Real Estate Terminology in Cape Town
South African real estate terminology can vary from that of other countries. Below are some important terms that may come up in your search for a new home.
Bond Registration Fees
Bond registration fees often catch first time homeowners in South Africa off guard. They include a number of fees, calculated with reference to the size of the bond, which, conglomerated, can be quite substantial. The constituent fees that go into making up this overall fee are:
- Conveyancing Fees: These are payable to the attorneys who register the property as your intermediaries, as well as to the attorneys chosen by your bank to register the bond over your property. The Law Society (http://www.lssa.org.za) limits the amount that conveyances are allowed to charge when transferring property in your name. These fees make up the majority of the Bond Registration Fees, amounting to approximately R4000 on a R500 thousand bond.
- Postage and Petties: This is a small fee the law firm will charge for posting documents to other firms, the estate agent, the bank and so forth. It averages R550.
- Deeds Office Registry: This is a fee charged by the Deeds Office to legally register your mortgage bond. For a bond of between R1 million and R2 million, you’ll be charged a fee of R650.
Close Corporation (CC)
A CC can consist of no more than ten members, whose interests in its (necessarily profit-making) activities must add up to 100%, expressed as a particular percentage. A CC is considered to be legal entity in its own right – thus doing business via a CC limits the liability of each of its members in accordance with the Close Corporations Act No.69 of 1984. For more information on how CC’s are registered, and the benefits of belong to one, visit http://www.seda.org.za/ or contact the Small Enterprise Development Agency (SEDA) on 0860 103703.
Capital Gains Tax (CGT)
CGT is considered an integral part of the income tax system – it’s a tax on capital gain, which non-residents also have to pay on taxable gains received from the disposal of any of the following assets:
- Land, buildings and other immovable property in South Africa
- Any long-term lease or other right or interest in immovable property in the country.
- Shares in any company in which the non-resident holds 20% or more of the shares in the company, and 80% or more of the value of the company’s net assets is made up by immovable property in South Africa.
- Assets of any permanent establishment owned by the non-resident in South Africa.
If you’re registered for income tax, you don’t need to register separately for CGT. If you aren’t, however, and you dispose of an asset in South Africa in such a way that this results in capital gain or loss, you’ll need to submit an income tax return.
When a non-resident sells property, he or she must pay a CGT withholding tax, which is collected by the conveyancer and paid directly to SARS (the South African Revenue Service).
For more information on income tax, visit http://www.sars.gov.za/ or take a look at the Tax section of this guide.
Freehold title is assumed when a buyer purchases a property that is freestanding, and as such gains ownership of all landing and buildings to which that property is attached. The new owner should receive a deed the property (separate title) and becomes singly responsible for all manner of services and maintenance to said property.
This term is has no strict definition. It generally indicates the presence of large furnishings, such as beds, couches, cupboards, chairs and tables, refrigerators, stoves and, sometimes, home entertainment centers. It may or may not indicate that the kitchen is properly equipped, or that other luxury utilities, such as dishwashers, tumble driers and so forth are present. The best approach is to examine the apartment for these features, and then ask the owner whether he or she is willing to provide them as part of the lease agreement.
Number of Rooms
This phrase always indicates the number bedrooms, and should not additional rooms like a lounge or other, multipurpose areas.
In this case, a buyer purchases a apartment or unit in a block or complex. The buyer will then receive a deed to the title for his section, which also entitles him to a proportionate, undivided share of the property as a whole. He will be required to contribute on a pro rata basis to shared expenses, and will have to comply with house and management rules.
Transfer Duties/Transfer Fees
Transfer Duty is a government tax that tends to constitute the majority of the secondary costs when purchasing a home. If the seller is VAT registered, then no transfer duty will be payable, as the seller is supposed to include VAT in the proposed purchase price of the property.
For individuals (‘natural persons’), there is no Transfer Duty levied on properties with a purchase price of R500 thousand or less. Between R500 thousand and R1 million, a duty of 5% of the value over R500 thousand is levied. Between R1 million a R2 million, a duty of 8% added to a flat rate of R25 thousand is charged.
For trusts, companies and closed corporations, an amount equal to 8% of the purchase price is required. Registered VAT vendors can claim this sum back at the end of the year from SARS (the South African Revenue Service).
Add to this the cost of the service of your Transferring Attorneys (around R6 thousand on a purchase price of R500 thousand), their Postage and Petties fee (R550) and the Deeds Office registry fee (R70 for homes under R150 thousand, R600 on a bond between R1 million and R2 million), and you have a not inconsiderable sum best remembered if engaging in any calculations on the feasibility of a purchase. The entire fee is payable, once-off, to the Transferring Attorneys.