Property transfers have been hard-hit by the depressed economy and the Covid 19 Pandemic, resulting in normal turnaround times being seriously disrupted.
Accordingly, some Sellers need to make up lost time to meet their plans and obligations. The normal process is that only after the offer to purchase is signed, will the seller “get around to dealing with” the Conveyancer’s requests for paperwork. So, the usual process of assembling the paperwork, only after the property has been sold can drag out the transfer considerably – already a 2- to 3-month long process, calculated from the date of sale.
Speeding up a 2- to 3-month process
However, there needn’t be all these delays, if sellers attend to the applicable points in list below – before the property is sold, says Conveyancing Attorney Denoon Sampson, Denoon Sampson Ndlovu Inc.
“The results will be registration of transfer in just a third of the usual time,” says Sampson, “Some sellers are so desperate that they will do anything to expedite the process. On the other hand, some sellers are reluctant to spend money on fixing up the property in case the sale collapses,” he states.
Why do property transfers take so long?
The two most common delay factors are the seller taking time to gather Certificates and Paperwork and secondly, delays with cash payments to facilitate the transfer.
“It actually is possible to for a cash transfer to be registered in just 4 to 5 weeks, instead of the usual 8 to 12 weeks; calculated from the date of sale. But the proviso is that the purchaser pays immediately and all the completed paperwork is handed to the conveyancer, the moment the sale agreement is signed,” says Sampson.
“It is never how long the Deeds Office takes; but rather how long the purchaser and seller take to meet their obligations; before the documents can be lodged in the Deeds Office. So generally speaking, the Deeds Office does not delay; it is all about the Seller and Purchaser taking their time, after the agreement is signed.”
It is important to note that each sale and its conditions are unique, therefore the following must be considered carefully when aiming to expedite a transfer of a property.
Validity of clearance certificates
It will remain valid for a period of 60 days counted from the Print Date; meaning the date upon which the rates and taxes assessment calculation is printed. So this means that if the transfer is not registered within the 60 day period, then a revised fresh clearance will have to be obtained.
Cost to apply for a rates and taxes clearance certificate
Each municipality will probably have their own different admin fees. The Johannesburg City Council charges an admin fee to process an application for a rates and taxes calculation of R477.93. The purchaser will pay for the cost of applying for a rates assessment. Most conveyancers will use a rates and taxes runner to expedite the issue and calculation of the clearance certificate and they will charge an additional approximate R740.00. The cost of obtaining a revised rates and taxes clearance certificate will be the same as mentioned above.
Cost of obtaining a sectional title levy clearance certificate
Most managing agents of Body Corporate’s are private institutions and this charge will be an average of about R1200.00 per calculation. The purchaser will pay the body corporate admin fee of this R1200.00. In addition to a levy clearance certificate, a municipal rates and taxes clearance certificate will also have to be issued as set out above. With regards to a levy clearance certificate the managing agent will charge a lesser admin fee of about half.
Who pays the municipal rates and taxes arrears and sectional title levy arrears?
The seller will pay municipal rates and taxes arrears and sectional title levy arrears. The seller will also be required to pay a future provision for rates and taxes water lights electricity sewage, and other charges; in advance, calculated normally at 4 months multiplying the normal average charge. Body corporate managing agents will normally just charge a one-month upfront provision of levies in advance.
Sampson says, “The cost of a Rates and Taxes Clearance Certificate would not be incurred upfront, because it is not possible to apply for an “Assessment Calculation”, if one does not have all the Purchaser’s details. So Sellers would have to wait until an Offer to Purchase with a specific Purchaser has been signed, before incurring the cost of a Clearance Certificate.”
But what if the sale collapses? Would gathering all the documents specified below be wasted?
“No. Most of the Certificates and Documents below should be in place even if there is no sale, and one might regard this exercise as putting one’s house in order anyway. For example Insurers and legislation require existing owners to be in possession of valid House Plans, Electrical, Fence and Gas Certificates whether or not there is to be a sale.
“Most potential Sellers realise that they may as well get started, as all the Certificates can still be used, if the first sale collapses and the property is resold a second time.
“Obviously, if the transfer is to be urgent, Sellers would avoid an offer to purchase that contains conditions that will cause a delay – for example, having to wait for the purchaser to sell her own property with long guarantee time limits.”
Here he sets out time-saving preparations that will speed up the steps towards transfer as follows:
Time-saving preparation before your property is even sold
The seller can be faced with an astonishing amount of paperwork; which could include the items listed below. Of course, not every property has the same history and unique circumstances and therefore not all these items will apply, advises Sampson.
- Giving the 90 days’ Notice to the existing bondholder for cancellation of the bond.
- Having an Access Bond frozen, before cash can be drawn therefrom.
- Obtaining building plans for the house.
- Incorrect rates and taxes accounts, especially where a previous subdivision took place;
- Lost original title deed and the long delay in having a duplicate original issued,
- failing to have had conveyancing documents or a Power of Attorney signed before travelling overseas.
- Repairing all known defects in the property before show day,
- Arranging Electrical Certificates of Compliance, Gas and Fence Certificates, which are valid and beyond reproach,
- Making sure that the Company or Close Corporation Seller has not been de-registered by the company’s office.
- 75% of Shareholders, Directors and Members in a Close Corporation to authorise the sale of its property.
- Trustees in a Family Trust must first be updated.
- Making sure that the property, if built within the last 5 years, has the obligatory NHBRC (National Home Builders Registration Council)
- Not having paid Engineering Services and Endowments, that were raised when an application to subdivide or rezone the property, was submitted to the Council.
- Deceased Estates: Only an Executor appointed by the Letters of Authority is allowed to sell the Deceased’s property.
90 Days Notice
Most people no longer wait for the 3-month notice period to pass, because, whilst they wait out the 3 months, they will be debited with 3 instalments, to avoid the penalty; which normally equates just one instalment. So most do not pay three instalments to save just one instalment, which is the equivalent of the penalty.
Un-freezing an Access Bond
Once the conveyancer requests the existing mortgage bond cancellation figures the Home Loan will be frozen and it can take time for the bank to unfreeze the account and allow the seller to withdraw his funds. Any funds that are required upfront, should be withdrawn from the Home Loan, before the transaction reaches the conveyancer.
It is becoming more and more common that purchasers and their Banks require up to date Building Plans.
However, the Johannesburg City Council often no longer has any record thereof, advises Sampson. So a draughtsman or architect will have to be commissioned to prepare fresh drawings and thereafter have them approved by the Council. About 3 or 4 weeks can be saved on this process and all of this should be done before the sale.
After the Sale – Paying for rates and taxes and a sectional title clearance certificate
These days it is no longer possible to apply for a Rates and Taxes Clearance Certificate without first uploading the purchaser’s details as well as details about the property. So the cost of a Clearance Certificate can be avoided, until there is actually a sale in place. A Sectional Title Clearance Certificate can always be issued in more or less a week and this can be applied for after the purchaser’s bond has been granted.
Incorrect rates and taxes records for previously subdivided properties
Despite the above, unravelling and correcting the Council’s faulty Rates records can always be done at any time before a sale.
Generally speaking, Municipal Rates and Taxes Accounts are never updated to reflect separate and distinct accounts for each newly created subdivided property. It can take at least 4 to 8 weeks to unravel these accounts before any rates and taxes Clearance Certificate can be issued for transfer.
Rates and Taxes Consultants specialise in getting the Council to reconcile and correct its records and they should be instructed to proceed, long before there is a sale.
Lost title deeds – a 5-week delay for a duplicate original to be issued
Legislation has very recently changed to require an application and an advertisement in the press before a duplicate original title deed can be issued to replace one that has been lost.
Sampson says a conveyancer should be requested upfront to find out if the existing bondholder still retains the title deed as in the past, many title deeds were lost by the banks and also by owners who no longer have any mortgage loan.
Signing a Power of Attorney for Conveyancing Documents – before leaving to go overseas
It is really costly and cumbersome to have the signature of documents authenticated before a government authority overseas, (which is necessary). Serious delays can be avoided if a Power of Attorney is signed with a Conveyancer in South Africa, before departure.
Be rigorous about repairing defects before the sale
The general rise in in “Consumer Protection Awareness” is likely to put most sellers on the back foot and sellers are encouraged to make sure that everything in the property is ship-shape, so that they can avoid costly and time-consuming disputes and repairs.
These days purchasers have a heightened sense of entitlement and will try and seek out defects in the property – even those that have been “covered up” or “painted over”. Demands and disputes that the defects be repaired before transfer, obviously will cause a delay.
Recently neighbours of the property that had been sold, complained to the new purchaser that there were sewage leaks. The seller had always denied that there was a problem; but the very rigorous purchaser insisted that, before transfer, the whole sewer line in the complex be dug up, the leaking pipes located and repaired.
If regular maintenance of the drains and trimming of the roots within the drains had been carried out; the seller would not have had to pay so much money to fix.
Alternatively, one can disclose in detail, the nature of the defects, by writing them into the contract and stating that the seller will not be responsible for compensating for, and will not repair, the defects.
Electrical Certificate of Compliance, Gas and Fence Certificates
These certificates are always required before lodgement in the Deeds Office. Also, some of the banks have experts who will scrutinise an Electrical Certificate of Compliance before they will allow bank guarantees to be issued. So one has to avoid half-baked and invalid Certificates, because inevitably, the purchaser and/or his prospective Home Loan Bank will detect an invalid or bogus Certificate.
So again costly delays will be incurred, because the purchaser will now request a Second Electrician to query and quibble the first Certificate.
De-Registration of a close corporation or company by the company office (CIPC)
If the owner CC or Company has been de-registered by CIPC, then the Transfer cannot be registered by the Deeds Office. In normal times, it can take up to 8 weeks to have the Close Corporation or Company re-instated. Your accountant should start this process well in advance.
Close Corporation and Companies require 75% Approval to sell its “Sole” immovable property and assets
There are still many Companies and Close Corporations that own, just a single asset; namely a residential property; as a hangover from the past.
So if you want to sell the only asset, (namely the “whole or the greater part of its assets” in the entity), then the legislation requires 75% of voting rights in the Company, to approve the sale by a “Special Resolution.” This applies to a Close Corporation as well. This means that in addition to the Directors, 75% of the Shareholders and Members’ s Interest Owners, must approve a Resolution to sell the property.
Trustees must comply with the law – to ensure valid contracts
For a sale from a Trust to be valid, the Trust must be; (1) registered with The Master of the High Court and issued with an IT number; (2) signed by someone who has been authorised as a Trustee to the Trust by The “Letters of Authority” issued by the Master of the High Court; (3) and the Offer to Purchase and signature thereof, authorised by a Resolution signed by the appointed Trustees.
If someone signs an agreement when He is not authorised, the contract will be invalid, and He can be sued for damages in his personal capacity – Goldex 16 (Pty) Ltd v Capper (2019). So even a beneficiary, nominated in a will, cannot sign any contract, unless his name appears in The Letters of Authority.
A subsequent ratification of only one Trustee’s signature, by the other Trustees cannot cure an invalid sale – Thorpe v Trittenwein (2007).
It is common that Trustee resignations and appointments are frequently not updated, in the records of the High Court and this should be done well in advance before the property is sold.
One of the conditions of a loan is that the Trustees in a Family Trust, must be currently authorised and confirmed in the Letters of Authority issued by the Master of the High Court.
We have a client where, one of the authorised Trustees passed away and the bank now requires a new Trustee to be appointed and approved by the Master of the High Court, before the bond can be registered. In normal times it is estimated the Master will take up to six weeks to approve this appointment.
National Home Builders Registration Council (NHBRC) Certificates
If the property to be purchased, is less than 5 years old, the purchaser’s Mortgage Bond Bank must be in possession of the NHBRC certificates for the building, before it is allowed to register its new mortgage bond.
Normally, the seller’s existing bondholder, should be in possession of this document and the conveyancer should be requested to obtain it from the existing bondholder. If there is no existing bondholder, the owner should be in possession of the certificates. It is very difficult and
time-consuming to try and extract Duplicate Original Certificates from the NHBRC offices.
Unpaid Municipal “Engineering Services Endownments” will delay the rates and taxes clearance certificate
It happens fairly often that an application to subdivide or re-zone the property was made to the Council and then postponed or never completed. The moment an application is submitted, the Council will debit the property (and not the owner) with its Town Planning fees.
So even before the Council will calculate the amount to be paid for the issue of a Clearance Certificate for the Deeds Office, an upfront payment of these Subdivision and/Rezoning Council charges must be made to the Municipality. Importantly: the Council is not concerned with which owner in the past, incurred these fees.
We had a matter were the Seller was not aware that a previous owner of ten years back, applied to subdivide and then never completed. That owner could not be found and the current owner ended up having to pay the Bill.
Deceased Estate Sale: Not Anybody can sign on behalf of the deceased estate
Only the person who is named in the Letters of Executorship issued by the Master of The High Court is legally competent to sign all contracts on behalf of the deceased estate; as per Section 13(1) of Act 66 of 1965.
However, because the issue of the Letters of Executorship is frequently delayed, it is common for a family member to try and sell the deceased’s property without waiting to be authorised.
But, if the Deceased Estate sells the property before the Letters of Authority have been issued or it is by sold by someone whose name does not appear in the Letters of Executorship, the sale will be entirely invalid.
Therefore it is best to try and expedite the issue of the Letters of Authority as soon as possible; so that the property can be legally sold and then transferred.
‘Not every item on this list will apply to each sale’
Not every item on this list, will apply to each sale, says Sampson.
“But it provides a checklist of what could arise. In addition, Conveyancers will always be willing to elaborate and assist upfront with queries. In conclusion, it is best to avoid having signed an agreement and only then to find out that there is an unforeseen delay, because your paperwork has been delayed or has to re-issued, which will cause pressure from the purchaser to expedite. In some cases purchasers will refuse to continue paying rent, if it appears that the seller is the cause of the delay.
“In essence, it is best to start preparing the paperwork long before the property is sold.”
*Denoon Sampson practised insurance litigation at Deneys Reitz now known as Norton Rose and conveyancing for E Oppenheimer and Sons, Anglo American, SA Permanent Building Society and many others at Weber Wentzel and EFK Tucker. He was a founder member of Sampson Okes Higgins, which became Denoon Sampson Ndlovu and is a consultant to The Standard Bank on its Electronic Payments and Guarantee process.