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Buying Property in South Africa |
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South Africa is reputed to have one of the best deeds registration systems worldwide with an exceptional degree of accuracy and security of tenure being guaranteed. When it comes to buying property in South Africa, property can be owned individually, jointly in undivided shares or by an entity such as a company, close corporation or trust or a similar entity registered outside South Africa.
There are no restrictions on property ownership by non-residents, save for a prohibition on illegal aliens owning immovable property within the country. | | | | | There are, however, procedures and requirements which must be complied with in certain circumstances, such as, the local registration of entities registered outside of South Africa where it purchases property in South Africa and the appointment of a South African resident public officer for a local company whose shares are owned by a non-resident.
In the event of a non-resident buying property in South Africa with the intention of residing here for longer periods, permanent residence will have to be applied for in accordance with the given requirements and procedures of South African law. |
When buying property in South Africa it is wise to be as knowledgeable and informed an investor as possible. Cape Waterfront Estates would like to guide you on the rules and regulations regarding foreign investment.
Real estate in South Africa is also known as immovable property. Currently there are no restrictions for foreign nationals (temporary residents) wishing to buy and own real estate in South Africa. Foreigners (non-residents), defined as either natural persons or legal entities whose normal place of residence, domicile or registration is outside of South Africa, are subject to certain restrictions on property ownership, and illegal aliens are prohibited from owning immovable property in South Africa.
Acquiring property overseas is complicated. To avoid making costly mistakes or engaging in illegal transactions, hire a licensed property consultant who is registered with the Estate Agency Affairs Board and is familiar with South African laws and customs.
Legal Procedures - With the assistance of your estate agent, make sure that there are no outstanding charges on the property, i.e. mortgages, pre-emptions ("rights of purchase"), tax or other liens.
- Ensure that the deed of title is properly investigated. Don.t just assume that the vendor owns the property.
- If the legal entity is registered outside of South Africa, have it registered locally as well.
- Local companies with shares owned by a non-resident must appoint a South African resident public officer.
Offer to Purchase
Once the above procedures have been adhered to, a preliminary Offer to Purchase is entered into between the buyer and seller. The Offer to Purchase will contain some, if not all, of the standard provisions discussed below. An Offer to Purchase/Agreement of Sale is always a written agreement that becomes irrevocable once its terms and conditions have been accepted.
Purchase price
The purchaser makes a deposit on the property. The parties concerned negotiate the deposit amount and the conditions under which a deposit might be returned.
Provision will be made for a guarantee in respect of the balance of the purchase price. A guarantee will only be acceptable if issued by a local financial institution; the funds would have to be remitted to South Africa in order for a local bank to issue such a guarantee. Alternatively, arrangements can be made between a foreign and a local bank for a back-to-back guarantee to be issued. In certain circumstances, it is also possible to negotiate the issue of a Standby Letter of Credit from an overseas institution.
Voetstoets
This is a standard inclusion in all Deeds of Sale and implies that the property is bought "as is", meaning in the exact condition in which it is found. Of course, all the property's defects should still be brought to the attention of the purchaser.
Electrical & Beetle certificate
The property owner is required by law to be in possession of a valid 'electrical compliance certificate' confirming that the property's electrical installation meets certain statutory requirements.
The beetle certificate verifies that all accessible parts of the property are free of infestation by certain types of beetle, and is not a legal requirement.
Fixtures and fittings
A property is sold with all fixtures and fittings of a permanent nature, including anything attached to the property or too large to remove from the property. All items that are to be included in the purchase price should be detailed in the Agreement of Sale.
Transfer of Immovable Property
Once all the requirements of the primary Offer to Purchase have been fulfilled, a final Agreement of Sale is drawn up and the transfer of the immovable property between the parties becomes effective. Only then will ownership of the immovable property shift from the seller to the buyer, and a new title to the real estate will be registered with government authorities.
Additional Property Costs
The purchaser is responsible for the payment of transfer costs, an inspection fee and the initiation fee. Transfer costs include transfer duty and conveyancers' fees.
Transfer duty is calculated as a percentage of the purchase price and varies depending on the purchaser's legal status. For a legal person the transfer duty is 8% of the purchase price. For a natural person the calculation is as follows:
| Purchase Price | | Transfer Duty | | | | | R0 - R500 000 | | 0% | | | | | R500 001 - R1 000 000 | | 5% (above R500 000) | | | | | R1 000 001 + | | R25 000 + 8% (above R1 000 000) |
Conveyancers' fees, charged by the attorneys for attending to the transfer and registration of mortgage bonds, are calculated according to a tariff
Bond registration fees become payable.
Non-residents are liable to pay Capital Gains Tax on the disposal of the following: - Immovable property situated in South Africa, including any right or interest in immovable property
- Assets of a permanent establishment of a non-resident through which trade is carried on in South Africa
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Foreigners can apply for property loans through Mortgage SA Home Loans
With the right legal counsel, a foreign purchaser of immovable property in South Africa can easily navigate the legal requirements with very little problem.
The Benefits of a Sole Mandate |
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