What about paying rates and obtaining a rates clearance certificate from the local Municipality?

When a property changes ownership the conveyancer will need to apply to the Seller’s local municipality for a certificate known as a rates clearance certificate. The clearance figures for rates which must be paid are normally for an amount of rates about six months in advance. Only once the amount is paid in full will the municipality give the conveyancer the clearance certificate. Without the clearance certificate the transfer cannot be registered by the Registrar of Deeds and ownership in the property pass to the Purchaser. After registration the municipality will refund the Seller the amount the Seller paid in advance.

What happens at the Deeds Office?

The conveyancer lodges the title deed and other documents that he has prepared at the deeds office for registration of ownership of the property into the name of the purchaser. The Deeds Office is a government office holding title deeds, survey diagrams and information about all property ownership in South Africa. 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. Then, in the presence of the conveyancer and registrar of deeds, the transfer of the property is registered in the name of the purchaser. The bond, if any, is registered simultaneously. On registration the purchaser becomes the legal owner of the property. The title deed reflecting the new ownership is produced by the deeds office after registration and will be given to the new owner by the conveyance. If a bond was registered the title deed will be given to the bondholder, usually a bank.

Is VAT or transfer duty payable on transfer of property?

If a seller is not a registered VAT vendor, transfer duty is generally payable on the purchase price by the Purchaser. If, however, the Seller is a registered VAT vendor, then VAT is payable on the purchase price by the Seller at 14% which is higher than transfer duty. It should be noted that there is no transfer duty should the purchase price of the property not exceed R 500 000.00. The Seller and the Purchaser must make sure that they know whether VAT or transfer duty is going to be payable on the sale and must then make certain that the Deed of Sale refers to their agreement about this aspect correctly. In the event that both parties are registered for VAT and the property is sold as part of a going concern, then VAT is levied at a zero rate i.e. VAT and not transfer duty is relevant but none is payable.