While those living in sectional title complexes may feel that they are always at the mercy of the scheme’s trustees, and have very little say on many issues concerning their own homes, there are certain instances where decisions may not be made without the written consent of every owner in the complex.
“Owners do have power and should know when and where they can wield it,” says specialist Sectional Title attorney and BBM Law director Marina Constas.
“The Sectional Titles Schemes Management Act talks about the functions and powers of the body corporate. The act then goes on to delegate the functions and powers to the trustees; but there are specific instances where the written consent of every owner is required. Not even a unanimous resolution is sufficient,” she expands.
Constas explains that the first instance is where there is land outside the boundaries of the complex which the body corporate may want to purchase. She cites the example of her recent case in the northern suburbs of Johannesburg. “In this case, the Council had a large piece of land adjacent to a complex in Killarney, Johannesburg. The owners at the complex were struggling with parking, with visitors having to park outside. They approached the Council to purchase the piece of land for additional parking. Every owner had to submit their consent in writing. One owner refused and as a result, scuppered the entire deal.”
The second instance concerns the developers of sectional title complexes and gives owners the power to influence extensions to their complex. “Developers often register a right to extend the complex, building in phases. If a developer runs out of money or cannot exercise his right to extend for any reason, he may want to sell the right to extend to another developer with resources,” Constas explains. She notes that in this case, written consent from every owner is required. “Owners may only want to give their consent when they are satisfied about what the new developer wants to build. Owners in a complex in Bruma, Johannesburg, recently refused to give their written consent for a new developer to buy the right to extend as they had heard rumours that instead of building more residential units as per the original right, the developer planned to put up a conference centre,” she reveals.
The third instance in which every owner’s written consent is needed is tied into the fiduciary duty that trustees have towards owners. “If there is a conflict of interest; for example, the painting of the complex will be undertaken by a trustee’s brother-in-law, the only way that the decision can be ratified is if every owner agrees,” Constas says.
The fourth case that demands every owner’s consent is if an owner wants to change his exclusive use area into a business venture – for example converting a carport into a spaza shop or an exclusive use courtyard into a laundromat. “This cannot simply be approved by the trustees,” she explains. “The owner must obtain the written consent of every owner. If this consent is not forthcoming, he can now approach the Community Schemes Ombud for a directive.
“Sectional title owners do have power and must be aware of when their written letter of consent counts,” Constas concludes.
Letting out property can give you an excellent “annuity” income, and if that concept appeals to you and a buy-to-let property comes your way at the right price put an offer in right now; before the current ‘buyer’s market’ runs its course.
In your financial planning however remember the tax implications, because as a landlord you must add your rental income to your salary and other taxable income in your tax return every year. Not to do so is tax evasion, and that carries heavy financial penalties as well as the very real threat of criminal prosecution.
Having to pay tax on your rental income could be make-or-break when it comes to deciding on how much you should pay for a particular property, so do your homework before you put your offer in.
Our tax laws are complex and specialised, so professional advice on your particular circumstances is essential here. These general concepts will however help you in your initial planning –
You must declare your gross rental income to the taxman whatever type of accommodation you rent out – whether a whole house or apartment, just a room/garden flat or anything similar – or if you are in the guesthouse/B&B/Airbnb business.
Your taxable income will be calculated by subtracting allowable deductions from your gross income.
In general, only “expenses incurred in the production of that rental income can be claimed” (SARS). So you can claim things like levies, rates and taxes, bond interest, advertising, agent’s fees, homeowner’s insurance, garden services, electricity and water, repairs and maintenance to the leased area (which would, says SARS, “usually take place when a person attempts to restore an asset to its original condition as a result of damage or deterioration”). Beware the “beginner’s mistake” of thinking that your full bond repayment instalments are deductible – not so, only the interest portion can be claimed and not the capital repayments.
In regard to VAT (per SARS): “The supply of accommodation in a dwelling is an exempt supply for VAT purposes, and consequently you may not deduct VAT incurred on expenses in respect of supplying accommodation in a dwelling.”
And when it comes to renting out only a portion of a property (a room say in the house you live in) you can only claim pro-rata to total floor area. Click here for a practical example from SARS.
Take advice also on claiming depreciation on furniture and the like – your allowable deduction there might be worthwhile.
Not allowed are “expenses that are capital in nature or that are not in the production of rental income” (SARS). So the cost of improvements to the property – which would normally “result in the creation of a better asset” (SARS) – cannot be claimed. Improvements can however be added to the “base cost” of your property – important when you come to pay CGT (Capital Gains Tax) on eventual disposal.
Your total taxable income (i.e. including net rental income) will be taxed as per current tax tables.
What if your letting business shows a loss? Per SARS – “should the expenses exceed the rental income, the loss should be available for set-off against other income earned by the individual, provided that the loss is not “ring-fenced” in terms of prevailing anti-avoidance provisions”. In other words SARS could ring-fence your letting business losses to stop you from setting them off against your regular non-rental income. But if that happens you don’t lose those losses, they are just carried forward so that when your letting business starts turning a profit the losses can then be set off against that profit.
Keep an eye also on your obligation to register for and pay provisional tax. As an individual if you earn taxable income of R30,000 p.a. or more in “rental from letting of fixed property” you fall into the net.
Create and maintain a full spreadsheet, with a file of supporting documents, of all income and expenditure (distinguish between revenue and capital, claimable and not claimable). It’s a relatively painless exercise if you update it regularly, but a real challenge if you end up trying to recreate everything only when the annual “income tax return panic” sets in, or when SARS and/or your accountants call for breakdowns and documentation.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
The recent festive season saw the release of the land expropriation Bill for public comment as well as some other new indicators. What does this mean for homeowners and property investors?
President Cyril Ramaphosa made it clear in his third January 8 statement that the government plans to accelerate the return of the land to those who work it and need it – which includes the mechanism of expropriation without compensation – with the assurance that this will be done in a manner “that promotes economic growth and sustains food security”.
His statement followed the release early in December of the draft Constitution Eighteenth Amendment Bill for public comment. Written comment on the Bill must be sent before 31 January and can be done by emailing firstname.lastname@example.org.
The release of the Bill sparked some sensationalist press which reignited fears that private property ownership could be under threat. Commenting on the matter, Maryna Botha, director of legal firm STBB, disagrees and says there is no indication whatsoever that the final version of the Expropriation Act – which is the enabling arm of this whole drive – will in any way open up legal “land grab” possibilities or arbitrary deprivation of property. She explains that the Constitution has not changed in this regard and arbitrary deprivation of property is still constitutionally impermissible.
The Constitution, in section 25, requires that where the court makes a determination of the amount of compensation, this must be informed by the following factors:
(a) the current use of the property;
(b) the history of the acquisition and use of the property;
(c) the market value of the property;
(d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and
(e) the purpose of the expropriation.
“The amendment merely states that after taking these factors into account, it MAY be in order for a court to order that nil rand be paid,” says Botha.
“Essentially, the draft amendment suggests an addition to the current wording of section 25 of the Constitution to state (explicitly) that a court may, where land is expropriated for land reform purposes, determine that the amount of compensation to be paid is nil. The draft Bill further states that national legislation must set out the specific circumstances where a court may determine that the compensation amounts to nil rand. These instances should therefore be indicated in new expropriation legislation”, she explains further.
Botha says that the publication of a revised version of the 2019 draft Expropriations Bill was also announced to be ready for release in December, but to date the Bill has not been published.
“Given the relationship between the (draft) section 25 amendment and (draft) new expropriation legislation, it would have been much more meaningful had these been published simultaneously. There is therefore still no clear indication of the circumstances in which it is proposed that expropriation be allowed without paying any compensation.”
A third event says Botha was the release of a draft policy for selecting land allocation beneficiaries. She highlights the following from it:
Botha says the good news for property owners (and would be owners) and investors in South Africa include the following:
(1) The ultimate decision is still in the hands of the courts;
(2) there are constitutional safeguards;
(3) no-one – not even the ruling party, would benefit from anarchy;
(4) it is safe to ignore some of the uninformed statements that some political figures are making as the whole process is regulated by legislation and rights are protected in this way.
With regards to decision-making on the type of property to buy, homeowners and property investors can look at residential homes and holiday homes as ownership of these properties won’t be affected. However, until the expropriation bill is published, there remains some uncertainty with regards to government’s reform plans towards agricultural land.
The offer of a lucrative contract in another country or a promotion to a position in another town or city is usually cause for celebration – but can present problems if you have to move in a hurry.
“If you’re a homeowner, for example, you will need to decide whether to sell and be ‘free’, or whether to become a landlord and bank on having a home to come back to in a year or two that may also have appreciated in value,” says Richard Gray, CEO of Harcourts Real Estate.
“Our advice in such instances is that it is less risky to sell if you still have a large bond on the property. For one thing, the costs of operating a rental property are higher than you might expect if you have not been a landlord before, and between these and your bond repayment there may no profit in renting.
“Secondly, if your tenant defaults or absconds, it could put you under severe financial strain if you have to cover the bond instalment on your old home as well as paying rent or another bond instalment in your new home town.”
Gray says that if you do decide to rent out your property, you must be sure to appoint a reputable managing agent – “someone who knows the area well and can advise knowledgeably on a realistic rental level, who has a good track record as regards the selection of creditworthy and reliable tenants, and who will see to it that the property is properly maintained in order to protect its value”.
Similarly if you decide to sell, he says, you will need to be very careful in your choice of estate agent, especially if you are going to have to pack up and move before your home is sold. “You will be entrusting a major asset to this person, so you need to be sure they are from an established, reputable company and will always act in your interests. He or she should also be a good communicator who stays in touch and gives you regular feedback about viewings, buyers and the progress of the transaction once the property is sold.”
In addition, there are a number of things you can and should do yourself to ensure that your property remains secure, retains its “kerb appeal” and sells as quickly as possible. These include:
And finally, says Gray, you should review the provisions of your homeowners’ insurance (HOC). “Many HOC policies offer limited cover if a property is vacant for more than a month and you may find that it is worth your while to hire a guard or a house-sitter until your home is sold.”
Every homeowner knows that the joy of ownership comes with the responsibility of repairing each and every small and large thing that goes wrong in a home and on a property, and that inevitably, issues around repairs crop up regularly. This is the case for all homes, though obviously age and location have a greater or lesser effect. When it comes to home maintenance, it pays to heed the advice of Emily Dickinson, who once said, “If you take care of the small things, the big things take care of themselves.”How to plan for annual maintenance
Start a home-maintenance fund:
It’s important to include home-maintenance into an annual budget and set aside an amount into a designated fund every month. Mike Greeff CEO of Greeff Christie’s International Real Estate suggests setting aside one to three percent of your purchase price if you have purchased within the past two years. If you purchased three or more years ago, request a property valuation from an experienced estate agent, and calculate one to three percent from that amount.
“Having the security of a fund allows you to ensure that you can perform important maintenance tasks regularly and take on repairs as and when they crop up,” says Greeff, adding that neglecting maintenance inevitably leads to compounding of which become so much more expensive, and could have been avoided.
Summer in the Western Cape, with its dry, sunny days is the perfect time to check your roof and repair any cracks to ensure that your home is leak-free when the winter rains come. This is also the ideal time to damp-proof your walls and repair any damage already caused; Damp marks on ceilings are indications of roof leaks and bubbling and blistering paint is a sign of damp.
External walls, doors and windows must be regularly checked – cracks must be mended and wood treated and varnished to avoid rot which leads to contraction and inevitably to leaks.
March is a good time to cut back overgrown trees to minimise the chance of falling bough sand resultant damage to your buildings and property during winter storms.
Clear your gutters regularly during late summer and autumn months when dry leaves accumulate, and ensure that down pipes are unblocked and draining properly. Sagging gutters must be repaired.
Have your chimney cleaned and your fireplace serviced, particularly if it is a wood-burning stove. The same is true for a gas fire.
This is the perfect time to prepare your garden. If you’re going to invest in your garden, consult with a landscaper who will assess your soil and the positions available in your garden. A well-researched and thoughtfully landscaped garden will mean a significant saving in money and time in the long run. Planting the wrong plant in the wrong location either results in a failure to thrive or huge plants which cover the windows of a house and block out light, or trees with roots that buckle brickwork and paving.
Spring is the ideal season to paint your home. This is also the time to discard rusted or beyond repair items such as garden furniture or awnings damaged by wind and rain.
Boreholes should be serviced annually in spring. Maintenance of the pump and fixtures can help to prolong the life of certain borehole components. The same is true of garden irrigation systems.
Attend to loose or creaky timber floors, as these can be an indication of a faulty or dropped sub-floor structure.
If you install new electric fixtures such as remote-controlled gates or garage doors or an electrified fence, ensure that you receive a certificate of compliance from your electrician. The same is true for gas installations.
Drains should be cleaned regularly in order to avoid blockage.
Check your water meter and your rates bills and if you suspect a leak, it pays to have a qualified leak detector do a thorough check and repair the problem in order to save in the long run.
Do it yourself.
Save money by doing minor repairs yourself obviously depending on your comfort with a hammer and drill.
Regular home maintenance is key when it comes to trying to sell your property as it can be tremendously stressful when you have a huge amount of costly repairs which have accumulated during your occupation. “Even a dated property will sell if it’s neat, but in the current market, you have to be a step ahead of the buyer, and this means eliminating the need for repair,” says Greeff. He suggests a thorough inspection of the building by a qualified building contractor who is a member of the Master Builders & Allied Trades Association.
It’s tough out there for second-time home buyers. Trying to sell a first property or get a second home loan from the bank is not always easy. Especially as home prices continue to decline according to the FNB Property Barometer.
Additionally, second-time buyers are sometimes at a disadvantage as banks tend to be more lenient with first-time buyers, who often get loans at 100 percent. “Affordability is one of the largest obstacles,” says Elize Dormehl of PropertyFox, who has a 30-year history as a property agent. “Mainly as you have to sell your first home before you can buy the second. The current property market has an abundance of houses available but there are not many sales.”
However, there is hope for second-time buyers:
While the outlook may seem dim, second-time buyers do have some advantages over their first-time counterparts. “Firstly, they have some experience of owning a home,” says Elize. “Additionally, they may have a better understanding of managing their money as they know what to expect from the property buying process.”
Elize adds that one of the reasons why second-time buyers lose out on offers is the lag in trying to sell their first home. A big issue is often incorrect pricing, with some sellers hoping to make more than the current market permits. That’s why accurate valuation is absolutely crucial.
Louwrens Viljoen – son of Elize Dormehl and also an estate agent – says digitisation is transforming the valuation process, “PropertyFox’s data-rich valuation algorithm, for example, takes historical data and the current market climate into account in order to help a client’s decision-making process before the listing is built. This helps the second-time buyer to sell their home at the correct market value for every situation.”
Viljoen adds, “A recent example is a linked property which we had a sole mandate on. Through our counselling and valuation process, we were able to help the family sell and buy within one month – even in this difficult climate.”
Here are Elize and Louwrens’ other top tips for second-time buyers to bag a new home:
You may think that already owning property automatically helps you get bond approval for a second purchase but that’s not always the case. “It’s important to get an idea of the bond you now qualify for as your financial situation may have changed and lending criteria has too,” says Viljoen. “This process also helps you understand what your credit record looks like and prepares you for what to expect when looking for a home. At PropertyFox, we also refer our clients to bond originators, which not only speeds up the process but also protects the client’s interests.”
SAVE UP FOR A DOWN PAYMENT
While a lot relies on your credit record, it’s a good idea to save up for a down payment, advises home-loan blog Mr Cooper. “Most second-time buyers will not receive a 100% bond unless they earn a very good salary and look amazing on paper,” says Elize. “Typically, if you don’t sell your first property, you will only receive 80% or less, so you will need to manage your finances wisely if you decide to buy a second property as an investment or holiday home.”
TAKE ADVANTAGE OF THE ‘SUBJECT TO SALE’ CLAUSE
According to Property24, this clause states that a buyer who puts an offer down on a house must be given enough time to sell their existing home. “In the current climate, not all sellers will give the option of accepting another offer to wait for you to sell your home,” says Viljoen. “You could end up selling your home for less than its market value so it’s best to speak to your agent about valuations beforehand or use PropertyFox to run your home through their valuation algorithm to get a head start.”
Does it matter to you at which price your property sells? For most sellers, this is not only important but often the most important factor!
“The most important advice to a seller is to never select an agent based on their estimate of the price for your home.
Never have a price discussion before selecting the agent you would like to work with. Select your estate agent based on their knowledge and expertise, their professional approach and their strategic marketing plan presented for your property.
The agent can only provide an estimate of the market price. They may end up being wrong and markets may change due to unforeseen events.
At whatever point the property market is within its cycle, the following five points are provided to sellers to assist them in pricing their homes correctly and thereby giving themselves the best chance at realising a sale.
1. Use an impartial evaluation of market activity as the most effective way to estimate your property’s selling price. This assumes that you have already selected the realtor you intend to work with and together you explore the market activity.
Using a comparative market analysis (CMA) as an excellent tool, you can identify properties most similar to yours that have recently traded. This process will also highlight competition in the market. As a seller, you need to understand which other properties a buyer will be looking at. Of those properties currently on the market which have been on the market for over six months?
Time on the market is an indicator of overpricing and even though this period lengthens as you move up the price spectrum, there is a real danger of a home becoming stale and being discriminated against by the active buyers in the market.
2. A seller will have to accept that the value of their home is determined by what a buyer is willing to pay for it in the current real estate market.
Value is therefore not determined in any way by the length of time the seller has owned the property, or by the amount of money spent on the property or even by what the seller may need to purchase their next home.
These are irrelevant in establishing today’s value for the property. In the greater Ballito market for instance, prices have been flat for the past three years across most price brackets. The lower brackets have experienced the greatest positive growth, while the highest levels have experienced negative growth.
This may be hard sometimes for a seller to accept and will then force the discussion around their motivation to sell or to hold.
3. The longer a property remains on the market the higher the probability that the eventual selling price will be substantially lower than the original asking price.
Regardless of the market you find yourself in, in any geographical location around the world, this remains true. Pricing the home correctly from the outset, therefore, becomes critically important.
If your home has been on the market without success for more than six months then it is time for a breather. Relisting the home with revised imagery as if it was a brand new listing is a strategy that can work to keep things fresh.
4. Carefully consider the three key elements that impact the sale of a home: price, condition and location.
Once you are happy with your gross asking price, explore how to present the home in showroom condition. If your agent recommends de-cluttering, take this advice seriously and start throwing things out – not only can it be very therapeutic, but you may even start to enjoy your new minimalist surrounds!
5. Be discerning where you source your pricing information from.
Whether it is from competing estate agents attempting to talk the price up to secure a mandate or from a neighbour who believes they have a gifted insight into the property market, evaluate all information objectively and with caution.
A correctly priced home with a motivated seller and focused and committed estate agent has every chance to realise a transaction in almost any given market.
Source : https://sapropertyinsider.co.za/
Analysing property trends in South Africa based on recent barometers and research documents there are varied reasons and opinions explaining why certain markets are under pressure and others are thriving. For instance according to the FNB Affordable Housing Insight for the third quarter released in October affordable South African residential properties priced between R250,000 and R500,000 are experiencing a strong third quarter, with some properties sold at 5% above asking price. Whilst 95% of properties in the higher end of the market sell below-asking price, at approximately 10% discount.
These research documents and data provide us in the real estate market with much-needed insight and understanding into markets, especially from a holistic perspective. The data and analysis highlight valuable trends and market movements that greatly assist in making strategic decisions.
For many agents taking this data and applying it to our businesses in a sustainable manner to assist with long term return on investment strategies can be a daunting task. Combine that with rapidly evolving technologies and innovation agents are propelled into a world that changes dramatically year on year and sometimes even more frequently.
The access to these perspectives and tools has forced real estate companies to prioritise innovation and ensure clients are always assisted in a way that incorporates the latest available data and technologies.
We've even noticed that within our group, because Harcourts is so focused on innovation, that agents and offices are pushing boundaries we never thought possible. Advancements are being developed on the ground level and the decisions to incorporate plans that get better results are rapidly included in strategies. It is an exciting time for property investment in South Africa as we often face difficult markets yet continually feel compelled to raise the bar.
The commitment to client service undoubtedly drives a lot of these innovations. Clients are informed and have great insight into all that's available both from an informative and technological perspective. This ensures the real estate market does not become complacent in its thinking and approach and forces perpetual training and knowledge sharing internally.
As an international real estate company we feel the need to allow our employees the freedom to develop and apply new defining plans so that we as a group do not stagnate and inhibit thought and implementation patterns that could define the new real estate.
CEO Harcourts South Africa
It constantly amazes me how buyers will start the house-hunting process, and even make an offer on a property, without first finding out what finance they will qualify for.
The banks change their lending criteria on a regular basis – so what you may have qualified for 6 months ago could well not apply today.
When buyers say: “I’ve already spoken to my bank” – that sadly, in most cases, means absolutely nothing! If you’ve spoken to someone at your local branch or even a personal banker, they are not the ones who will process or consider your bond application. Their sales pitch to you is that “it shouldn’t be a problem”. Really?
In our experience, where a buyer has not been pre-qualified for a home loan, they are mostly disappointed in either the amount of finance they qualify for, the interest rate offered, or the percentage of the purchase price the bank will finance – or a combination of all of the above.
I mean, would you go to do your grocery shopping without knowing that you had cash or credit available? How much more so when you purchase a property…?
You should start house-hunting once you have a very clear indication what you can afford. Surely it will make a difference as to what properties you will view? Why set your heart on something that you will never be able to purchase…
By all means, speak to your bank. But their informal indication of the bond you should obtain really means nothing. You need to request to be pre-qualified. Some banks have this facility – so make use of it. They will even give you a certificate confirming the figure – and this will help you when you come to making an offer on a property.
In my experience though, I’d encourage you to work with a bond originator. Why? They will know which bank will consider your application most favourably. They will know where the best deal may be, and they are in a position to submit to multiple banks to try and get you the very best finance deal.
There is absolutely NO cost to you. They get paid by the bank and it costs no more than if you went to the bank yourself. It’s just one set of application forms, one set of supporting documentation, one consultant to speak to – and then they fight for you. They’re on your side. Difficult to say that about the banks, who clearly “bat for themselves” given the record profits they are making.
For example, Ooba bond originators have a service called Ooba Bond Indicator – it’s on their website. You can “pre-qualify” yourself here and receive a very accurate indication of what finance you should obtain. It’s quick, it’s easy, and it costs you nothing.
Once you have been qualified and you make an offer, it will strengthen your ability to beat off competing offers of buyers that haven’t been through this process.
It’s been somewhat of a busy couple of weeks from a property regulatory perspective. Two property Bills were signed into law: the Property Practitioners Bill of 2019 (PPB) and the Electronic Deeds Registration Systems Bill of 2019; and the Constitutional Court upheld a ruling that homes that are being built for leasing and rental purposes must be enrolled with the National Home Builders Registration Council (NHBRC).
Property Practitioners Bill
Transformation has been long in coming for the property market. For 43 years the Estate Agency Affairs Act of 1976, which the PPB replaces, had, among other issues, exposed property buyers to the rule of ‘voetstoots’, which left them exposed to financial risk when buying homes.
Voetstoots - the act of purchase without guarantee - meant that should a buyer discover (after conclusion of a sale agreement) that the property has defects, they literally had to suck it up largely because to prove that a seller, or the agent for that matter, had deliberately concealed known defects, was difficult and associated with high legal costs.
While most estate agents/agencies have been practicing their craft with awareness and honourably coaching the sellers to reveal such defects, the PPB ensures that consumers are protected with the mandatory provision of a Property Defects Disclosure. This means an agent can no longer accept a mandate from a seller without written disclosure of all known defects, which they in turn must reveal to the buyer.
Considering that sellers cannot be expected to be aware of every potential structural flaw, compliance notices will be required, which is suggested will be undertaken by an inspector appointed by the Board of Authority, the latter replacing the Estate Agency Affairs Board. Such inspectors will be required to obtain warrants to enter premises.
The Board of Authority serves to govern all property practitioners, namely estate agents, bond brokers, home inspectors, property managers and brokers as opposed to just estate agents as is currently the case. The Board will also be mandated to inform consumers of their property rights, and property agents of their obligations.
A Property Practitioners Ombudsman is also to be established. This will lighten the load on courts given it will have the power and function to consider and dispose of complaints by the public against property practitioners.
In turn property practitioners will be bound to comply with an additional requirement to their Fidelity Fund Certification which confirms that agents/agencies are legally entitled to carry out estate agency activities; that being to be in possession of valid tax clearance and BEE certificates.
Overall the Bill, which aligns the industry better to global best practices, provides improved consumer protection by deepening regulation of property practitioners that have to ensure that their duty of care is to both buyers and sellers. However, the practical implementation of the PPB is yet to be informed by regulation. This is expected to take some time and only once regulation is agreed, published for comment, and Ministry approval granted, can the Act be promulgated.
Electronic Deeds Registration Systems Bill
At last South African buyers and sellers will experience improved turn-around times in the provision of registered deeds and documents. The Bill introduces e-DRS, the Electronic Deeds Registration System, which enables the electronic processing, preparation and lodgement of deeds and documents by conveyancers and the Registrar of Deeds. The government believes this will greatly enhance security of title and the acquisition and disposal of fixed assets.
Other benefits include: the enabling of registration of large volumes of deeds; countrywide access to deeds registration services; enhanced accuracy of examination and registration; availability of information to the public; and security features including confidentiality, non-repudiation, integrity and availability.
However, e-DRS, as with the PPB, may take some time before the reality of practice can be realised.
Rental markets must be enrolled with the NHBRC
The Constitutional Court, with the dismissal of an appeal in September brought by rental market developer Xantha Properties 18, has reinforced that homes being built for leasing and rental properties must be enrolled with the NHBRC.
According to the Housing Consumers Protection Measures Act 95 of 1998 (HCPMA) all new homes must be enrolled with the NHBRC 15 days prior to construction. Home enrolment insures consumers against poor building practises and permits the NHBRC to conduct building inspections at key stages of construction. A newly enrolled home can be subject to a minimum of four and a maximum of eight inspections (this depends on the enrolment value of the home as well as the complexity of the construction).
The matter brought before the Constitutional Court had huge implications for housing consumers who rely on the rental market to access a home. Xantha challenged the constitutionality of provisions of the Act proposing that it (Xantha) should not be required to enrol homes given they are constructed solely for purposes of leasing or renting out and would not be sold to third parties.
“Xantha’s success would have had the effect of undermining the objects of the Act or its effectiveness to regulate the home building industry and to protect housing consumers,” said NHBRC Acting CEO Otsile Maseng. “We welcome this ruling as it once again vindicates the NHBRC mandate against developers and builders who don’t adhere to building standards and the law.”
Source: Private Property
Mixed-use real estate isn’t just taking South Africa by a storm. Developments that combine residential, retail, commercial and office spaces are becoming increasingly popular in the rest of the continent, and for all the right reasons.
When it comes to economic growth, all eyes are on Africa. Data by the International Monetary Fund (IMF) for instance shows that this continent accounts for four of the world’s top five fastest-growing economies, namely Ghana (8.8% growth in 2019), South Sudan (8.8%), Dominco (8%), Rwanda (7.8%) and Ethiopia (7.7%).
This as well as increasing spending power, a rapid urbanization rate and Africa’s expanding working-age population – which according to the World Economic Forum will be larger than either China or India in 2034 – are transforming the continent’s cities profoundly.
Take Rwanda’s capital of Kigali, which according to the Eden Strategy Institute has one of the world’s top 50 smart city governments. Not coincidentally, the city has become a mixed-use real estate hotspot too.
“Technologically enhanced mixed-use developments form part of Kigali’s master plan to drive investments, improve the business climate and build infrastructure to grow the city’s economy. The authorities know that modern mixed-use developments support a vibrant, productive and liveable city,” says Nicholas Stopforth, managing director of Amdec Property Developments.”
In South Africa, Amdec Group’s projects such as Melrose Arch have proven this. This development has changed the way people from Melrose live, work, and spend their free time. With a landscaped urban design that allows pedestrians access green public spaces amongst hundreds of trees, Melrose Arch incorporates residential complexes, luxury hotels, an events venue, dozens of restaurants and coffee shops, a shopping galleria, AAA-grade office buildings and a flagship Virgin Active gym.
“Residents and working professionals have everything they need on their doorstep, without having to get into their cars and worry about safety. This was one of the first developments to achieve that for this area,” he says.
Lagos in Nigeria is another one of Africa’s mixed-use rising stars. According to Stopforth, these types of properties are becoming more popular as locals and expats alike looking for safe pedestrian-oriented precincts where one can live, work, play and shop. This is amplified by high levels of traffic congestion, something which besides Nigeria’s economic heart is also affecting Accra, Nairobi, Addis Ababa and other metros including Johannesburg and Cape Town.
“This is why our latest project, The Yacht Club which incorporates Africa’s first AC by Marriott Hotel, is located in Cape Town’s city centre, close to N1 and N2 access points, and near the Central Business District, the V&A Waterfront and other business and entertainment hubs.
Whilst the Amdec Group is drawing inspiration from what is going on in established markets, the company is watching developments closer to home closely, too. “In terms of future projects, we aren’t just looking at what is happening in cities like Hong Kong, Sydney, and New York. As a leading developer on the African continent, we are certainly looking at what African megacities like Nairobi and Lagos are doing!”
When it comes to scaling down for retirement, searching for the right home is probably the most important decision you will need to make. This of course can greatly depend on affordability and the kind of lifestyle you would like, but according to Cape Town conveyancing attorney and estate law expert, Michelle Dommisse, Director of Michelle Dommisse & Associates, it’s a decision that can also have a significant impact on the inevitable ‘end of life legalities’ that we leave behind.
“When it comes to purchasing a retirement home, today there is either the option of investing in a Life Right or a sectional title unit, across all price bands,” says Dommisse.
Life rights in a nutshell
In broad terms, a life right is usually a more affordable option especially because there is no transfer duty payable on purchase. Another advantage is that there is no heavy maintenance for owners and levies are usually forecast in advance. When the purchaser dies, another advantage would be that there is no capital gains tax payable and the full purchase price is refunded to the owner’s estate, less a small administration fee.
“Some life right developers share a percentage of the capital appreciation with the person who purchases the life right (or his or her estate). We have had sight of life right agreements where the developer shares 15% of the profit, and retains 85% of the profit and we have seen agreements where there is no sharing of the profit.
“A Life Right is an excellent retirement option, but like everything it also has its risks. I always ask my clients if the Life Right they are buying includes a frail care facility, because in many cases, residents are only allowed to live there as long as they can live independently. If they cannot, they can be forced to sell and move to another facility,” says Dommisse.
Sectional title retirement
So how does this compare to sectional title retirement options, you may ask.
As is the case with most property purchases, the concepts of lifestyle and location are key and there is no doubt that both drive long-term capital appreciation.
“If one has decided to live in an area that is in high demand and is consistently going up in value, it makes sense to want to achieve 100% of the profit – and even with the inevitable capital gains tax penalty – this could still greatly benefit your estate when the time comes to sell.”
“Having said that, I find that in many cases it boils down to an emotional rather than a financial decision. Even for a retiree, there is something very appealing about owning your own home, having pets and even a garden, especially while you are still fit and want your independence and space.
In many cases Life Right options do allow pets, but the process is very restrictive because of the apartment-style model and small spaces.
“Then there are places in the Western Cape, like Helderberg Village in Somerset West, that are difficult to compare because while it is a sectional title development that typically yields high investment returns because of its location and because it has been established over 30 years, it also offers the advantages of high security, a community lifestyle and onsite healthcare of many good Life Right options. For retirees who can afford this, it is one of those that encompass the best of both worlds,” says Dommisse.
How can this choice effect one’s estate?
The importance of a well-drafted will for those who want to provide for the best interests of their loved ones cannot be under-estimated says Dommisse.
“Apart from Estate Duty, which is applicable for any estate over R3.5million, there are ways to structure an estate so that the inevitable implications of capital gains and income tax are minimised. Remember that an estate can take up to a year to wind up, so funds which are usually placed in an investment on behalf of the family, will be subject income tax,” says Dommisse.
But how does property ownership effect an estate?
“One of the most common things I hear from my clients during estate planning is: ‘everything needs to be fair. I have five children and five properties, so just divide my estate equally.’
“This means that each child will receive a 20% ownership of five properties, whereas, it would actually be better to leave each property to a specific individual. The reason for this is simple – transfer duty is not applicable when property is bequeathed in a will so an enormous amount would be saved for the estate,” says Dommisse.
End of life legalities can be very complex says Dommisse who warns that even small oversights can be very costly, especially for the wealthy.
“Unfortunately an off-the-shelf will, as opposed to using an estate expert can end up costing your loved ones. A simple example would be the absence of a special clause that states that your appointed executor does not have to pay a bond of security to the master. If this is not stipulated, it can end up costing 0.5% of an estate, unnecessarily.”
Of course there are many other factors than can impact an estate and contribute to a well-structured will, but when deciding on a retirement property option, these are some to consider.
What compliance certificates do I need when selling my home?
Often when conveyancing attorneys attend to property transfers they find that homeowners are caught unawares of the compliance certificates that are required when selling a house and are subsequently shocked by the associated costs which they did not budget for.
Homeowners are often caught unawares of the costs and compliance certificates that are required by the law when selling a house.
A question frequently asked is whether or not these certificates are a legal requirement and in what circumstances can they be avoided?
In brief, compliance to electrical, water, gas and electric fence certificates is prescribed by law and carries penalties for non-compliance. The beetle certificate is not prescribed by law anymore but it is customary to include it in standard offers to purchase, especially for property situated in coastal regions. Banks also often include these certificates as requirements for a loan for the property that they are bonding in order to ensure that the property is compliant for their security purposes.
It is recommended that all sellers do a thorough inspection at listing stage, so that they know what they are in for in terms of repairs.
Below is a detailed summary of the different types of certificates of compliance and explanations as to what is required by law:
1. Electrical Compliance Certificate
Only registered electrical contractors may perform electrical work and issue the certificates.
The requirements for an Electrical Compliance Certificate are set out in the regulations to the Occupational Health and Safety Act. In general, each ‘user’ or ‘lessor’ must have a valid electrical certificate. Although regulations refer to ‘user’/’lessor’ and not ‘owner’, the description of user/lessor necessarily incorporates the owner of the electrical installation who will also be the owner of the land.
Regulations lay down many general requirements, as an example, only registered electrical contractors may perform electrical work and issue the certificates.
In respect of property transfers, the regulations prescribe as follows:
- It is obligatory to obtain an electrical certificate where ownership changes.
- Save where there is a valid certificate in place that is (a) not older than 2 years, and (b) there were no alterations to the installation since the issue of the current certificate, a new certificate is not required for purposes of transfer. The seller can then hand the current certificate to the buyer.
Parties may nonetheless agree that a new certificate must be provided, even where the current certificate is less than two years old and no alterations or additions to the installation have taken place (which is often the case in many standard offers to purchase).
Although the onus is on the seller to obtain this certificate and pay for the costs of repairs, this obligation can be shifted to the buyer by way of agreement.
2. Beetle Certificate
Many years ago it was prescribed by law (Forest Act) that the Department of Agriculture had to be notified of the existence of certain beetles found in timber in residential homes. When beetles were found, the wood had to be destroyed due to the danger posed by these beetles to wood and to avoid the risk of spreading.
The legislation specifically required such notification for three types of beetles, which became commonly known as the so-called ‘notifiable beetles’:
- European house borer (Hyloytopus bajulus)
- Longhorn beetle (Oxypleurus nodeiri)
- West-Indian drywood termite (Cryptotermes brevis).
The necessity to notify the department of such beetles found its way into sale agreements. Ever since, and despite the fact that it is no longer required in terms of legislation, standard agreements of sale, particular those in circulation in the coastal provinces (Western Cape and KwaZulu-Natal) continue to require a beetle certificate before transfer, given that these are the regions in which these beetles are most prevalent.
Always exercise caution - there are other beetles not included in this group that can cause damage to wood in a house. If parties are concerned about this possibility, it would be advisable to refer to all wood destroying beetles in general rather than to specify the type of beetle in the agreement, so as to obtain a certificate that includes confirmation that no wood destroying beetles of any nature were found in the premises.
Some noteworthy points:
- The seller and buyer can contract out of the requirement to provide a beetle certificate. However, if parties agree that no beetle certificate is necessary and the bank requires it for the buyer’s home loan, then it will need to be provided at the purchaser’s expense. Obviously if it is a cash deal, this does not present a problem.
- The certificate is usually not required in sectional title schemes as these are generally more recent buildings with little or no timber. However, where there is a risk of beetle infection in a sectional title unit, for example where an old building was sectionalised or where you have a top floor unit with wooden beamed roofing, it may well be prudent to provide for a beetle certificate.
3. Electrical Fence Certificate
This is governed by the Electrical Machinery Regulations which were promulgated in terms of the Occupational Health & Safety Act. The overriding purpose of requiring an Electrical Fence Certificate is to ensure that the installation is safe.
The certificate is required where:
- There is a change in ownership of a property after 1 October 2012 at which property there is an electric fence.
- There was no change of ownership but there has been an alteration or modification to an electric fence after 1 October 2012, even if it was installed before 1 October 2012.
There is no mention in the legislation of the certificate being valid for a fixed time period once issued (unlike electrical certificates) and once obtained it can be transferred from one owner to the next provided of course the agreement of sale does not specify a time period and provided there were no alterations to the installation after the certificate was issued.
With sectional title properties, the electric fence is generally situated on the common property which is deemed to be body corporate property. Every owner of a section within a sectional scheme is also a member of the body corporate and is also therefore an undivided part share owner in the common property.
“We are of the opinion that when a sectional unit is transferred there is also a change of ownership (even though only in part share) of the common property, and as a result of the change of ownership of property on which the electric fence is situated it will be necessary to comply with these regulations,” say the conveyancing attorneys.
“Given that the management of common property falls within the duties of the body corporate, we are of the opinion that it is adequate for the body corporate to have a compliance certificate issued for the electric fence of the entire scheme which can be produced and when called upon to do so.”
The body corporate should have a new certificate issued every time there are alterations done but it would not be necessary to have a new certificate issued every time there is a transfer within the scheme.
What happens within a gated estate that is not sectional title but freestanding erven where part of the fence is on the erf transferred (commonly referred to as home owners’ associations)?
As discussed above, the compliance with the regulations is triggered when there is a change in ownership of property on which an electric fence installation exists.
Technically where there is a change in ownership of property within a homeowner’s association on which an electric fence exists (typically your perimeter properties) then a certificate would need to be issued or be in place.
It does however seem unfair that all of the members of a homeowners association benefit from an electric fence, but only those properties on which the actual fence is built would need to have the certificate issued.
“As a result, our view is that as in sectional schemes it would be more practical for the homeowner’s association to have a certificate issued for the entire electric fence installation which can be produced as and when required in transfers,” say the conveyancing attorneys.
4. Water Installation Certificate
“In 2011, the City of Cape Town Municipality passed a new water bylaw which requires that, with effect from 18 February 2011 onwards, all sellers of properties within its jurisdiction must furnish a Water Certificate (which has loosely and in our view incorrectly been called a Plumbing Certificate) to the municipality before transfer of ownership.”
- This requirement is only applicable to properties that are situated within the jurisdiction of the City of Cape Town Municipality.
- The certificate is required for both freehold and sectional title properties.
- It is not a full plumbing check and fix. Please ensure the buyer understands this. “The requirements of what needs to be certified in a Water Compliance Certificate are very specific and limited (as listed below) and it is for this reason we believe that calling these certificates ‘plumbing certificates’ is misleading as it may lead buyers to believe that a comprehensive plumbing check is being conducted and certified,” say the conveyancing attorneys.
- Although the bylaw does not specifically say that the certificate must be provided to the buyer, it has become commonplace to include such a provision in the offer to purchase. It safeguards the buyer who then knows that his or her property at least complies with the requirements of the city’s water bylaw - and the seller is in any event obliged to lodge it with the city before transfer.
What does the Water Installation Certificate say?
This Certificate (only) confirms that:
- The water installation conforms to the National Building Regulations.
- The property’s water meter is registering.
- There are no defects that can cause water to run to waste.
- No rainwater leaks into the sewerage system.
The intention of the legislation:
- Manage water resources and water loss.
- Protect the buyer from latent defect claims and high water bills due to leakages.
- Health and safety (not allowing a cross connection between storm water and sewer).
- Ensuring water meter accuracy.
- Provide an opportunity to gradually eliminate the increasing number of storm water connections into our sewers that are putting capacity pressures on our sewerage network and treatment capacity and are illegal.
The plumber attending at the property basically does the following:
-Checks that the water meter is standing still when all taps are closed (this means there are no leaks on the property).
- Checks the roof gutters/storm water drains and the sewerage manholes (to ensure the rain water flows into storm water drain and the sewerage in the sewerage drain and no cross connection).
- Checks that the geyser is up to SABS standards.
- Checks pipes under basins/sinks.
- Checks that all external pipes are bracketed properly. In respect of all other plumbing works or sanitary ware which is not working properly, this may fall under either a latent or patent defect and is a matter to be resolved between the seller and buyer, bearing in mind the principles applying to voetstoots clauses.
5. Gas certificate
Pressure Equipment Regulations were also promulgated under the Occupational Health and Safety Act (effective October 2009), which brought gas appliances installed in properties more or less in line with electrical installations.
- From 1 October 2009, it is required that any person installing a liquid gas appliance at a property must have a certificate of conformity issued in respect thereof.
- The certificate may only be issued by an authorised person registered as such with the Liquefied Petroleum Gas Safety Association of Southern Africa (LPGAS), after he or she has inspected the installation and is satisfied that it is safe, and leak free.
- Gas installations for which certificates of conformity are required would include built-in gas fires or braais, gas stoves, hot water systems and the like.
- Furthermore, in terms of Regulation 17(3) of the Pressure Equipment Regulations, the law speaks of a certificate being required after any installation, alteration, modification or change of ownership of property which necessarily implies that a certificate would need to be in place or issued upon the transfer of a property.
- The parties cannot contract out of it - it is required in respect of all properties where there is a gas installation, whether the owner lives there, rents out the property or whether it is vacant or stands empty for most of the year.
- Unlike electrical certificates, there is no mention of how long the certificate is valid for once issued in the legislation although many standard offers to purchase will put a time frame on how old the certificate that is provided may be (usually two years).
- Ordinarily in terms of the offers to purchase there will be an obligation placed on a seller to obtain the certificate prior to transfer for delivery to the buyer after transfer. As with the other certificates, it is always better for the inspection and any remedial work to be carried out prior to the date of occupation by the buyer and even earlier due to bank and bond requirements, as mentioned before.
It is always recommended that sellers do their inspections at the listing stage and then they will know what they are in for in terms of repairs. In addition, although it is usually required that the seller should provide the buyer with the certificate by no later than the date of transfer, it is best that the inspection and remedial work is at least done before occupation by the buyer and better still even earlier, as most banks now request a copy for purposes of clearance of the bond for lodgement.
Somerset West, Cape Town native Steve Caradoc-Davies to lead global real estate franchise group
Global real estate franchise group, Harcourts International, today announced the appointment of Steve Caradoc-Davies as Chief Executive Officer to lead the 132-year-old company into the next era. Mr Caradoc-Davies will take over leadership of the 900-office network and approximately 10,000 team members in nine countries, from Mike Green, who takes on a new focus within the business. Both changes are effective 1 October 2019.
“Steve brings a unique understanding from his 30 years in the real estate business, having held roles in property management, sales, office management, owning his own franchise for over 25 years and developing it into the best-performing Harcourts office in South Africa,” said Mr Green.
“More importantly though, Steve is passionate about Harcourts. He loves our culture and values and has a very strong level of integrity and caring. I believe he will take our organisation to the next level.”
The change in leadership has been planned as part of a succession plan and aligns with the organisation’s long-term focus on strategic initiatives across digital marketing, technology, training, people & culture and client experience. Mr Caradoc-Davies will lead the executive leadership team to support the long-term vision of the business, while continuing to add greater value to the franchise business owners and their teams, who are the foundation of the Harcourts Group.
“First, I must acknowledge the extraordinary achievement Mike has had leading Harcourts for the last 20 years and creating an incredibly successful business, a strong family culture and a vision where people are at the heart of everything we do,” said Mr Caradoc-Davies. “Thank you to the Harcourts board for entrusting me with this responsibility. It is a privilege and honour for me to lead Harcourts into the next chapter.”
Prior to joining the corporate leadership team at Harcourts, Mr Caradoc-Davies was business owner of the number one Harcourts franchise office from 2014-2019 in South Africa, Harcourts Platinum, in Somerset West, Cape Town, which also achieved an international Harcourts Top 20 Steve Caradoc-Davies ranking from 2014-2019. He has played an active role in Harcourts South Africa, serving as a director on the board since 2005.
As only the third chief executive in the history of Harcourts International, Mr Caradoc-Davies’ role is aimed at further strengthening the company's global presence and service to its franchisees, and he will oversee the network across Australia, Canada, China, Hong Kong, Fiji, Indonesia, New Zealand, South Africa, and the United States.
An accomplished businessperson, industry thought leader and keynote speaker with specific interest in strategic business and team growth, Mr Caradoc-Davies is based in Brisbane, Australia.
Franchise Business Owners Applaud Appointment
The appointment to CEO of Mr Caradoc-Davies has been applauded by Harcourts franchise business owners globally.
Louis Barbosa, owner of Harcourts Rhino in Roodepoort, Gauteng, the number two ranked office in South Africa and a member of the Harcourts South Africa board, said:
“We are excited at the appointment of Steve Caradoc-Davies! Steve comes from the coal face, having served in the trenches and learnt the real estate trade from the bottom up. He fully understands the industry, and more important his blood is truly blue. We are sure that he will lead by example and will take Harcourts International to new heights. We wish him everything of the best in the future and look forward to his visionary leadership.”
Dane Atherton, business owner of Harcourts Coastal, the #1 ranked Australia office, based on the Gold Coast said:
“What I am most excited and confident about is that Mike has hand-selected someone who is proven in the trenches as successful and passionate about Harcourts.
“Steve has real estate in his blood and that is massive for this new role. He’s a Hall of Famer in South Africa and was number one in South Africa, he is a guy who ‘gets’ Harcourts. We have total confidence in him because he understands Harcourts and the culture because our culture is our number one differentiator. The Harcourts DNA, Mike’s DNA, is part of every business owner and that includes Steve. I trust Mike’s decision to hand the baton to the next generation.”
Mike Green Legacy
In 1997, Mike and Irene Green moved to Australia from New Zealand after establishing and operating the most successful Harcourts franchise in New Zealand with 9 offices and 150 people, achieving the number one position for four consecutive years. In 1999, Mr Green became Managing Director of Harcourts International, responsible for the overall operation and direction of Harcourts' group of companies, taking it from an initial group of 100 offices in two countries to over 900 in nine countries today. At the same time, Irene Green took over as Head of the Harcourts Academy, leading the development and delivery of industry leading training and development for the entire Group.
The strategic growth has led Harcourts to be the fastest growing real estate franchise network in Australasia and the #1 in New Zealand for 20 years running, as well as numbernumber 3 in Australia after only 18 years’ operating there and number 4 in South Africa after only 10 years. The Group achieved a combined $35bn in sales last year and gained market share in every market in which it operates.
“The past 20 years has been a wonderful and extraordinary journey - it’s been fun, challenging, hugely rewarding and really quite amazing to be a part of all that we have achieved as a group,” said Mr Green.
“However, I believe the time is right for me personally, to step back and take a little more time away from the business especially now Irene and I have grandparent duties.”
Mr Green began his real estate career at the age of 19, in Auckland for independent office Burrett and Veitch in Parnell, before moving to Christchurch in 1983. After 5 years in Christchurch with Collins Real Estate, then Harcourts as it became, Mike and Irene moved to Auckland where Mike became the Assistant Regional Manager for Harcourts. After 2 years in this role, he and Irene changed direction and became owners of their first Auckland franchise office, Mike Green Real Estate Ltd (Epsom). Growing the business to nine offices and over 150 people, the operation achieved No 1 Harcourts Franchise for Harcourts New Zealand for four consecutive years.
Mike and Irene Green moved to Australia in 1997 beginning Harcourts’ international growth.
Mr Green is a co-owner of Harcourts with Irene Green and Paul Wright and will continue to sit on the board of directors and serve the global business in a limited capacity across strategic initiatives.
About Harcourts International
Harcourts has been in the real estate business since 1888. With over 900 offices in nine countries, Harcourts International is one of the fastest growing real estate groups in the world.
Harcourts offers a full range of real estate services, specializing in residential, commercial and rural property sales as well as property management services. Harcourts works closely with several affiliate groups including Mortgage Express, Landmark Harcourts, Luxury Property Selection, NAI Harcourts and Harcourts Complete to offer clients a comprehensive real estate solution.