Property 24/10 - 79

Avoid delays with property transfer

Conveyancers handling the buying and selling of residential property find that a surprisingly large number of those with whom they deal are partially or wholly ignorant of the steps to be taken to complete a property transaction.

 Property deals, says Ulrik Strandvik, a director of Gunstons Attorneys, are involved and complicated.  “Several government and/or municipal departments play a part in them and there are pitfalls all along the way.”  

Those who enter into property transactions without professional advice, he cautions, all too often end up being badly hurt.

Asked to give examples of the sort of ignorance he as a conveyancer regularly encounters, Strandvik listed:

1. Failure to appreciate all the costs involved 

Strandvik says, frequently the buyer will not realise that he has to pay transfer duty when called to do so by the conveyancer. “This date can often be several weeks ahead of the date that transfer actually takes place.”

Huge demand for industrial properties
South African demand for industrial space has seen new industrial property developments come into the market and being quickly snapped up.

Brokers report that investors who held back over the past years due to poor market conditions are now back and have confidence in the industrial market again.

They say buyers are queuing up looking for investment properties as well as owner occupiers to up or down size especially in the Cape Peninsula.

The South African Property Owners Association (Sapoa) and Investment Property Databank (IPD) reported in the second quarter of 2011 that over the most recent years, three, five and 10 year periods, industrials have averaged higher total returns than both the retail and office sector.

The industrial income return in 2010 grew to 10.0 percent up from 9.5 percent in 2009 as a result of a combination of declining capital values in 2009 and strong income growth in 2010.

Why Capetonians live closer to work?
Many people and property buyers are reportedly living and buying homes close to where they work instead of spending hours commuting.

According to Lanice Steward, managing director of Anne Porter Knight Frank says the proliferation of CBD and CBD fringe homes (especially high density apartment blocks) in and around Cape Town in the last decade has surprised many.

She explains that is had been quite apparent for a long time that this would happen because people are no longer prepared to spend hours in traffic commuting.

“There is a greater call for a “saner” lifestyle and people are now insisting that they live closer to their workplaces.”

Popular Cape Town CBD fringe areas include Green Point, De Waterkant, more recently Woodstock, Salt River and Observatory, parts of Oranjezicht and Vredenhoek.

“The swing to CBD fringe living is a worldwide phenomenon and not confined to South Africa. “It is to be welcomed because it saves fuel and pollution and keeps these areas alive 20 hours out of 24.”

I sold it, can agent claim commission?

A Property24 reader asks:

If an estate agent brings a purchaser to a property open mandate and takes the seller an offer which is turned down immediately by the seller for two reasons: (a) price too low and (b) subject to buyer having to sell a property.

Three months later, that particular purchaser responded to the seller advertising the same property privately and a sale of the house resulted and the price originally offered, for example R2.8 million gross, was for the nett figure the seller was advertising.

Would the estate agent still be entitled to claim commission even though this purchaser has now been through the property privately?

Marlon Shevelew, specialist rental/eviction/sectional title attorney and general litigation attorney at Cape-based legal firm  Marlon Shevelew and Associates responds: 

Trusts for property now less in vogue
Trusts as a vehicle for holding property are not as popular and in vogue as they once were.

So says Lanice Steward, MD of Anne Porter Knight Frank, and the main reason for this, she believes, is that the capital gains taxes on property held in a trust are now higher than those for individuals.  

Nevertheless, says Steward, in her opinion, trusts will always have an important part to play in estate planning because they offer safeguards against misuse of the legacy. 

“The decision as to how to hold the property should be made in conjunction with the client’s financial advisor and not the estate agent who is usually unaware of the client’s financial situation,” says Steward. 

She says that regrettably many of the less experienced agents have caused problems because they are not completely au fait with the legal and tax differences applicable to trusts, companies and close corporations.

Property: Live-together couples split
A change in SA law made a few years ago has greatly improved the position of those who are divorcing and, in the process passing their residential property to one of the couples concerned:  since 2006, the partner taking possession of the property no longer has to pay transfer duty on it.

“This was obviously a logical step to take because whether or not it was stipulated in the couple’s legal documents in most cases they were in practice joint owners,” says Ulrik Strandvik of the legal firm Gunstons Attorneys.  

He says the law has recognised the realities.

The law also accepts that the same transfer duty exemption can apply to a couple who have been in a longstanding relationship, sometimes referred to as a common law marriage. 

In dividing up their assets following an agreement to part, the person taking over their home is no longer required to pay transfer duty. This applies even when their union was never formalised by a marriage ceremony or contract, provided they clearly intended to form a long-term partnership or had had such a partnership.

Can I cancel a prior CPA rental lease?
A Property24 reader asks:

What would you consider to be a ‘reasonable cost’ and what is the current situation with the retrospective implementation of the CPA on leases signed prior to March 2011?

I have a situation where my wife signed a lease with 10% annual escalation, 6 weeks deposit, 3-year term and a clause that says the agent is entitled to her full commission as the ‘first claim’ against the deposit for the full period of the lease should we cancel it early. Is this allowed?

My main question is this, I want to cancel my 3-year lease and I am only one year into it and it was signed prior to CPA implementation. Do I give two calendar months’ notice and quote the CPA and an unreasonable/unfair agreement and hope for the best or can I get clarity from somewhere that I will be doing the right thing and will not lose my deposit or end up in court being sued?

Marlon Shevelew, specialist rental and eviction attorney at Cape-based legal firm     Marlon Shevelew and Associates      replies:

The question below actually raises an interesting issue 

When is right time to sell property?
South African property catapulted into a realm of high demand, high returns and high general interest during 2004 and kept its idyllic state until the recession in 2008 brought about the reality of high debt-to-disposable-income ratios, affordability levels and lack of liquidity and therefore lending appetite from financial institutions. 

With an excess of homes for sale in the current market, many may be asking ‘when is the right time to sell my property and have I missed the boat?' Correct pricing remains one of the crucial elements of a successful sale.

But while the market conditions may have changed since the recession hit, there is still demand for property, returns to be made on property investments for the savvy buyer and a good level of general interest, says Adrian Goslett, CEO of RE/MAX of Southern Africa

During the boom years, making a fortune on real estate investments, and turning them over quickly, was relatively easy, says Goslett. “While returns may not be as high as they were during the boom period, not much has changed as property remains a solid asset class showing sound long term returns”. 

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