BUYING A PROPERTY IN CAPE TOWN, SOUTH AFRICA

BUYING a property is usually the biggest investment that a family undertakes and thus involves a lot of preparation and activity. Buying your own home offers you financial and psychological security but, if you are a first-time buyer or have not done so for some time, it can be quite a daunting experience. The following is a general guide to the process of buying a property in South Africa and hopefully it will assist in making this process a lot less stressful for you. Buying property in Cape Town is no different to buying property elsewhere in South Africa.

Before you begin
Which town or suburb?
A house or an apartment?
How to pay
How to find a property
Looking at the property
Offering to buy the property
The "cooling off" period
Transferring ownership
Costs of buying
Defining property
Ownership
Rights of ownership

Before you begin
Before you look for a property, you need to decide:

• which town or suburb you want to live in
  
• whether you want a house or an apartment
  
• how you will pay for the property.
  

Which town or suburb?
When you choose a town or suburb, consider the following:

• is it convenient for your work?
  
• does it have the places of worship, shops, schools, and other amenities you need?
  
• is there public transport (bus, train, taxi service)?
  
• what is the crime rate?
  
• is the air clean or is it polluted?

A house or an apartment?
If you buy a house, you will own the whole property and you will have to maintain and repair it. You will also be able to use it as security for a loan.

If you buy an apartment in a building, what you will own will depend on the type of ownership scheme:

• if it's a sectional title scheme (i.e. a condominium or strata property), you will own the apartment (and any garage or servant's quarters or storeroom that you buy with it) directly, and you will jointly own the "common property", such as the passages, the elevator and the garden, with the owners of the other apartments - you will be able to use your apartment as security for a loan
  
  
• if it's a share block scheme, you will not own the apartment itself, but you will own shares in the company which owns the building, and those shares will give you the right to live in the apartment - you will not be able to use your shares as security for a loan

Generally speaking, owning an apartment means less repair and maintenance work than owning a house.

How to pay
Generally speaking, there are three ways of paying for a property:

• paying the full price in cash
  
• paying part of the price in cash and the rest with a loan (usually called a "bond"); It is advisable to apply to your bank for a pre-approved loan, which will enable you to look for property in the price bracket you know you can afford
  
• paying the full price with a loan (known as "100% bond")

If you take a loan, you will have to repay it over a period of 20 years (though this is variable). As a general rule, you should not spend more than 30% of your monthly income on the loan repayment.

How to find a property
You can find out about properties for sale in several ways:

• look at websites
  
• read newspapers - many of them have special property advertising pages
  
• drive around the suburbs (especially on Sunday afternoons) and look for "for sale" or
  
• "on show" signs
  
• visit estate agency offices.

Looking at the property
Once you have found a property that interests you, you should look at it carefully. Ask about, or look for, the following in particular:

• is the building in good condition?
  
• are there cracks in the walls, inside and out? Beware of wallpaper that could be used to cover cracks inside.
  
• are the grounds in good condition?
  
• are the walls damp? Feel plastered walls for moisture.
  
• Check woodwork for woodworm or rot.
  
• does the roof leak? Check for missing roof tiles.
  
• is the roof insulated?
  
• is the electricity (or gas) in safe working condition?
  
• is the plumbing in good working condition? Open taps and flush the toilets.
  
• are all fixtures and fittings of a good quality and in good repair?
  
• Look at the colour schemes. Will you have to repaint to suit your requirements?
  
• are the shapes of the rooms suitable for your own furniture?
  
• are their sufficient cupboards in the kitchen and bedrooms?
  
• how much are the annual rates?
  
• in what condition are the carpets and/or tiles?
  
• are there sufficient plug points and will extra rewiring be required?
  
• do you like the neighbourhood?
  
• check automatic gates and garage doors.
  
• check the condition of boundary walls and fences.
  
• check the pool for leaks and a working pump system.
  
• check the condition of the garden. Is tree felling required?
  
• is there a lot of traffic along the road?
  
• are there vagrants in the neighbourhood?
  
• are there plans to develop any new buildings or roads that might affect the property?
  
• Is there room for future extensions on the property?
  
• Ask you estate agent for a comparative price analysis of similar properties in the area, to ensure that the property is being offered at a fair and reasonable price.
  
• Always visit the property at different times of the day to establish noise, traffic, sun orientation, etc.

If you're looking at a sectional title property, also ask:

• how much the monthly levy is (this will be your share of looking after the "common property")
  
• if any special levy is being discussed or planned
  
• to see the body corporate's most recent financial statement
  
• if the developer or the body corporate has reserved a right to extend the scheme in the future.

If you're looking at a property in a remote country village, also check the following:

• does it have TV and radio reception?
  
• does it have telephones?
  
• can you link up to the internet or e-mail?
  
• will your mobile (cellular) phone work?

Offering to buy the property
Once you've decided to buy the property, you must make an offer in writing. If an estate agent is handling the sale, he or she will probably draw up the document for you to sign. By law it must contain the following information:

• your name and address
  
• the seller's name and address
  
• the property address or erf number or section number
  
• the price you are offering to pay
  
• whether or not you are entitled to a "cooling off" period.

This document is also known as an "Agreement of Sale" or "Deed of Sale" and is an agreement in writing stating the terms and conditions under which you consent to the purchase of the property. This is a legal document and it is very important that you understand all the clauses which it contains. A good agent will explain each clause in detail. Most agents have a standard form, but you can also add clauses of your own if you feel it necessary. If you are still not sure of certain clauses, you can ask your attorney or legal advisor to look it over before you sign. Remember that if you are applying for a bond, the offer must clearly state the amount of the bond and the number of days in which the bond must be approved. All alterations and the bottom of each page must be initialled. Ensure that any blank spaces or lines are crossed out to prevent anything from being added. Make sure that the fixtures and fittings are clearly listed in the offer.

The offer will probably also contain some or all of the following clauses:

• how you will pay for the property - typically 10% on acceptance of the offer and the balance on transfer of ownership to you (if you pay a deposit, make sure that it is held in a trust account until transfer and that you receive the interest)
  
• whether or not it is conditional on you obtaining a loan - if so, state how much the loan should be and set a deadline for obtaining it
  
• whether or not it is conditional on you selling another property - if so, state the address and set a deadline for selling it
  
• the date on which you can occupy the property - if it is before the date of transfer, you should pay the seller "occupational interest" every month until transfer
  
• the seller must provide a certificate to state that the property is not infested by wood-destroying beetles - this is often asked for though it is not required by law
  
• the seller must provide you with a certificate to state that the electrical system complies with government safety regulations
  
• a list of any fixtures and fittings which you are buying as part of the property
  
• you are buying the property "voetstoots" - this means that you accept the risk that it might contain defects and will not hold the seller liable for them (unless he or she knew about them and did not tell you)
  
• if the property is sectional title: a clause stating whether or not the developer or the body corporate has reserved the right to extend the scheme - if it has and this is not stated, you can cancel the sale
  
• any other conditions of sale.

Once you have signed the offer, the estate agent must present it to the seller. If the seller accepts it, you have a binding contract.

The "cooling off" period
If you are buying a house or apartment or other residential property in your own name, and the price is R250 000 or less, you will be entitled to a 5-day 'cooling off" period, during which you can reconsider your offer and cancel it if you want to, without being in breach of contract. The following conditions apply:

• you must be a "natural person", not a company or a close corporation or a trust
  
• you must be buying for yourself, not on behalf of someone else
  
• notice of cancellation must be in writing and must be signed
  
• notice must be delivered to the seller within five days after the buyer signed the offer to purchase - this excludes the day on which the offer was signed, and any Saturday, Sunday and public holiday
  
• if, during the "cooling off" period, you sign an offer to buy another property, it automatically cancels the offer to buy the first property - unless you want to buy both
  
• if you have paid any money, such as a deposit, the seller must refund it in full.

You will not have the right to the "cooling off" period if:

• you are buying on behalf of another person or a company, close corporation or trust
  
• the property is being sold by auction
  
• you and seller have already signed a similar contract for the sale of the same property
  
• you are exercising an option to buy, which has been open to him or her for at least five days.

Transferring ownership
Once the seller has accepted your offer, you have bought the property. However, it does not legally become your property until the details of the sale have been registered in the Deeds Office and the official records have been changed to transfer ownership from the seller to you. This usually takes a few months. The transfer process involves some or all of the following steps:

• the seller nominates an attorney (conveyancer) to carry out the process - by law only a qualified and registered conveyancer is allowed to draw up transfer documents
  
• the seller (or the estate agent or broker handling the sale) supplies the conveyancer with the deed of sale, the electrical compliance certificate, the beetle clearance certificate (if applicable), and proof that you have been granted a loan (if applicable)
  
• the conveyancer checks the title deeds of the property
  
• the conveyancer draws up the transfer documents and has them signed by you and the seller
  
• the conveyancer obtains a rates clearance certificate from the municipality (or, if the property is sectional title, a levy clearance certificate from the body corporate) to show that the rates or levies have been paid up to date
  
• the conveyancer pays the transfer duty to the SA Revenue Service on behalf of the buyer, and obtains a receipt
  
• the conveyancer lodges all the documents, the rates/levy clearance certificate, and the transfer duty receipt, at the Deeds Office
  
• the conveyancer obtains the purchase price from you
  
• the Deeds Office scrutinises the documentation - if they are in order they register them, but if they are not in order they return them to the conveyancer for correction and resubmission
  
• if the purchase is being financed, e.g. by means of a bank loan, the financier's conveyancer (who may or may not be the same as the seller's) draws up the mortgage bond registration documents for you to sign - these documents are usually lodged at the Deeds Office together with the property transfer documents
  
• after transfer has been registered, the Deeds Office issues the official deed of transfer to you, as the new owner.

Costs of buying
Buying a property can be expensive. In addition to the purchase price which you pay the seller for the property itself, you can expect to pay some or all of the following:

• transfer duty (a tax charged by the government) - if you are buying as a company, a close corporation or a trust you will pay 10% of the purchase price, but if you are buying as a "natural person", the first R140 000 of the price will be exempt from duty and on the balance you will pay 5% up to R320 000 + 8% on the balance
  
• conveyancing fees (to the lawyer who draws up the transfer documents)
  
• pro rata rates on the property (for the remaining months of the current rating year, which runs from 1 July to 30 June)
  
• Deeds Office registration fee
  
• "posts and petties".

If you have taken out a loan and are registering a mortgage bond as security, you will have to pay:

• stamp duty (a tax charged by the government)
  
• conveyancing fees (to the lawyer who registers the bond)
  
• valuation fees (to the financial institution's valuer)
  
• Deeds Office registration fee
  
• "posts and pettes".

Ask the estate agent for a written statement of these costs.

IF you own property in South Africa, or are thinking of buying property here, there are many things which you need to know. Here is some information which may be of use to you.

Defining property
A plot of land is defined by means of a land surveyor's diagram, which is registered by the Surveyor-General. The plot is known as an "erf" or a "stand" and is identified by means of a unique number, such as "Erf 123 Cape Town".

A sectional title (i.e. condominium or strata) scheme is defined by means of a sectional plan, which is registered by the Surveyor-General. It is identified by means of a name and a unique number, such as "Oakridge Lodge - Sectional Scheme 123/1999". Each section, e.g. an apartment or a garage, is identified by means of a section number.

Ownership
Ownership of property is registered in the Deeds Offices (there are eight, in different parts of the country). Any member of the public is entitled to look at these records.

When a property is sold, the change in ownership must be registered in the Deeds Office. The record shows not only who the owner is, but if the property has been bonded as security for a loan.

Properties which do not belong to private citizens or to organisations belong to the state and are administered by various government departments. The rights to any minerals which may lie beneath the surface of a property automatically belong to the state, even if the property is privately owned.

Rights of ownership
In theory, the owner of a property has the right to use it as he or she pleases, and even to destroy it. In practice, there are many laws and regulations which restrict the owner's use. They include:

• zoning schemes, which dictate whether the property must be used for residential or commercial or other purposes
  
• building regulations, which prescribe how and where buildings may be constructed on the property
  
• servitudes, which give other people rights over the property, such as the right to walk across it or to lay drainpipes underneath it
  
• sectional title conduct rules, which regulate how people must behave in a sectional title scheme
  
• common law obligations, such as not causing a nuisance to neighbours and not endangering other people's lives and property
  
• the terms of a will, such as a fideicommissum (entail) which dictates who must inherit the property
  
• national heritage laws, which require owners of properties which are more than 60 years old to obtain permission to renovate or alter or demolish them.

Please note: This guide on buying property in Cape Town has been compiled in good faith, but we accept no liability for any errors, or for any use that is made of it, or for any problems or damage that may arise as a result of using or acting upon this information.