Who exactly is responsible for which costs during a property transaction?

SELLERS and buyers have different responsibilities and obligations during a property transaction, before the property can change ownership, and both parties need to prepare financially before selling or buying a home says Jose de Abreu of RE/MAX Property Associates and managing partner of De Abreu and Cohen Inc, conveyancing attorneys.

“It is fairly common for a buyer to require a percentage of the purchase price of the home as a deposit, but this is not the only cost that buyers need to prepare for. You also need to factor financial aspects such as the transfer fees and the bond costs, if registering a bond with a finance provider,” says De Abreu.

When a property is bought and transferred into the buyer’s name, the government levies a tax on that property transaction based on the value of the property. For vacant stands, the transfer duty is based on the value of the land, but transfer duty on existing homes will be based on the value of land and buildings.

“From March 2015, properties valued below R750 000 are exempt of paying transfer duty. Transfer duty on homes bought for more than R750 000 is charged on a sliding scale percentage relative to the property’s value. For example a property valued at R3m will pay R85 000 plus 11 percent of the amount above R2.25m.”

De Abreu says that the transfer duty is payable to the conveyancing attorneys about one month before transfer, so buyers will need to have the money saved up before they start looking at homes.

“When property has been purchased from a developer that is registered for VAT, then VAT is charged by the seller on the purchase price and paid over to SARS,” he says. “In such a case the purchase price of the property could either be expressed as VAT inclusive or VAT exclusive, so the buyer must take care to note whether the purchase price as recorded in the written agreement of sale excludes or includes VAT.”

De Abreu says that if you buy a property with the intention to renovate or subdivide the property, you might be required to pay for a con- veyancer’s certificate regarding certain title restrictions that may be relevant to that particular property. This certificate will generally cost in the region of R2 500 plus VAT.

You may also be required to pay for the approved plans of the property. Even if the seller may have drawn up plans for the renovation and the offer to purchase may stipulate their inclusion, the seller is not legally bound to provide the buyers with the approved plans, unless expressly stated in the agreement.

“Another possible cost to consider is occupational rent. Although this is largely determined by the agreement between the two parties, when transfer is due and the date on which it is agreed the buyer can move into the property. The occupational rent amount is determined beforehand and stipulated in the offer to purchase. The stipulated amount should be based on fair-market value,” says De Abreu.

Sellers will be responsible for paying the agent’s commission, along with obtaining all clearance certificates for the property. These would include an electrical certificate of compliance (ECOC), which must not be older than two years and must cover all electrical installations during this time. It is important to note that, where applicable, electric fences are covered under a separate certificate.

Other clearance certificates include water and plumbing certifi- cate, gas certificates and beetle certificates if applicable. If no repairs are required, the cost of obtaining all the certificates will be about R2 500 depending on the service providers used.

“Sellers will be responsible for paying the bond cancellation fees, which are payable directly to the bond cancellation attorney and are applicable even for bonds with nil balances. Sellers will be required to provide their bondholders with three months written notice to cancel their bonds. If this is not done, sellers are generally required by the bondholders to pay bond penalty interest, which will equate to about one month’s bond repayment for every month of notice not given,” says De Abreu.

He says that as a general rule, sellers will have to pay a four month advance on their rates and services, as well as any arrears owing on any levies or their homeowner’s association fees and may also be asked to pay these in advance, up to the anticipated date of transfer.

“If either the buyer or seller is not sure of what they are required to pay, they should consult with a real estate professional or property attorney who can provide them with further guidance. Financial preparation will ensure that the property sales process runs smoothly and that there are no monetary surprises on either side of the sale,” De Abreu says.