Legal Matters - Property Life Style

By: Property Lifestyle  11-11-2011

We highly recommend you consult with a conveyancer for specific requirements.

South Africa has a highly accurate modern system of registration based on the cornerstone of an accurate diagram and tide deed relating to all properties in South Africa other than unalienated StateLand. The main purpose of this deeds registration system in respect of land is to ensure security of tenure and indisputability of an owner's title.

Most properties in South Africa are held by the registered owners under freehold title. The purchase of immovable property in South Africa will, in the great majority of cases, comprise obtaining ownership under freehold title. Section 16 of the Deeds RegistrationAct is the statutory provision governing the recordal of the change of ownership of property in South Africa.

Ownership of immovable property can only be conveyed by aseller to a purchaser before the Registrar of Deeds, in whose area of jurisdiction the property is situated. Only attorneys, who are also conveyancers, are allowed to execute a Deed of Transfer in terms of the above provision. Contractual obligations which arise between the parties in a sale are recorded in a written deed of sale.

This written document must reflect all material terms of the agreement ( i.e. what is included and excluded in the offer).

This agreement must be in writing and signed by the parties or their agents under their written authority. A verbal sale agreement in respect of immovable property is unenforceable and void in South Africa.

Sales and purchases of property in South Africa are normally negotiated by Estate Agents acting on behalf of their client. A client can be a seller or a purchaser, as the case may be.

Once the sale has been finalised, the seller's conveyancer ( i.e. the attorney ) is duly instructed to pass transfer of the property to the purchaser. The purchaser may, but is not obliged to, nominate a conveyancer of his choice to act on his/her behalf and supervise the conveyance of the property.

The registration procedure normally takes 2 - 3 months. It depends on the circumstances of each case. If all parties are readily available to sign documentation, registration could be done within one month.

An alien who is residing in South Africaillegally is not allowed to purchase property. There are no restrictions for non-South African citizens resident abroad, to purchase property.


The costs payable by the purchaser in acquiring property are as follows:
The purchaser pays transfer duty to the SA Revenue Services in the form of a once off real estate tax. If the property purchased is registered in the name of a company or close corporation, the transfer duty is 10 % of the gross purchase price of the property.

If the purchaser is a natural person and registers the property in his own name, the transfer duty is calculated on the gross purchase price of the property at the following rate :

1% on the first R60,000.- ; plus 5% on the amount between R60,001.- and R250,000.- and 8% on R250,000.- upwards . These percentages are fixed by the SA Revenue Services.

Should the seller be a registered vendor for Value Added Tax purposes, VAT at the rate of 14% will be built into the purchase price by the seller and transfer duty will be exempt for the purchaser.

The purchaser also has to pay transfer costs directly to the seller's conveyancer for passing transfer and attending to the formalities. Transfer costs amount to approximately 0.81% on a gross purchase price of R500,000.- ; 0.58% on a gross purchase price of R1 million Rand and 0.36% on a gross purchase price of R2 million Rand. These charges are not a fixed percentage of the price and may vary slightly according to the rates set by the conveyancer who does the transfer, but the difference is minimal.

When purchasing a property, a purchaser is normally required to pay the purchase price and costs in three stages:

First, 10% of the gross purchase price is normally payable as a deposit to the real estate company on signature of the deed of sale by both parties. This amount is held by the real estate company in their trust account, pending registration of transfer, interest on which accrues to the Purchaser.

Secondly, the balance of the purchase price is lodged with the conveyancer just prior to transfer.

Thirdly, the transfer costs (legal and registration costs) are payable about four weeks prior to the date of transfer; this must be done prior to the transfer of the property, so that lodgement can be effected in the deeds registry of the relevant transfer documents for examination and the balance of the purchase price plus any occupational rental and share of the current years rates and taxes (levied by the local authority) will be payable against registration of transfer.

The cost payable by the buyer is the estate agents' commission.
The tariff recommended by the institute of Estate Agents is set at 7.5% of the gross purchase price. These commissions attract Value Added Tax (VAT) of 14%. The commission rates may vary from region to region.

At present, there is no restriction contained in the exchange control regulations against non-residents introducing capital into South Africa for the purpose of purchasing property.

Should a non-resident decide to dis-invest and sell the property at a later stage, the full proceeds of the sale can be freely transferred out of the country. This is possible as long as non-resident status is retained.

Local banks recommend that when introducing funds for this purpose the bank must be notified of the purpose for which the funds are being introduced so as to set up a record of their transfer from outside South Africa.

It will facilitate the removal of such funds at a later stage if the party is to dis-invest, when the non-resident will merely be required to exhibit their deed of transfer for the property and the subsequent deed of sale for the re-sale.

This should be proof of the amount originally introduced from outside South Africa and the amount realised on re-sale.

Property or shares purchased by a non-resident must have the share certificates and / or title deeds endorsed "non-resident".

There are several ways in which non-residents bring money into South Africa to purchase property:

  • by telegraphic transfer from outside South Africa : upon arrival of the funds at the local bank, a non-resident account is opened in the client's name.
  • cash may be introduced to the local bank : the cash must be converted in South African Rand at the local bank and a non-resident account is opened in the client's name. Funds transferred by telegraphic transfer will get a better exchange rate than a cash conversion; also the bank's commission is 0.3 % for transferred funds versus 1.0 % for cash conversions.


After defining the objective for which a property is being acquired, an appropriate vehicle must be chosen to hold such property: this means the name or entity in which the property will be registered and can be as follows :

An individual purchaser can acquire a property alone or jointly with other parties. Two or more persons may act as joint purchasers and will be collectively and jointly liable pro rata for the purchase price, unless specified to the contrary in the contract.

A partnership is not a separate legal entity and does not exist apart from the individuals constituting it. Immovable property can be acquired and registration can be effected in the name of partners carrying on business in partnership. SA Law allows for a maximum of 20 partners. Partners can only be held jointly and collectively liable as long as the partnership exists. Should the partnership be dissolved or the estate of one of the partners be sequestrated on insolvency, the partners will be held jointly and severally liable in solidum for any debts incurred during the partnership.

A South African private company may have 50 shareholders. A sale to an unincorporated private company is void but an agreement can be entered into by a nominee purchaser for a company in the course of incorporation. Once the company is incorporated, the purchase of the property can be ratified.

Within 21 days of establishing a place of business in the Republic an external company i.e. a company incorporated outside South Africa is required to file a certified copy of its Memorandum of Incorporation with the Registrar of Companies. In terms of Section 324 of the Companies Act, the External Company, thereafter, has the same power as SA Co. to own immovable property in the Republic.

1-10 Natural Persons may form a Close Corporation. There are no shares in a CC and each member's interest is expressed in a percentage.

In R.S.A., a duly formed inter vivos trust created by the founder appointing trustees to hold the assets of the trust on behalf of beneficiaries (once registered with the Master of the Supreme Court) can acquire immovable property subject to the provisions contained in the Trust Deed.

The effect of a contract in South African Law is not dependent on the name given to the contract. Therefore depending on the manner in which the contract is drawn a so called joint venture may well be an ordinary partnership. In most instances, where parties co-operate in a commercial association they want to avoid the risk of problems on the insolvency of either partner and want a commercial association other than a partnership. Generally, a joint venture will be conducted through the means of a limited liability company. Due consideration will have to be given to the memorandum and articles of association to ensure that they are consistent with the joint venture agreement.

When entering into a deed of sale the purchaser might not have decided by what vehicle the property is to be acquired. In this event the purchaser can enter into the deed of sale personally and incorporate a provision whereby he has the right to nominate a third party as purchaser within a specified period of usually about 1 month. Should such nomination not be made and accepted by the third party in the prescribed time, then the purchaser is obliged to acquire the property in his own name.

If the property to be acquired is in fact already owned by a Company or a Close Corporation and such property comprises the sole asset in the company or close corporation, the purchaser, if that is the form in which he would like to own the property, may acquire the total shareholding and loan accounts in the company . The purchaser may also buy total membership in the close corporation, instead of buying the property out of the company or close corporation, thus becoming the owner of the property through this medium. Should this be possible, transfer duty is not payable and the costs incurred are minimal.

An offshore trust can hold the property via shares in a company registered in South Africa. This company can have the property as its only asset. The asset(s) in the trust will not form part of the estate of the person who transferred them into the trust. This provides the security of knowing that they will be held for the benefit of the person's heirs independently of any legal considerations in South Africa.

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