The purchase price is usually secured by a banker’s guarantee payable to the seller’s conveyancer or any third party nominated by the seller or his conveyancer. Since guarantees issued by a foreign bank would usually not be accepted by the conveyancer, a foreign purchaser should arrange for a guarantee to be issued by a South African bank. Alternatively, the full purchase price may be paid to the conveyancer for investment pending registration of transfer.

Funds (excluding costs and disbursements) placed with the conveyancer will be held in a separate trust account, the interest on which will accrue to the Attorneys’ Fidelity Fund. In order to ensure that the funds are invested by the conveyancer for the purchaser’s benefit, the purchaser should instruct the conveyancer accordingly.

The S.A. Reserve Bank has imposed regulations governing the transfer of funds out of South Africa. In order to ensure that a non-resident purchaser is able to remit the proceeds of the property on eventual future re-sale, any funds introduced by the non-resident to acquire the property should be disclosed to a South African commercial bank. The banks act as agents of the S.A. Reserve Bank. After registration of transfer the purchaser should ensure that he is in possession of a document issued by a South African bank, proving the transfer of his funds from abroad. (The title deed proving ownership of the property may be endorsed by the bank as “non-resident,” although this is no longer a requirement.) In the absence of such proof, formal application to remit the proceeds of the re-sale would have to be made to the S.A. Reserve Bank, resulting in delays. An application may also be refused by the S.A. Reserve Bank.

If the purchaser is acquiring the shares in a property owning South African company or close corporation to purchase the property, he should ensure that he is in possession of a document issued by a South African bank, proving the transfer of his funds from abroad.

A non-resident purchaser may borrow funds via mortgage through a South African commercial bank provided this does not exceed 50% of the purchase price. If the mortgage finance exceeds 50% of the purchase price then approval from the S.A. Reserve Bank is required.

Most South African contracts contain this old Dutch maxim meaning that the property is bought “as is.” Linked to the notion of caveat emptor i.e. “let the buyer beware,” the duty is on the purchaser to make sure he is happy with the state of the property. Generally building surveyors are not employed in South Africa, although some do practise in the larger cities. The fees of the surveyor will depend on the size of the building. In the coastal areas it is customary for the seller to provide the purchaser with a certificate that any dwelling house acquired by a purchaser is free of beetle infestation. Any person taking transfer of property on which a dwelling house is erected, is required to be in possession of an electrical compliance certificate confirming that the electrical installation on the property is safe. A prospective purchaser should insist on a clause dealing with this aspect in an agreement of sale.

A property is sold together with all fixtures and fittings of a permanent nature, in other words anything which is attached to or accedes to the property. It is best to avoid uncertainty by specifically listing all such items which the parties intend to include in the sale, in the written agreement of sale.

This usually coincides with occupation. However, the legal term is understood to include the benefits and risks of ownership. In view of the fact that the risk in the property may therefore pass before formal registration of transfer in the Deeds Registry, a prospective purchaser should arrange for the property to be insured from date of possession. Insurance can usually be arranged through any branch of a commercial bank.

The purchaser is usually liable for the following costs:

• transfer fees which are based on a recommended tariff issued by the S.A. Law Society
• some form of tax either in the form of value added tax or transfer duty
• deeds office levies, pro rata municipal rates and sectional title levies (applicable to sectional title properties only)
• the costs of obtaining the rates and levy clearance certificate/s

Once transfer of ownership has been registered the purchaser may deal with the property in the manner he prefers, subject only to title restrictions or any restrictions contained in the applicable municipal zoning scheme. The purpose of zoning scheme regulations is to regulate the use of properties in a particular area for the mutual benefit of all property owners in that area. It should be noted that any rental income earned from property in South Africa will be subject to income tax in terms of the South African Income Tax Act.

Non-residents who own property in South Africa may have to open a local bank account in order to service bond repayments as well as their municipal rates, and to receive rental income. The South African bank will require an application for a bank account, supported by a Certificate of Introduction from his own (foreign) bank as well as certified copies of the client’s passport as proof of identity, proof of residential address and proof of income. Once the bank account has been opened, foreign funds must be transferred into the account. In certain circumstances local currency may be deposited into the account, provided that the necessary supporting documentation is furnished to the bank.

The estate agent who brokers the contract usually acts for the seller who is then responsible for payment of the agent’s commission. The seller also appoints the conveyancer. Although the conveyancer may assist the purchaser, in the case of conflict of interest between the parties the purchaser would be advised to seek independent legal advice.

The above information is given by way of introduction to any non-resident considering purchasing property in South Africa. The contents hereof should neither be regarded as legal advice nor as a comprehensive statement of a complex aspect of South African law. Prospective purchasers are urged to seek legal advice prior to signature of any agreement of sale.