What is conveyancing?

The term “conveyancing” describes the legal process whereby rights in fixed property are registered in the deeds office. These rights include ownership, mortgage, servitude, mineral rights and others. All these rights vest legally in a person only upon registration. The registration process, therefore, places an official ‘seal’ on a person’s rights in fixed property. ‘Fixed property” is any land, whether improved or not such as a house, farm or sectional title flat.

This information deals with the transfer of ownership pursuant of the sale of fixed property. The procedure is similar to that required for the ownership of fixed property pursuant to donation, inheritance, exchange or a divorce settlement and so forth.

A conveyancing transaction involves a chain of steps which begins with the deeds of sale and which continues through the ultimate registration of ownership and the reconciliation of finances and payments.

Who is a conveyancer?

A conveyancer is admitted as such by the High Court after having completed a special qualifying examination. In addition, only a person, who has been admitted by the High Court as an attorney, may practice as a conveyancer. All conveyancers are therefore, also attorneys. To be admitted, the person has to complete the required academic studies (usually four or more years for the necessary law degree) then a period of articles or work in a law office for the necessary experience and then an extensive practical examination. If the qualified attorney wishes to practice in a highly technical branch of the law dealing with property, he or she has to do an intensive study of a large number of Acts of Parliament, regulations, High Court decisions and decisions by Registrars of Deeds relating to fixed property. Then he or she has to pass a conveyancing examination. Only after passing this examination will the High Court allow the attorney to practice as a conveyancer.

Who appoints a conveyancer?

In South Africa, the usual practice is for the seller to appoint a conveyancer for a property transaction, although this, like other aspects of sale agreement, can be varied as a result of negotiation between the parties.

The purchaser may also appoint a conveyancer to advise him or her, but these charges will be over and above the conveyancing costs submitted by the seller’s conveyancer, who will be doing the actual transfer.

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

The sale of fixed property is affected by entering into a written contract referred to as a deed of sale. The first prerequisite is that the deed of sale must be a written agreement. It must be signed by both the purchaser and the seller (and by the seller’s spouse and the purchaser’s spouse in some cases). A written ‘offer to purchase’ signed by a purchaser and accepted by a seller also constitutes a deed of sale. A verbal contract for the sale of fixed property is not valid.

The deed of sale is an important document which must be carefully examined. The parties (with the assistance of a conveyancer or attorney) must check that the total amount payable by the seller or his estate agent are incorporated in the document and that nothing mentioned in the document is contrary to legal provision.

Occupancy of the property does not necessarily have to coincide with the registration of transfer. If occupation takes place prior to registration, the deed of sale must provide what rent is payable until the date of registration.

Risk in the property passes to the purchaser when the deed of sale is signed, although the consequences can be (and often is) changed in the deed of sale itself. The purchaser must, therefore, take out insurance in appropriate cases.

The purchaser is usually responsible for payment of transfer costs. These are fixed in terms of legislation or by guidelines and the purchaser and the purchaser will be able to know in advance , to within a few rand, what the costs will be.

Finally, if the sale is subjected to the granting of a bond, this must be specified in the deed of sale. It should also be specified as to what the amount of the bond must be, how much time the purchaser will have to obtain the bond, who will apply and so forth. It must also be specified that if the purchaser is unable to obtain the required bond in time, then the whole deal is to fall through. Arrangements as to which amounts (if any) the purchaser has to pay in these circumstances should also be specified.

The deed of sale is only valid if it is signed by all parties. Ownership does not, however, pass on signature of the deed sale. The purchaser becomes owner only on registration of the property in his or her name in the deeds office. The deed of sale grants the purchaser the right to claim transfer of the property.

What happens next?

The property must be signed by the seller and it authorises the conveyancer to attend to the transfer on the seller’s behalf.

Both the seller and the purchaser will be required to call at the office of the conveyancer to sign certain documents which have been prepared by the conveyancer and which will enable the conveyancer to affect the transfer in the deeds office. The documents that will have to be signed are the following:

Declaration in respect of status

In this document the purchaser declares his her marital status. This deals with such questions as whether he or she is married in or out of community of property (which determines whether the property is to be registered in his or her name or in the name of both the spouses). Unmarried adult persons , whether never married, divorced or widowed, are granted full rights of ownership.

Transfer duty and Value Added Tax (VAT) declaration

Transfer duty is a form of tax payable to the State and is calculated on the value of the property. If the deed of sale is signed by either the seller or the purchaser after 30 September 1991 then Value Added Tax may be payable on the transaction. This tax will be payable on the estate agent’s commission, on the conveyancer’s fees and on proportions of some municipal rates. If the seller is registered as a vendor then VAT will also be payable on the purchase price.

If VAT is payable on the purchase price, then no transfer duty will be payable. The conveyancer will require the parties to sign lengthy declarations about these taxes. With these declarations in hand he or she will be able to finalise the matter with the Receiver of Revenue and either pay the transfer duty (after being put in funds to do so) or obtain a transfer duty exemption. Without a transfer receipt or a transfer duty exemption receipt being produced, the Registrar of Deeds will not register the transaction.

Transfer duty has been reduced for all property sales on or after 23 February 2011 as follows:
1.    Non-natural persons (companies, close corporations, trusts, etc) which used to pay transfer duty at a flat rate of 8%, will now enjoy the same exemption threshold and reduced rates as individuals, making it more attractive to hold property in such entities.
2.    The exemption threshold increases from R500,000.00 to R600,000.00.
3.    From R600,001.00 to R1,000,000.00, the rate is now 3% (previously 5% from R500,001.00 up).
4.    R1,000,001.00 to R1,500.000.00, the rate is now R12,000.00 plus 5% (previously R25,000.00 plus 8%).
5.    From R1,500,001.00 the rate is now R37,000.00 plus 8% (previously R65,000.00 plus 8%).

Mortgage or bond documents

If the purchaser gets a loan from a financial institution (bank or building society) or from his or employer or other source, the lender will insist that the purchaser registers a mortgage over the property to secure a loan.

To enable the bond to be registered, the purchaser will be required to sign a written power of attorney for the conveyancer to do so.

To enable the conveyancer to draw up all this documentation correctly, the purchaser must submit his or her identity document, marriage certificate and if applicable, antenuptial contract to the conveyancer. Details of the loan and the lender will also be required.

What costs are involved?

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

• Transfer duty or Value Added Tax- where transfer duty is payable to the Government it is calculated as follows: Nothing on the first R100 000.00 of the purchase price + 5% on the balance of the purchase between R100001.00 and R300 000.00 and thereafter 8% in the case of a natural person (properties sold for less than R100 000.00 are exempt from transfer duties) and 8% where the purchaser is a company or closed corporation. VAT is currently payable at the rate of 14% of the purchase price.
• A pro rata portion of the rates payable on the property to the relevant local authority (or a pro rata portion of the levies payable on the Body Corporate in the case of a flat (plus Value Added Tax where applicable). Pest clearance and electrical compliance certificates together with any costs involved in making the house fit for the issue of such certificates are usually the responsibility of the seller.
• The conveyancer’s fee is determined by a guideline tariff but the amount of the fee may be negotiated with the conveyancer.

Where a bond is to be registered, the purchaser will have to pay the stamp duty on the bond (0.2% of the amount secured by the bond) an amount charged by the financial institution for the inspection of the property, provisional interest and insurance premiums and the conveyancer’s fee (calculated on a sliding scale based on the amount of the bond).

Who arranges the transaction?

Having carried out the necessary searches in the deeds office and having checked all the details of the property and parties to the transaction, the conveyancer prepares the title deed and other necessary documents on behalf of the purchaser pays the Receiver of Revenue and of both the seller and purchase the local authority.

Once the documents have been signed by the purchaser and the seller, and the purchaser has paid the costs and made satisfactory provisions for the payment of the purchase price, the conveyancer can proceed with the registration of the transfer of the property in the purchaser’s name. (He will only do so, however, once the purchase price has been paid or secured).

What happens with the trust monies?

Section 78(2a) of the attorneys act specifically makes provision that an attorney, at the instruction of any person, may open a trust savings or other interest bearing account and the interest is paid out according to instruction. These funds are protected by the Attorney’s Fidelity fund. The attorney may charge a fee for this service.

What happens at the deeds office?

The conveyancer will lodge the title deed and other documents that he has prepared in the deeds office for registration. The deeds office is a government registry of ownership in all fixed property. If there is a bond to be registered the conveyancer attending to the bond (who is usually not the conveyancer attending to the transfer) will also lodge the bond documents in the deeds office for registration simultaneously with the transfer documents.

The examiners in the deeds office scrutinize the documents to ensure that they comply with all relevant legislation and regulations. When they are satisfied, they inform the conveyancer that the deeds are ready for registration and thereupon, in the presence of conveyancer and registrar of deeds, the transfer of the property is registered in the name of the purchaser. The bond (if applicable) is registered simultaneously.

On registration the purchaser becomes the lawful owner of the property. The title deed reflecting his ownership will be released by the deeds officer after registration and will be handed to him by the conveyancer, unless a bond had been registered, in which case the bondholder retains the title deed.

How long does the process take?

Having read this information you will be aware that conveyancing is a complex field requiring extensive knowledge, skill and attention to detail on the part of the conveyancer.

In the usual conveyancing transaction there are a number of parties involved such as:

• The seller (and spouse)
• The purchaser (and spouse)
• The institution which previously gave the bond to the seller (and the conveyancer acting on its behalf)
• The Receiver of Revenue
• The municipality or local authority
• The institution which gives the new bond to the purchaser (and the conveyancer acting on its behalf)
• Estate agent
• Conveyancer(s)
• Registrar of Deeds

More often than not the following additional parties are also involved:

• The buyer of the purchaser’s previous property (which the purchaser had to sell to obtain the cash portion of the purchase price)
• The conveyancer acting for the purchaser in that transaction
• The institutions which gave and are giving the loans in that transaction (and their conveyancers) and so forth

Very often there are whole chains of transactions linked up in this fashion.

The conveyancer has to complete the arrangements with all these parties. Because human beings and various institutions are involved in each instance, delays are possible at any stage of the transaction. The conveyancer (also being an attorney) knows exactly when and how to use legal methods to compel delaying parties to act more expeditiously.

It is important, therefore, that the purchaser should sign the documents and pay the required amounts as soon as the conveyancer calls on him or her to do so; this helps ensure that there are no unnecessary delays.

The length of time it takes to get a transaction into the deeds office is dependent on the transaction time taken by each and every one of the mentioned parties. The usual time taken by the deeds office to inspect all the documents lodged by the different conveyancers for a specific transaction is 7 working days.

On average the time taken to register the transfer of property, where a bond is involved, will be two or three months from the date that the conveyancer is instructed.

Unforeseen difficulties like the death of one of the parties, attachment of property by a creditor of the seller and so forth may cause the period to be extended.

Why is a conveyancer necessary?

Most people are accustomed to doing much of their personal business without the need of a legal or other advisor. However, a great deal is at stake in the transfer of fixed property. It is generally the largest single asset that a person owns and the transaction for the purchase or sale of a fixed property is probably the most important contract undertaken by individuals.

The law therefore, provides that only qualified conveyancers may attend to the transfer of fixed property and related transactions. This is not only to have proper protections to the rights and interests of the public, but also to safeguard the integrity of the South African land registration system, which is universally regarded as one of the best in the world.

When all checks have been made, the conveyancer has followed all the procedures, and the property has been registered in the name of the purchaser, the purchaser can be assured that he or she has the best title to the property.