Call us
Durban
+27 (0)31 702 5311

Conveyancing

This article is designed to inform homeowners and prospective homeowners about the process of conveyancing.

What is Conveyancing?

The term “conveyancing” describes the legal process whereby a person becomes the registered and lawful owner of fixed property and ensures that his ownership cannot be challenged. “Fixed property” includes any land, whether improved or not, such as a dwelling house, a farm or vacant plot. It also includes units in a sectional title scheme. Formal conveyancing is also required for registration of mortgage bonds and other real rights in fixed property.

This article deals with the sale of fixed property. The procedures are similar for other acquisitions of fixed property when formal conveyancing is necessary, e.g. where the fixed property is acquired as a result of donation, inheritance, exchange or from a divorce settlement.

A conveyancing transaction involves a number of steps that usually begin with the deed of sale and continue through to the registration of transfer of ownership in the Deeds Office, the reconciliation of finances and the payment of the purchase price to the seller.

Who appoints a Conveyancer?

The seller usually appoints a Conveyancer to attend to a fixed property transfer although this, like other aspects of a sale agreement, can be varied by negotiation between the parties.

A Conveyancer is an attorney with a postgraduate qualification and by law is the only person who can register property transfers. This is necessary to ensure the protection of the interests of the parties to the transaction and to maintain the high standard of land registration.

The purchaser may also appoint a Conveyancer to look after his interests, but his/her fees will be additional to the conveyancing costs charged by the seller’s Conveyancer, who will be doing the actual transfer.

What is the first step in the sale of fixed property ?

The first requirement is a valid agreement of sale. This is a written agreement that is signed by both the purchaser and the seller (and by the seller’s spouse if married in community of property). A written “offer to purchase” signed by a purchaser and accepted by a seller also constitutes a binding agreement. A verbal contract for the sale of fixed property is invalid.

The written document is important and must be carefully drafted. The parties must ensure that the purchase price payable by the purchaser is what was agreed, that the terms of payment are acceptable to both parties and that all terms, conditions and undertakings are incorporated in the document. It is always wise to consult an Attorney to prepare or peruse the agreement before signature.

What happens next ?

Transfer of the property must be registered in the Deeds Office.

To enable the Conveyancer to prepare the necessary documentation, he will have to obtain the title deeds. The parties must submit their identity documents, marriage certificates and, if applicable, antenuptial contracts. Depending on the circumstances, other documents may also be required.

Both parties will be required to sign the necessary transfer documents which have been prepared by the Conveyancer and which will enable him to effect transfer. The documents to be signed include the following :

A Power of Attorney to pass transfer.
This document must be signed by the seller as it empowers the Conveyancer to transfer the property on his/her behalf.

Declaration in respect of status.
In this document the purchaser declares his/her marital status. It contains statements such as whether he/she is single or married in or out of community of property (which determines whether the property must be registered in his/her name or in the name of both spouses).

Transfer Duty and Value Added Tax Declaration (VAT).
Transfer duty is a form of tax payable to the Government and is calculated on the value of the property. In some instances VAT will be payable on the purchase price. VAT will be payable on the estate agent’s commission, on the Conveyancer’s fees and on part of the municipal rates. VAT is not usually payable on transactions between private purchasers and seller but will be if the seller is a registered vendor under the Vat Act.

If VAT is payable on the purchase price no transfer duty will be payable. After transfer duty and VAT declarations have been signed, the Conveyancer will be able to pay the transfer duty or where applicable to obtain a transfer duty exemption certificate, without which the Registrar of Deeds will not register the transaction.

Mortgage bond documents.
If the purchaser obtains a loan from a bank or from his/her employer, the lender will usually require the purchaser to register a mortgage bond over the fixed property to secure the loan. To enable the bond to be registered, the purchaser will have to sign a power of attorney to pass the bond.

To enable the Conveyancer appointed by the bank to prepare the necessary documentation, the purchaser must submit his/her identity document, marriage certificate and, if applicable, antenuptial contract to the Conveyancer concerned.

What are the costs involved ?

The costs relating to the transfer of fixed property fall into three categories :

Transfer duty or VAT
Where transfer duty is payable to the Government it is calculated as follows :
0% on the first R140 000,00 of the purchase price + 5% on the balance of the purchase price up to R320 000,00 and thereafter 8% in the case of natural persons, (dwellings sold for less than R140 000,00 are exempt from transfer duty) and 10% where the purchaser is a company, close corporation or trust. Where VAT is payable the standard rate is 14% of the purchase price at present.

Rates and Levies
The purchaser also pays a pro rata portion of the charges payable on the fixed property to the relevant local authority or the levies payable to the Body Corporate in the case of a sectional title unit (plus VAT where applicable).

Fees
The Conveyancer’s fee is prescribed by a tariff and is calculated on a sliding scale based on the purchase price.


Bond Registration Costs

Where a bond is to be registered. stamp duty is payable to the Receiver of Revenue (0.2% of the amount secured by the bond) and an amount may also be charged by the bank for the inspection and valuation of the property together with provisional interest and insurance premiums. The Conveyancer’s fee is calculated on a sliding scale based on the amount of the bond is payable to the Conveyancer who registers the bond.

Who handles the various transactions ?

Having done the necessary searches in the Deed Office and after checking all the details of the property and parties involved, the Conveyancer prepares a draft deed of transfer and other transfer documents.

Once the documents have been signed by the purchaser and the seller and the purchaser has paid the transfer costs, the conveyancer pays transfer duty to the Receiver of Revenue and obtains a clearance certificate from the local authority or Body Corporate, as the case may be.

Once the purchase price has been secured and clearances obtained the Conveyancer may proceed with the registration of transfer of the property.

What happens to trust monies ?

Section 78(2A) of the Attorneys’Act specifically makes provision that an attorney, on the instruction of any person, may open a trust savings or other interest bearing account to invest funds entrusted to him/her. The attorney has exclusive control of this account and the interest is paid according to the investor’s direction. These funds are protected by the Attorneys’ Fidelity Fund and the attorney may charge a fee for this service.

What happens at the Deeds Office ?

The Conveyancer will lodge the documents that he has prepared with the Deeds Office for registration. The Deeds Office is a Government department entrusted with the registration of all fixed property and real rights in fixed property. If there is a mortgage bond to be registered, the Conveyancer attending to the registration thereof will lodge the bond documents in the Deeds Office for registration simultaneously with the transfer documents.

The examiners in the Deeds Office examine the documents to ensure that they comply with all relevant legislation and regulations, If the documents are ready for registration they are executed by the Conveyancer in the presence of the Registrar of Deeds simultaneously with the mortgage bond in favour of the financial institution and any other simultaneous matters.

On registration, the purchaser becomes the lawful owner of the property. The title deed reflecting his/her ownership will be released by the Deeds Office after registration. It will then be handed or posted to him by the Conveyancer concerned unless a mortgage bond has been registered, in which case the title deed will be retained by the bondholder as part of its security.

How long does the process take ?

After reading this pamphlet you will be aware that conveyancing is a complex process and requires extensive knowledge, skill and accuracy on the part of the Conveyancer.

The period of time it takes to lodge the transaction in the Deeds Office depends on the cooperation of each party and their contractual arrangements. The usual time taken by the Deeds Office to examine the documents lodged by the different Conveyancers for a specific transaction is seven to ten days. On average the time taken to register the transfer of fixed property, where a mortgage bond is involved, will be six to eight weeks from the date that the Conveyancer who attends to the transfer was instructed.

Unforeseen difficulties, such as the death of one of the parties or attachments of the property by a creditor of the seller, may cause delays.

What recourse does the public have if the Conveyancer fails to perform properly ?

Conveyancers are subject to the disciplinary powers of the Law Society of the province in which they practise. Law Societies act in the interest of the public. If one of the parties believes that a Conveyancer has not performed properly, he/she may lodge a complaint with the relevant Law Society. It will investigate the matter and may discipline the Conveyancer if this is justified.

If the Conveyancer has been negligent and the purchaser or the seller has suffered any loss, such party may have a claim against the Conveyancer for damages.

Why is a Conveyancer necessary ?

Most people are accustomed to doing their personal business without the need of a legal or other adviser. However, a great deal is at stake in the transfer of fixed property. It is usually the largest single asset that a person owns. A transaction for the purchase or sale of this asset may be the most important document ever signed by an individual.

The Law therefore provides that only qualified Conveyancers may attend to the transfer of fixed property and related transactions. This protects the rights and interest of the public and also safeguards the integrity of the South African land registration system, which is universally regarded as one of the best in the world.

When all procedures have been followed by the Conveyancer and the property has been registered in the name of the purchaser by the Registrar of Deeds, the new owner is assured that he/she has a good and unassailable title to the property.

The Law, recognising that transactions of immovable property are usually the most important in a person’s lifetime, wishes to ensure that they are handled by specialists.

ONLY AN ATTORNEY CAN QUALIFY AS A CONVEYANCER !

Legal Topics

For the information of our clients, we have prepared articles on certain aspects of law that may be of interest. Please note that these are not detailed expositions of the law but are for information and interest only. Please obtain professional advice before you act in any way.