IF ONLY I KNEW - SELLERS TAKE NOTE!

2012-02-01 03:52

IF ONLY I KNEW - SELLERS TAKE NOTE!

Like many other specialist areas, property owners tend to rely almost exclusively on estate agents and attorneys for advice when selling property, and correctly so. However, there are some basic guidelines which I list hereunder which may serve as a guideline for all prospective sellers.

These are by no means exhaustive and should you feel the need to further explore any of these issues, or other issues for that matter, it is recommended that you approach an attorney for legal advice, and if financial advice is required, an accountant or tax consultant.

  1. Before giving a mandate to an estate agent to sell your property, it is imperative that you know what the net sale price is that you wish to generate from the sale. In order to be able to calculate this, it is essential that you know what charges and costs you will be liable for resulting from the sale.
  2. The normal charges that are for the seller’s account are as follows:

    1. The legal costs relating to the cancellation of the bond on the property. Attorneys work according to a tariff and generally this amount should not exceed R2 000.00.
    2. The costs of obtaining the Electrical Certificate and Gas Certificate (if applicable) and the costs relating to any repairs required so as to secure the issue of these certificates. The costs of the actual certificates can vary but should generally not exceed R1 200.00 plus Vat each. However if repairs are required, this will be extra.
    3. The costs of obtaining a Beetle Certificate and the costs of any repairs. It should be noted that a beetle certificate is not a requirement in terms of any statute or regulation, but buyers normally request that this clause be inserted especially where the property is of a certain age and has wooden floors and/or a timber roof structure. In a sectional title development, the roof would generally form part of the common property and thus it would only really apply to any timber flooring.
    4. Obviously the electricity, rates, taxes and other municipal charges and Body Corporate or Home Owners Association levies up to the transfer date (unless occupation is given earlier and the buyer agrees to pay these charges as from the occupation date).
    5. Agent’s commission. This will be at the rate that was agreed in the mandate given to the agent, and if no specific rate was agreed and/or mandate given, the seller is entitled to negotiate such rate. Ensure that provision is made for the Vat on the commission as this will be payable in addition to the rate of commission agreed, for example 5% plus Vat.

There are also two further financial matters that a seller should be aware of and which are not always taken into account at the beginning of the sale process, namely that of early bond cancellation penalties and Capital Gains Tax.

Penalties:

In almost all instances the Bank who holds the bond will require a 3 month written notification to cancel the bond. In other words, should the period between the giving of the notice and the cancellation of the bond (in other words the date that the property is transferred) be less than 3 months, then penalties are levied which gets reduced the longer the notice runs until it reaches nil upon it reaching 3 months. Accordingly, in order to avoid any penalties or at least reduce the extent thereof, it is imperative that the bank be notified in writing of your intention to cancel the bond immediately once a Sale Agreement has been signed.

It would be advisable to request the transferring attorney to do so, alternatively check the bank’s website and follow the instructions thereon.

Capital Gains Tax (“CGT”):

Where the property constitutes the seller’s primary residence and is sold for more than R2 Million, the first R1,5 Million will be exempt from CGT, and if the property is sold for less than R2 Million the full purchase price will generally be exempt from CGT.

Where the property is not the seller’s primary residence, CGT will be payable on the full capital gain. For natural persons, CGT amounts to an effective 10% of the gain.

There are special conditions for persons who are non-residents of South Africa and where 5% (if the seller is a natural person) of the total of the sale proceeds (not only the capital gain) are to be paid over to SARS pending final calculation of taxes which are due. It would be advisable to consult an accountant to liaise with SARS in this regard for the purposes of getting a tax directive.

GIVING OCCUPATION BEFORE TRANSFER

In certain instances the buyer will request that occupation be given prior to the date of transfer which will require that the seller either moves out or that the tenant which is in the property is given notice to vacate.

It is essential however that, before you allow a buyer to take occupation of your property,  the purchase price of the property is properly secured, in other words the deposit paid and the balance secured either by way of bank guarantee or paid into the transferring attorney’s trust account. Failure to do so could give rise to serious implications.

Imagine this – you decide to rent a home, sign a lease and pay the deposit and first month’s rental so as to allow the buyer to move in. The sale does not go ahead due to no fault on your part. The result - the buyer is in your property and will hopefully move out, but you have signed a lease where you will be held liable for rental. Even worse, the buyer refuses to move out and you have to incur legal costs to have him ejected, with the property possibly being subjected to damage. Or, you have given notice for your tenant to move out and now you have to look for another tenant resulting in loss of rental!

The above constitutes a very basic summary of some of the issues that a prospective property seller should consider. Most important is that you obtain certainty and clarification before you put pen to paper. Once signed, the Sale Agreement constitutes a valid and binding contract which is incapable of being changed without the buyer agreeing to do so.

Most Sale Agreements are presented to sellers as an Offer to Purchase by the buyer with a cut off time by when the offer must be accepted by you. It is advisable that you do not give up doing the necessary checks and calculations simply because you wish to accept the offer before it expires. In most instances buyers will agree to an extension of the date.

Want to reply to this blog or share your views? Publish on News24 by following the prompts here.

Basilio Roberto de Sousa

Attorney and Notary

Tel : (021) 422 1323  ext 236 

Direct Fax: 0865111884

Internet:   http://www.abgross.co.za

Email:     basil@abgross.co.za

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