South African law allows non-residents to buy property without any restriction and most buyers will find the process similar to that of the UK. Most properties in South Africa are sold as freehold with an individual title, but properties can also be owned as sectional title or share block:
- Sectional title is the usual way of owning a property in a communal development such as an apartment block or a gated community. Do make sure that you know what the rules are before you buy so that you don't find yourself falling foul of your community on issues such as pet ownership or other community regulations.
- Share block is a system where a company owns the land and the structures and individuals own shares in the company. This method of home ownership is falling out of favour as it is not as secure as sectional title and for this reason many previous share block developments are converting to sectional title.
Using an Agent
Non-resident property purchasers in South Africa can have confidence in their estate agent while most agents will act in their best interests during the buying process. They are governed by a strict code of conduct and must undergo a series of training courses before they are allowed to practise as agents. All brokers and agents must belong to the Estate Agent's Board, which strictly enforces the rules and regulations regarding buying and selling properties.
Making an Offer
When the purchaser has found a property of their dreams, an offer will need to be made for the property. A word of caution here - once the agreement of sale has been signed there is no backing out of the deal unless some extraordinary circumstances come to light.
It is not usual to have a survey done in South Africa, but your agent can arrange one if you wish.
The agreement will deal with the following points:
- The purchase price is stated in the agreement and while it is not mandatory to give a deposit, it is usual. The agent deposits this money into an interest bearing account for the benefit of the buyer. At this point a local bank or lending institution guarantees the full purchase price and funds must be deposited in a South African bank, or a mortgage arranged.
- The date of occupation and possession is fixed in the contract as well details for the final transfer.
- Voetstoets is a standard inclusion in the deed of sale and literally means that the property is sold “as is'. In other words, buyers accept the property in the exact condition they find it. However the seller is legally obliged to disclose any known defects at the time of sale.
- The seller must also provide a valid “electrical compliance certificate' to show that the electric installations meet safety requirements. A beetle - free certificate is another requirement, which states that the property is free of infestation from beetles such as the borer beetle.
- Fixtures and fittings are included in the agreement too. Any agreement between purchaser and seller to buy fittings will also be included in the deed of sale.
The buyer's lawyer should also ensure that the seller has no other outstanding debts on the property prior to transfer.
A legally qualified conveyancer must handle the registration of a property and the costs are usually paid by the buyer, but can be split between the two. However if this is so, it must be stated in the agreement of sale.
All necessary documents for the transfer will be prepared and the title is then registered in the land registry. From the time of transfer, all former mortgages are cancelled and the new mortgage is registered.
Transfer duty is payable at the following rates:
No duty up to R500,000 of the purchase price
5% (R25,000) R500,001 - R1,000,000
from 8% R1,000,001
Apart from transfer duty, the range of costs will include lawyer's fees and mortgage arrangement fees. Buyers should allow an additional 5 to 8% of the purchase price when considering a property purchase in South Africa. In addition, if the property is new, buyers may have to pay for electrical and water installations. You should ask your builder to confirm this in writing before signing any agreement.
In any country, property owners will find they have to pay taxes and we advise you to consult a tax expert who has in depth knowledge of the system. Our tax experts can advise you on various ways to legitimately save on your tax bill while taking into account your particular situation.
Value Added Tax or VAT is charged only on agent's fees which are normally paid by the seller.
Property taxes are annual taxes that are paid to local councils for services such as garbage collection and sewerage installations and vary from according to region.