Property Transfer Costs in South Africa
When selling or buying a property in South Africa, a question that is frequently asked is, who is responsible for covering which costs? We’ve outlined the costs the seller is responsible for along with those that are for the buyer’s account.Knowing what you are responsible for upfront prevents any misconceptions and allows you to better plan and facilitate the sale of your property with greater peace of mind.
Property Transfer fees borne by the seller
The general guideline in all of the provinces in South Africa except for KwaZulu-Natal is that the seller of an immovable property chooses the conveyancer that will attend to the transfer. The purchaser pays the costs of the transfer but the seller appoints the conveyancer as the seller arguably has more to lose if the transaction does not proceed properly.
Estate Agent’s Commission
If the seller appoints an estate agent to assist with marketing the property and finding a buyer, the seller would be liable for the agent’s commission in the event of a successful sale and where the agent was the effective cause of that sale. This commission is usually an agreed percentage of the purchase price or a set fee. For first time sellers it is worth mentioning that they can negotiate this rate with their estate agent, when they provide the estate agent with a mandate.
Municipal Accounts – Rates & Taxes, Water, Electricity, Sewerage & Refuse
An immovable property in South Africa cannot be transferred to any other person without the prior written consent of the local municipality to whom the seller is liable for property rates and taxes and utilities including water, electricity, sewerage and refuse. The conveyancer undertakes the administrative work involved in procuring a proper written consent. To provide that consent, the municipality will request payment of any amount already owing on the account as well as an upfront payment of approximately 3 to 4 months’ worth of fees in advance. The seller will need to budget for this lump sum payment of any arrears and an advance of 3 to 4 months of their usual monthly municipal fees. The advance portion will be allocated as a credit on the seller’s account, which will work down during the transfer process. Should there be a credit remaining on the account after transfer, the municipality processes a refund into the conveyancer’s trust account. Municipalities do not accept guarantees or undertakings and as such the seller needs to budget to have the cash available in order to receive the written consent from the municipality. Should the property form part of a body corporate in a sectional title scheme or a home owners association, a lump sum would likewise need to be paid in order to secure the prior written consent to transfer by the body corporate or home owners’ association. The seller would need to budget for this expense too.
Certificates of Compliance
A seller is also required to provide the purchaser with compliance certificates in respect of:
- All electrical wiring & installations at the property
- Electric fences installed at the property
- Gas installations at the property
The certificates of compliance cannot be older than two years and must be issued by properly registered workmen and contractors. The seller is liable for their fees for issuing the certificates as well as for any work that they are obliged to attend to in order to ensure that the property is properly compliant. The seller would need to budget for this expense as well.
Property Transfer fees borne by the buyer
A buyer is liable for the transfer duty which is payable to the South African Revenue Service (SARS). This is a tax imposed by SARS when an immovable property is transferred from one person to another. Transfer duty is calculated on a sliding scale according to the fair market value of the property being transferred.SARS may request proof of the fair market value. Properties valued at less than R1 million are exempt from transfer duty. For any properties valued at more than R1 million, the calculation is as follows, for all properties purchased on or after 1 March 2020. Please note: these rates are subject to change and are reviewed annually. For current rates, please visit https://www.sars.gov.za/types-of-tax/transfer-duty/Value of the property (R)Rate1 – 1000 0000%1 000 001 – 1 375 0003% of the value above R1 000 0001 375 001 – 1 925 000R11 250 + 6% of the value above R 1 375 0001 925 001 – 2 475 000R44 250 + 8% of the value above R 1 925 0002 475 001 – 11 000 000R88 250 +11% of the value above R2 475 00011 000 001 and aboveR1 026 000 + 13% of the value exceeding R11 000 000
Transactions exempt from transfer duty
There are certain transactions that are exempt from transfer duty including a VAT transaction, a divorce or deceased estate transfer. We encourage you to contact us for a consultation to discuss the particulars of your transaction and whether transfer duty applies.
A buyer is also liable for the conveyancer’s professional fee for attending to the transfer of the property. This is calculated on a sliding scale according to the fair market value of the property and the Legal Practice Council provides a recommended tariff to be used as a guideline on what would be considered a reasonable fee.The buyer is also liable for the conveyancer’s fees charged to obtain the municipal consent as well as any administration fees charged by a body corporate or home owners association to issue their respective consents to the transfer.
Deeds Office Fee
The Deeds Office charges a fee for attending to the registration of the transfer and that too is calculated according to the fair market value of the property, as disclosed in the transfer papers drafted by the conveyancer.As an ‘accountable institution’ a conveyancer is obliged to establish and confirm the identity of all parties to a transaction as well as the source of the funds which are exchanged. The conveyancer is entitled to charge a fee for complying with this statutory obligation.The conveyancer must conduct a search through the Deeds Office to ensure the accuracy of the information received and a nominal amount is charged for this too.
Should a buyer need to take occupation of the property before the property is registered in the name of that buyer, and should that be an option available, the buyer would be liable for occupational rent as well as for utility charges for the period of occupation prior to transfer. There are certain minor disbursements incurred including messenger fees, couriers and delivery charges, which would be for the buyer’s account too.These are the costs which parties could expect to incur in a typical South African Property transfer. We encourage you to arrange a consultation to discuss and confirm what would be applicable to your own transfer, being signing a sale agreement, to ensure that you can budget and plan properly, before incurring contractual obligations that you may not have bargained on.South African Conveyancing Attorney and Property Law specialist at Witz Inc., Callyn Datnow, will readily assist you with all aspects of your property transfer. Please contact us today to see how we can assist you.