Category Archives: Real estate law

Information, articles and news that is relevant to real estate law in South Africa.

Instalment sale: a brief definition.

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An instalment sale agreement is an agreement between a buyer and a seller about the purchase conditions of a property. This type of agreement mandates that the seller needs to be paid in full within 5 years but not before at least 1 year has passed. It creates a more direct relationship between the buyer and the seller as opposed to a relationship between the buyer and a lending institution. This is because the buyer does not necessarily need a homeloan from the beginning.

The instalment sale needs to be registered against the title deeds of the property before the seller can receive any money. The registration is done by a conveyancing attorney and is paid for by the buyer, registration should be complete within a few weeks.

At the end of the agreed upon repayment period if the buyer does not pay the remaining outstanding balance in full or if he /she misses a payment he will lose all the money he has already paid and the seller will regain possession of the property. This puts the buyer in a vulnerable position and they should ensure they keep up with their payments and make provision for the final payment. The monthly repayments should not be less than the minimum bond payment the seller needs to pay.

Here or a few reasons why an instalment sale may work for you:

  • The property will stay in the sellers name until it is fully paid off, and if the buyer misses a payment the the property will once again revert to the seller.
  • Depending on how the buyer is financing the payment of the property it could speed up the process. He may decide to pay cash or take out a loan of some sort.

Be comfortable with the person you enter into an installment sale with as you will waste alot of time if it is someone who simply cannot afford to pay the instalments. Many buyers can afford the repayments but get declined a homeloan for other reasons, because of this an instalment sale would be attractive to some people looking to buy a home.

Yes2Property answers all questions to the best of our ability but you should always seek professional legal advice when necessary.

Usufruct: a brief explanation.

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There are some pretty weird terms out there when it comes to property and the law. One of the weirdest looking is usufruct.

Usufruct refers to the legal right to benefit, derive a profit from and use someone else’s property provided that that persons property is not damaged in any way. The emphasis in defining usufruct seems to be in obtaining these benefits in a legal way. Once the usufruct has been legally obtained the holder of the usufruct, known as the usufructuary, has the right to use and enjoy the property.

The idea of usufruct has been around for a long time and can be traced back centuries. The English word usufruct derives from the Latin roots usus and fructus, from verbs meaning to possess and to have the benefit of, respectively.

An example of usufruct is where a husband bequeaths a residential property to his children in his will, but stipulates that his wife may enjoy usufruct until the day she eventually passes away. By doing this he ensures that his wife has the use and enjoyment of the property.

Usufruct can have serious consequences when it comes to Capital Gains Tax so any legal process you intend to follow needs to be investigated and advised upon by a trained professional. You may not be immediately concerned with the legal implications but a qualified person will be able to tell you exactly what will happen years in the future if ,for instance, you intend on selling your property.

Whether your interest in usufruct is related to a will or perhaps a trust of some sort always seek professional legal advice.

Common complaints about neighbours.

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We buy a home with a vision of how wonderful it is going to be living there. However sometimes we end up getting a nasty surprise that for the most part we can do nothing about, bad neighbours.

The problems our neighbours can create for us are endless, ranging from annoying through to downright destructive behaviour. People take it very personally when others affect their ability to enjoy their home and privacy and this is compounded when the problem lives next door 24/7.

The most common complaints people have of their neighbours are the following:

Rubbish all over the place
Barking dogs
Noisy children
Parties all the time
Spousal fighting
Spying on you                                                                                                                                                                                                                      Parking disputes

All of these issues, if left unchecked, may put a great deal of stress on your relationship with your neighbour. I lived in a rented house a few years back that had a family with two small boys living next door. The children enjoyed throwing their toys over the wall and watching them smash on the paving I had at the back. The tenant before me had merely thrown the pieces back over the wall, I didn’t want to do this for fear of injuring one of the children as they were rather large toys.

I know children will be children but their parents never scolded them for dirtying my yard and it was only after they started throwing drill bits at people that I was forced to increase the urgency of my complaints. I had children myself that may have been injured.

Whenever dealing with their parents I was always polite but firm because they would try and excuse the behaviour by saying that it only happened a few times a week and we should just throw everything back over the wall which I refused to do. The parents needed to realise how inconvenient it was for me to keep dealing with their mess by making them come and fetch the things that were thrown over.

Eventually, after many months of complaining every time it happened, they finally stopped throwing their things over the wall.

The best way to deal with something that is basically just annoying is to be persistent but polite. Eventually your “annoying ” persistence should show results.

However in the case of more serious transgressions one should always deal with the authorities, such as vandalism of your property by a neighbour or threats of violence.

Remember that when dealing with a neighbour you are more than likely still going to be living next door to them for years to come and that it is very unpleasant having a bad relationship with your neighbours. Try and keep your dealings with them as amicable as possible.

Trusts in layman’s terms (With a twist in the tail?)

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Can you believe it the first month of the year is nearly at an end and I trust you all had a good rest over the festive period.

I thought I would share some new information with you that has just come to light and may not be common knowledge to all.

In the past you could “generate” income via a Trust to boost your income and therefore be able to qualify for larger bonds with the banks. The banks have become very strict on what they accept as income. Before they will accept it, they do some serious investigation first. The original concept of flowing the same money around is no longer effective. They want to see more substance, such as available equity or funds invested in Money Market accounts.

At this point in time the banks would only start looking at this if the Trust has been ‘trading” for longer than 2 years and the cashflow is of such a nature that these distributions are sustainable.

Yup, with a swish of the tail the policies change overnight and at this stage the banks are as confused as a chameleon on a Smarty box. Rumours are that the banks policies will be in place by the end of February and things should start settling down.

One thing has come through very strongly and that is that the criteria for obtaining finance have become much stricter and going to worsen as time goes on.

My prediction is that South Africa is going to become like the rest of Africa unless the policies change. Ten percent of the people will own property with the balance renting.

On the other hand………. We could be that 10% ?

Trust you have a wonderful day.

Andre

Will I lose my home immediately?

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Many people have never been through the trauma of repossession and just the thought of it makes many of us break out in a sweat, but do we really know what will happen?

Each case is assessed individually but alot of the time if you inform the bank  of your dire financial situation in time or are approximately less than 6 months in arrears your case will first be passed on to the banks pre-legal department. This department aims to assist in making repayment arrangements for clients who are in arrears, however as I said each case is assessed individually and you should contact your bank to find out what will happen in your situation.

You should then be true to your word and make the payments you have arranged.Most banks also have a system that allows for 3 strikes, if you fail to keep up your end of the bargain 3 times your case will then be passed on to the legal department. They will usually try and design another payment structure however this time they will try and have you sign a document that allows them to sell your home  or property using their own agents on your behalf if you again default. Always have a qualified person assess any document like this as there could be pitfalls for you if you sign it without knowing all the consequences thereof.

This is not a pleasant situation to be in and the best advice you can get is to contact your lender as soon as you become aware of a possible problem. Each case is unique but if your situation is a temporary one they will usually be able to offer help.

Sellers be aware. Avoid delays in transfer.

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If you are selling your property there are some pitfalls and hidden costs you need to be aware of. If you ignore them it can delay the registration of the transfer of the property.

As a seller you must be aware of your responsibilities as soon as the offer to purchase has been signed and the conveyancer is appointed.

  • All rates, in the case of full title properties, need to be paid up to the date of the transfer.
  • All levies, in the case of sectional title properties, need to be paid up to the date of the transfer.
  • All costs involved to get an electrical compliance certificate issued that certifies that the property is safe. This certificate is a legal requirement.
  • Although it is not a legal requirement, some bondholders require an entomologist certificate certifying that the property is free from wood-destroying insects.
  • If the property was bonded the seller is responsible for the cancellation costs.

Further as a seller it is important to remember to include an occupational rent clause in the sales agreement. Remember, if it is not there, you can not get it.

Another important thing to remember is that the risk of the property only transfers to the buyer once the property has been transferred.

As always your comments welcome.

Building alterations considerations.

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Lots of people forget about the legalities and submitting the plans when they renovate or alter their home, why should you? It’s your home… But this is a HUGE mistake to make so don’t.

The first thing you need to plan when thinking about property alterations is the building legislation, after that you need to consider the impact the alterations will have on your neighbours. If you neglect this step, a building inspector can legally force you to stop all building and you will have to demolish all the alterations, at a huge cost.

Things to consider:

“Every well built house started in the form of a definite purpose plus a definite plan in the nature of a set of blueprints. “ - Napoleon Hill

ALL plans need to be approved.

All building plans, this includes internal structural changes and alterations that need to comply with fire regulations, need to be approved by your local council before work commences.

Have a chat with the neighbours

Your neighbour could lodge a complaint at the council and get your plans scrapped. If you take the time to chat to them before hand you could greatly reduce this risk.

When the work requires excavation of land or public services

If the building work requires land excavation, electricity supply, plumbing and drainage you will need to get in contact with your local authority to find out exactly what you need to do.

If you are planning to put in a pool, fireplace or a boundary fence, you need your plans approved.

The procedures

You submit your building plans to the council building plan examiners. They go through the plans to ensure that all regulations, laws and essential requirements have been met. you will need to submit the following documentation: copy of the title deed, a zoning certificate and a completed application form.

The council may require that changes be made to the plan before approval and only then will the scrutiny fee be determined which is usually based on the plan’s square meters.

The average waiting period for approval can be 6 weeks, depending on the complexity of the plans. You should start following up after 4 weeks and ensure they have all the information they require.

So the most important thing to remember is planning, planning ,planning.

Evaluate your homes security.

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Most South Africans are aware of the increasing need to secure our homes from theft and violence.This is an unfortunate fact of present life in South Africa.We can call on government to make changes that will reduce criminal activity but any measures that are put in place for this purpose will take a long time to show any visible effect.

We need to have a realistic view on crime and protect ourselves as much as we can where we feel necessary.There are various options available to us some of which are,living in gated communities, having alarm systems installed on the premises, physical barriers like bars on windows and security cameras.

Security cameras are a great way to monitor premises at multiple points from one position.The person employed to monitor the feed from the cameras can be in one place watching everything that is going on in the property.This is very advantageous as you would need to employ minimal staff and have the cameras do alot of the work for you.However a human presence usually helps deter criminal activity.

Physical barriers also seem to do their job in most cases even if they get damaged in the attempt of a break-in.Putting bars on the doors and windows of a home may seem like an unacceptable compromise to alot people for many reasons, one of which is from an aesthetic perspective.Although making the house “ugly” is not always the reason for peoples’ reluctance to install such security measures.Alot of people feel they are being jailed in their own home instead of feeling as though they are keeping criminals out.

Whatever your perspective may be take the appropriate legal measures to protect your home and family and remember to plan your security for the holiday season aswell.Having a neighbour or friend check on your home while you are away can do alot to calm many fears.

Trusts: a description in layman’s terms (with a twist of Lemon?)

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Hi again!

Have you thought about how many things are connected to lemons? If you buy something that breaks, you say you have bought a lemon. If someone is grumpy, you liken them to a sour lemon, if you have a cold, you guessed it – the vitamin C in lemons takes care of it and so we can carry on.

Today I would like to discuss banks and the misconception we are all under when it comes to loans. Most of us see the Bank Manager as a real old sour lemon with a shrivelled greenish skin, waiting to extract your limbs to salt for the coming winter.

In most cases when I have dealt with banks I do not even know who the bank manager is, seen them or know how they determine loan criteria. Most of the applications for home loans go through Bond originators anyway and maybe this misconception comes via my father and grandfather who revered the bank manager the same as a policeman or politician, who should be avoided at all costs.

This essay is an appeal to Mr. Bank Manager out there (lets call him Ned) to let us in to some of the secrets on how the bank system works when approving loan applications, specifically where Trusts are concerned. I have seen excellent information on home loans, calculators and basic requirements on all the bank websites, but still lack an understanding of the process and what this entails, specifically where Trusts are involved.

Come on Ned, be the First to Nationally give us a Standard process and stop being Absanonymous.
Look after yourselves and I “Trust” you have a wonderful day.

Anyone any thoughts on this?

Trusts: a description in layman’s terms (with a twist of Latin) – part 3

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What do Trusts mean to a Property Investor?

Trusts offer solutions for many situations but it does not necessarily mean that it is a solution for all problems. The working of a trust must be fully understood before it is created. It is very important that you get advice from an expert in the field of trusts and that you do not allow anyone (including me) to influence your decision-making.  Also bear in mind that the rules / legislation can change and the discussion in these essays are purely of a general nature.

So let’s get down to it:

  • An Inter Vivos discretionary Trust must be formed
  • Trust must be drawn up in such a manner that the Trustees are also beneficiaries and have the right to appoint anyone else or any other Trust as a beneficiary.
  • This will enable funds to be “distributed” between Trusts and from and to Trustees with tax benefits (under current legislation)
  • It is always a good idea to have two Trusts; one for trading in (where the risk lies) and one for “hoarding” assets which have been paid up. You will then have peace of mind that your worldly goods are safe should anything happen.
  • There is also a tax benefit here should you join the world of ghosts, goblins or eternal life (depending on how you’ve lived of course) as you will not have assets in your estate. These assets will be safely in your Trust and no estate duty will be applicable
  • To make all the above legal, an independent Trustee must be appointed. This Trustee will not have a vested interest in the Trust or be required to provide any sort of suretyship.

So, now we have come to the end of a bit of information regarding Trusts and I hope it helped somewhat and that the mud has cleared from the water a bit.

Look after yourselves and I “Trust” you have a wonderful day.

To part 2…