Oc­cu­pa­tional rent: what you need to know

George Herald - Private Property - - Property News -

Whether you are a buyer or a seller, it is vi­tal that you are fa­mil­iar with the terms and con­di­tions stip­u­lated in the prop­erty sales agree­ment, says Adrian Goslett, re­gional di­rec­tor and CEO of RE/MAX of South­ern Africa.

South African law states that those who would like to ei­ther sell or buy a prop­erty are re­quired to put all con­trac­tual agree­ments in writ­ing. "The rea­son for this is to re­duce the risk of am­bi­gu­ity dur­ing the prop­erty trans­ac­tion, so that each party has a clear un­der­stand­ing of what is re­quired of them," says Goslett. "Con­trac­tual lan­guage has be­come eas­ier to un­der­stand since the Con­sumer Pro­tec­tion

Act was in­tro­duced in 2011. How­ever, it is still nec­es­sary for both par­ties to read through the sale agree­ment and agree to all its var­i­ous con­di­tions and terms be­fore they put their name to it, es­pe­cially when it deals with as­pects such as oc­cu­pa­tional rent."

Safety net

The clause per­tain­ing to oc­cu­pa­tional rent is cru­cial be­cause it shields both the buyer and seller. It en­sures that the seller is fi­nan­cially com­pen­sated if the buyer moves into the home be­fore trans­fer. Con­versely, it pro­vides the buyer with fi­nan­cial com­pen­sa­tion if the seller is still liv­ing in the prop­erty af­ter the trans­fer has oc­curred.

"The oc­cu­pa­tional rent pro­vi­sion is of­ten glanced over be­cause most buy­ers only in­tend to move into the prop­erty once it has been reg­is­tered in their name. How­ever, things don't al­ways work out ac­cord­ing to plan and buy­ers may find them­selves in a sit­u­a­tion where they are re­quired to move into the prop­erty sooner than they ini­tially ex­pected. If a buyer has given no­tice at their cur­rent res­i­dence, and trans­fer on their new home is de­layed for what­ever rea­son, they could find them­selves in oc­cu­pa­tion of the prop­erty be­fore it is in their name. It is this ex­act sit­u­a­tion that makes the oc­cu­pa­tional rent clause so im­por­tant," Goslett ex­plains.

On the flip side, it is not only the buyer that runs the risk of hav­ing to pay oc­cu­pa­tional rent. The ma­jor­ity of home­own­ers sell their prop­erty to pur­chase an­other one.

They too may have to wait for the trans­fer to go through on their new home while liv­ing in their cur­rent res­i­dence. If they are still liv­ing in their cur­rent res­i­dence when it is trans­ferred into the new owner's name, they will be li­able to pay oc­cu­pa­tional rent. "While not ideal, it is in these si­t­u­a­tions that know­ing and un­der­stand­ing the terms of the oc­cu­pa­tional rent clause al­lows ev­ery­one in­volved to know what is ex­pected and not to be caught un­awares," adds Goslett.

Stip­u­late the amount

Should ei­ther cir­cum­stance come to pass, it is es­sen­tial that the oc­cu­pa­tional clause stip­u­lates the amount of oc­cu­pa­tional rent to be paid. Even if the date of oc­cu­pa­tion is listed as the date of trans­fer, the rental amount still needs to ap­pear in the agree­ment in writ­ing to avoid con­flict or any mis­un­der­stand­ings.

The seller will ul­ti­mately de­cide what amount the oc­cu­pa­tional rent will be; how­ever, both par­ties must be in agree­ment be­fore sign­ing the doc­u­ment. The rental amount should be mar­ket-re­lated and should ide­ally be enough to cover the bond re­pay­ment.

"Hav­ing an un­der­stand­ing of the sales agree­ment and its con­di­tions will help sell­ers and buy­ers to avoid any un­nec­es­sary con­flict, and will make the en­tire process of buy­ing or sell­ing a home far less daunt­ing," says Goslett.

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