Renting vs Buying: The Pros and Cons
In a lowering interest environment, tenants are reconsidering their priorities. Driven by reduced interest rates and more lenient loan criteria, tenants are starting to have their sights firmly set on owning a home. While many—particularly the ‘millennial generation’—chose to travel and live more ‘freely’ in the past, priorities have since changed. The pressing question right now is: ‘Should I continue renting, or should I buy?’ The simple answer is to do your homework, and to consider the pros and cons. However, before you even begin to look around, make sure that you request a free home loan prequalification. These can be easily accessed online via bond originators such as Ooba Home Loans. This gives you an idea of what you can afford, and what your credit rating is. A credit rating of 600-plus is what you need to be considered for a home loan. A prequalification is therefore a good place to start in determining whether you would qualify for a bond. In addition, start scoping out the property market at least three to six months prior to putting in an Offer to Purchase. Once you know what you can afford, chat to agents in your area, and register on websites such as Property24 and Private Property to receive alerts for property listings. This gives you a better idea of what is available in your price range, what properties go for in areas of your choice, and what the demand is like. Doing your research will empower you when it comes to making a deal. It gives you bargaining power through knowledge of the area and the market in general. To Rent, or Not to Rent? Renting pros: Flexibility: If you’re undecided as to where you want to invest, or whether your income will be secure in the longer term, then renting is best for you. No ownership costs: Homeowners are sometimes hit with costs that tenants don’t have to factor in. These relate to maintenance, levies, rates and taxes, and home insurance. Less responsibility: Renting a small lock-up-and-go is appealing for those who want as little maintenance as possible. In addition, if one were to be retrenched or needed to move quickly, it would be simpler. Renting cons: No return on investment: The obvious downfall is that you are paying for an asset that you don’t own, and will not make returns on. Bound by rules: Rental agreements are rigid, and a tenant is bound by these. Failure to comply can result in fines and further legal action (in a worst-case scenario). To Buy, or Not to Buy Firstly, if you are considering buying a home, a question often asked is: ‘Is it better to finance your home over 20 or 30 years?’ On a 20-year bond, you pay lower interest rates with higher monthly repayments; whereas on a 30-year bond, you pay higher interest rates with a lower monthly repayment. A 30-year bond is better suited to an investor who has a tenant to cover their monthly repayments, and there is a higher chance of achieving a positive cashflow. However, paying off your bond sooner is better. Add an extra R500 per month (at minimum), and you will see the difference that it makes. Chat to your bond originator to help you do the maths. Home Ownership Pros: Ownership and equity: Owning an asset, regardless of the economic climate, is a positive. If you look after your home and focus on paying it off quickly, you can still make a return rather than paying off someone else’s bond. Freedom to personalise: You now get to decorate, renovate, and call the shots for the most part. Rental income as an additional revenue stream: If you’re looking to rent out your place, a tenant can cover your bond and (hopefully) your bills. Although the income is taxable, you can also claim a tax deduction on costs incurred in producing such income (such as bond interest, rates, maintenance, rent collection costs, etc.) Benefits your credit score and finances: Your mortgage account is a great place to put your savings—the interest saved is higher than what you can earn on cash deposits, is effectively tax-free, yet is also low enough should you wish to borrow against it in future. In addition, making repayments on your home each month (on time) improves your credit record. Home Ownership Cons: Hidden costs: Be sure to download a home loan calculator prior to putting in an Offer to Purchase. This way, you know what the transfer fees are as well as the attorney fees. Remember that there are transfer duties (for properties over R1.1 million) as well as attorney fees for the transfer and bond registration that you will need to factor in. Less mobility: Spur-of-the-moment decisions to backpack the world or relocate for work will require more thinking and admin time. Returns not guaranteed: No returns are set in stone. You might over-capitalise, or interest rates could increase, and you may never make your money back, let alone turn a profit. That is why it’s important to do your research prior to purchase—and to pay off your home as quickly as possible. WRITTEN BY GRANT SMEE Grant Smee is a property investor. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Claiming Ownership Through Acquisitive Prescription
One way to acquire property in South Africa is through acquisitive prescription. This method does not rely on the transfer of rights from a predecessor in title; instead, it acknowledges specific factual criteria that, when met, grant legal rights and title to ownership. This article will outline the requirements necessary for successfully claiming ownership through acquisitive prescription, with a focus on the Prescription Act 18 of 1943 and the Prescription Act 68 of 1969. Acquisitive prescription is regulated by the Prescription Act 18 of 1943 (“1943 Act”) as well as the Prescription Act 68 of 1969 (“1969 Act”). According to section 2(1) of the 1943 Act, acquisitive prescription is the acquisition of ownership through the possession of another person’s movable or immovable property, or the use of servitude in respect of immovable property, continuously for 30 years nec vi, nec clam, nec precario (without force, without secrecy, without permission). Section 1 of the Prescription Act 1969 (Act 1969) stipulates that “subject to the provisions of chapter I and chapter IV, a person shall by prescription become the owner of a thing which he has possessed openly and as if he were the owner thereof for an uninterrupted period of thirty years or for a period which, together with any periods for which such thing was so possessed by his predecessors in title, constitutes an uninterrupted period of thirty years.” Requirements for Acquisitive Prescription The following requirements must be satisfied in order for one to be successful in their claim for acquisitive prescription: Possession (or use, in the case of acquiring limited real rights). Openness (nec clam). Possession as if the owner (This means that the possessor must act as though they are the rightful owner of the property. This involves having the intent to claim ownership (animus) as part of civil possession, along with elements from previous requirements, such as not holding the property by permission (nec precario) and demonstrating an adverse use of the property. Continuous possession for 30 years. 1. POSSESSION The type of possession required for prescription is not defined in the 1943 Act. The 1969 Act is slightly clearer in this regard, stipulating that the possessor needs to possess “openly and as if he were the owner”. The individual claiming ownership of the property must demonstrate both physical control and a corresponding mental attitude towards the property. This means that possession should not only involve tangible control but also reflect the mindset of an owner or the intention to acquire ownership. This type of possession is referred to as civil possession, which encompasses both objective and subjective elements: physical possession combined with animus domini, or the intention to acquire the property. 2. OPENNESS (NEC CLAM) This requirement requires the property to be held peacefully and openly. Possession must be held in an open manner and patent to the general public and also in a manner that the owner would have been able to see and take notice of the possession and the various acts of the user associated therewith. 3. POSSESSION AS IF THE OWNER This requirement stipulates that the property must not be held under revocable permission or any contractual or legal relationship, such as a lease or usufruct. There should be no grant of permission implied. If a tacit agreement can be demonstrated, it may allow one to contest the claim of acquisitive prescription. The Prescription Act mandates that the potential acquirer must act as if they are entitled to possess and use the property rights. This requirement aligns with the dominus element of civil possession, incorporating aspects of both nec precario and adverse use. 4. CONTINUOUS POSSESSION FOR THIRTY YEARS This element requires the property to have been held for an undisturbed period of thirty years. In Welgemoed v Coetzer and others 1946 it was held that the required continuity of occupation need not be absolute continuity, for it is enough if the right is exercised from time to time as occasion requires and with reasonable continuity. In practice, the claimant needs to do no more than demonstrate that possession, including that of predecessors in title insofar as this is relevant, endured for the thirty-year period to a sufficient degree to justify the conclusion that the exercise of rights of ownership was continuous. In light of the foregoing, it is clear that acquisitive prescription is a valid principle in our law that allows a possessor, who has satisfied all the requirements as set out in the acts and in terms of common law, to obtain the title of the property by virtue of their possession and use of the property for a specific period of time. Reference list: Prescription Act 18 of 1943 Prescription Act 68 of 1969 Mark Evan Investments CC v Groenveld and Another (11747/2017) [2023] ZAKZDHC 74 Welgemoed v Coetzer and others 1946 TPD 701 at 720 Acquisitive Prescription in View of the Property Clause, Ernst Jacobus Marais 2011 While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes
How to Wind Up a Deceased Estate
Winding up an estate in South Africa is a meticulous process governed by the Administration of Estates Act 66 of 1965. It involves the collection and distribution of a deceased person’s assets, settling debts, and ensuring that the estate is managed according to the law and the deceased’s wishes. This article outlines the steps involved in this process, providing a clear roadmap for executors and beneficiaries. Step 1: Reporting the estate The first step in the winding-up process is to report the death to the Master of the High Court in the jurisdiction where the deceased lived. This must be done within 14 days of the death. The following documents are required: Death certificate. Certified copy of the deceased’s ID Document. Marriage certificate (if applicable), as well as the antenuptial contract (if applicable). Certified copy of the surviving spouse’s identity document, should the parties be married in community of property. Original will (if available). Completed death notice form. Inventory of assets. Completed next-of-kin affidavit (if applicable). Nomination of executor (if applicable). Acceptance of trust. Certified copy of the executor’s identity document. CIPC documents if the executor is a company / closed corporation. Marriage declaration. Affidavit in respect of jurisdiction. Step 2: Appointing an executor The Master of the High Court will appoint an executor to manage the estate. If a will exists, it typically names an executor. If there is no will, the Master will appoint an executor, and this executor needs to be nominated by the intestate heirs. An incorrect will and/or executor appointed in an estate without a valid will, may result in the Master asking for the executor to furnish a bond of security to the value of the gross estate. The executor receives a ‘Letter of Executorship’ granting them the legal authority to administer the estate. Step 3: Gathering and valuing assets The executor must identify, secure, and value all the deceased’s assets. This includes bank accounts, real estate, investments, personal belongings, and business interests. The executor must also ensure that any income due to the deceased is collected, such as rental income or dividends. Step 4: Settling debts and liabilities The executor must settle all debts and liabilities of the estate. This involves notifying creditors and settling outstanding accounts. Creditors must be given notice of the deceased’s death and allowed time to submit their claims (outstanding bonds, credit cards, personal loans, etc.), which is done by way of an advertisement in the Government Gazette and a newspaper usually circulated in the area in which the deceased lived. Step 5: Preparing the liquidation and distribution account The executor prepares a liquidation and distribution (L & D) account which reflects the assets, liabilities, and how the net assets will be distributed among beneficiaries, either in terms of the will or the Intestate Succession Act. It must be submitted to the Master of the High Court for approval, and is also made avai-lable for public inspection for a period of 21 days. Step 6: Paying creditors and taxes The executor must ensure that all taxes owed by the deceased (including income tax, capital gains tax, and estate duty) are paid. SARS will issue a tax clearance certificate once all taxes are settled. Taxes and liabilities (apart from administration fees) may only be paid once the Master has approved the L & D account, and after the inspection period expired with no objections lodged against it. Step 7. Distributing the estate Similarly to the payment of creditors, distributions and transfers of assets may only take place once the L & D account is approved and after the inspection period expired with no objections lodged against it. This distribution marks the final stage of the winding-up process. Step 8: Finalising the estate The executor must ensure that all steps are completed, including the transfer of property title deeds, and closing bank accounts. Challenges and considerations Winding up an estate can be a complex and lengthy process, often taking from several months to years. Executors must navigate legal requirements, deal with potential disputes among beneficiaries, and manage the administrative burden. It is therefore imperative you use an executor who is professional, experienced, and has operational ability. While many feel comforted by nominating trusted friends and family to execute their estates, these individuals seldom have the necessary expertise and operational capability, and the Master may request that this individual is assisted by a professional. The winding-up process in South Africa is detailed and requires careful attention to legal and financial obligations. Executors play a crucial role in ensuring that the deceased’s wishes are honoured and that beneficiaries receive their rightful inheritances. By following the prescribed steps and seeking professional assistance, when necessary, the process can be managed effectively, providing closure to the deceased’s affairs and support to their loved ones. WRITTEN BY VIRATH JUGGAI Virath Juggai is a risk specialist. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Planning to Renovate Your Home?
Your insurer or broker should be the first to know. Many South African homeowners are investing in renovating their homes to increase its value. However, whether you’re planning to revamp your kitchen, bathroom or do some landscaping, anything that affects the replacement cost of your home can affect the amount of short-term insurance cover—and, in turn, your premium. If you embark on renovating your home, it’s important to notify your insurer or broker, as this changes your risk profile during the renovation period. Renovations on your property exposes you to the risk of damage or theft to the property. Most insurers require notifications of this type of risk change, as special conditions could be applied to the policy such as additional excess, or limited cover if there is theft or damage. It must also be mentioned that personal liability will be excluded due to the high risk of having builders on your property, and the possibility of them being injured whilst on duty or causing damage to third party property. In addition, one would need to look at the extent of the renovations. For example, if you are gutting the house or removing the roof, most insurers would request the cancellation of the policy and have it replaced with a Contractors All Risk (CAR) policy designed for this type of risk. It is important to get your broker’s advice on this, and see what your current policy will cover in the event of a claim during the renovations period—or more importantly, what you will not be covered for—and obtain the right type of policy for any shortfall in cover. Your building contractor may have this insurance, which covers your property as well as the contract work, during renovations. Insist on being provided with a copy of the policy. Most experienced and registered building contractors will have this insurance in place, and you should be covered in the event of building material theft, damage to your existing property or to those of neighbours, defective workmanship, and so on. Should your building contractor not have this insurance in place, you can easily obtain it through your broker. Before renovations commence, it is advisable to have a CAR policy in place, which is easy to obtain. An upfront lump sum premium is normally payable, and the policy is valid for around 9 months. It is accompanied with an option to extend cover for up to 2 years, generally at no additional cost. The following information will be required to apply for a CAR policy, which will determine the premium that a homeowner will be charged for comprehensive cover: Full description of contract works Insurance period—start and estimated end date Estimated contracted value Maintenance / defects liability period Public liability limit (value) It is equally important to remember that once you have signed the release and occupy your newly renovated home, that you immediately notify your insurer or broker of the completion of renovations done in order to have any special conditions removed from your policy. Finally, you should stipulate the value of the renovations, and increase your sum insured to accommodate this accordingly. If you cancelled your homeowner’s policy due to major renovations, now would be a good time to activate a new one. WRITTEN BY ELIZABETH MOUNTJOY Elizabeth Mountjoy is a private wealth manager. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.