoofed. Your money is gone – forever.
  2. Your payments to the attorney: The main risk here is to the buyer paying the whole or a large portion of the purchase price to the transferring attorney. Of course transfer duty and other costs of transfer can also add up to a tidy sum, whilst as a seller you will be paying for things like bond cancellation costs, rates, agent’s commission and so on.

    The scam here is that once again emails are intercepted, and this time you receive an authentic-looking but entirely fraudulent email asking you to pay into “account C”. The email appears to come from the conveyancing firm but of course it is again a clever (often very sophisticated) spoof, this time of the firm’s branding, details and email address.

    The false account details might be in the email itself or in a falsified attachment – nothing is safe. The email may be in the form of a “we’ve changed our banking details” notification, or the criminal may work on the basis that you just won’t notice the change. And of course account C isn’t the conveyancer’s trust account at all, and the minute you make a payment into it your money is – once again – gone forever.

How can I protect myself?

The problem normally starts with criminal interception of emails or hacking of online data and what follows is a classic case of a “wolf in sheep’s clothing” deception.

Here’s your essential checklist to minimise the risk –

  • Keep all your anti-virus, anti-malware and other security software updated, learn all about protecting yourself from malware/spyware/phishing attacks (your bank will have tips for you – see e.g. Nedbank’s “Fraud Awareness” page here), and generally treat all electronic communications with caution – even those appearing to come from a trusted source like your attorney.
  • Read “Is That Sender For Real? Three Ways to Verify the Identity of An Email” on FRSecure’s blog. All the tips given there are important, but at the very least use the methods given to find out where the email really comes from. Then check back to see that it matches in every detail the email address you were given at the start of the transfer process.
  • Be suspicious if anything in the email just feels “not-quite-right” – perhaps only a cell phone number is given, or a free generic email address (like Gmail) is used, or the wording is somehow “off”. If the email makes you even the slightest bit uneasy, err on the side of caution and investigate further.
  • Most importantly, never accept notification of any change in your attorney’s banking details without visiting or phoning your attorney to check all is in order (don’t of course use the phone number given in the suspicious email!).

A final thought – are you the weakest link?

As a client it’s no use relying on your attorneys to have all the latest security systems and procedures in place. Think of how banks enforce stringent security protocols and protections, yet still their customers are regularly scammed.  If your own computer, network or actions are the weakest link in the chain, then that’s what the criminals will exploit!

Follow the above tips to protect yourself and if you ever have even the slightest doubt about anything, take no chances and contact your attorney to check! 

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voetstoetsBoth sellers and buyers (of anything – houses, cars, you name it) need to understand how the CPA (Consumer Protection Act) has impacted on the very common “voetstoots” (“as is”) clause.

Firstly, what’s the difference between “patent” and “latent” defects?

Before we get into the meat of this question, let’s understand two important terms –

  • “Patent defects” are those that can be easily identified on inspecting the goods – like a broken door, damaged tiles, cracked mirror or windscreen, and so on.
  • “Latent defects” on the other hand are hidden or non-obvious. They “would not have been visible or discoverable upon inspection by the ordinary purchaser”. Think for example of seasonal roof leaks, broken underground drains, leaking geysers and the like.

Exactly what is a voetstoots clause?

A general rule in our law is that when you sell something, you give the buyer an “implied warranty” against defects. That can be disastrous for the seller as it allows the buyer, on finding a defect, to claim a price reduction (or sometimes cancellation of the whole sale).

Hence the very common voetstoots or “as is” clause. In effect as seller you are telling the buyer “you agree to take the goods as they are, the risk of defects is on your shoulders, and I give no guarantees”. Note however that a seller cannot always hide behind such a clause – if he/she is aware of a latent defect and deliberately conceals it with the intention to defraud the buyer, all voetstoots protection falls away.

And then along came the CPA

The Consumer Protection Act has been a game changer when it comes to consumer rights. In a nutshell, as a buyer you are entitled to receive goods that are of good quality, “reasonably suitable” for the purposes for which they are generally intended, defect-free, durable and safe.

If anything you buy fails, or turns out to be defective or unsafe –

  • You can return the goods to the supplier – without penalty, and at the supplier’s risk and expense – within 6 months of delivery, and
  • You can require the supplier to give you a full refund, or to replace the goods, or to repair them. The choice is yours; the supplier cannot dictate your options to you.

But does the CPA apply to all sales?

Here’s the rub for buyers – the CPA applies only when the seller is selling “in the ordinary course of business”, so generally “private sales” will fall outside its ambit.

In other words, if you buy a movable like a car from a trader or dealer, the CPA applies and overrides the voetstoots clause. But if you buy from a private seller, the voetstoots clause applies and you have no CPA protection.

What about property sales?

Developers, builders, investors and the like are clearly bound by the CPA.  But for private sellers the position is less clear. Although it seems very likely that one-off private sales of residential property don’t fall under the CPA, there is some suggestion that we won’t be 100% sure on that until either our courts rule definitively on it, or the CPA is amended to provide clarity. On the “better safe than sorry” principle, don’t take any chances – cover yourself as below.

Practical advice for sellers

Cover yourself by disclosing any defects you know of to the buyer, and record any such disclosure/s in a written and signed annexure to the deed of sale. A buyer cannot complain if you have informed him/her of the condition of the goods and they have been bought on that basis.

Then if you are selling in the “ordinary course” of your business, be very aware that the CPA applies to you. Understand its very strict requirements (what is said above is of necessity only a brief overview) and the risks of not complying.

If on the other hand you are a “private seller”, make sure you are covered by a properly-drawn “voetstoots” clause. On the off-chance its validity is challenged, you can avoid later disputes with a “belt-and-braces” approach – have the goods checked out by an independent expert (like a home inspection service when selling a house) and have your lawyer incorporate that into the sale agreement.

Practical advice for buyers

Don’t risk having to fight in court over whether or not the CPA applies to your purchase, and over whether or not any voestoots clause is valid. Be warned that depriving a private seller of the protection of a voetstoots clause is never going to be easy, particularly since you will need to prove that the seller intended to defraud you by concealing a defect.

Rather be sure of the condition of the goods before you buy. If the seller hasn’t provided you with an expert report as above, commission one yourself.

This article is for general information purposes and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact an Attorney for specific and detailed advice.

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2539“A friend and I are considering buying a house together as an investment property. I’m quite keen but she is a bit worried about how it will work and if it’s a good idea. Can you give some guidance on what the pros and cons might be of jointly owning the property?”

Buying property, whether for personal use or investment or business purposes, remains a stressful exercise. Often, as probably in your case, a person feels they wish to share some of the responsibility and financial exposure with another person and then partner up to jointly buy a property, essentially co-owning the property in question.

In such a case you and your friend will have to apply for a home loan together (and jointly have to meet the necessary credit application requirements, etc.), the property will be registered in both your names and you can own the property in either equal undivided shares or according to a determined percentage.

There are pros to co-owning a property. You can share expenses, deal jointly with upkeep and maintenance issues, help manage tenants and rental issues and divide the responsibility for mortgage repayments.

On the downside, it must be understood that you are a co-owner. That means that issues may arise if you and your friend are no longer friends; you may want to sell, but your partner not; you don’t want to spend money to renovate, but your partner does; you want to kick out your tenant but your partner wants to keep him, and so forth. Most of these issues can be dealt with in a properly drafted co-ownership agreement, but it must be appreciated that you don’t have the same freedom over your property as with sole ownership.

In such a co-ownership agreement, one should typically provide for what share each party owns in the property, financial contributions to the loan repayment, maintenance and upkeep costs of the property, the distribution of any profit, management of the bank account, arrangements regarding the renting or selling of the property, pre-emptive rights to buy the property etc. The agreement should also deal with the situation if a co-owner passes away and who will inherit or have the option to buy the co-owners share.

Clearly co-ownership has pros, but also cons, many of which can be quite onerous if not properly engaged with beforehand and addressed in a clear agreement between the co-owners. Our advice is to seek the assistance of a property specialist and discuss the option of co-ownership as well as other potential structures for investing in a property portfolio before making any final decisions.

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Real estate stress as a group of family homes shaped as a dangerous falling ball as a symbol for a housing or house construction industry problem with 3D illustration elements.

Signing surety for another’s debts carries huge risk. Yet every day directors of property holding companies happily sign personal suretyships for their company’s (usually substantial) debts.

The problem is that it all seems so safe in the beginning. You need a bank loan to buy or develop a property, you’ve done your homework and the deal’s a good, sensible one. It’s only when things go wrong down the line that your signature on that suretyship document comes back to haunt you, and by then it’s far too late – or is it?

A recent High Court decision illustrates one of the very restricted circumstances in which you may be able to escape from the trap you signed yourself into.

The developer, the trust and the bank

  • A property developer lent some R10 million to an associate’s companies for a shopping mall development. The associate’s companies then borrowed a further R5 million from a bank, which took a R5 million mortgage bond over the one company’s property as security. And – here’s the rub – the developer also signed suretyship to the bank for the R5 million both personally and on behalf of his family trust.
  • The developer signed these suretyships believing that there was enough equity in the bonded property (valued at R12 million) to cover both the R5 million bond and another bond that he was told about of R2.7 million. What he didn’t know at the time was that there was yet another bond over the property, and this was a big bond for R15 million. Neither his associate nor the bank had told him about it.
  • Only when both of the associate’s companies failed did the developer realise that there was no equity in the property at all, with bonds totaling R22.7 million against a value of R12 million, and that the bank’s liquidation dividend would leave it with a large shortfall.
  • The bank duly sued the developer and his trust as sureties for R5.7 million (R5 million plus interest). To understand how that turned out in court we need to look at when our law will let you off the hook, and when it won’t.

When can you escape from a suretyship?

  • Our law will generally hold you to the agreements you make, and a suretyship is no exception.  You can only free yourself from it if it “was induced by fraud, duress, undue influence or mistake, whether induced by misrepresentation or otherwise”.
  • Without going into all the legal niceties (you definitely need your lawyer’s specific advice if you ever find yourself in this unhappy position) the general principle is that, where you rely on a “justified error as to the nature or contents of the [suretyship] document”, you must show that you were “misled as to the nature of the document or as to the terms which it contains by some act or omission (where there was a duty to inform) of the other contracting party.”
  • In lay terms, you have to prove that the bank either actively misrepresented, or failed to disclose, something “material” (significant or vital) to you. And where you rely on a failure to disclose something (as in this case) you have to further show that the bank had a “duty to speak” i.e. had a duty to tell you about it. That’s because our law generally requires you to be aware of what you are contracting yourself into, rather than requiring the other party to “tell all”. The exception to that is where you can prove that the other party had “exclusive knowledge” of something material and your right to know about it “would be mutually recognised by honest men in the circumstances”.
  • That’s quite a mouthful and it’s not easily proved, but in the particular circumstances of this case the developer succeeded in doing so. The Court had accepted that the developer wouldn’t have signed surety if he had been aware of the R15 million bond, and that the bank officials knew of his concern about there being enough equity in the property to cover the R5 million.  Moreover the developer hadn’t done a deeds search (which would have revealed the extra R15 million bond) because as he saw it there was a “relationship of trust” between him and the bank’s officials and he would have expected them to tell him about it.
  • Critically, the bank’s disclosure to the developer of the R2.7 million bond but not of the R15 million one led the Court to conclude that, having thus made an incomplete disclosure to the developer, “a duty arose requiring the [bank]’s officials to speak and to make a full and honest disclosure to the [developer] of the material facts in their knowledge.”

The developer and his trust are accordingly off the hook. But there’s a strong confirmation there of just how narrow your potential escape route is from a suretyship. So as always take legal advice before signing anything! 

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men businessman showing empty pockets hiding behind wads of mone

‘n Persoon skuld jou miljoene rande, maar wanneer hy gesekwestreer word, blyk dit dat hy oor geen bates beskik nie. Dan kom dit onder jou aandag dat hy ‘n trustee is van ‘n welgestelde familietrust met baie bates wat jy vermoed eintlik syne is. Kan jy enigiets van die trust opeis om jou skuld te verhaal?
Onder sekere omstandighede sou jy dit wel kon regkry, maar dit is ver van ‘n algemene reël af. ‘n Onlangse saak wat in die Appèlhof aangehoor is, illustreer die moontlikhede.
Die piramiedeskema, selfmoord en vee ter waarde van R11 miljoen wat skoonveld is. 
  • ‘n Voormalige boer en veehandelaar het selfmoord gepleeg. Hy het skulde van R35 miljoen agtergelaat. In die proses het hy heelwat plaaslike boere en sakemense in sy piramiedeskema ingetrek en bedrieg. Ingevolge die skema sou boere met “beleggingskontrakte” hul vee op plase by hom laat wei. Hy het die plase gehuur en uiteindelik sou die boere hul vee saam met die vee se nageslag as opbrengs weer terugkry.

  • Die veehandelaar het selfmoord gepleeg, waarna sy bestorwe boedel deur die hof as insolvent verklaar is.

  • Een van die grootste skuldeisers het 1501 stukke vee met ‘n geraamde waarde van R11 miljoen verloor. Hierdie skuldeiser het die Hooggeregshof genader om die trust te sekwestreer waarin die plaaseiendom geregistreer was en waarvan die oorlede bedrieër in lewe ‘n trustee was. Die skuldeiser het aangevoer dat die trust die bedrieër se alter ego was. Volgens hom was die trustvorm hier misbruik en was daar nooit werklike enige skeiding van die bates van die oorledene en van die trust nie. Die trusts se finansiële sake is nooit afsonderlik gehou nie; daar was nie werklik sprake van onderskeiding van bates tussen hom as persoon en in sy hoedanigheid as trustee van die trust nie; hy het die trustfondse ook gebruik asof dit deurgaans sy eie was.

  • Die Hooggeregshof het geweier om ‘n sekwestrasiebevel teen die trust uit te reik; en die Appèlhof het met hierdie bevinding saamgestem. Die skuldeiser se eis was ongelukkig beperk net teen die oorledene se boedel, daar was geen eis teen die trust nie. Die skuldeiser het gevolglik nie enige gronde gehad om die trust te sekwestreer nie. Die hof bevind hierbenewens dat –

    • Indien die skuldeiser beweer het dat sy vee in groot getalle deur die trust gehou is of wanaangewend is, moes hy die hof eerder genader het vir ‘n bevel om teruggawe van sy vee, alternatiewelik vir skadevergoeding teen die trust as gevolg van die verliese van die vee. Om so vanuit die staanspoor weg te val met ‘n aansoek vir sekwestrasie van die trust, is glad nie regtens aanvaarbaar nie.

    • Indien die trust inderdaad ‘n skyntrust was (“a sham”), kan dit nie gesekwestreer word nie, want dit bestaan regtens nie. Jy kan nie iets sekwestreer wat nie bestaan nie.

    • Indien dit later sou blyk dat daar bates in die trust was, wat eintlik bates van die oorledene was, sou dit nie die skuldeiser se plek wees om die bates van die trust op te eis nie. Dit sou slegs die aangestelde trustees van die insolvente boedel wees wat hierdie funksie sou kon uitoefen.

  • Die hof bevind dat die skuldeiser eerstens sy volledige eis teen die insolvente boedel moes bewys. Daarna moes hy dan aandring op ‘n ondervraging om vas te stel of daar gronde was waarop die boedel die vee van die trust sou kon opeis en /of skadevergoeding van die trust kon eis.
Die aanslag op ‘n trust 101
Indien jy die geldigheid van ‘n truststruktuur wil aanval, sou jy die hof kon vra vir ’n bevel om te verklaar dat die trust se bates as die persoonlike bates van die skuldenaar verklaar moet word. Ingevolge ‘n bekende uitspraak van die Hooggeregshof in 2014, moet jy onderskei tussen twee verskillende gevalle met trusts. Die twee sluit mekaar uit –
  1. Jy moet aanvoer dat die trust ‘n skyn is (“a sham”) en nie werklik bestaan nie; of

  2. Indien die trust nie ‘n skyntrust is nie en dus wel bestaan, kan jy die hof steeds nader om rondom die trustvorm te werk en te kyk wat werklik aangaan. In die proses vra jy ook dat die normale gevolge van trusteienaarskap in geheel of gedeeltelik opgeskort word. (You ask the court to “go behind the trust form” or to “pierce its veneer” and to disregard “the ordinary consequences of [the trust’s] existence”.) Die hof is dan by magte om byvoorbeeld te beveel dat trustbates in werklikheid bates in die trustee se persoonlike boedel is.
Hierdie is egter ‘n uiters gespesialiseerde regsgebied – vra jou prokureur om jou hierin by te staan en te adviseer.
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Stacks of two hundred rand bank notes assembled in the shape of a house on an isolated backgroundIt is common knowledge that the purchaser is responsible for the payment of the transfer costs and bond registration costs (if applicable) during the transfer process. However, as the seller, you will also be liable for costs during the transfer process.

Estate Agent’s Commission
An estate agent charges commission on the sale of any property, and it is usually expressed as a percentage of the purchase price, but it can also be for a set amount. However, commission usually excludes VAT, except if determined otherwise in the sale agreement.  VAT is currently charged at 15% for sale agreements concluded after 1 April 2018.  The estate agent’s commission is paid only when the property is registered in the purchaser’s name. Therefore, the transferring attorneys (conveyancers) will pay out the net proceeds of the sale to the seller after deducting the commission and bond amounts (see below). The estate agent’s commission is most likely the biggest cost payable by the seller.

Bond and Bond Cancellation Costs

Besides having to settle the outstanding bond amount if there is an existing bond registered over the property, a bond cancellation attorney will have to formally cancel the registered bond before the property can be transferred to the buyer. It is further important to note that the bond will have to be cancelled even if the bond amount has been paid in full prior to the sale of the property. The bond cancellation and the transfer of the property can be done simultaneously. If the transferring attorneys are on the specific bank’s panel of attorneys, they can also request to act as the bond attorneys. Bond cancellation costs are payable on transfer and, therefore, no advance cash payment is necessary by the seller.
Most banks require 90 days’ written notice of a seller’s intention to settle the full bond amount and cancellation of the bond. If you decide to sell your property, make sure that you give your bank the required notice beforehand. Penalty interest is extra interest payable on the outstanding balance of your bond. You will only be able to cancel the bond and transfer the property after the 90 days have expired, otherwise the bank may charge you a penalty fee for cancelling your bond early. This fee is calculated pro rata depending on the date of registration of transfer and simultaneous cancellation of the bond, which can be a substantial sum to pay unnecessarily. However, some banks won’t charge penalty interest if you will be registering a new bond with them on another property simultaneously with the sale of your current property.

Compliance Certificates

Before a property is registered in the purchaser’s name, various compliance certificates are required. If applicable, the seller is responsible for the costs for electrical, beetle, electric fencing, gas, and plumbing compliance certificates. In some instances, sellers are also required to pay for the necessary work to be done before the certificate can be issued.
An Electrical Certificate of Compliance (ECOC) is valid for a period of two years according to current legislation. If the seller has an ECOC that is older than this, or any electrical alterations have occurred during the applicable two year period, the seller will be required to obtain a new ECOC by enlisting the services of a certified electrician.
If a homeowner has opted to install electrical fencing as a security measure, an Electrical Fence System Compliance Certificate is now also required where applicable. It is important to note that an ECOC and Electrical Fence System Compliance Certificate are two separate and different documents.
Another certificate which might be applicable to the transfer is a Beetle (entomological) certificate. This certificate is to confirm that the wood in the property hasn’t been infested by beetles and is usually only needed if your house is at the coast. While not compulsory, homeowners who are selling their property in the Western Cape and KwaZulu-Natal regions will generally need to provide the purchaser with a beetle-free certificate.
To confirm that the gas lines are safe, and only needed if there are gas appliances in the house, homeowners will be required to obtain a Gas certificate of conformity, which indicates that the installation has been done by a qualified technician.
A Plumbing certificate confirms that the plumbing is sound and is only required in Cape Town.
Inspections will have to be conducted by contractors for these certificates to be issued. These inspections normally take place only after any other conditions in the sale agreement (such as the purchaser obtaining bond approval) have been fulfilled. If there is work needed to be done to achieve compliance, then the contractor will give a quote for it. It is the seller’s responsibility to arrange and pay for the inspections and any remedial work that may arise, but often the contractor will be happy to delay receipt of payment until transfer takes place.

Rates and Taxes Clearance Certificate

The conveyancers will require a rates and taxes clearance certificate from the local municipality, and the seller will need to pay upfront to get this certificate. To provide the clearance certificate, the municipality can ask between two and six months of payments in advance, as well as all outstanding rates and taxes. If the property transfer registers within a shorter timeframe, the municipality will refund the seller the additional amount paid.

Levies Clearance Certificate

In the instance where a property is situated within an estate or sectional title scheme, similarly to the rates and taxes clearance certificate, the homeowners’ association or body corporate may request that the seller pays for their levies a few months in advance to ensure these costs are covered until transfer takes place. The homeowners’ association or body corporate will in any event not consent to the transfer of the property if there are any outstanding levies owed to them by the seller.

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UntitledInnovations and special provisions that apply to sectional title apartments and town houses do not necessarily apply to homeowners’ associations.

This is according to specialist sectional title attorney and director of BBM Attorneys, Marina Constas, who said that it is important to know the difference between the two and how different regulations may or may not affect them.

“The latest buzz words in the property industry are community schemes,” she said.

“The Department of Human Settlements, currently the umbrella body for such schemes, has taken control of their regulation.

“Community schemes include sectional title complexes, homeowners’ associations, shareblock developments, retirement villages, gated estates with constitutions and social co-operatives, which now fall under Section 1 of the Community Schemes Ombud Service (CSOS),” said Constas.

Sectional Titles

While the CSOS Act covers all community schemes, sectional title stakeholders must also consider the Sectional Title Schemes Management (STSMA), where recent amendments have introduced several new innovations.

“These must be understood and embraced by the sectional title industry. However, they do not automatically relate to homeowners’ associations and other community schemes,” said Constas.

Examples include the establishment of a reserve fund and a mandatory maintenance, repair and replacement plan.

“While many trustees manage their buildings very well and have always had buffer funds, an inordinate number find themselves in financial difficulty, with buildings being run from hand to mouth each month.”

“This reserve fund aims to ensure that buildings do not fall into disrepair. A related maintenance, repair and replacement plan is another completely innovation in the STSMA. From now on, the body corporate must prepare a written maintenance, repair and replacement plan which sets out the major capital expenses within the next 10 years.”

Constas pointed out that other important STSMA amendments include the stipulation that any changes to the management or conduct rules of a sectional title scheme must be approved by the chief Ombud after the necessary resolutions have been taken.

“The duties of owners have also been changed. An owner must now notify the body corporate of any change of ownership or occupancy in his unit. In terms of insurance, trustees are now obligated to obtain valuations every three years and owners may not obtain an insurance policy in respect of damage arising from risk covered by the policy of the body corporate.

“On the financial front, the complex’s budget may now include a 10 percent discount on levies if an owner’s contributions are all paid on the due dates.

“There is no longer a reference to an accounting officer in the sectional title legislation. Consequently, all buildings, even those with 10 or less units, must be audited,” she said.

Constas adde that the new concept of executive managing agents has now been included in the rules for sectional title schemes.

“Distinguishable from an ordinary managing agent, the executive managing agent actually steps into the shoes of the trustees and is liable for any loss suffered by the body corporate as a result of not applying care and skill.

“Even pets have been revised in the STSMA legislation,” Constas said.

“Disabled residents who require an assistance dog to reside with them and accompany them on common property no longer need the formal consent of trustees.”

While the STSMA’s recent innovations do not automatically apply to homeowners’ associations, Constas notes that they may choose to adopt certain provisions from the Act.

“So, if I live in a cluster golf estate development, the maintenance, repair and replacement plan does not apply in my scheme unless the scheme has legally adopted that particular rule.

“If I live in a sectional title scheme, the managing, repair and replacement rule automatically applies,” she said.

Community Schemes

The Community Schemes Ombud Service (CSOS) Act, on the other hand, applies to all community schemes.

“The service is there to regulate, monitor and control the quality of all community scheme governance documentation and provide dispute resolution,” she said.

“Whilst the CSOS Act does not specifically talk about a compliance certificate for homeowners’ association rules, the Ombud’s office will be effecting amendments to bring the law regarding registration and rule compliance for homeowners’ associations in line with sectional title schemes.

“In the interim, the Ombud’s service is encouraging homeowners’ associations to send rules in for vetting,” Constas stated.

She added that the Ombud currently has jurisdiction to deal with any disputes in cluster schemes and notes that the Community Schemes Ombud Services levy must be paid by homeowners’ associations whether they are company registered or simply have a constitution.

Constas said that although the Ombud service faced serious challenges in its infancy, great strides have been made, with over 33 000 complexes having paid over monies. Those homeowners’ associations that have not registered with CSOS will be penalised, she said.

“Now that the Ombud’s office is gaining traction, there will be time to augment and improve the provision of services and to flesh out interesting issues in the industry, such as the Air BnB onslaught,” said Constas.