Quite frequently inexperienced homebuyers are ignorant about the total costs involved in a property transaction or, if they are aware of them, they may not realise when such payments become due.
Home buyers, he says, must do their homework regarding the costs and the payments required before putting in an offer, so they are not caught in a difficult legal situation.
This is according to Ulrik Strandvik, a director of Gunstons Attorneys who says South African law stipulates that transfer duty (i.e. the tax on a property transaction) becomes payable as soon as a sale agreement is signed.
He adds the Agreement of Sale will in most cases state that the costs (which include the transfer duty and the attorneys’ fees and disbursements) are payable on demand by the conveyancer.
He says these costs are often called for by the conveyancer at the initial consultation with the buyer, which may take an unprepared buyer by surprise. “This is especially true when a buyer is relying on funds which are tied up in the sale of his/her existing home, which is to be registered simultaneously with his/her purchase.”
Where a buyer is caught out by the timing of the payment of transfer duty, says Strandvik, it is often possible to arrange bridging finance or a loan and attorneys can be useful in introducing buyers to those capable of granting such monies.
Home buyers, he says, must do their homework regarding the costs and the payments required before putting in an offer, so they are not caught in a difficult legal situation.
South African transfer duties are heavily weighted in favour of the poor and are seen as a significant way of raising extra revenue from the more affluent sections of the population, says Strandvik. The total transfer duties in South Africa today, he adds, provide “very useful” State income but are thought of by some to be a dampener on the residential market.
Transfer duties are not charged on homes below R600 000 in value. For those valued at R600 000 to R1 million the transfer duty is 3%. Homes priced from R1 million to R1.5 million pay 5% transfer duty and those homes above R1.5 million are charged at an 8% rate.