The old age saying that change is the only constant has not been more true than it is today. Consumers across the board are navigating challenging times where the cost of living is continuously on the rise.

With another interest rate increase, amongst other increased costs, on the cards prospective property purchasers need to prepare for higher financial demands. Not only will they need to save more, but they should also be aware of a number of costs associated with property acquisition, besides the purchase price.

Buying a property

  • FICA: the attorney attending to the transfer will charge both the purchaser and seller a fee to ensure the parties are compliant in terms of the Financial Intelligence Centre Act, 2001, as per their legal obligations.
  • Transfer fees: a purchaser will be required to pay the attorney attending to the transfer a fee for the transfer of the property. The fee is calculated on the value of the property by means of a tariff system compiled by the Legal Practice Council.
  • Deeds office fee: the deeds office charges a registration fee, calculated on the value of a transaction. This fee is charged separately for registration of the transfer and registration of a mortgage bond (if applicable).
  • Bond fees and initiation fees: a purchaser will be required to pay the attorney attending to the bond registration (if applicable) a fee for the transfer of the property. The fee is calculated on the value of the property by means of a tariff system compiled by the Legal Practice Council. It is common practice for financial institutions offering loans to charge an initiation fee to the purchaser.
  • Transfer duty: a purchaser is required to pay transfer duty to the South African Revenue Service ("SARS"). The amount payable is based on the value of the property and calculated according to the transfer duty scale, legislated each financial year.
  • Homeowners association fee: if a property falls under a homeowner's association, new members will likely need to pay a joining fee.
  • Insurance: homeowner's insurance is a prerequisite to obtaining a bond and is necessary even with cash deals. The purchaser is liable for the insurance costs. For a sectional title property, the insurance is applicable to the entire scheme. Accordingly, each section owner is required to contribute to the insurance. The purchaser is liable for the costs of the insurance certificate and monthly contributions.

Although the focus has been on the potential purchaser, it is worth noting that there are costs associated with selling a property too:

Selling a property

  • FICA: As with buyers, sellers are subject to a FICA fee.
  • Agent's commission: if the sale of a property is concluded with the assistance of an estate agent, the agent is entitled to a fee. The fee is calculated as a percentage of the purchase price and is agreed to between the seller and agent. The commission and agent's details are also required to be disclosed to SARS, by the attorney attending to the transfer.
  • Rates clearance fee: the seller is liable to obtain the rates clearance certificate (unless the parties agree otherwise). The seller is liable for the 'clearance figures', municipality's fee to issue the figures and certificate and the transfer attorneys fee to attend to the application.
  • Levies: For a sectional title property, a levy clearance certificate is required. The seller is liable to obtain the levy clearance certificate (unless the parties agree otherwise). The seller is liable for the clearance figures, the managing agent's fee to issue the figures and certificate and the transfer attorney's fee to attend to the application.
  • Compliance certificates: if a sale agreement requires compliance certificates (electrical, gas, electrical fence certificates etc), the seller will be liable for the costs of the relevant inspections and obtaining such certificates.
  • Bond cancellation costs: if the seller has given the property as security to a third party, the mortgage bond will need to be cancelled to enable the transfer of the property. The seller is liable for any amounts due on the bond, with interest, as well as the costs to cancel the bond. The financial institution in whose favour the bond is registered will appoint an attorney to attend to the bond cancellation.

Whilst the economic, social, environmental and overall climate continues to change, the costs associated with the buying and selling of property are likely to remain, and potentially increase. Both potential sellers and purchasers alike should assess the market and their respective obligations and associated costs when looking at the feasibility of a potential transaction. Having knowledge of these costs will assist in budgeting effectively and avoiding any unexpected surprises during the property purchasing or selling process.

Reviewed by Andrew Bembridge, Head of ENSafrica's Property practice.

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.