More Sectional Title Info

Management, conduct and house rules
By Judith van der Walt

Every sectional title scheme is governed by a set of rules comprising management and conduct rules. If the developer does not make new rules when opening the sectional title register, the management and conduct rules prescribed by the Sectional Titles Act of 1986 ("the 1986 Act") automatically applies to the scheme. After the opening of the register, the members of the body corporate are entitled to amend the management rules by unanimous resolution and the conduct rules by special resolution. Subject to further procedural requirements imposed by the 1986 Act, the amendments to the management and conduct rules will only come become enforceable once the new rules have been filed in the scheme's register at the Deeds Registry where the register is held.

It is therefore clear that all management and conduct rules have to be filed in the scheme's register before they can be enforced, irrespective of the fact that they have been amended or adopted by unanimous or special resolution. The question now arises: what about house rules? Can the members of the body corporate make house rules?

It is quite a common occurrence to find a management rule (or a "Schedule 1 Rule") applicable to sectional title schemes registered under the provisions of the Sectional Titles Act of 1971 ("the 1971 Act"), empowering the trustees to make house rules. The scope of these house rules is usually limited to rules in connection with the health, safety and cleanliness of the common property. Any house rule which purports to deal with a section for example, is therefore not enforceable but house rules do not have to be filed in the scheme's register at the Deeds Registry to be enforceable.

The rules prescribed in terms of the 1986 Act do not empower the trustees to make house rules. However, there is no prohibition against empowering trustees to make such house rules but such power must be embodied in a new management or conduct rule. If trustees were empowered to make house rules under the 1971 Act, they are still entitled to so irrespective of the fact that the 1986 Act does not allow for it.

In many circumstances, house rules create confusion. The reasoning behind the obligation to file rules in the Deeds Registry is to make the rules freely available to any interested party. On inspection of the register, any interested party will be able to establish immediately what rules apply to the scheme. If trustees are empowered to make house rules they can adopt new house rules at their trustee meetings as they see fit without informing owners of the new house rules and without taking into account the views of a certain majority of owners.

I do not ever suggest to or encourage trustees to make house rules. I believe that the issues often dealt with in house rules are better dealt with in conduct rules. The process of adopting rules by unanimous and special resolution is more inclusive and transparent and encourages good governance in a sectional title scheme.

Judith van der Walt is an attorney, notary and conveyancer at Paddocks, a specialist sectional title firm operating throughout South Africa.

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Buying into a Sectional Title Scheme – What You Don’t Know Can Hurt You!
By Jennifer Paddock
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Jennifer is a lawyer and consultant at Paddocks, a specialist sectional title firm. For further information, please call 021 674 7818 or visit www.paddocks.co.za .

Introduction
The rise in popularity of sectional title ownership over the last two decades is a testament to the fact that sectional title ownership is fast becoming the preferred home ownership option for both resident owners and buy-to-let investors. Modern lifestyle demands the ability to enjoy the benefits of facilities such as good security, gymnasiums, communal pools and the like. However, individual ownership of these benefits proves costly both in terms of time and money due to the corresponding maintenance obligations attached to such amenities. In sectional title ownership, these benefits can be enjoyed whilst the maintenance and financing of such amenities is shared by all owners of the scheme.

Despite its advantages, sectional title ownership is notoriously considered more complex than conventional title ownership and for good reason… Buying into a sectional title scheme is a commitment by the new owner to form part of a community which is governed by legislation and rules and which has financial and administrative obligations which must be met. As an investor it is important for you to know exactly what you are buying, what your management obligations will be, what costs you will be responsible for after transfer and what rules you will be bound by before putting pen to paper. In sectional title ownership, ignorance is not bliss because what you don’t know can hurt you. So read on before you sign a sectional title deed of sale…

What exactly are you buying?
You will often hear people speaking of buying a “flat”, an “apartment” or a “townhouse” when referring to what they buy in sectional title schemes, yet technically all of these terms do not describe what they are in fact buying. When you buy into a sectional title scheme you are buying a composite thing called a “unit”. A unit consists of a section together with a share in the common property. A section is an area which you own exclusively (such as a townhouse or apartment) to the median line of the walls, floors and ceilings. The common property is an area which you will co-own with all other section owners and includes all areas of the scheme which are not included in the sections such as driveways, entrance foyers, stairs, lifts, gardens, swimming pools and so on.

As a buyer, you may also benefit from exclusive use rights allocated to your section which allow you to use a portion of the common property to the exclusion of all other owners, for example a parking bay. Exclusive use rights may be allocated to a section by either being formally registered on the sectional plans of the scheme (in terms of section 27 of the Sectional Titles Act 95 of 1986 “the Act”) or more informally by passing a rule which gives the owner of a section the right to use such an area (in terms of section 27A of the Act). If you have been allocated exclusive use rights in terms of section 27 or section 27A it is important to understand that although you have the right to use an area of the common property exclusively, that does not mean that you exclusively own that area. It remains part of the common property and is therefore still owned by all the owners of sections, however no other owner has the right to use it besides you.

Before signing a sectional title deed of sale it is important for you to obtain and analyse a copy of the registered sectional plan of the scheme. Ask yourself the following questions: is the extent of the section described in the deed of sale the same extent shown on the sectional plan? Are any and all exclusive use areas allocated to me in the deed of sale allocated to the section which I am buying on the sectional plan? Asking these questions will help to prevent the all too often experienced headache when a unit owner finds out after transfer has taken place that what he thought he was buying (in terms of his deed of sale) is not in fact allocated to him on the registered sectional plan. Ask the estate agent, managing agent or seller for a copy of the registered sectional plan, alternatively find the sectional plan you are looking for on Sectional Titles Online( www.sto.co.za).

Your participation in the management of the scheme
Buying a unit in a sectional title scheme comes with automatic membership to the governing body of the scheme, called the ‘body corporate’. Membership is mandatory so even if you are a buy-to-let owner you, as owner, are the member of the body corporate and not your tenant. The body corporate is an association of owners which exists to run the scheme from a financial and administrative point of view and maintain the common property. Owners elect a board of trustees to carry out the body corporate obligations at every Annual General Meeting (“AGM”) and in many schemes the trustees contract with a managing agent to assist them in this regard.
What costs will you be responsible for?

All costs related to your section, which you own exclusively, are for your own account. Remember that you only own your section to the median line of its floors, walls and ceilings and therefore the foundations, ‘outer-skin’ and roof of the building are common property and are therefore not your exclusive financial responsibility. All costs related to the common property, which is co-owned by all owners, as well as all payments for the general running of the scheme are paid by the body corporate from its levy fund. These costs include insurance of the buildings to their full replacement value, maintenance and repair of the common property, wages of staff employed by the body corporate and so on. The body corporate estimates its expected expenditure each year, takes this budget to the AGM for approval and once approved, divides the estimated expenditure between the owners (generally in accordance with each owner’s ‘participation quota’ – a calculation which determines the fraction of each owners contribution in relation to their floor area) to work out each owner’s ordinary levy. Each owner is then liable to pay such contribution, generally in monthly instalments.

If a necessary expense arises during the course of the year for which the body corporate did not budget, the trustees are entitled to raise a ‘special levy’. The trustees can decide whether the special levy is to be paid in one lump sum or in instalments and owners have no choice but to pay it. Owners whose levies are in arrears will be unable to vote on general resolutions at general meetings and will also be charged interest on these arrear amounts. The trustees are entitled to institute levy collection procedures in the Magistrates Court to recover the outstanding amounts from such owners.

As a prospective buyer, it is vital that you find out not only what ordinary levies you will be responsible for (ask to see a copy of the seller’s levy statements) but also to ascertain whether there are any anticipated special levies on the horizon. You can find this out by asking the trustees or the managing agent. You can also inspect the common property carefully to establish if there are any obvious defects which are going to require expensive repairs or maintenance work. A substantial special levy, for example to replace a lift in the building, could have you reaching far deeper into your pockets than you ever expected because once you’re an owner you have to pay special levies raised. Do everything you can to find out about special levies before putting pen to paper and then at least you have the choice of investing despite the risk of extra expense.

Other expenses for your account are rates (which by mid-2008 will be payable directly to Municipalities by all sectional owners), water and electricity (these are sometimes included in your levies depending on whether the scheme has implemented separate water and electricity meters or not), maintenance of geysers serving your section (whether or not they are situated on common property) and contributions towards maintenance of your exclusive use areas.

How do the rules of the scheme restrict the use of your unit?
Every sectional title scheme is governed by the Act but each scheme may have different management and conduct rules which are in place to regulate the way the scheme is run and the way in which the owners and occupiers behave. All owners and occupiers are bound by the scheme’s rules so even if you are a buy-to-let investor you are responsible for ensuring that your tenants are aware of the rules (you are obliged to attach a copy of the scheme rules to your written lease agreement) and abide by them. The rules of a scheme can be incredibly restrictive and therefore it is essential that you read and understand the rules before committing to being bound by them when buying into the scheme. If you own pets, check the rules to see if pets are allowed in the scheme – resident-owners regularly suffer enormous heartache when they buy into a scheme, move in and are given notice that the scheme’s rules do not allow pets. Buy-to-let investors likewise may need to ascertain whether short-term letting is restricted as many schemes have rules which do not permit leases of less than three to six months.

Any changes which you wish to make to the common property will need trustee and/or body corporate approval. If you want to place an air conditioning heat exchange unit or a satellite dish outside your section, these first need to be approved by the body corporate. Remember that anything outside of your section is common property and therefore co-owned by all owners of sections so even minor changes to it need prior body corporate approval. If you have an exclusive use balcony area which you wish to enclose, you cannot simply get approval of your building plans by the local authority and go ahead with the enclosure, you need to get the trustees to sign your building plans before the local authority will approve them. In short, sectional title ownership involves a community aspect which restricts an owner’s use far more than conventional title. In sectional title your interests are not the only interests that are to be considered and the body corporate constitutes an additional layer of governance to which conventional title is not subject.

You may get a copy of the rules from the estate agent, the managing agent, the seller or your local Deeds Registry. Check them to see if there are any rules which you are not happy to abide by. It must be noted that rules are not absolute and can be amended, substituted or deleted, but the procedures and levels of agreement amongst owners required to achieve this often make it difficult to do so.

Things to look out for:

The financial status of the body corporate
The body corporate is responsible for maintaining and repairing the common property and if the body corporate is in debt, your investment could suffer dramatically. The financial position of the scheme and any reserve funds can be checked by obtaining a copy of the financial statements adopted at the last AGM of the body corporate– ask the estate agent, seller, trustees or managing agent for a copy of these and inspect them.

Is the scheme subject to future development rights?
If the developer or the body corporate have future development rights to extend the scheme, these rights must be disclosed in every deed of sale for units in that scheme. If you sign a deed of sale and find out afterwards that the developer or body corporate hold future development rights which were not disclosed in your deed of sale, you are entitled to walk away from the contract.

Are you buying off-plan?
It is not unusual to buy a unit in a sectional title scheme before the scheme has been registered or even before the building has been built. If you are buying ‘off-plan’, as sales of this nature are often called, the latest date of completion must be stipulated in the deed of sale. You should not pay any money directly to the developer until the certificate of completion has been issued. Money may be held in trust, either by an attorney or an estate agent, on the developer’s behalf until the certificate of completion is issued, but the developer is not entitled to receive any consideration until then.

Conclusion
Knowledge is power. If you are buying into sectional title, the more you know about this type of title, the more likely you are to protect your investment. So before you buy, take the time to investigate the scheme fully and once you’re a sectional title owner keep your finger on the pulse of the body corporate by attending meetings. Consider becoming a trustee, or even the chairperson so that you are able to maintain control and are not hit with any nasty surprises.

This article is courtesy of Jennifer Paddock published in the Paddocks Press newsletter and permission to publish has been granted from the Paddocks Publishing division.

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Sectional Title Property: Fidelity Cover

TRUSTEES NEED TO TAKE CLOSER LOOK AT FIDELITY COVER

By Mike Addison

Mike Addison is an expert on sectional title insurance and is the director of Addsure. See www.addsure.co.za

Recently, the question of fidelity cover has arisen on the STO website and others. Here follows more or less what our thinking is in terms of insuring the body corporate I terms of PMR 29(2)(b). In a nutshell, trustees are supposed to see to it that the body corporate has fidelity cover, a sum, if any, to be determined by the body corporate at a general meeting. In other words, it should be decided at an AGM how much cover is needed for Fidelity.

Fidelity Cover is additional cover against the loss of money or property stolen by an employee. Thus, if you have a specifically designed sectional title policy, you may automatically be provided with say R20,000 or R50,000 cover – this essentially covers the body corporate should a trustee or employee be found to have stolen money and/or other property belonging to the insured or for which they are responsible.
Under normal circumstances, the managing agent is NOT considered to be an employee.

Here’s the interesting part:
If the body corporate funds are held / managed via the managing agent's trust account then such funds ARE covered by the Estate Agents Affairs Board Fidelity Fund.

If the funds are held in the body corporate’s own bank account and the trustees sign such cheques i.e. control their own funds, then the body corporate should or may need to purchase additional fidelity cover. This can be expensive though, in my view. R100,000 costs approximately R2,500 per annum (2.5%).

If the funds are NOT held in trust, then the Estate Agents Affairs Board (EAAB) does not cover - see EAAB website for more detail. The EAAB Fidelity fund will apparently still cover losses where managing agents are NOT registered as long as the money was held in trust or supposedly held in trust. This is busy being tested – we as insurance advisors, the affected bodies corporate and NAMA are watching this with keen interest after a recent debacle where a Cape Town Managing Agent went into liquidation and its affairs are being wrapped up.

The difficult one is where the Managing Agent and the trustees jointly sign - here it is difficult to say who is controlling the money. What if both a trustee and a Managing Agent together collude and run off with the money? We are suggesting covering all bases under these circumstances and that will include suggesting to the Managing Agent that they themselves take additional FG cover via their own commercial policies i.e. over and above. Also take the aforementioned.

Just to add a further cat among the pigeons, we are now also strongly recommending Professional Indemnity cover for Managing Agents although this is nowhere stipulated as a requirement. This further protects the body corporate clients. The same case I mentioned - such cover could certainly have helped - depends on outcome though. If it is found that accounting error causes a loss rather than dishonesty, professional indemnity policy rather than Fidelity cover is what should respond.

Dr Jooste, chairperson of the National Association of Managing Agents (NAMA) recently wrote an article for Paddocks Press, in which he deals with the trust account aspects according to the Estate Agents Affairs Act. Of course, there are some areas that need to be clarified and made clearer for the many untrained trustees out there. There is in fact more to it than that. The dynamics of the body corporate, the relationship and experience of the Managing Agent, the Managing Agent 's internal systems, checks and balances should all be considered.

Some suggestions:
Get yourself a Managing Agent who is registered with the EAAB or can show that they have applied for registration particularly if your money is held in trust
Support managing agents who are members of the National Association of Managing Agents (NAMA).
Check your body corporate management rules and make sure whether or not there is a specific rule amendment in this regard
Check bank account system and insure accordingly – if own bank account for example, refer to general meeting and insure according to decision taken
Definitely obtain written advice from your insurance broker/advisor in this regard referring to PMR 29 2 (b) in particular – this is an insurance need where advice is required.

This article is courtesy of the Paddocks Press August 2008 edition.

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Estate Agents in the Current Market Conditions

Estate Agents still need to up their game
By Jennifer Paddock
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With the introduction of the FET Certificate in Real Estate, which is registered at an NQF level 4, estate agents throughout South Africa need to up their game. All estate agents will be required to obtain the FET Certificate in Real Estate by 2010 if they want to continue to be eligible to obtain a Fidelity Fund Certificate.
In the past, an estate agent has been able to qualify as such by working as a candidate estate agent under a principal estate agent for a period of one year. After twelve months and without passing the Estate Agency Affairs Board examination, this candidate agent was able to work as a principal estate agent and even open his or her own estate agency.

The advent of the FET Certificate in Real Estate will not allow candidate agents to become principal agents in this manner and is bound to raise the standards of professionalism within the industry. Buyers and sellers will become accustomed to a higher standard of knowledge on the part of their estate agents and therefore agents will have to fight harder to keep themselves a cut above the rest.

For estate agents, selling property in the current and future property markets may be no easy feat. With interest rates heading skyward and buyers becoming more and more astute, the pressure is on for good estate agents to differentiate themselves from the so-called 'rats and mice' in the industry. Says Jennifer Paddock, a sectional title lawyer at Paddocks, “The competitive advantage necessary to achieve this comes in the form of education.” Of course every estate agent will have to pass the FET Certificate - but this basic training will not stand out as extraordinary in light of the fact that every other estate agent will also have it.

Jennifer highlights that an important area in which many estate agents are under-qualified is the area of sectional title property sales. These sales differ tremendously from sales of conventional property in many ways and an estate agent with a certification in sectional title property sales will allow them to handle these sales in a more professional and efficient manner than the non-certified estate agents. There is no better time to get ahead of the pack. Knowledge is power and estate agents can empower themselves in their business through further education.
The University of Cape Town‘s Sectional Title Specialist Realtor Certificate Course, presented in conjunction with Paddocks, has proven to be extremely popular in the real estate industry. This is a part-time course, is ideal for full-time employees and is presented nationally. Should you be interested in receiving a University certification in sectional title sales, please contact Christina on 021 674 7818 or chistina@paddocks.co.za. Alternatively, visit www.paddocks.co.za.

Jennifer Paddock is a lawyer and consultant at Paddocks, a specialist sectional title firm, operating through-out South Africa. Visit www.paddocks.co.za or call 021 674 7818.

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.

Things to Know About Sectional Title

SECTIONAL TITLE

Sectional title schemes provide an ideal opportunity for developers to reap considerable profits in the real estate market. Such developments can comprise residential units, offices, shops, commercial and industrial units and especially mixed schemes - the possibilities are endless.

The developer plays an essential role in the creation process of a new sectional title scheme. Much of the success of a development depends on his performance during these initial stages.

Developers should pay attention not only to the physical aspects of the scheme but also to their role in creating a viable and harmonious community of owners. Each project is unique and therefore requires, amongst other things, its own set of rules, formula for allocating participation quotas and exclusive use areas.

In practice, prospective developers are usually lay businessmen without the necessary knowledge of their function in the scheme. They therefore need to be assisted by qualified attorneys and conveyancers with expertise in sectional title matters. It is only then that developers and the public can truly take advantage of the numerous opportunities inherent in the sectional title industry. (For an in-depth article on the subject see Van Schalkwyk & Van Der Merwe “A Critical Analysis of the Role of the Developer in Sectional Title Developments” 2008 (2) TSAR 222.)

We hope that this information will be useful to you and should you require any further assistance please do not hesitate to contact us!

(Louie Van Schalkwyk is a Candidate Attorney in the employ of C&A Friedlander Inc’s Conveyancing Department)

This article is courtesy of C & A Friedlander Attorneys.

Managing your Investment Portfolio

How do I make the most of the high interest rate situation?

A press office feature released by Mazars Moores Rowland has given some valuable advice on how to make the most of the high interest rates. The current situation can benefit you if you do a reshuffle of your current investment portfolio, making adjustments with “an eye on tax efficiency, cost effectiveness and wealth enhancement”.

Marius Fenwick, a financial advisor with Mazars Moores Rowland says that depending on your age and current portfolio mix, the improved yields that result from higher interest rates may produce greater tax liability. The key to avoiding this is knowing where to start shuffling your portfolio.

The advisor suggests, “Take a look first at your retirement annuities and consider moving some underlying investments into a money market fund where yields are now close to 12%. The interest earned within the annuity won’t be taxed”. This doesn’t mean that all the underlying investments should go into a money market fund though.

According to Fenwick, for long-term growth you need to invest in equities, which is an asset class that has outperformed bonds and property over time. “And remember too, that once the interest rate cycle peaks and turns down, the stock market will start to run,” he adds. This approach is said to make sense particularly for living annuitants in a somewhat volatile market.

Say that you’re drawing down 8% of your annual investment value as a pension. Putting some of the underlying investment into a money market fund at a yield of about 11.5% will mean that fewer equity units within the annuity will have to be sold to produce the desired income from the drawdown of 8%.

“It may be worth considering shuffling the portfolio to ensure two years’ worth of income will be generated from an allocation to a money market fund while the rest is invested in a balanced portfolio and allowed to produce an inflation-beating real return over time,” believes Fenwick.

Of course, there will be those whose tax rates are such that an interest-bearing investment in their own individual rights will not be efficient. Individuals and trusts of a high net worth (including a 40% flat tax rate) would benefit from considering an investment in dividend income funds, which are yielding up to 9,4% tax-free after fees – and preserving capital at the same time, this according to the financial advisor.

For those who are willing to put money away for a period of 5 years, a lump sum investment in an endowment product built on an interest-bearing instrument will produce around 9.3% return, which is tax-free and guaranteed for the full term.

The pressure exerted on our currency by high interest rates may make offshore investment a sensible option. Part of your portfolio shuffle should include a look at offshore-linked funds and an additional investment outside of the country, either directly or through an asset swap.

Fenwick also stresses that while prices in the listed property sector have dipped significantly in an environment of high interest rates, property fundamentals still remain sound. This option is particularly popular as an income producer for retirees.

Those who invest in property should remember that it is a long-term investment that produces a steadily rising income and that they should continue through the period of volatility, rather than secure a loss on their investment by selling shares prematurely.

Also, given that the performance of listed property tends to track that of bonds, “the time for bonds to shine will come again” and consequently, so will the opportunity for investors to consider income funds with bond exposure.

The trick is not to try and time the market and to get your selection of asset classes right, rather than your choice of asset managers. A solid-performing and balanced portfolio is said to be the solution and it is advised to let your advisor make the calls on asset classes over the long term.

The information in this article is courtesy of Claire Densham (“Making the most of high interest rates”, Mazars Moores Rowland, Itinews, 16 May 2008).

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

Insuring Property in South Africa

What do I need to know when insuring my property?

What do I do when property has been lost or stolen?

• Make a police report, providing a statement and list of all the stolen articles. Remember to keep the case number.
• If you have had a pre-loss assessment or valuation done then your task will much easier, as you’ll be able to do a “stock-take”.
• Report the claim to your insurer.
• You will need a quote for the lost or stolen items. An assessor is usually appointed to deal with larger claims.
• Insurers may decide either to replace the goods or to pay you out for them.
• If you are underinsured then average may apply: you will be paid out only for the amount insured and if the insurer does apply the average then this payment has to be in cash.

What do I do if I have a car accident?

• Stop immediately and turn off the engine.
• Phone an emergency number and report your location and any injuries.
• Render any assistance to the injured persons while waiting for an ambulance to arrive.
• Do not move the vehicles if there are no injuries. If they are obstructing traffic then mark the positions of the vehicles and move them off the road, if this possible and not dangerous.
• Even if you are at fault, do not make any statement.
• If police are at the scene, try to obtain a reference number and the name of the officer, otherwise report the accident at your nearest police station within 24 hours and make a statement.
• You are obliged to give your name and address, as well as your insurance details to the other party.
• You will need to provide your insurers with information about the other party, witnesses and the accident, so make sure you gather as much information as possible before leaving the scene of the accident.

How much should I insure my home for?

• Always insure your home and its contents for their replacement value.

There are various insurance options available at different brokers, so it’s important that you shop around for the deal that is best suited to your personal situation.

The information in this article is courtesy of www.nedbank.co.za (Property Insurance Frequently Asked Questions, 8 May 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

Selling Property Privately

How do I go about selling my property privately?

Important things I should know:

More and more people are discovering the benefits of selling their property privately. It’s not nearly as daunting a prospect as it might initially seem. After all, who else is more informed, more inspired and more committed than you are when it comes to making that sale? One of the main benefits is that selling property privately promotes a much more open and healthy buyer/seller relationship – apart from the obvious fact that you’ll both save a lot of money.

Can I list property privately if I’ve given a mandate to an estate agent?

Yes, but if you’ve given the estate agent a sole mandate (which must, by law, be in writing) and you have not reserved the right to sell privately in such an agreement then you cannot sell privately until the mandate has expired.

What are the 4 golden rules that I should keep in mind when selling privately?

• Ensure that the selling price is market-related and remember that there is no agent’s commission associated with the sale, so don’t pitch too high.
• List your property on a website that sells property privately and market your property effectively.
• Consider initiating your sale campaign with additional newspaper advertising.
• Conduct show houses.

The information in this article is courtesy of www.privateproperty.co.za (FAQ, 8 May 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

Wills and Estate Planning

YOUR WILL

I am sure that you are familiar with the saying that nothing is certain in life,
other than death and taxes.

For this reason, if for no other, it is important to ensure that one’s Will is up to date.

Experience indicates that one should review one’s Will every two to three years, as almost invariably changes in circumstances will be encountered that necessitate either a Codicil, or even a fresh Will.

In addition, there have been changes to the estate duty legislation over the past few years, which could also make it advantageous to revise your Will.

The estate duty exemption was increased in 2007 to R3 500 000.00 per person. It is important that one’s affairs are structured in such a way as to take advantage of this concession, as well as other changes to the tax laws, to ensure that one’s estate is not saddled with unnecessary estate duty and capital gains tax. The cost of reviewing your Will and discussing these changes is small in relation to the savings that can be achieved.

We hope that this information will be useful to you and should you require any further assistance please do not hesitate to contact us!

Disclaimer: The material contained herein is purely for information purposes and does not constitute legal advice and we therefore accept no responsibility for loss or damage which may be incurred from relying on information supplied herein.

All rights reserved

Copyright C&A Friedlander 2006.

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

Buying Property as a Non-Resident

Buying Property as a Non-Resident

BUYING PROPERTY AS A NON-RESIDENT IN SOUTH AFRICA
INFORMATION TO ASSIST

South Africa is said to have one of the best Deeds registration systems in the world which is highly accurate. All the information to each piece of land including diagrams and owners details are recorded in the Deeds Registry of that region.

Herewith some interesting and useful information which you should read if you are thinking about purchasing property in South Africa:

1. The Transferring attorneys:

In South Africa usually the Seller of the property nominates the conveyancing attorneys who will attend to the registration of the Transfer. A Conveyancer is a qualified attorney who specialises in the transfer of property.

2. Transfer Costs:

Although the Seller chooses the transferring attorneys the costs are usually
paid by the Purchaser to the Sellers Conveyancers. The transfer costs
usually include Transfer Duty, which is an amount payable to the Receiver
of Revenue and is based on a formula calculated on the Purchase Price:

Natural Persons
(a) R0- R500 000.00 (Purchase Price) – No Transfer duty is payable
(b) R500 000.00 – R1 000 000.00 – 5% of the purchase price is payable as transfer duty
(c) Above R1 000 000.00 – 8% of the purchase price is payable as transfer duty

Non-natural Persons
Transfer duty is paid at a flat rate of 8% of the purchase price.
Besides transfer duty there are also the conveyancer’s fees for
attending to the registration of the transfer which are payable by you.
These fees are usually calculated with reference to a recommended
tariff, which is based on the Purchase Price of the property.

3. Borrowing money in South Africa to Purchase Property

Usually Non-residents cannot obtain a mortgage bond of more than 50% of the Purchase price of the property. The remaining Purchase price must be deposited into South Africa from a foreign bank.
Should you be interested in obtaining a mortgage bond to facilitate finance of the property in South Africa you will need to provide the bank with the following documentation:

1. Proof of Identification (i.e. passport)
2. Proof of income
3. Proof of your residential address

In order to make the monthly loan repayments you will need to open a banking account with a South African Financial institution. You will again need to provide the bank with the above list of documentation and once the account has been opened it will be necessary for you to deposit foreign funds into the account. It is also a good idea to register for Internet banking with that bank so that you can access your funds on the Internet when you are abroad which will be very useful.

4. Bringing Foreign Funds into South Africa to Facilitate transfer of the immoveable property

You can transfer funds from abroad into any nominated bank account in South Africa. If you are paying a deposit on the property this would either be paid into the Estate Agents trust account or the Conveyancing attorneys trust account depending on the wording of the agreement of sale. This can be done with the balance of the purchase price as well. The Estate Agent or Conveyancing Attorneys then invest the monies on your behalf in an interest bearing account. Once the transfer is registered the interest which accrued from the invested funds would then be credited to your account.

5. Signature of the Transfer Documents

The transfer documentation can either be signed by you here in South Africa or alternatively the documents can be sent to you abroad. It is advisable that if you are not going to be able to sign the documents in South Africa that you give someone here in South Africa Power of attorney to sign the necessary transfer documents on your behalf. If the documents are sent to you overseas for signature there are certain requirements that have to be complied with. You will need to sign these documents before the South African Embassy in that country or go to a Notary Public which can be quite costly.

6. Income Tax in South Africa and How it effects non-residents purchasing property in South Africa

Non-residents are liable for income tax accruing from a South African source only. For example if you lease out the property the income received from the rental will be subject to South African income tax.

If a non-resident who has not permanently immigrated to South Africa is seemed to spend more than a certain length of time within the country they could be deemed to be considered as a resident for the purpose of income tax.

7. Capital Gains Tax

When you as a non-resident sell the immoveable property you will be liable to pay capital gains tax.

Should the property be registered in your name as an individual 25% of the profit made on the selling of the property will be taxed on the individual’s marginal income tax rate. The maximum marginal rate is currently 40%, which translates to a maximum flat rate payable of 10% of the capital gain.

8. Selling the property

Once the property has been registered in your name as a non-resident the title deed will be endorsed “Non-resident” and this will assist you (should you sell the property one day) in transferring the profit (less any capital gains payable/ settlement of a bond etc) made by you out of South Africa.

In accordance with the South African Exchange Control regulations once
the property has been sold by you moneys from a foreign source, together
with any profit made by you may be transferred to your banking account
overseas by the transferring attorneys.


We hope that this information will be useful to you and should you require any further assistance please do not hesitate to contact us!

Disclaimer: The material contained herein is purely for information purposes and does not constitute legal advice and we therefore accept no responsibility for loss or damage which may be incurred from relying on information supplied herein.

All rights reserved
Copyright C&A Friedlander 2006.

Credit Ratings

Things You Need to Know About Bond Credit Ratings

When you apply for a home loan, there are a number of factors that influence your FICO credit score. Most financial institutions strive to adhere to a maxim of ‘only good credit need apply’. There are institutions that will lend to individuals or businesses with very low credit scores, but these loans often come at an exorbitant price, costing consumers much more than the original purchase. Even if your credit score isn’t necessarily bad, but ‘so-so’, you’ll probably end up paying a lot more than someone with a very good credit rating.

Payment history

This includes payments that have been missed or paid late. Your payment history also involves the different types of payments that you make each month (car, house, credit cards, etc). Roughly 30% of your credit score is determined by your payment history. A person with good credit will most likely have a history of consistently paying on time each month over a long period of time, with little or no missed payments.

Amount owing on accounts

Do you have dozens of accounts carrying high balances? Are most of your credit card accounts maxed out? Or can most of your debt be traced to one or two accounts, such as your mortgage and car payments? Good credit is hard to come by if you carry balances on many different accounts.

Length of credit history

This has to do with whether you have established sufficient history to provide an accurate portrait of how you manage your finances. Lending institutions want to know whether you have a history of paying on time. If you have managed credit perfectly, but your account is only a year old, it probably won’t raise your credit score. It’s best to keep it up for a few years and you’ll see your credit score soar.

Types of credit

The type of credit you use is a factor in calculating your credit score. For instance, the use of credit cards, mortgages and installment loans (car, student loan, etc). If the type of credit you use weighs heavily on credit cards and other high interest sources, then your credit score will certainly suffer.

New or recent credit history

This has to do with any new credit accounts that you may have opened, whether you’ve made requests for new credit and how you’ve recently managed all of your credit. If you open several accounts at once, this could hurt your credit score. A person with good credit usually has a long history with a few accounts that are in good standing.

The importance of paying your bills on time every month cannot be stressed enough.

Many banks offer the option of scheduling automatic payments each month and it is advised that you make use of them. Also, don’t open new credit accounts if you don’t intend to use them, and don’t open and close accounts frequently. Instead, focus on using the accounts that you already have responsibly. This alone will raise your credit score and make it much more likely that an institution will grant you the best loan.

The information in this article is courtesy of www.buyprop.co.za (accessed Thursday 20 March 2008).

If you are interested in buying or selling property in South Africa, please visit http://www.sahometraders.co.za/.

Going Green at Home

How can you help ease the electricity crisis in South Africa, as well as do more for the environment?

With electricity use such a problem around the country at the moment, it might help to have some useful information about what you can do at home to help. An article on “Greening your home” by Giles Griffin was published in The Property Magazine (April 2008). Environmentally friendly and energy saving design has gone in and out of fashion over the years, but it’s now safe to say that “going Green” makes a lot of sense.

Electricity isn’t the only supply that is proving unreliable and costly. In Cape Town, there are similar constraints that apply to water and waste management. Generating up to 6% more waste each year, Cape Town’s landfill sites are steadily filling up and closing fast. Out of the six sites that are currently available in the province, two have already closed and two more are nearly full. Waste is undeniably a major issue, as soon there will be nowhere for it to go.

Water demand is growing by 4% a year and is a problem throughout the country. Although water experts believe that there’s no need to worry and that there is little danger of another Eskom situation, there are now by-laws that have been established in the Cape to govern the use of water. The point is that South Africans need to act rather than just think about saving energy, waste and water. Anybody who has seen An Inconvenient Truth will have an idea of what this means.

Grace Stead (owner of environmental consultant company, Steadfast Greening) has produced an extremely practical and user-friendly Smart Living Handbook that outlines various things that can be done to save in all areas at minimal cost. Some of these include fitting a solar water heater to save energy, or installing compact fluorescent light bulbs and switching off appliances when they aren’t in use. In order to reduce waste, it’s suggested that you check the toxicity of items that you buy, compost your organic waste and follow the three Rs: reduce/recycle/reuse. To save on water, taps need to be aerated, toilets multiflushed and a water-wise garden planted.

Reinhold Viljoen, also an energy consultant, mentions making passive solar inventions in your home, such as shading, overhangs, insulation in ceilings and walls, and considering what type of glass you are using. To save water, he suggests that you harvest rainwater to flush toilets and top up pools, as well as using grey water systems for the garden.

When it comes to looking after our environment, we can start by looking after our own properties and ensuring that we are doing all we can to save on energy, waste and water. It might mean a little more of an investment upfront, as some of these alternatives are a little more expensive, but they will certainly pay for themselves in the long run.

The information in this article is courtesy of Giles Griffin, “Greening your home” in The Property Magazine, April 2008.

If you'd like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

Important Information for Buyers and Sellers

IMPORTANT INFORMATION FOR SELLERS AND PURCHASERS


For TRANSFERS make provision for extras such as post and petties, Rates Clearance Certificate or a Levy Clearance Certificate (+) R1 000

For BONDS make provison for extras such as post and petties, Deeds Office fees and Bank initiation fees (R2 000 – R5 700)

Non-resident sellers should be aware that for sales of R2 000 000 (two million rand) and more a portion of the purchase price (currently 5 % for individuals; 7.5 % for companies and 10 % for trusts) will be paid to SARS on account of Capital Gains Tax. The seller may subsequently apply for a refund for any amount overpaid.

Once the conveyancer has applied to the seller’s financial institution to issue a bond cancellation instruction for the existing bond, the seller may no longer be able to access funds from the bond and will be required to continue making bond payments until registration.

The purchaser will be required to pay transfer duty as early as approximately 6 weeks prior to registration. Speak to the seller’s conveyancer as soon as possible after signing the Agreement of Sale to determine what date payment of transfer duty is required and to discuss bridging finance should this be necessary

Please ensure that your tax affairs are up to date as any unresolved issues with SARS could delay transfer

If a mortgage bond is not finally approved before the due date, the Agreement of Sale is no longer valid and binding on the parties.

All sellers should be advised that in most cases there will be Capital Gains Tax implications. Please contact one of our experts in this regard.

Once rates clearance figures have been requested a seller should not make any further payments directly to the local authority, Payments should only be made to the conveyancer on the conveyancers’ request, to avoid duplicate payments.

This article is courtesy of C & A Friedlander Attorneys.

Landlord and Tenant Rights in South Africa

Pro-landlord laws

Rent: Can landlord and tenant freely agree rents in South Africa?

Rents can be freely negotiated in South Africa.

However, the tenant can file a complaint with the Rental Housing Tribunal if the landlord is charging too much rent for poor-quality accommodation. The tribunal can order the landlord to reduce the rent if the building is not well maintained.
Deposits

There is no restriction on the size of deposit, but it must be stated in the contract.

The landlord must invest the money in an interest-bearing account, and the interest rate must not be lower than the rate applicable to a savings account. Within 14 to 21 days of the end of the lease, the landlord must return the security deposit, with interest.

What rights do landlords and tenants have in South Africa, especially as to duration of contract, and eviction?

The landlord cannot prematurely end a fixed-term lease.

If the tenant remains in the unit after the end of the fixed term with the express or tacit consent of the landlord, the lease is deemed to be a periodic lease. Periodic leases can be terminated by giving a month’s written notice.

If the tenant refuses to vacate the property after the expiration of the lease, the landlord must obtain a summons from the court. If the tenant decides to respond to a summons, he or his lawyer must file within three days the “Notice of intention to defend” printed at the back of the summons. A hearing will take place. The court may then issue an eviction order. The landlord must supplement this with a warrant of eviction, stamped by the court. Under the law, notice must be given two weeks in advance before the tenant is evicted.

If the tenant poses an immediate threat to the landlord, then the landlord can file for a “summary judgment.” A summary judgment allows the sheriff to evict the tenant even if the case is still being heard in the court.

To fight off an eviction, the tenant can claim a right of retention, a right to stay in the house until the landlord compensates the tenant for any improvements made on the house.

The Sheriff with the help of the police carries out the eviction. If the tenant owes rent, the court can order the sheriff to attach the tenant’s properties to the house. It means the sheriff can take the tenant’s properties and sell them to compensate the landlord. A landlord can also file for an “interdict,” preventing the tenant from taking his things as long as the arrears are not paid.

EVICTION FOR NON-PAYMENT OF RENT
Duration until completion of service of process 10
Duration of trial 189
Duration of enforcement 10
Total Days to Evict Tenant 209
Courts: The Lex Mundi Project

How effective is the South African legal system?

The Rental Housing Act [No.50 of 1999] provides for the establishment of Rental Housing Tribunals in all provinces of South Africa and grants them the authority to settle disputes between tenants and landlords. So far only three of the nine provinces have created housing tribunals, Gauteng, Western Cape, and North West.

Rental Housing Tribunals use the same procedures as a Labor Court and give rulings with the same power as those of a magistrate’s court. The tribunal has 30 days to help the parties reach a solution. If any party is not satisfied with the proceedings of the tribunal, he may take the case to the High Court.
Recent changes in African landlord and tenant law

Rental Housing Act [No.50 of 1999] repealed rent control which had been in place since 1976. It governs the relationship between the landlord and the tenant and applies to all written and verbal agreements made, effective August 1, 2000.

This article is courtesy of the Global Property Guide.

If you are interested in buying or renting property in South Africa, please don't hesitate to visit the SA Hometraders website.

Buying property in SA

What do I need to know when buying property in SA?

All contracts to acquire land must be in writing, contain certain prescribed information and be signed by both buyer and seller to be valid and legally binding. Contracts most commonly take the form of an Agreement of Sale or Offer to Purchase which once accepted constitutes an Agreement of Sale. Once an Agreement of Sale has been signed by both parties it represents a valid and binding document from which neither party can withdraw without incurring legal consequences, save for certain instances where:

• the agreement is subject to certain conditions which are either fulfilled/not fulfilled;
  
• the purchase price is less than R250 000.00 and certain additional criteria in terms of the Alienation of Land Amendment Act are present entitling the Purchaser to "cool off".

The de facto ownership of property can also be obtained by means of acquiring the shares/members interest and loan claims in a company/close corporation respectively which company/close corporation is the registered owner of a property. These contracts, strictly speaking, need not be in writing and can be concluded verbally which, although legally binding, is not advisable and it is recommended to record the agreement in writing to ensure that the material terms agreed to are accurately recorded.

It is important, furthermore, to note that only a natural person can acquire the members' interest in a close corporation. Accordingly, if it is intended for a non-resident company or trust to be the ultimate purchaser, provision can be made for the close corporation to be converted to a private company at a nominal expense to facilitate same and this should be a condition of purchase.

Accordingly the decision to enter into and sign an Offer to Purchase/Agreement of Sale is not a decision to be taken lightly and it is recommended that an inexperienced purchaser obtain independent legal advice if uncertain in any respect.

How does the transfer process work?

The registration of a property transaction is handled by a specially qualified legal practitioner known as a conveyancer. It is customary for the seller to appoint the conveyancer to attend to the registration of transfer of a property sold, whilst the costs attendant on same are for the account of the purchaser, unless contractually agreed to otherwise.

The conveyancer prepares the requisite transfer documentation that, after signature by the purchaser and the seller, is lodged together with the cancellation of any existing mortgage bonds and new mortgage bonds to be registered in a regionally located Deeds Registry. The deeds are subject to an intense examination process whereafter they are made available for registration. On date of registration of transfer all existing mortgage bonds registered over the property are cancelled simultaneously with the registration of any new mortgage bonds by the purchaser in favour of the bank granting financial assistance. The purchaser is recorded as the new owner of the property and the purchase price is paid to the seller. The above procedure does not apply in an instance where the shares/members interest and loans are acquired in a property-owning company/close corporation where no change in ownership is recorded in the Deeds Registry. It is important to note that upon transfer to the new owner, any liabilities in respect of the property incurred by the previous owner, remain with the previous owner and not necessarily pass to the new owner, unless otherwise agreed to.

What costs will I incur?

Brokerage is payable where an estate agent is responsible for concluding a sale of property. Brokerage is customarily payable by the seller who mandates the estate agent to procure a purchaser for the property. The seller is also responsible for the cost of procuring a 'beetle free and electrical compliance' certificate. The purchaser is responsible for the payment of transfer costs and the costs of registering any new mortgage bonds over the property purchased. Transfer costs include transfer duty payable to the Receiver of Revenue calculated using the following formula, payable to the Receiver of Revenue:

• R0 - R150 000 Exempt5% between R150 001 – R320 0008% on the balance above R320 000
• where a natural person purchases the property, shares or members interest in a residential property owning entity; or
• 10% of the purchase price
• where the purchaser of the property, shares or members interest in a residential property owning entity, is not a natural person. Attorneys' fees for attending to the transfer and registration of mortgage bonds are calculated according to a tariff. Further sundry charges are imposed by the Deeds Registry and the Bank granting financial assistance.

What about signing documents?

Documentation prepared by the conveyancer pertaining to the registration of transfer of the property and any mortgage bond to be registered over the property is required to be signed in black ink and must be authenticated if signed outside South Africa. This is sometimes inconvenient and it is possible, and often advisable, to leave a General Power of Attorney in favour of an entrusted person within South Africa to assist in this regard. Where the purchaser is married, which marriage is governed by the laws of a foreign country and a mortgage bond has been applied for, please note that the spouse of the purchaser will be required to assist the purchaser in signing the mortgage bond documentation. Marriages according to the laws of the England and Scotland are exceptions to the aforegoing rule.

What provisions can I expect to find in a purchase/sale agreement?

The Offer to Purchase/Agreement of Sale will contain certain of the following standard provisions:

PURCHASE PRICE

A deposit is not mandatory but serves as a gesture of good faith on the part of the purchaser and an indication of financial ability. This amount will be invested by the estate agent/conveyancer in an interest-bearing trust account for the benefit of the purchaser.
Provision will be made in the Agreement for a guarantee to be called for in respect of the balance of the purchase price. In general, a guarantee will only be acceptable if issued by a local financial institution which means that the funds will actually have to be remitted to South Africa in order for a local bank to issue such a guarantee or, alternatively, arrangements must be made between a foreign and local bank for a back to back guarantee to be issued. It is, however, possible to negotiate the issue of a Standby Letter of Credit from an overseas institution in certain circumstances.

OCCUPATION, POSSESSION, TRANSFER AND OCCUPATIONAL RENTAL

Occupation is the physical occupation of the property whereas possession is generally deemed to be the date upon which the purchaser assumes responsibility for the property and it is customary for the risk of ownership to pass on the date of possession. Transfer refers to the actual date of registration of ownership in the Deeds Registry in favour of the purchaser. Occupational consideration is the rental payable by the party occupying the property belonging to another where the date of occupation and date of transfer differs, which is better expressed in Rand terms or as a percentage of the outstanding balance of the purchase price.

VOETSTOETS

This is a standard inclusion in all deeds of sale and implies that the property is bought 'as is.' 'As is' means 'in the exact condition in which the property is found'. However, all patent and latent defects present in the property within the sellers' knowledge must be brought to the attention of the purchaser. It is not standard in South Africa to conduct property surveys but these can be arranged with the assistance of the estate agent or an attorney and should be included as a condition of the purchase.

ELECTRICAL AND BEETLE-FREE CERTIFICATE

The property owner is required by law to be in possession of a valid 'electrical compliance certificate' certifying that the electrical installation at the property meets certain statutory safety requirements. The beetle-free certificate certifies that all accessible parts of the property are free of infestation by certain defined beetle and this certificate, whilst a standard inclusion in the Agreement of Sale, is neither a legal requirement nor included in sales of sectional title units. The cost of attending to the necessary repairs in order for the aforesaid certificates to be provided, is generally accepted as being for the account of the seller, although, the parties can contractually agree otherwise.

FIXTURES AND FITTINGS

A property is sold together with all fixtures and fittings of a permanent nature situated thereat. Generally fixtures and fittings include anything which is attached to the property or which by virtue of its considerable mass accedes to the property. In the event of any uncertainty, the purchaser is cautioned to ensure that all items intended to be included in the purchase price are specified in writing in the Agreement of Sale.
The format of agreements concluded for the acquisition of shares/members interest and loan accounts in property-owning companies/close corporations contains many of the aspects discussed above, although it is substantially different and includes numerous warranties and indemnities granted by the seller to the purchaser who acquires the property-owning entity together with its financial history.

EXCHANGE CONTROL/REPATRIATION OF FUNDS

All funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated together with any profit on resale of the property, provided, the title deed of the property has been endorsed "non-resident". Similarly, funds introduced to acquire shares in a company/members interest in a close corporation may be repatriated together with any profit on resale, provided, the relevant securities have been endorsed "non-resident". Funds, introduced into South Africa in the form of a foreign loan to fund acquisitions of corporate entities which own property in South Africa, may be repatriated in terms of the original loan approval by the Reserve Bank. The profit on resale may also be repatriated, provided, the relevant securities have been endorsed "non-resident".

INCOME TAX

South Africa follows a revenue-based income tax system meaning that income earned from a South African source will be subject to ordinary income tax. Non Residents are liable for tax on a more limited basis and their liability is dependent on the source of their gross income being a South African source.
Any rental earned by non-residents in respect of South Africa properties will be subject to income tax and it is the responsibility of the non-resident to register as a South African Tax Payer.

CAPITAL GAINS TAX

South African residents are liable for the payment of Capital Gains Tax ("CGT") on the disposal of any asset, subject to certain limited exceptions. Non-residents, however, are only liable to pay CGT on the disposal of the following:

• Immovable property situated in South Africa, including any right or interest in immovable property (this also includes an interest of at least 20% in a company where 80% or more of the value of the net assets of the company is attributable, directly or indirectly, to immovable property in South Africa);
• Assets of a permanent establishment of a non-resident through which trade is carried on in South Africa.

CGT is payable in the year in which the asset is disposed of and is calculated by adding 25% of the capital gain, or profit, to the individuals income for that year and taxing that income at the individuals marginal rate of income tax. The maximum marginal income tax rate for individuals in South Africa is presently 40% (reached at taxable income levels above R270 000). The capital gain is calculated and disclosed in the individuals' income tax return for the year in which it is sold. Thus, if a non-resident disposes of an immovable property in any year of assessment and is not already registered as a South African taxpayer, he or she will have to register as such and submit an income tax return reflecting the calculation of the capital gain and will be liable for the payment of CGT on that gain.CGT became effective on 1 October 2001 and is thus payable only from that date. The amount of a capital gain is calculated either by deducting the value of the property as at 1 October 2001 (together with the costs of acquiring and improving the property) from the proceeds on disposal of the property or by apportioning the amount of time the property was owned between the period before 1 October 2001 and the period after that date.
South African residents do not pay CGT on the first R1-million of profit made on the disposal of their primary residence. However, non-residents will not qualify for this exemption if their primary residence is not in South Africa.

This information is courtesy of strb: Buchanan Boyes Smith Tabata Attorneys.

If you would like to buy or sell property in SA, please visit the SA Hometraders website.

Property FAQ

Is it possible for foreigners to buy property in South Africa?

Yes, it is. The law only prevents illegal immigrants from owning land in South Africa. Foreigners are subject to the same laws as locals, which makes it perfectly safe to own property. The only catch is that non-residents are only able to finance a maximum of 50% of the purchase price through a South African bank. Normally, a 10% deposit is required on purchase, with the balance (40%) to be paid in cash or financed through another mechanism (cash, mortgage or personal finance) from abroad.

Should I invest in commercial or residential property?

Commercial holdings generally offer good, stable long-term returns, whereas residential properties are a little more risky. If you already own a home, then investing in commercial property is probably a good idea. However, if you don't own a home then it would be best to invest in residential property, as South Africa has a capital gains tax waiver on primary residences.

How do I qualify for a home loan?

You can qualify for a home loan if you don't have a bad credit record; your bank account is well managed; your general accounts and hire-purchase or bond payments are not in arrears; and your property or furniture has not been repossessed due to non-payment.

What documents do I need to apply for a home loan?

- Your latest salary slip, or if you're self-employed, your latest bank statement certified by an accountant, or a letter from an accountant or auditor to confirm your income;
- Your marriage certificate;
- Identification documents for both you and your spouse;
- Bond statements for the last 6 months, or the title deed;
- Bank statements for the last 6 months.

What kind of security do I need for a home loan?

The loan amout should not exceed 80% of the market value of the property. You can't use the municipal valuation or the market replacement value. R75 000 is the minimum market value of the house allowed. The property should also be insurable, which means that it should be well maintained and in a good state. Monthly repayment should not exceed 30% of your gross income.

What else do I need for a home loan?

When you purchase a home, you should ideally have some extra cash. This should be around 8 - 10% of the home loan amount, excluding the deposit. Be aware that there are many hidden costs that go into buying a new home so it's best to be prepared. The banks also require you to take out a house insurance policy in case of natural disasters like storms or fire. It's also advisable to take out a life assurance policy so that the bond payments can be covered in the untimely event of your death.

There are a range of property-related issues that are bound to arise when you buy or sell a home. If you have a property-related question and would like an answer from an expert, please feel free to join our Property Forum and make a posting.

If you'd like to buy property in South Africa, visit http://www.sahometraders.co.za/.