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South African Property
Purchase - An Overview
 South Africa follows
a system of land registration where every piece of land is
reflected on a diagram and ownership recorded in one of the
regionally located Deeds Registries where documents are
available for public viewing. South Africa is reputed to have
one of the best deeds registration systems worldwide with an
exceptional degree of accuracy and of tenure being granted.
Property can be owned individually, jointly in undivided shares
or by an entity such as a company, close corporation or trust or
a similar entity registered outside South Africa.
Buying South African Property as a Foreign National
Foreigners are referred to as non-residents, whether they be
natural persons or legal entities whose normal place of
residence, domicile or registration is outside the common
monetary area of South Africa. A South African Resident who has
lived abroad for more than 5 years, regardless of whether or not
he/she has emigrated will also be regarded as a non-resident for
the purposes of obtaining finance in South Africa. There are
certain restrictions on property ownership by non-residents, and
it is prohibited for illegal aliens to own immovable property
within South Africa. There are also certain procedures and
requirements which must be complied with in certain
circumstances, such as, the local registration of entities
registered outside of South Africa where it purchases a property
in South Africa and the appointment of a South African resident
public officer for a local company whose shares are owned by a
non-resident.
Property of
any kind in South Africa is usually purchased through a broker
or Real Estate agent who should be a registered member of the
Estate Agents Board.
Making an offer
In South Africa, all contracts to purchase property must be in
writing, must contain certain set information and be signed by
both the buyer and seller of the property, for the contract to
be legally binding. These contracts usually take the form of an
Offer to Purchase or Agreement of Sale, and once this has been
signed by both parties is a valid binding document from which
neither party can withdraw without incurring legal consequences.
Accordingly the decision to enter into and sign an offer to
Purchase / Agreement of sale is not something to be taken
lightly and it is recommended that an inexperienced purchaser
obtain independent legal advice if uncertain in any respect.
The offer to purchase will contain certain of the following
standard provisions
- Purchase
price : a deposit is not obligatory but serves as a gesture
of good faith on the part of the purchaser and an indication
of financial capacity. 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
- 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 must
be brought to the attention of the purchaser.
- Electrical
and Beetle 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 requirements. The
beetle free certificate certifies that all accessible parts
of the property are free of infestation by certain defined
beetle.
- Fixtures and
fittings - A property is sold with all fixtures and fittings
of a permanent nature situated thereat. Generally fixtures
and fittings include anything with 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.
Owning property in shares
Besides individual
or joint ownership, property can also be obtained by means of
acquiring the shares / members interest and local claims in a
company / close corporation respectively which company is the
registered owner of a property. These contracts should also be
in writing. Only a natural person can acquire the member’s
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 the same should it be a condition of the purchase.
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