There’s death and taxes. And then there’s divorce and transfer duty. It would be inaccurate to really compare the former to the latter, but one thing is for sure - both need to be handled with care, sensitivity and sound advice.
Our property advisors are often asked questions around transfer duty in the case of a divorce order awarding a spouse sole ownership of a fixed property, says Bruce Swain, CEO of Leapfrog Property Group.
“And yes, it can certainly be confusing,” he says.
According to Swain, here’s what you need to know about the transfer duty on a property in terms of a divorce order:
1. The act
“Simply, in terms of the Transfer Duty Act, transfer duty does not apply when a property is awarded to a spouse in terms of a divorce order,” says Swain.
Similarly, when people are married in community of property, the spouse immediately becomes the owner of a half-share of the property without having to pay any transfer duty.
The transfer duty exemption is applicable to all marital regimes and civil unions. “However, in the event that the property is not awarded to the spouses and the couple reach an agreement regarding the allocation of the property outside the court, the property will be liable for transfer duty payable by the spouse that acquires the property,” Swain points out.
2. Take note of trusts
The exemption of transfer duty also does not apply in the case where a property is registered in a trust.
“The exemption only comes into effect when one spouse had sole ownership of the property or a whole of a portion of the ownership of the property and that property is then acquired by the other spouse,” says Swain.
What’s also important to note is that the transfer duty is then payable by the spouse that acquires the property, and not the one who is relinquishing the property. That is because the trust ‘owns’ the property, and not the divorced spouse. The transfer duty in this case is based on the value of the property, rather than the price. In most cases, though, the price is deemed to be the value of the property.
“Typically, the spouse that acquires the property from a trust has to settle the transfer duty within six months of the divorce order being granted, as this is the date deemed to be the ‘transaction’ date,” says Swain.
Be sure to make provision in this regard, and plan accordingly as hefty penalties apply on late payments.
3. Plus the paperwork
When a decision has been taken to award a property to one spouse in a divorce case it needs to be recorded as such, with the fixed property properly identified in the paperwork.
According to the Deeds Registries Act, a written application may be made by the spouses of a former marriage in community of property to the registrar to endorse the title deed of the property.
“The endorsement serves to confirm that formal transfer has taken place, that the property has been released from the bond (if the property is bonded), and confirms that the transferee is solely responsible for the bond,” Swain explains.
Occupational rent may also come into effect when a property is transferred from one spouse to another in terms of a divorce order. “Occupational rent comes into effect if one spouse continues living in the property after finalisation of the divorce,” says Swain.
“A divorce is, invariably, very difficult to deal with - for all parties involved. Throw a property into the mix and it becomes even more complex, which is why it is pertinent to seek the help and advice of a trusted property professional and legal expert to ensure a fair and satisfactory deal for both spouses.”
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