Offer to Purchase
An Offer to Purchase (OTP) is signed by the buyer. The seller is given a time frame to choose to accept, reject, or counter the offer. The sale agreement or deed of sale is a binding contract between the buyer and the seller that forms the basis of the transaction. The OTP must contain the income tax numbers of all parties, including the agent, as well as copies of the IDs of all parties for FICA compliance.
Suspensive Conditions
The buyer or bond originator applies to the bank for financing. A bond application will form part of the suspensive conditions, which are undertakings that need to be fulfilled before the sale is finalized. Another common suspensive condition is the sale of the buyer’s existing home.
Bank Guarantee
The estate agent will send the sale agreement to the transferring attorney—one of three attorneys appointed during the process. If there is an existing bond on the property, the transferring attorney will contact the seller’s bank to request the original title deed and cancellation figures, also known as discharge costs—this is the amount required to settle the seller’s bond. The seller needs to inform their bank of their intention to sell three months prior to the bond cancellation to avoid penalties.
Documents and Payment Costs
The buyer is liable for the transfer duty and transfer costs, while the seller is responsible for rates and taxes. The transferring attorney requests a Rates Clearance Certificate from the local authority. According to South African law, a property can only be transferred once all municipal charges and associated costs have been paid in full to the relevant parties. Once this is done, a Rates Clearance Certificate will be issued by the local council. The seller may be required to pay a few months in advance to obtain the certificate; however, any credit on the account at the date of transfer will be refunded. At this stage, the transferring attorney will also conduct a Deeds Office search to verify all the details of the property. After this is completed, the transferring attorney will assemble and prepare the required documentation, which can take up to three weeks. The seller is responsible for arranging the beetle, plumbing, electrical, and gas certificates (if applicable). These certificates must be submitted to the transferring attorney before the property is registered.
At this stage, the buyer will be contacted by the transferring attorney to sign the necessary documents. The buyer will be required to sign a Power of Attorney to Transfer, as well as a number of affidavits to verify their marital status, financial status, and identity.
Buyers can prepare for this by organizing the following documentation:
- Proof of address (not older than three months)
- A certified copy of their identity document
- Their income tax number
- A declaration regarding marital and solvency status
- Details concerning the identity of the attorney handling the transfer of the purchaser’s property, if the buyer is using the proceeds to pay for the purchase
- Particulars of the granted bond
These documents are necessary to meet the Financial Intelligence Centre Act (FICA) requirements. Apart from FICA, the transfer process must satisfy the necessary criteria of several regulatory institutions, including the Transfer Duty Act, the Value Added Tax Act (for the South African Revenue Service or SARS), and the Municipal Property Rates Act.
The buyer will pay the transfer costs and their share of the rates and taxes. A pro forma account will be presented to the buyer with estimated costs. The buyer will receive a final account after the property has been registered and the actual costs are known. The costs may vary because the registration date is uncertain, and a portion of the costs is determined by this date.
The transferring attorney instructs the lodging attorney to lodge the documents with the Deeds Office. The lodging attorney is located near the Deeds Office and acts on behalf of the transferring attorney, who may not be in the vicinity. The lodging attorney will coordinate with both the canceling attorney and bond attorney to ensure that all the documents are lodged on the same day. The documents must be registered simultaneously because the seller’s bank holds guarantees ensuring it will be paid when the bond is canceled, and they will not cancel the bond until the new bond is registered.
A Deeds Office examiner will carefully review all the documentation. This process takes between seven and ten working days, depending on the workload at the Deeds Office. Once the documents have been examined, the examiner will contact all the attorneys to inform them that everything is in order, and registration will occur the following day.
Registration
The documents are registered, making the buyer the new owner of the property, and the seller is paid the net proceeds. At this stage, the estate agent will also be paid their commission. The transferring attorney will send the original title deed to the buyer’s bank. If the buyer does not have a bond, the title deed will be sent directly to the buyer. On average, the entire process takes around three months, starting from the date of sale and ending with the property being registered in the new owner’s name.