South Africa: Purchasing Property in South Africa

Last Updated: 23 August 2010
Article by Ronel Straughan

Visitors to South Africa may find a property they wish to make their new or second home, or to buy property for rental or investment purposes. Bowman Gilfillan Inc has the expertise to assist in negotiating a contract to protect the interests of a buyer or seller. We can supervise or attend the process of registration of transfer of ownership of immovable property and advise purchasers on the security of title. Our international reputation and local market knowledge establishes confidence in our expertise.

The firm was recently awarded the following ACQ Global Awards 2010:

Client Care Law Firm – Africa
Deal Maker – Africa
Most Trusted Law Firm – Africa
M&A Law Firm – Africa

The firm is a member of Lex Mundi, an association of 160 independent law firms, each a pre-eminent law firm in its jurisdiction. Lex Mundi membership provides for the exchange of professional information about local and global practice of law, all of which adds to the peace of mind of a client who may be doing business in South Africa for the first time.

Forms of ownership

There are several forms of property ownership in South Africa:

  • Freehold land (whether or not in a township, registered as an erf, lot, plot, stand or farm, and demarcated on a diagram or general plan which defines the extent of the land in question, and which ownership includes any permanent fixtures on the land);
  • Sectional Title Units (generally apartments in a multi-unit building offering full ownership of particular areas of the building, joint ownership of the common property of the scheme and membership of a body corporate consisting of all the owners in the scheme);
  • Share Block (the ownership of shares in a company which owns a property, in which the owner of particular shares is allocated the exclusive use of specific areas of building or land, and shares in the costs of the company);
  • Time-share (interests in the use of property is shared between members of a club);
  • The purchase of the interests in a property-owning legal entity, such as a company or close-corporation;
  • Fractional ownership (a general class of shared ownership and usage of property allocated under a number of different schemes and legislation);
  • Syndication (multiple owners grouping together to purchase the property and share in its ownership, either informally or professionally managed).

The initial document binding

Visitors tempted to buy property in South Africa may be faced with a standard pre-printed agreement for completion. The terms of this "offer to purchase" or "agreement of sale" signed by the offeror is in fact the final agreement once accepted by the other contracting party. Purchasers should not be under the misapprehension that it is a preliminary or draft document or merely a statement of intent. In particular, the identity of the purchaser (self, spouse, children, company, foreign legal entity, close corporation or trust) must be certain before the offer is made, as this cannot be changed after the offer has been accepted. The pre-printed standard form must reflect the true intention of the seller and purchaser and should be altered by the purchaser making the offer, if necessary, to suit the requirements of the parties. The agreement can be made subject to the fulfilment of suspensive conditions such as the securing of mortgage loan finance. In particular, it may be wise to make any offer conditional on a due diligence period during which the buyer can examine all aspects of the property within a defined period once the price and terms are settled, before deciding to proceed with the purchase.

Due Diligence

The agreement can provide for a period of due diligence during which the purchaser investigates all information available in respect of the property. The investigation can include both legal information (title conditions, zoning rights, building and use restrictions, development capacity and building plans) as well as all physical aspects of the property that can be determined by a thorough investigation by the purchaser (such as the physical condition the buildings, damp and structural problems, encroachments, boundaries and occupancies).

In the case of farming properties there may be additional considerations including water rights, the availability of irrigation schemes, access, servitudes, roads, soil condition, climate conditions, the history of land use which may affect organic farming classification and farm workers' accommodation and vested rights.

In the case of sectional title properties it is recommended that the purchaser inspect the rules of the scheme, the audited financials of the body corporate of the scheme, the minutes of the latest AGM of the body corporate and the budget for the current year.

Other terms

An agreement for the sale of land must be in writing, contain certain prescribed information and be signed by both contracting parties. This in not necessarily the case where the contract is for the purchase of shares or the member's interest in a legal entity, but of course this is recommended. There are currently no restrictions on property ownership in South Africa by non-residents, other than for illegal aliens. The right to be present in South Africa to enjoy the ownership of the property is, of course, governed by considerations of residence status/visas.

Important aspects of the agreement include:

  • Costs payable by each party including any possible occupational consideration payable;
  • Whether the price includes VAT and whether the purchaser must pay transfer duty. Transfer duty is calculated on a sliding scale up to 8% on the higher of the value or sale price for private individuals, and at a flat rate of 8% for legal entities;
  • Whether the property is being sold as a "going concern" by a registered VAT vendor;
  • The timing of the payments required under the agreement. Generally the deposit and the transfer costs must be paid soon after conclusion of the agreement and the balance of purchase price must be guaranteed well before transfer of ownership. This must be anticipated by the buyer before committing to these payments.
  • Voetstoots clause: The purchaser is deemed to have knowledge of all that can be established from a thorough examination by a diligent purchaser, described in the due diligence process set out above;
  • The dates on which occupation may be taken and on which risk passes to the purchaser;
  • Warranties with regards to the introductory agent. Generally the commission payable to the property broker is paid by the seller;
  • Fixtures and fittings: the agreement must record what is included in the agreement as forming part of the purchased property;
  • Any implied obligations of the purchaser, such as the obligation to retain a portion of the purchase price for payment to the SA Revenue Services if the seller is a non-resident.
  • A cooling-off period for sales under R250 000,00

The process of acquiring ownership

The registration of transfer of ownership of the property is attended to by a conveyancing attorney, generally appointed by the seller, at the cost of the purchaser. The costs include the transfer duty payable to the State, deeds registration fees, rates clearance costs as well as the fee of the conveyancer (as determined in accordance with recommended guidelines of the Law Societies). The costs of the registration of a mortgage bond, if required by the purchaser, would be in addition to the costs of the transfer and this will be payable to the attorneys preparing the loan and bond documents for the lending institution.

The documents are prepared by the conveyancer for signature by both parties, and if these are to be signed abroad, certain strict rules must be followed for the proper authentication of signatures.

Foreign funds are easily introduced to South Africa by payment into a local banking account. Purchasers are urged to ensure that their record-keeping of funds brought into South Africa is well-maintained with the correct proof of receipt from the local receiving bank to facilitate the repatriation of funds on the resale of the property in due course in accordance with local Exchange Control Regulations. Money may be borrowed locally, although restrictions apply. Importantly, on the sale of the property, non-residents may repatriate the full nett proceeds of the sale provided certain requirements are met. It will be necessary to secure exchange control approval for the transfer by providing proof of residence status and the introduction of the full purchase price and costs from abroad for the initial acquisition. Accurate record keeping is essential and the endorsement of the title deed to show the non-resident status of the owner will facilitate this process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions