BUYING YOUR FIRST HOUSE – AN ACTION PLAN

      “Buy land – they’ve stopped making it” (Mark Twain)

So you’ve decided to buy your first house – exciting! There’s nothing like owning and living in your very own dream house, and if you choose wisely your home could well be one of your most important investments ever.

Get started with these tips

First, understand how much cash you will need

Make a list of all the costs you need to plan for (there are plenty of convenient online calculators to help you figure out what your transfer and bond costs are going to be so Google for one that suits you) –

  • Deposit: Unless you pay the whole purchase price in cash, you will need to raise a bond. You may qualify for a 100% bond, otherwise be ready to pay at least 5% – 10% of the price as a cash deposit. Of course there may be benefit in paying more if you can afford it.
  • Bond registration costs: The bank’s attorneys will register your bond and you will need to pay them the registration costs. The bank will also charge you a bank initiation fee.
  • Transfer costs: Standard procedure (unless your sale agreement provides otherwise) is for you to pay the transfer costs, even though it is usually the seller who chooses the conveyancing attorney.
  • Transfer duty: This government tax is payable unless there’s VAT on the sale, and the sale agreement will almost certainly provide for you to pay it. No duty is payable on a property valued up to R900,000 and a sliding scale applies to houses above that threshold.
  • Associated costs: Make a list – moving, redecorating, furnishing, Internet connections and so on. Don’t forget this step, these costs can add up alarmingly!

So what’s your price range?

You now have your figure for one-off costs, but before you finalise your budget make provision also for all your new ongoing costs as they will all affect long-term affordability –

  • Recurring and monthly costs: Rates/taxes/levies, homeowner’s insurance, water, electricity and so on. Provide also for both short- and long-term maintenance costs for both home and garden.
  • Your bond repayments: This is the crunch – will you be happy with the lifestyle you can afford after paying your bond every month? When you first apply for a bond shop around for the best interest rate and – this is vital – be absolutely sure that you will always be able to afford the monthly payments, even when (not if) interest rates start rising again.

Get a bank pre-approval here – with today’s restrictions on credit grantors when it comes to responsible lending practices, it will help you gauge affordability. And as a bonus, it gives you a great negotiating tool when you move on to the offer stage!

The end result – you have your budget, that gives you your price range, and you can move on to…

House hunting

Lots of questions to ask yourself here of course –

  • Location, location, location: What area/s will you concentrate on? Where do you want to live? What sort of lifestyle are you after? What amenities do you want close by? Research the area – what are average selling prices in the suburb and is your budget up to it? Do houses in the area have a history of good value growth? What are crime levels like?
  • Searching: With your price range and target area in mind, the “thrill of the hunt” is at last upon you! Online searches are increasingly popular but choose whichever channel or channels you are comfortable with.
  • If buying in a community scheme: Check what Rules and Regulations you are letting yourself in for – you will be held to them. Make sure that the Home Owners Association or Body Corporate’s finances are sound (ask for audited financials and management accounts). Ask about any special levies or other planned expenditure on the horizon (get it in writing).
  • Plans, defects and the rest: Ask for copies of approved building plans (check for any unlawful structures or deviations from plan), look for and ask about defects like leaking roofs, problem foundations etc – consider getting a full professional report unless you are very sure of your own abilities in this regard.

Approach your choosing and purchasing decision as though it’s the most important financial decision you will ever make (it may well be).

Making an offer, and the legal bits

So now you’re ready to make your offer on a house. Excitement mounts – will the seller accept? Or perhaps counter-offer? You can’t wait to find out. You are presented with a Deed of Sale, a pen and a cheerful “just sign here, we’ll do the rest”.

Hold on a second!

Take no chances here. Before you sign anything, have your lawyer check the paperwork for you, with a Deeds Office search for anything that may affect your decision-making such as restrictive title deed conditions, servitudes (giving other people rights over your property) etc, etc.

Remember also that with property sales what counts is what’s in writing so tell your lawyer about any verbal undertakings or disclosures given to you.

For professional legal advice, contact Goldberg & de Villiers Inc on 041 501 9800.

BEWARE OF ONLINE AND EMAIL SCAMS WHEN YOU ARE PURCHASE A PROPERTY

To avoid falling victim to these scams, experts recommend the following measures:

  1. Know your service provider/attorney/conveyancer and always personally verify any change in payment instruction;
  2. Before making a payment, request the contact person that you have been dealing with at the business or firm of attorneys to confirm the amount and their banking details telephonically or to provide you with other proof of their banking details;
  3. Treat any email notification of a change of banking details with suspicion. Rather obtain telephonic confirmation or confirmation in person of the change in banking details;
  4. Do not click reply to an email when you are sending important information. Instead create a new email and type in the email address afresh or select the address from you address book. In this way you can avoid replying to a fake email address that looks similar to the correct email address;
  5. Cooperate with your attorney when proof of your banking details are required in the form of an original bank statement or cancelled cheque;
  6. It is not always practical to make personal contact with parties involved in transactions in our fast-paced, digital age however it imperative to verify bank details in person.

Contact the professional team at Goldberg & de Villiers Inc on Tel. 041- 501 9800 for assistance on your property related matters.

WHAT HAPPENS IF YOU CANCEL YOUR LEASE EARLY?

 

“There ain’t no such thing as a free lunch” (Wise old adage)

You sign a two year lease for a nice little apartment (or a large family house if you have a spouse, 3 kids and a dog) but after 6 months your employer transfers you and you have to cancel early.

“Fine” says your landlord “but you are breaching your lease and I am holding you liable for the remaining 18 months’ rental”.

What are your rights? As is often the case in life, that depends…

Check the terms of your lease

First things first, generally your most important consideration is this: “What does my lease say about termination?”

Most leases specify what happens if you don’t comply with the terms of your lease and our law will generally hold you to your agreements. So if you have agreed to be bound to a two year lease, your starting point should be that you are at risk if you cancel early.

Before you concede anything however, consider the following –

Does the CPA apply?

First step is to decide whether the Consumer Protection Act (CPA) applies to your lease.

The CPA gives its protections to “fixed-term agreement” tenants but only if your landlord is leasing to you “in the ordinary course of business” and it’s unfortunately not yet clear how our courts will interpret that definition in property leasing scenarios. For example, if your landlord is a property investor running a full-on letting business with a whole selection of apartments or houses, you will definitely fall under the CPA. But what about a private home owner who is overseas for a year and rents to you on a temporary basis? Or a pensioner letting out a “granny flat” to boost their retirement income? You can certainly argue that in both cases the landlord is making “a business” of the letting out, but expect your landlord to disagree.

The 20 day notice provision in the CPA

If the CPA does indeed apply, this is the crux: The CPA allows you to give your landlord 20 business days’ notice, at any time, and for any reason.

“Hooray” I hear you shout, “I get off scot free”. But not so fast!

The CPA also allows your landlord –

  • To recover any amounts still owed by you in terms of the lease up to the date of cancellation, and
  • To impose a “reasonable cancellation penalty”. The principle here isn’t to punish you by allowing your landlord to, for example, automatically hold you liable for the full remaining period of your lease. The idea rather is to let the landlord recover all actual losses resulting from your early cancellation – rental lost until a new tenant is in place, re-advertising costs, new agent’s fees, new lease preparation costs and so on. Particularly if you are cancelling a fixed-term lease early on, expect to pay for the privilege.

Note that this all applies regardless of what your lease says – you can’t be contracted out of these protections. In other words if your lease imposes a set “early cancellation fee” or the like, it must still be a reasonable one.  Note also that you must give the required notice “in writing or other recorded manner and form” (keep proof).

What if the CPA doesn’t apply?

In this case, you have no specific right of early cancellation and will be bound by the terms of your lease.

But you still aren’t entirely at your landlord’s mercy. Any penalty imposed on you must still be reasonable. Per the Conventional Penalties Act, a court can reduce a penalty if it is “out of proportion to the prejudice suffered” by the landlord.

Credit: LawDotNews

For more information, contact Goldberg & de Villiers Inc on 041 501 9800.

HOMEOWNERS BEWARE! INVASIVE PLANT SPECIES

 

Regulations to the National Environmental Management: Biodiversity Act published in 2014 have placed a burden on homeowners to establish whether there are any invasive plant species on their property, and in the event of them selling such property, they are obliged to notify the purchaser prior to conclusion of a sale agreement, that there are listed invasive plant species on that property.

Category 1 (prohibited) plants need to be removed from the property, and permits need to be obtained for category 2 and 3 plants. The regulations carry fines of up to R5,000,000.00 and/or a maximum 10 year sentence, so it is vital for homeowners to take proper advice when selling their property and to ascertain whether or not they have invasive plant species present on their property.

For more information, contact Tracey Watson-Gill at Goldberg & de Villiers Inc on 041 501 9800.

EXISTING BOND OVER A HOME YOU ARE SELLING

When a property is sold it is usually the purchaser who is liable for the cost of transfer. However if the seller has an existing bond over the property that is being sold, the seller is liable for the costs of cancelling such bond. The bond cancellation is a separate transaction but is linked to the property transfer.

The bond cancellation fee is payable to the conveyancing attorney instructed by the seller’s bank to attend to cancellation of the existing bond. It is necessary to register the cancellation of a bond even if the bond has a nil balance.

For more information and professional legal advice, contact Goldberg & de Villiers Inc on 041 501 9800.

 

LANDLORD V TENANT: CONSIDER THE TRIBUNAL DISPUTE RESOLUTION OPTION

 

“Agree, for the law is costly” (Marcus Tullius Cicero, Roman lawyer and statesman)

We all know how easy it is for misunderstandings and disputes to arise between landlords and tenants, and whilst most can be resolved with a bit of open communication and negotiation, sometimes independent intervention is needed.

Enter the Rental Housing Tribunal, which uses the Rental Housing Act to “speedily resolve” landlord/tenant disputes, to balance the rights of both sides and to protect them both from “unfair practices and exploitation”.

Note that this applies only to residential housing, not to commercial or industrial leases.

What’s the cost and how does it work?

It’s free, and to get going you lodge a complaint with your local Tribunal. An impartial mediator is then appointed to help you settle the dispute and reach an agreement. If that fails a formal hearing is held and a ruling issued. Either side can take the ruling (which is binding and must be complied with on pain of criminal prosecution) on review to the High Court.

You can if you like draw up your own complaint and represent yourself in the hearings, but – particularly if there’s a lot at stake – taking legal advice upfront is far safer.

Because the Tribunal cannot order eviction (only a court can do so) and needs time to resolve complaints, landlords faced with a non-paying tenant will usually go straight to court.

For most disputes however, both landlords and tenants should seriously consider following the quick, cheap and easy Tribunal route.

Prevention being better than cure…

Of course first prize is as always to avoid disputes altogether.  Start off with a properly-worded, clear and comprehensive lease. Make sure you comply with Rental Housing Act basics like joint inspections for damage, investment and refund of deposits, avoiding unfair practices and so on.

Ask your lawyer for assistance here – blindly using a generic lease without taking advice is a recipe for disaster.

For assistance, contact the professional team at Goldberg & de Villiers Inc on 041 501 9800.

Credit:LawDotNews.

 

NEIGHBOURS BEHAVING BADLY: NIP ILLEGAL BUILDING IN THE BUD!

Bad neighbours do not just impinge on your enjoyment of your property;  they can also cause serious harm to its value.   So if you notice illegal building activity next door,  move quickly to nip the problem in the bud.

Your hand in this regard has just been strengthened.   An important new decision by the Supreme Court of Appeal (SCA) confirms that you are not limited to trying to compel the municipality to enforce its own building and zoning laws –  you can apply for demolition directly.

Demolition ordered – despite a “supine” municipality

  • A new retail/office development exceeded the local Town Planning Scheme’s coverage limit of 60% (the actual coverage as constructed was 86.13%), and insufficient parking bays were provided
  • The developer claimed to have obtained municipal approval of its building plans but the “supine and uncooperative attitude of the municipality” made it difficult for the Court to determine any more than that,  if the municipality had indeed given approval, it seemed later to have cancelled it
  • In any event,  held the Court, any such purported approval of the plans had to be set aside and the developer was ordered to partially demolish its building so as to bring it into compliance with the law.

First prize, second prize

The SCA has cleared the way for neighbours themselves to apply for demolition orders.   That is an important new weapon in the fight against illegal construction activity,  but it is still only second prize.

The problem is that where you (rather than the municipality) bring the demolition application, “private” or “neighbour” law applies and the court is not obliged to order demolition;  it has a discretion whether or not to do so.   And, demolition being a draconian remedy,  the court may rather decide to make an alternative order such as a damages award.   Indeed,  had the developer in this particular case not incurred the court’s wrath by persisting in its illegal conduct after ignoring warnings of illegality,  it might have escaped demolition altogether.

In contrast, where a municipality does its job properly and brings its own application for demolition,  “public law” applies and our courts have previously held that they then have no discretion where unlawful buildings are concerned –  they must order ‘total demolition”.

First prize it seems is still to force your municipality to fulfil its legal and moral duty to uphold the law by taking the offending builder to court itself.

Regardless,  the most important thing is to act quickly –  so get legal help as soon as you become aware of illegal construction!

Credit: LawDotNews

For more information, contact the professional legal team at Goldberg & de Villiers on 041 501 9800.

FROM THE HORSE’S MOUTH: HOUSE SALES AND THE VAT INCREASE

 

“If you hear something (straight) from the horse’s mouth, you hear it from the person who has direct personal knowledge of it” (Cambridge Dictionary)

We all know by now that the VAT rate increased from 14% to 15% on 1 April. How does that affect your residential property sale/purchase?

We are talking big money here – if for example you bought a house from a developer for R10m + VAT, that extra 1% adds R100,000 to your cost. Fortunately a little-known (until now) section of the VAT Act provides some relief to residential property buyers.

This is what SARS has to say about it (slightly simplified) –

Question – “Is there a rate specific rule which is applicable to me if I signed the contract to buy residential property (for example, a dwelling) before the rate of VAT increased, but payment of the purchase price and registration will only take place on or after 1 April 2018?”

Answer – “Yes. You will pay VAT based on the rate that applied before the increase on 1 April 2018 (that is 14% VAT and not 15% VAT).

This rate specific rule applies only if –

  • You entered into a written agreement to buy the dwelling (that is “residential property”) before 1 April 2018;
  • Both the payment of the purchase price and the registration of the property in your name will only occur on or after 1 April 2018; and
  • The VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes –

  • An existing dwelling, together with the land on which it is erected or any other real rights associated with that property;
  • So-called plot-and-plan deals where the land is bought together with a building package for a dwelling to be erected on the land; or
  • The construction of a new dwelling by any vendor carrying on a construction business.”

But what about commercial property?

Let’s quote SARS again on property generally (once again, slightly simplified) –

Question – “How will the rate increase work generally for fixed property transactions?”

Answer – “The rate of VAT for fixed property transactions will be the rate that applies on the date of registration of transfer of the property in a Deeds Registry, or the date that any payment of the purchase price is made to the seller – whichever event occurs first.

If a “deposit” is paid and held in trust by the transferring attorney, this payment will not trigger the time of supply as it is not regarded as payment of the purchase price at that point in time.

Normally the sale price of a property is paid to the seller in full by the purchaser’s bank (for example, if a bond is granted) or by the purchaser’s transferring attorney. However, if the seller allows the purchaser to pay the purchase price off over a period of time, the output tax and input tax of the parties is calculated by multiplying the tax fraction at the original time of supply by the amount of each subsequent payment, as and when those payments are made. In other words, if the time of supply was triggered before 1 April 2018, your agreed payments to the seller over time will not increase because of the increase in the VAT rate on 1 April 2018.”

Credit – LawDotNews

For more information, contact Tracey Watson-Gill or Adri Ludorf on 041 501 9800.

www.goldbergdevilliers.co.za

 

 

HOW TO AVOID DISPUTES OVER JOINTLY OWNED PROPERTY

       “Co-ownership is the mother of disputes” (Roman law maxim)

Buying property can be an excellent investment, but it can also be expensive. So sometimes it makes a lot of sense to share the financial burden with someone else. Perhaps for example you are spouses or life partners buying your first home. Perhaps you are a group of families planning to share a holiday house, or two firms looking to co-own business premises.

Just be very careful here…

What can go wrong?

Co-ownership (or “joint ownership” – it’s the same thing) always starts off all fine and friendly. You’re life partners, or business partners, or best friends (you may even be all of those things together) and all is good between you. So nothing can go wrong, right?

Unfortunately it can, and as many bitterly fought court cases can attest, it does. “The sting’s in the tail” as the old proverb has it, and problems tend to raise their ugly heads only down the line, long after you first became joint owners. Imagine a scenario where you can’t agree on how to run the property and/or cover its expenses, or you need to wind up your co-ownership but can’t agree on how to do so. What happens if one of you wants to buy the other out but the other refuses or you can’t agree on a fair price? Or if (as co-owners are entitled to do if not bound to a contrary agreement) they sell their share/s to a total stranger? Or the time may come when you need to/want/must sell your share and your co-owner refuses to co-operate.

The issue here is that when you are co-owners of property you don’t each hold separate title to your own physically-delineated “share”. Your title deed (registered in our Deeds Office) will reflect each co-owner as holding an undivided share in the property. You have to act jointly or call in the lawyers.

A great deal of unhappiness and dispute – perhaps even the cost, delay and hassle of litigation – beckon. For example, a court can order one of you to buy the other out, or to subdivide the property, or even to order its sale (commonly by public auction) – but it really is a last resort to ask a court to decide what is best for you.

A simple solution and a checklist for you

The trick of course is as always to plan ahead. Before you buy the property, take advice on the best structure to use for your particular circumstances. Factors to bear in mind would include things like ease of ownership, cost of ownership, the tax angle, ultimate disposal, estate planning, asset security, protection from creditors, and so on.

A whole multitude of factors, unique to each situation, will determine whether you should own the property in a legal entity like a company or trust, or register it in your names jointly, or find some other way of ensuring that you share equally in both the costs and the benefits of property ownership.

Critically, you need to put in place a written, signed agreement setting out as clearly and as simply as possible –

  • Your agreed method of ownership, and whether your undivided shares will be 50/50 or in another proportion.
  • Who will cover what expenses, and how? Think about all the transfer costs, the moving costs, the costs of municipal services, maintenance costs, bond instalments, and so on. If it’s an office held by a company for example, what rental will each of you pay? Who will pay the rates? Can co-owners make improvements to the property and if so how will they be compensated?
  • If you are trading with the property (perhaps letting it out to tenants), will you share profits and losses in the same proportion as your shares?
  • Who will attend to administrative duties? You need to cover things like paying the bond, arranging insurance, keeping financial records, dealing with tenants, and the like.
  • Who will enjoy what benefits of the property, and how? In an office-sharing scenario for example, define exclusive-use and common-use areas, who gets the best undercover parking etc. If it’s a holiday home, who gets to use it and when? Who gets the Summer Holidays each year? If you are a life partnership couple you should have a cohabitation agreement in place anyway – if you don’t, ask your lawyer to draw one up for you and to integrate your co-ownership deal into it.
  • Last, but certainly not least, you have to plan for the end game part. Without an agreement to the contrary, a co-owner can sell his/her share without the other’s consent – a recipe for dispute. And if your relationship falls apart, you need to be able to wind up your joint ownership without all the hassle, stress, delay and cost of legal action. Consider also what happens if one of you goes insolvent or is liquidated, or if a co-owner’s creditors attach his/her share for sale in execution. Specify what happens to a co-owner’s share on death. Agree on how you will value the property, or each co-owner’s share in it, if you need to.

The above is of course just a summary of some common issues, so ask your lawyer to help you with your own checklist.

For more information contact Tracey Watson-Gill at Goldberg & de Villiers Inc on 041 501 9800.

Credit-LawDotNews

 

IMPLICATIONS OF VAT INCREASE ON PROPERTY SALES

If you are currently negotiating a deed of sale to purchase immovable property or if a sale has already been concluded in writing and is still in the process, questions may  arise as to the VAT rate that will apply to the transaction.

In the following instances the 14% VAT rate will continue to apply to the sale of residential property including units in sectional title schemes and share block schemes, and plot and plan and free hold dwellings:

  • where the 14% VAT rate applied to the sale before 1 April 2018,
  • where the purchase price was determined and stated in the written agreement;
  • if the written agreement was signed by the parties before 1 April 2018;
  • where payment and registration takes place after 1 April 2018;

A VAT rate of 15% will apply to the sale of commercial property concluded before 1 April 2018 and registering after 1 April 2018.

If you have concluded a sale agreement before 1 April 2018 it is advisable to review the sales agreement and to obtain expert tax advice to ensure that provision is made for the increased VAT rate, if applicable, and appropriate mechanisms are in place.

Contact Goldberg & de Villiers Inc on 041 – 501 9800 if you require advice on your property related matters.