Transfer duty – No surprises – Part 2
The Transfer Duty Act 40/1949 (“the Act”) states that transfer duty (duty) is to be levied on any property acquired by any person by way of a transaction. The Act is clear as to whom and by when the duty is to be paid. It states that the duty shall be payable by the person who acquires the property within six months of such acquisition. Should that person fail to pay the duty within the aforesaid period he/she shall be liable to a penalty at a rate of 10% per annum on the amount of the unpaid duty. It must be mentioned that the penalty is calculated for each completed month after the expiry of the six months. It is important to therefore look at the definition of acquisition as set out in the Act. The date of acquisition is the date the transaction was entered into irrespective if the transaction was conditional or not. The date of acceptance by the seller of an Offer to Purchase will constitute the date of acquisition and will be reflected in the transfer duty receipt issued by SARS. It has been argued that should a Deed of Sale be subject to a suspensive condition the contract will only be perfected on the date of fulfilment of the suspensive condition which should then be viewed as the date of acquisition. Considering the definition hereinbefore it is improbable that this argument will be accepted by SARS. A prudent conveyancer would advise the purchaser to pay the transfer duty within the six-month period. How does SARS determine the value on which duty shall be payable? In the event consideration is payable, for example, the purchase price, then duty will be calculated on that consideration. If no consideration is payable, for example, a donation of a property, then transfer duty shall be paid on the declared value of the property. As to the declared value, the Act defines this as the amount declared by the person who is acquiring the property. However, if SARS is of the opinion that the declared value or the consideration payable is less than the fair value of the property, it may determine the fair value of that property. Fair value is defined as the fair market value of the property as of the date of the acquisition of the property. In determining the fair value SARS shall have regard, according to the circumstances of the case, to the municipal valuation of the property and any sworn valuation furnished by the person acquiring the property. In practice when a conveyancer applies for an assessment and SARS wishes to determine whether the consideration or declared value is in line with the fair market value, they request that the municipal valuation and occasionally two independent estate agents’ valuations be provided to them. Transfer duty is then paid on either the fair value or the consideration or the declared value, whichever is the highest. SARS wants its pound of flesh. One should keep in mind that SARS has the right to add certain payments to the consideration payable for the acquisition of the property and assess duty on the combined amount, for example; a) any commission or fees paid by the person acquiring the property, for example, if the purchaser of a property is contractually bound to pay the estate agents commission; b) if the property has been acquired by the exercising of an option to purchase, any consideration paid by the purchaser to the seller in respect of the said option; c) any consideration paid whatsoever in respect of the property other than rent payable by the purchaser. It is therefore inadvisable to state in a contract that the purchaser, over and above the purchase price, is paying an additional amount for certain movables as SARS might view this as part of the consideration and assess duty on the combined amount. A person acquiring a property should therefore be mindful of the above and when in doubt obtain legal advice. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
How will the POPI Act affect the real estate industry?
On 1 July 2020, the enactment of the Protection of Personal Information Act (POPI Act) commenced, which will come into full effect on 1 July 2021. As its name states, the POPI Act aims to promote the safeguarding of personal information by putting in place the necessary regulations and legislation needed to realise this. Since its acceptance into parliament on 19 November 2013, the media has been flooded with the scope of the Act and how it will affect those who work with personal information. One industry that should not be overlooked during this time of preparation, is the real estate industry. Personal information has always been a vital part of the real estate industry, and as such, the industry comprises various responsible parties that fall within the scope of the POPI Act. Estate agents, for one, use the data of their clients to better equip them in the search for their clients’ perfect homes, discerning the needs from the data. They also use this information to complete documentation such as lease agreements, FICA compliance affidavits, bond approvals, mortgage bond applications, and transfer deeds. So, it makes sense that estate agents must have access to as much personal information as possible. Conveyancers, who also work with the personal information of clients, often receive sensitive data from buyers, sellers, estate agents, insurers, auditors, homeowners’ associations and financial institutions. This information is regularly passed on to governmental bodies such as SARS, deeds offices and municipalities. As such, it is clear that the effect of the POPI Act will be unavoidable on the real estate market. What are Responsible Parties? Simply put, a responsible party is anyone who is responsible for the processing of personal information, whether it be in the collection, safekeeping, or destruction of that information. They must ensure the integrity of every step taken during the processing of personal information, and must ensure that the guidelines and regulations of the POPI Act are always adhered to. As part of their duties, responsible parties must put in place the necessary measures that safeguard information against any possible internal or external risks, and regularly update these safeguards to ensure up-to-date security. What are Data Subjects? Data subjects are essentially any person whose personal information is collected or kept by the responsible parties. The POPI Act includes a non-exhaustive list of exactly what is considered personal information, which responsible parties must familiarise themselves with. The Act also includes the specific rights of data subjects, which aim to protect the personal information of all data subjects. How will the Real Estate Industry be Affected? The first step towards POPIA compliance may be the easiest. Neither estate agents nor conveyancers may share a client’s information or pass it on to another organisation or body without the data subject’s written approval. This is especially important as there are various role-players involved in a property search and its subsequent sale. Estate agents will also not be able to hand over the information of tenants and interested buyers to landlords and sellers without the necessary policies having been set up and permissions gained. Another big change will come in the way estate agencies conduct their marketing. From newsletters and campaigns to special offers and latest listings, agencies and agents will have to obtain the necessary permissions to continue with such communications. For many who receive such unwanted communication, this is a welcome change – one less “spam” email you have to delete before even opening it. But for those who benefit from such communications, the additional steps that need to be taken to ensure that they continue to receive the latest news and developments is vital. The most important part is, the POPI Act puts the decision of what information is given out back in the hands of the individual to whom the information belongs. Whatever way you look at it, that’s something good. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Make the property transfer easy by picking the right conveyancer
Since property transfers are some of the highest-value transactions that you may make in your lifetime, it naturally follows that you need to ensure that you don’t let your money go to waste – especially when choosing someone to handle the process for you. Choosing the right conveyancing attorney can save you a lot of headaches down the road. As COVID-19 hit the shores of South Africa, there was already quite a clear indication of what the medium-term future might hold. Consumer spending dropped across the globe, and investors, in panic, were withdrawing the value from their financial assets. Over the stretch of 2020 in South Africa, this led to the need to stimulate the economy by lowering interest rates. In the middle of it all, the property market stands as a mirror image of the surrounding economy, where conveyancing attorneys are standing on the frontlines, as if fighting in a war. The property market remains an active market right now because those who were adversely affected by the effects of the pandemic are selling off property to make ends meet, while for those who weren’t as adversely affected, there has never been a better time to buy property with sustained low interest rates on property bonds. In the middle of the storm of the active property market are the conveyancers who are doing all the work to deal with the legal aspects of the property transfers taking place. This is why, for the buyers and sellers at the end points, the right conveyancer can mean a world of difference and should not be chosen lightly. A conveyancing attorney is someone who helps both the buyer and seller navigate the terms of transfer of a property that will have consequences far into the future. With these long-term stakes, buying property is a big commitment. Perhaps the only greater commitment you can make in life is getting married. And just as much as you wouldn’t choose just any marriage officer to officiate your wedding, it is also inadvisable to pick your conveyancer at a whim. What, then, are the qualities you need to look out for in a conveyancing attorney? Knowledge and Expertise A Conveyancing attorney, in the simplest of terms, is a lawyer who handles all the legal processes related to the transfer of a property on behalf of the buyer and seller. Since property transfers are high-value agreements, it is necessary that you pick a conveyancing attorney that knows the ins and outs of property law as one misstep can seriously delay the transfer process. Conveyancers are qualified attorneys that have undergone additional training after obtaining their law degree and being admitted as an attorney in accordance with the terms of the Legal Practice Act. However, not all attorneys are created equally. So, choose one that is confident in their ability to handle all the legal matters and that has a track record to boot. Some property transfers might also require specialised knowledge related to restrictions and conditions to the use of the property (such as servitudes). A good conveyancer will be able to point out anything that could become a cause for concern. Accessibility and Transparency When it comes to legal matters, staying up to date is key as things can change quickly and new issues can rapidly pop up. A good conveyancer will be accessible to you and inform you of any new developments in the transfer process. Not only should they keep you up to speed, but should also be available to answer any questions you might have regarding the process. Poor communication is not a good look on a conveyancer. Make sure that your conveyancer is someone that will explain the processes involved in the property transfer as simply as they can. Approachability and trustworthiness A Good conveyancing attorney acts in the interests of both the buyer and the seller. Although the seller has prerogative when appointing a conveyancer for the transfer of their property, the buyer shouldn’t be left to bear the consequences of a poor decision. Therefore, the buyer and seller must find the conveyancer approachable and helpful when required. A conveyancer that acts in the interest of both parties not only smooths the process of the transfer, but also helps to make the entire process an amicable experience. The value of choosing the right conveyancing attorney cannot be overlooked. Peace-of-mind and clarity can go a long way towards making a house a home, while satisfying the seller’s needs as well. Reference list: https://businesstech.co.za/news/wealth/125583/conveyancing-fees-this-is-what-you-are-paying-for/ Conveyancing: Conventional Deeds (Act 47/1937): Guideline of Fees Legal Practice Act No. 28 of 2014 This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)