Advisory Services - Buying property in South Africa

Information for non SA residents

Financial Assistance

There are restrictions on loans to non-resident purchasers of property. In brief, the non-resident may only borrow up to a maximum of the amount invested by the non-resident into the purchase of the property, which translates into a 50% to value borrowing ratio. Such loans are, however, subject to foreign exchange approval by the SA Reserve Bank which approvals are efficiently handled by all South African Commercial Banks offering financial assistance. Financial assistance is granted in the form of a loan secured by a Mortgage Bond to be registered in favour of the Bank granting the loan. The obtaining of financial assistance should be included in the Agreement of Sale/Offer to Purchase as a suspensive condition where the sale is subject to the receiving of financial assistance. There are stringent restrictions and prohibitions imposed where the property is owned by a company and financial assistance is sought to finance the acquisition of shares and loan accounts in the property-owning company.

Transfer Procedure

The registration of a property transaction is handled by a specially qualified legal practitioner known as a conveyancer. It is customary for the seller to appoint the conveyancer to attend to the registration of transfer of a property sold, whilst the costs attendant on same are for the account of the purchaser, unless contractually agreed to otherwise. The conveyancer prepares the requisite transfer documentation that, after signature by the purchaser and the seller, is lodged together with the cancellation of any existing mortgage bonds and new mortgage bonds to be registered in a regionally located Deeds Registry. The deeds are subject to an intense examination process whereafter they are made available for registration. On date of registration of transfer all existing mortgage bonds registered over the property are cancelled simultaneously with the registration of any new mortgage bonds by the purchaser in favour of the bank granting financial assistance. The purchaser is recorded as the new owner of the property and the purchase price is paid to the seller. The above procedure does not apply in an instance where the shares/members interest and loans are acquired in a property-owning company/close corporation where no change in ownership is recorded. It is important to note that upon transfer to the new owner, any liabilities in respect of the property incurred by the previous owner, remain with the previous owner and not necessarily pass to the new owner, unless otherwise agreed to.

Costs

Brokerage is payable where an estate agent is responsible for concluding a sale of property. Brokerage is customarily payable by the seller who mandates the estate agent to procure a purchaser for the property. The seller is also responsible for the cost of procuring a 'beetle free and electrical compliance' certificate. The purchaser is responsible for the payment of transfer costs and the costs of registering any new mortgage bonds over the property purchased.

Transfer costs include transfer duty calculated using the following formula, payable to the Receiver of Revenue:
R0 - R140 000 Exempt
5% between R140 00 - R320 000
8% on the balance
Where the shares/members interest and loan claims in a property owning company/close corporation are purchased, the purchaser may save on transfer duty thereby ensuring a considerable saving in acquisition costs. Stamp duty, which is a nominal amount, is payable on transferring of shares from a seller to a purchaser. Attorneys' fees for attending to the transfer and registration of mortgage bonds are calculated according to a tariff. Further sundry charges are imposed by the Deeds Registry and the Bank granting financial assistance, whilst the Receiver of Revenue requires stamp duty on all new mortgage bonds registered, calculated at 20c per R100.00 (or 0.2%) borrowed.

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