The property transfer (conveyancing) process is a mystery to most South Africans, and as a result of this mystery many people are “ripped off” each year by attorneys who simply exist to make money. We want to make sure you’re not one of those people, so we’ve written the article below which explains the detailed steps in the transfer process.
The buyer needs to sign an offer to purchase (also called an OTP, a Sale Agreement or Deed of Sale). Once this document is signed, the sale agreement becomes a legally binding contract between the buyer and the seller, and forms the basis of the property transaction. In simple terms, once you sign the offer to purchase, you can’t change your mind or back out.
The buyer or bond originator (person who will liaise with financial institutions) applies to the bank or other financial institution for finance. The bond application usually forms part of the suspensive conditions (these are the events which need to happen before the sale is finalised). One of the most common suspensive conditions is the sale of the buyer’s existing home.
The estate agent sends the sale agreement to the transferring attorney (the first of three attorneys that will be appointed in the property transfer process). If the property which is being sold has an existing bond, the transferring attorney will contact the bank and request the original title deed and cancellation figures (also called discharge costs) to settle the seller’s bond.
The buyer’s bank will instruct a bond attorney to register a mortgage bond in the deeds office.
The seller’s bank then instructs their attorney, the cancellation attorney, to cancel the seller’s bond. The cancellation attorney will then send the title deed and guarantee requirements to the bond attorney and transfer attorney.
The transfering attorney will then request a rates clearance certificate from the local municipality. According to the South African law, a property can only be transferred once all municipal charges and associated costs have been paid in full to their relevant parties.
Once this is all paid up, the local council will issue a rates clearance certificate. It is not uncommon for the seller to be required to pay a few months in advance to obtain the rates clearance certificate, however all credit on the account at the date of transfer will be refunded.
At this step the transferring attorney will also do a Deeds Office search to check all the details of the property. Once this is completed, the transferring attorney will compile and prepare the required documents. This can take a few weeks.
The transferring attorney will contact the buyer to come in and sign all the documents. The buyer is required to sign a Power of Attorney to Transfer and a number of affidavits to confirm their identity, marital status and financial status. Buyers should prepare for this by getting the following documentation in order:
- Proof of address (not older than 3 months)
- A certified copy of their identity document (this can usually be done at the attorney’s office)
- Their income tax number
- Declaration in respect of marital and solvency status
- Particulars concerning the identity of the attorney who is transferring the purchaser’s property if the purchaser will be using the proceeds to pay for the property being purchased
- Particulars of the bond granted
All of these documents need to meet the Financial Intelligence Centre Act (FICA) requirements. Apart from these requirements, the transfer process is required to satisfy the necessary criteria of several regulatory institutions such as the Transfer Duty Act, the Value Added Tax Act for the South African Revenue Services (SARS) and the Municipal Property Rates Act.
The buyer must pay the transfer costs and their share of rates and taxes. The buyer will be presented with estimate costs in a pro-forma account.
After the property has been registered, the buyer will receive a final account with the actual costs. The reason that the costs vary is because at this stage the registration date is unknown and only a portion of the costs are determined.
The transferring attorney now 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 contact the cancelling attorney and the bond attorney to ensure that all documents are lodged on the same day. The documents must be registered at the same time because the seller’s bank has guarantees to ensure it will be paid when the bond is cancelled, and they won’t cancel the existing bond until the new bond is registered.
Deeds Office examiners will carefully check all documentation for errors. This process takes 7 – 10 working days, depending on the work load at the Deeds Office.
Once the documents have been examined, all attorneys will be contacted to inform them of the documents being in order and will be registered the next day.
The documents are registered at the Deeds Office. The buyer now becomes the new owner and the seller is paid the net proceeds. The estate agent will also be paid their commission.
At this stage, the transferring attorney will send the original title deed to the bank. If the buyer does not have a bond, the title deed will be sent directly to the buyer. The property transfer process is now complete.
Understanding the transfer sequence and having all the necessary documentation prepared in advance will cause less confusion and ensure that everything progresses without any negative incidents.