Possible pitfalls pertaining to zero-rating a commercial property transaction
Rawson - South Africa
There are several pitfalls one may encounter when attempting to rate VAT at 0% for a commercial property transaction. Previously, it was a fairly simple procedure to purchase a Private Company (PTY) or Close Corporation (CC) and quickly register it for VAT in order to facilitate a 0% VAT rated sale. “This, however, is no longer the case,” says Leon Breytenbach, National Manager of the Rawson Property Group’s commercial division. “It is mandatory for any business to register for VAT, if the income earned in any consecutive twelve month period exceeded or is likely to exceed R1 million, or an income of R83 333.00 per month.” Be aware that this includes income over any consecutive 12 month period as well as income which is likely to be earned over a forthcoming 12 month period.
Any business, where the income exceeded R50 000.00 in the past 12 month period, may choose to register for VAT voluntarily. Thus the monthly income must be above R4 166.00. This proviso does not include possible future income.
If the above mentioned thresholds cannot be met, it is most unlikely that registration of the CC or PTY for VAT will be achieved prior to the transfer taking place. Since it is a prime requirement that both legal entities are to be registered for VAT to structure the transaction at 0% VAT, the chances of the transaction being granted a zero-rated status are thereby extremely slim.
Water restrictions weigh heavily on landlords
Jawitz - South Africa
When it comes to water restrictions, who is responsible for what is the cause of mass confusion in the rental market.
"If a signed lease stipulates that a tenant has the enjoyment of an irrigation system and the landlord provides garden maintenance, then it is the landlord's responsibility to make alternate arrangements as water restrictions are in place."
"As acts of God such as a drought cannot be predicted, a wise solution is to get expert opinion on how to handle the lease agreement in light of these restrictions," says Natalie Muller, Regional Head of Rentals at Jawitz Properties Western Cape.
A tenant might be expected to water the garden with a bucket or watering can only, as per the restrictions. This may not be convenient, particularly if they were expecting to have an irrigation system.
Water restrictions weigh heavily
What value should I list for?
Lightstone - South Africa
One of the most important aspects of selling a property is to determine the listing price. Not only does it require a fair appraisal of a property’s market value, but also how long the property should be kept on the market to achieve its listing price. A property is rarely listed below market value but properties are often on the market for an exceptionally long time, usually because the price is too high. So what is the balance between listing price and time that it takes to sell the property?
The immediate observation is that a property listed above market value generally takes longer to sell. Being prepared to wait that much longer increases the chance of finding the right buyer prepared to pay the higher price. But, how much above market value is too much, resulting in no buyers coming along that see the same value in the property?