Sellers - Always Prevent These 5 Mistakes When Signing A Property Sale Agreement
Category Buying and Selling Property
1. In sales of sectional title properties, there often is confusion as to whether or not the exclusive use areas which the seller enjoys beneficial use of, form part of the sale. This depends on whether or not it is a formal exclusive use area registered in the deeds office or whether the rights are "informal" in the sense that the seller enjoys the use thereof assigned in terms of the rules of the relevant scheme. In the latter instance, the exclusive use area cannot be included in the sale agreement as part of the property sold.
2. Sellers often downplay the importance of giving adequate disclosure in the property condition report which is attached to the sale agreement. At present, it is not a legal requirement for the report to be attached to the sale agreement although recommended by the Estate Agents Affairs Board; but the law is about to be changed shortly to make it compulsory. Either way, it is best to give proper disclosure of the property 's condition in that report, simply because it is honest and the right thing to do. Also, if there is clarity upfront on the condition of the property, later disputes - that so often delay transfer or end in costly litigation - can be avoided.
3. Sellers should take note that agreements place the liability to ensure that certain prescribed Compliance Certificates are in place, on them. These certificates are mostly obligatory and relate to electric, gas and water installations on the property, amongst others. There is a cost for the certificate itself as well as for the reparation work to be done, if indicated. These costs are for the seller's account. Sellers however often forget to budget for this cost which can run up easily if the current installations have not been regularly maintained.
4. Where the seller of a property is an entity (for example a company or close corporation), it is very important to ensure that the members of the close corporation or directors of the company are in agreement with the sale. A properly drafted resolution is required and the resolution will also appoint a particular person to be the signatory on behalf of the close corporation or company. If the seller is a trust, similar provisions apply, although more strictly because of legal differences between trusts on the one hand, and companies and close corporations on the other. As a rule of thumb, it is crucial that the resolution is drafted and signed before the sale agreement is concluded.
5. Sellers and buyers alike often have incorrect understanding about the liability for the expenses in a property sale transaction.
5.1 Seller Expenses
5.1.1 AGENT'S COMMISSION
5.1.2 PENALTY BOND INTEREST:
If 3 months' written notice not given to bank to cancel Seller's bond, a cancellation penalty is payable. It equates to approximately one
month's bond instalment for each completed month of notice not given (or pro rata thereof).
5.1.3 BOND CANCELLATION FEE: (IF PROPERTY BONDED)
- Fees range from R4000 to R5000.
- If more than one bond is cancelled, the fee increases as per the applicable sliding scale.
- Note: still required to cancel the bond registration, even if the bond has a nil balance.
5.1.4 RATES AND SERVICES:
Any arrears, current amounts owing and a 60-day advance collection amount.
5.1.5 CERTIFIED COPY OF MISPLACED TITLE DEED:
Fees range from R2500 upwards, depending on the number of deeds to be replaced.
5.1.6 LEVY AMOUNTS OWING TO BODY CORPORATE OR HOMEOWNERS' ASSOCIATION
5.1.7 COMPLIANCE CERTIFICATES:
- Electrical (in order if issued under 2 years ago and no changes made to the installation).
- Beetle (if applicable).
- Plumbing (if applicable).
- Gas (if applicable).
- Electric fence installation (if applicable).
- Approximately R3000 for all 5 if no repairs necessary.
5.1.8 ANY REPAIRS AGREED TO IN CONTRACT
5.1.9 OTHER: - Financial undertakings for Seller. - Bridging finance for Seller. - Obtain directive from SARS (withholding tax scenario). - Repatriation of funds. - Foreign investment abroad.
5.2 Buyer Expenses
5.2.1 TRANSFER COSTS:
- Conveyancing fees, as per tariff.
- Transfer duty - payable to the conveyancers approximately a month before transfer.
- No transfer duty payable if Seller is VAT registered and the sale forms part of the Seller's VATable enterprise.
- Purchase price will either be recorded in contract as inclusive or exclusive of VAT.
- The account to Purchaser may include the cost of obtaining a homeowners' association's consent to transfer.
- Cost of rates clearance certificate.
- Cost of levy clearance certificate (in sectional title transfers).
5.2.2 BOND COSTS (IF REGISTERING A BOND)
5.2.3 TRIPARTITE AGREEMENT (IF APPLICABLE)
5.2.4 CONVEYANCER'S CERTIFICATE RE TITLE RESTRICTIONS:
May be required if Purchaser intends subdividing or renovating.
5.2.5 OCCUPATIONAL RENTAL:
- If Purchaser moves in before transfer.
- Always try and provide for a figure in the Agreement of Sale, even if occupation is on transfer.
5.2.6 PLANS:
If agreement does not oblige Seller to deliver copies of approved plans, Purchaser has to incur costs.
Author STBB Attorneys
Published 19 Oct 2021 / Views -