About Me

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I am a qualified Attorney. I specialise in Property Law, Commercial Law, Corporate Law and Trusts.
 
Please visit our website at www.prop-law.co.za for more details.
 
I am an elected Committee Member of the Property Committee of the Association of Pretoria Attorneys and through my involvement, I like to ensure that I am constantly at the "sharp-end" of Conveyancing Practice.

I am the elected Chairman on the Gauteng Council of SAPOA. The South African Property Owners Association (SAPOA) is the biggest and most influential institution in the property industry. SAPOA members control about 90% of commercial property in SA, with a combined portfolio in excess of R150 Billion (about $22 Billion). I am also on the National Council and the National Legal Committee of SAPOA.
 
Member of the Institute of Directors South Africa.

05 April 2012

Property prices edge up, but at 'wrong' time

Property prices edge up, but at 'wrong' time

There was a slight improvement in the property market in March, after a long slump, but it's bitter-sweet, says Seeff Property chairman Samuel Seeff.

For just as a recovery beckons, consumers are being hard hit by hikes in fuel, electricity and rail costs.

"The (March) increase (in house prices) of six percent is significantly higher than the 3.2 percent achieved last year. The good thing about it is that it shows there is some new energy in the market.

"More people are buying homes as prices are slowly increasing. We find that more buyers are prepared to pay close to asking prices.

"Several agents also said sellers have recently become more realistic with their asking prices," said Seeff.

Seeff said the industry hit its first slump in 2007 after the introduction of the National Credit Act and its second after the global economic slump in 2008.

"The introduction of the NCA had a great effect on people attaining bonds. And the year after, the recession affected every industry.

"Now that things are looking up for our industry, people have been hit with increases in petrol prices, electricity, higher municipal rates and the increase in food costs."

He said he would be able to establish by June whether the market was gaining momentum or not.

This year, Seeff recorded its best February in four years with total sales of close to R900 million, up by more than 28 percent on last year.

Seeff added that although the company will not, for the next five years, see the 22-35 percent price hikes it saw before 2007, recovery would gradually take place.

According to First National Bank, house prices in March showed the biggest improvement for sellers since June 2010.

"The FNB House Price Index showed a further slight acceleration in March, up from a revised February growth rate of 7.1 percent to eight percent year-on-year," said FNB property strategist John Loos.

He said the February index showed an increase of 0.9 percent year-on-year, with consumer price inflation (CPI) in February slightly lower than house price growth, at 6.1 percent.

Cape Times

Differences between the 'experienced property developers' and others

Differences between the 'experienced property developers' and others

The last four challenging years experienced by the SA residential property development sector have revealed clearly the big differences between the experienced developers and those who are still relatively new to the game says Shiraaz Hassan of Asrin Property Developers.

"It has been said," said Hassan, "that when the foundations for a new scheme have begun, over one-third of the work it entails has already been done. What this means is that the investigations, planning and the essential liaison processes with government parastatals, municipal authorities and interested and affected parties have been completed. It is a lack of thoroughness in these matters that has caused so many delays and resulted in so many of our colleagues' projects failing to be launched, even though they appeared to have potential."

The initial due diligence process, said Hassan, is especially important to the success of the entire scheme.

Experienced developers, he says, will spend considerable time and effort identifying the sites which genuinely offer multi-unit opportunities. Asrin, he said, carry out a thorough due diligence investigation and a market survey prior to any land acquisition.

"Once a potential site has been found we take trouble to ensure that it is not subject to restrictions, servitudes or conditions (such as a land claim) which might limit its effectiveness by conflicting with the development plan."

A market analysis, said Hassan, will help the developer to clarify where his target market lies, what the market can afford and what it will probably expect from the delivered product.

If the scheme does look feasible, he said, the appointed professional team will then play a vital role in advertising the developer's intentions and inviting comment or objections from neighbours or other affected parties, including the local or provincial authorities

Engaging with such parties, said Hassan, is "absolutely essential" prior to the approval of the land use application.

"We all know," he said, "that it can be very difficult to please all involved - and it has to be accepted that in SA one often encounters a "NIMB" (not in my backyard) stance which resents any form of development in its area, especially if, as is often now the case in Cape Town, it involves a densification of a low density area.

"I&APs (interested and effected parties) have a tendency to raise ridiculous objections - and such objections can delay schemes for years, in the process making them less viable, or canvassing for the land owner to shelve the project. However, with the enactment of the new Spatial Planning Land Use Bill this year (in April), we anticipate speedy resolutions to the tedious adjudication processes involved. This Act will empower authorities and municipalities to determine township schemes and approve land use applications without the involvement of provincial government."

A project steering committee is formed by the developer to drive the rezoning process with his consultants. Here again, he said, experience is essential - inexperienced consultants can so easily cost the developer extra cash. Asrin, said Hassan, will make a point of liaising first with their preferred architect, urban and town planners and environmental consultants. It is usually the town planner and the environmental control officer who guides the architect and the developer to ensure that the design conforms to the scheme's zoning parameters and the developer's vision and plan.

Less experienced developers, he added, are often "hit" by poor project schedules and approvals, which impact on cash flows. The scheme is basically sound, but they have not really considered all rezoning conditions and aligning their cash flows with these. Here again, he said, experienced developers know in advance what they have to achieve to meet prior to exposing themselves financially.

Asrin, said Hassan, has a rollout programme for the next 24 to 36 months and in the year ahead is likely to deliver anything from 330 to 500 units - but, he says, it has to be recognised that the SA economy is feeling the effect of the global slowdown and its poor ±2,8% growth rate. We believe markets will adjust themselves and demand for the oversupplied property will increase within the next 12 - 18 months.

"Survival in the development world is important for the economy - and for job creation - but it is a real challenge and it will be only those firms capable of doing the thorough pre-project research and planning that I have outlined here which will come through."

Asrin Press Release

02 April 2012

'Embrace the property transfer process'

'Embrace the property transfer process'

PLEASE SEE MY COMMENTS AT THE END OF THIS POST!
(Comments were made by myself and others on the original IOL Post.)

Are you unhappy about how long it takes to transfer your new home into your name? Have you been inconvenienced by transfer delays which meant you had to carry on renting in your old home? Have you had to reschedule your move into your new home due to delays? These are all problems experienced by home buyers on a regular basis, made even more topical now here in Cape Town due to delays coming from the City of Cape Town's Rates Department.

Property transfers almost always take longer than expected. It is a complex process and it can be delayed by many factors. Understanding the process will go a long way in avoiding any surprises and will prepare you for a smooth transition into your new home.

When purchasing a new home, the transfer processes revolve around satisfying the applicable regulatory environments surrounding property transactions. They are the Financial Intelligence Centre Act (FICA), the Transfer Duty Act (SARS), the Value Added Tax Act (also SARS) and the Municipal Property Rates Act. If you need a bond from a financial institution to finance the purchase, then you will of course have to follow that process of satisfying your bank's demand for documentation as well.

The process starts with getting the finance in place after your offer to purchase has been accepted by the seller. Your estate agent can assist by approaching a bond originator or you can approach a bank of your choice.

You will need the following minimum documentation for bond approval; your proof of address, your ID and your income tax number. These documents will satisfy the FICA requirements. The banks have different methods of evaluating your ability to repay bonds, but you will asked for proof of earnings from your employer, a monthly budget and an asset and liability statement as a minimum.

While you are waiting for bond approval, the conveyance attorney will start the procedure to transfer the property. The seller normally has the right to choose the conveyance attorney. They attorney is required to first of all also do a FICA test. If they have not already received the documents from the estate agent, you might be asked to forward those documents to them as well. You will also be asked to go to their offices to sign their instructions to proceed with the process of applying for transfer duty and rates clearance certificates. At the same time they will contact the bond attorneys, whose task it is to issue a guarantee that the funds are available from your bank to purchase the property. If the purchase is financed in part by cash, you will also be asked for a guarantee that the cash will be available when due.

Many of these procedures can run concurrently but some must be completed before the next step can proceed. Although time frames are subject to change depending on the many variables, the average durations that you can expect the processes to take are as follows:


•To obtain bond approval: 18 days from the offer being accepted by the seller.


•To signing the documents at the conveyance attorney: 18 days from bond approval.


•To lodge the transfer with the Deeds office: 39 days from signing at the attorneys.


•To transfer the property: 14 days from lodgement at Deeds Office.

In total this averages out at approximately 103 days or 3,4 months from the date your offer is accepted to the date of transfer. This could vary between as little as two months and as much as six months as all transfers are unique.

Issues that might delay this process are many and varied. Incorrect income tax numbers, not being able to meet with attorneys timeously, outstanding municipal rates that are not paid up immediately, documents relating to the building are not available (electrical compliance certificate, NHBRC certificate, Occupancy certificate, Council Approved Building Plans and Completion Certificate), delays in the many government and municipal departments and inconsistencies between agreement of sale and bond documents such as erf numbers and suburb names.

Property rights and ownership are enshrined in our constitution and that is one of the most important contributors to investor confidence and peace of mind for the home owner. Be patient, support the process and the results will come.

South Africa's strict Title Deed system has resulted in everyone having complete confidence in the accuracy of its data, but that does come at a price. That price is time.

Integrated Property Group Press Release

COMMENTS

It's not really the process that bothers me, but rather the costs. The boom days where property increased by 20 - 30% p/a are over and will not return for a very long time. Durning those times banks were happy to loan 110% bonds as they know their risks. Property buyers were happy to loan 110% bonds as their investment off-set the legal fees. These days however, it's not so. Post 2008 buyers are far from stupid and understand that for every R1 million of property they buy, they have to fork out at least 50k from their pocket. That's an unrefundible 50k if I may add. 75 000 Estate Agents during the boom - 35 000 Estate Agents now. The question is, how many conveyancing lawyers have lost business? I'm assuming not that many as their profit margins for a tranfer are most likely over 1000%. And they have the balls to blame the banks?
Posted by James Peterson on March 29, 2012 at 12:15 PM SAST Report this Comment
 
 
Can someone please advise me on why there is a sliding increasing scale of transfer attorneys fees dependent on the price of the house? Surely the work is the same no matter the house costs R100000 or R10 million. Same documents, same process same time involved...So why is it not flat rated?
Posted by aj on March 29, 2012 at 12:54 PM SAST Report this Comment
 
 
3.4 months average for transfer? I put my offer in in April last year, have been living and paying occupational since September, and this morning they call me to say they can finally go ahead with transfer. 3.4 months would be a blessing.
Posted by Mike on March 29, 2012 at 02:07 PM SAST Report this Comment
 
 
AJ it's called making money for Transfering Attorneys. Needs investigation.
Posted by Dube on March 30, 2012 at 06:55 AM SAST Report this Comment
 
 
@ James: I can't speak for all Conveyancers but I can assure you that profit margins are paper thin in conveyancing and that there have been virtually no increases in the tariff in recent decades. This is despite the fact that legislation is heaping more and more extra obligations upon the conveyancer. It is for this reason that there have been massive retrenchments in conveyancing departments and many firm closures since 2008.
Posted by Gareth on April 02, 2012 at 08:40 AM SAST Report this Comment
 
 
@AJ: A flat rate would appear to be an ideal solution until you consider the implications. The flat rate would have to be somewhere in the middle of the tariff scale in order to be reasonable. This would massively advantage the rich and severely punish the poor. That would be disastrous, especially when you consider that affordable housing is currently the economic driver of the SA property industry. (Consider that estate agents operate on the same basis.)
Posted by Gareth on April 02, 2012 at 08:41 AM SAST Report this Comment
 
 
@ Mike: That sounds ridiculous and there must have been some unique aspects (or incompetence) to cause such a delay. Our target is 6 - 8 weeks from receiving the instruction, assuming that the buyer has no problems in obtaining finance.
Posted by Gareth on April 02, 2012 at 08:42 AM SAST Report this Comment
 
 
All independant statistical analisys indicates that South Africa ranks as one of the best in the world with regard to Security of Title. This is due to the expertise of all involved (conveyancers, deeds staff, etc.). If you seek to drive this expertise away, you end up having to take out Title Insurance (e.g. the USA) to compensate for the possibility that your Title Deed may be invalid.
Posted by Gareth on April 02, 2012 at 08:50 AM SAST Report this Comment

John Loos shares views on property prospects

John Loos shares views on property prospects

Since holding a networking breakfast some three weeks ago, Dianne Brock, manager of the Western Cape Institute of Estate Agents of South Africa (IEASA), has received numerous requests to summarise the residential property update given by John Loos, the FNB economist, at the breakfast.

"Many people," said Brock, "are looking for signs of an upturn or, at least, for an authoritative analysis of the current trends. John Loos enabled us to take a balanced long-term view of the current situation. He does not yet predict an upturn within the near future, but his overall view remains optimistic."

ABSA's real growth house price graph for 1966 to 2008, said Loos, had shown some remarkable fluctuations but a similar graph produced from figures gathered by FNB from 1995 to 2010 indicates clearly that the trend is still upwards - from an average house price close to R350 000 in 1995 to a level of close to R800 000 in 2010.

"One must, however, bear in mind the changes in the properties themselves," said Brock, "when looking at property figures in the long term. Homes built in 1966 cannot be compared with those built in 2011. Comparing the home and plot sizes it becomes clear that today's offerings are significantly smaller."

Loos, she said, had shown that there is almost no likelihood of an upward movement in real terms on housing prices in the coming twelve months.

Considerable time was spent by Loos discussing the much publicised statement from housing analyst Erwin Rode to the effect that SA house prices are 25% overvalued.

"Loos was adamant," said Brock, "that it is just not possible to quantify the extent to which housing is 'overvalued' but he indicated that in his view the 25% estimate was excessive, especially now that prices are moving up in cash terms."

Discussing the current difficult trading conditions, Loos showed that for much of the time the present government has been in power, infrastructural spending by the State, now 0,5% of GDP, was nowhere near the 4% that had been the norm from the late 1950s to the early 1970s. This cutback, although fiscally wise, had impacted on the economy as a whole.

"With a lack of good public transport and with a higher cost of fuel, the people have begun to move closer to their work places. Smaller, denser housing schemes, with increased security are already proliferating in and around main business hubs.

The good news as revealed in the latest budget, said Brock, is that the State infrastructural spending will now increase and help remedy this situation.

The lack of developed urban land, Loos said, had been exacerbated by a huge shift by the rural population to the cities. These now house almost 60% of South Africans as compared to 46% in 1960. In the circumstances, faced with higher land and house prices South Africans have had continuously to downscale both the size of their homes and their plots and have increasingly moved to sectional title homes. Loos showed several graphs on this subject, one of which revealed that large homes are rapidly giving way to smaller homes. Only 7,4% of houses built recently have had four bedrooms and only 3,1% have five bedrooms.

Loos then, said Brock, looked at the global economy and how it inevitably impacts on South Africa and housing prices. With the World Bank predicting global growth of only 2,5% and with the IMF about to downgrade from their previous 4% forecast, South Africans; said Loos, cannot now expect more than the 2,8% growth predicted by the SA Reserve Bank for this year.

This in turn, he said, probably means that house price growth will remain at its current low levels. Average selling times, said Loos, are now 17 weeks and 6 days which again is an improvement on the longer periods of 2008, 2009 and 2011 but is still too long. In these conditions, said Loos, there is pressure on the banks to ease up on lending criteria.

However, said Loos, FNB and other banks are concerned that the 75% household debt (in relation to GDP), although an improvement, is still far too high for what is in fact still an emerging economy. They have no wish to increase their risk and to broaden the problems through irresponsible lending: the global economy is still in "high risk mode" and there is considerable uncertainty as to whether Europe and the USA will emerge from their current difficulties.

Reflecting these uncertainties, estate agency activity ratings, said Loos, have been significantly low. The current problems have led to a big drop in sales since the highs of the first quarter of 2010. In his opinion, the only way in which an estate agency can now grow turnover is by capturing a bigger market share. They should also, he said, encourage potential homeowners to make use of the banks' growing willingness to engage in non-mortgage lending.

"With consumer price inflation now around 6,1% the household debt figure is still likely to increase," said Loos, "and the banks have to see the broader picture and act accordingly."

Loos, added Brock, concluded his presentation by saying that estate agents have often failed in the prime business lesson of putting the client first. They have, he believes, often neglected to build long term client relationships. (Despite property selling and buying being only an occasional activity, the building of long term relationships, he believes, is very definitely possible and essential.)

Loos concluded his talk by asking estate agents two questions:

"Are you at the top of the client's mind when he needs property advice or information?" and "Is your personal brand as strong as that of the agency you represent?"

"It became clear to us," said Brock, "that Loos is challenging us to give higher levels of service and to try to put the client's welfare before any thought of personal profit."

Western Cape Institute of Estate Agents Press Release

29 March 2012

Standard Bank grabs crown in home loans

Standard Bank grabs crown in home loans

Standard Bank has overtaken Absa to become the mortgage bond market leader in South Africa, increasing the size of its home loan book to R275 billion from R244bn over the past 18 months.

Steven Barker, the head of home loans at Standard Bank, said yesterday that the lender had an overall market share of 32 percent at the end of last year, compared with about 27 percent previously, and it financed about one in three of all new mortgage advances.

The growth in Standard Bank's mortgage loan book is related to it writing a lot more business because not all its bank competitors, particularly Absa, have had as strong an appetite as in the past for providing mortgage finance.

Reserve Bank data showed that at the end of January last year Absa was the market leader with 30.57 percent of new mortgage advances, followed by Standard Bank (30.7 percent), Firstrand (18.48 percent) and Nedbank (16.83 percent).

Standard Bank has grown its mortgage bond book at a time when there has been a slump in the property market, resulting in a contraction in the number and value of home loans approved and granted.

Barker said that new mortgage advances totalled R360bn in 2007 but only R120bn in new mortgage advances were granted last year.

The strong growth in Standard Bank's mortgage bond book had demanded that it spend a lot of time understanding the risk of loans granted and pricing these loans appropriately to take into account the risk, he said. The bank still provided 100 percent loans for houses under R1.5 million, particularly to its own banking customers and people with lower risk, but it was more selectively than in the past.

However, Barker said that the bank generally needed a 10 percent deposit for loans of more than R1.5 million and expected a 20 percent deposit for loans greater than R2.5 million.

Barker said foreclosures of mortgage bonds were still high but were starting to move in the right direction.

Non-performing loans were declining although the bank would like this to happen faster but the property market was not providing a major underpin to allow distressed borrowers to exit the market.

Barker said the level of prepayment of mortgage bonds was lower than in the past, which was indicative that the purchasing power of consumers was being eroded by the steady incline in consumer price inflation and the strain households were still under to reduce debt.

Prepayment refers to households paying more than the minimum monthly repayment amount on their mortgage bonds. Barker said the only reason many households could afford to carry their current debt levels was because interest rates were low.

Sibusiso Gumbi, a home loans analyst at Standard Bank Research, said the deleveraging of household debt was continuing but at a snail's pace and household debt to disposable income was still not far off the peak of 82 percent.

Gumbi said the country's poor economic growth outlook, coupled with feeble economic consumer confidence and rising inflation, painted an uninspiring outlook for consumer spending and house price growth this year was likely to mirror this.

He said house price growth remained fairly muted last year, with Standard Bank's median year-on-year house price growth negative at minus 0.5 percent in December.

Business Report

Commercial properties beat the market

Commercial properties beat the market

Directly held commercial property outperformed equities and bonds in South Africa last year.

The SA Property Owners Association's property index, International Property Databank (IPD), released yesterday, showed property unit trust listed property funds achieved a return of 12.2 percent and directly held property posted a 10.4 percent return last year, compared with 2.6 percent for the equity market and 10.1 percent for bonds.

South Africa's overall commercial real estate market achieved modest growth last year, with a 10.4 percent return.

Uncertainty in global markets, weak local demand and slowing consumer confidence resulted in muted capital growth of only 1.4 percent while income returns were steady at 8.9 percent.

The index is based on a sample of 2 017 properties with a capital value of R204.8 billion at the end of December.

IPD South Africa managing director Stan Garrun said yesterday that the results confirmed the impact of global economic instability and subdued conditions locally on real estate investment performance.

He said high operating costs and a serious mismatch between demand and supply were taking their toll on returns.

"While these figures do not necessarily point to further recessionary conditions, they do indicate that it is a long haul back to pre-2008 levels. The good news is that prime assets are performing well in all sectors. Any economic uplift should quickly release major new income growth for both tenants and landlords, as well as a pent up property development pipeline," he added.

Garrun said fundamentals were placing downward pressure on rentals and bottom line returns even at national level and vacancies rose from 6.6 percent to 6.9 percent, rental growth reduced to 6.2 percent and rental yields softened by 36 basis points to 9.6 percent.

Retail property achieved the strongest capital growth of the three main sectors for the third consecutive year with a 10.1 percent return, comprising an 8.3 percent income return and 1.6 percent capital growth.

The office sector produced a return of 11.2 percent, comprising 1.3 percent capital growth and a 9.7 percent income return. Industrial property managed a return of 11.9 percent, with a 10.4 percent income return and 1.4 percent capital growth.

Business Report

Public input invited for new Rental Housing Bill

Public input invited for new Rental Housing Bill

The public is invited to respond to the redrafted Rental Housing Bill that was introduced on October 28, 2011, in the National Assembly.

The portfolio committee on human settlements met twice to consider submissions, and after much debate, had the Bill redrafted.

Written submissions must reach the committee secretary by 4pm next Thursday, April 5, 2012, with public hearings in parliament scheduled for April 24-25.

A public notice issued by Beauty Nomhle Dambuza, MP and chairwoman of the Portfolio Committee on Human Settlements states, among other things:

"The Portfolio Committee on Human Settlements had embarked on the process of redrafting the Rental Housing Amendment Bill. During the process of public hearings and oversight visits, the committee had witnessed irregularities in the rental sector.

"The committee is of the opinion that the Act should address the challenges the country faces in respect of the rental sector. Therefore, the committee invites all interested persons and stakeholders to submit written comments on the redrafted Rental Housing Amendment Bill, which must reach the committee by 4pm on Thursday, April 5, 2012."

This time around the Bill proposes more radical changes and with focus on tenants' experiencing economic hardships. Below are some of the e-mail changes envisaged and the possible reasons for these changes and intended outcomes:

The introduction of rights and obligations in the heading. Instead of relations between tenants and landlords, it will read "rights and obligations of tenants and landlords". It is not only what parties expect as their rights, but also what they need to give (obligations) to make their relationship successful. Rights therefore exist together with obligations.

Membership will change to seven. A provincial tribunal will function as two committees, each with three members. This will allow tribunals to conduct two hearings, even simultaneously, reduce case backlogs, register a greater number of complaints and reach out to more areas within a province.

Members do not have adequate knowledge, skills and training to perform the tribunal's dispute resolution tasks. The proposed changes will make it the national government's duty to fund programmes to train members and staff of the tribunals. This is essential for tribunals to perform more efficiently, provided the programmes are developed with great care. Several "courses" in the past were more cut-and-paste of legal issues and the reproduction of the Act.

The common-law position of leases will change. Where the common law allowed parties the choice to enter into a lease orally or in writing, all leases must be in writing. A simple pro-forma lease agreement in 11 official languages will be part of the proposed changes. It must also contain "minimum requirements for a lease agreement which may be used as a guideline by the tenants and landlords".

"Landlords must maintain the structure of and provision of utilities to the dwelling." This changes the right landlords had through contract law to pass over their common-law obligations.

Each province must have a Rental Housing Tribunal and all local municipalities are required to establish rental housing information offices. In terms of section 14 (3), the following would be the functions of the information offices:

(a) educate, provide information and advise tenants and landlords on their rights and obligations in relation to dwellings in its area of jurisdiction;

(b) provide advice to disputing parties on reaching solutions to problems relating to dwellings;

(c) refer parties to the tribunal;

(d) comply with any request of the tribunal in terms of section 13; and

(e) keep records of enquiries received by the office and to submit reports in relation thereto to the tribunal on a quarterly basis.

As for poor tenants, the proposed addition includes intervention by national government, making it compulsory for the minister to:

(a) monitor and assess the impact of the application of this Act on poor and vulnerable tenants; and

(b) take such action as he or she deems necessary to alleviate hardships that may be suffered by such tenants.

(6) For purposes of subsection (5), the minister may define criteria based on age, income, or other form or degree of vulnerability that apply to such tenants or group of tenants, and amend or augment the policy framework on rental housing referred to in subsection (3) in such a manner as he or she sees fit."
Written submissions for the Rental Housing Amendment Bill (B21-2011) or enquiries should be made to Koliswa Pasiya at kpasiya-AT-parliament.gov-DOT-za, or by telephone at 021 403 3725, 083 709 8495 or fax 086 666 0984.

Daily News

20 March 2012

Capital Gains Tax 'to affect property pricing'

Capital Gains Tax 'to affect property pricing'

The news about capital gains tax in the 2012 Budget has brought further relief for sellers of primary residences in some respects, but the general increase of the CGT rates will have a definite and immediate effect on the pricing of property.

This is according to Herschel Jawitz, chief executive of Jawitz Properties.

"Primary residences sold from March 1, 2012, for R2 million and more, the first R2m will be exempt from CGT. This is an increase of R500 000 over the previous R1.5m threshold.

"However, there is a substantial increase in the inclusion rate of the taxable net profit individuals realise when they sell, from 25 percent to 33.3 percent. This will translate into an average rate of CGT an individual pays of 13.3 percent, which is substantially up from the previous average of 10 percent," Jawitz says.

"The increase from a 50 percent inclusion rate to 66.6 percent will apply when a company or close corporation sells a property, which translates into an average of 18.6 percent, up from the previous 14 percent, and trusts' rates have increased from 20 percent to 26.7 percent.

"The increase in the inclusion rate when an entity sells a property is a further indication of SARS'S eagerness to encourage investors to take transfer of residences into their names, as entities are to be used mainly for trading purposes."

CGT is not a flat rate charged by SARS. Rather, it's a calculation based on the net profit realised, which is then added to an individual's income and taxed according to the tax tables. Furthermore, it's a rollover tax, which means that, even though the tax is triggered on the date the agreement is signed, it only becomes payable when the income tax return is submitted at the end of the financial year during which the property was sold.

Jawitz says the impact of the increase from 50 percent to 66 percent is substantial. If a home is owned in a legal entity then the actual tax payable to SARS will be as much as a third higher than last year, taking into account that the R2m exemption does not apply.

However, a number of deductions can be made against the gross profit, Jawitz says. These include any renovations that were carried out and which will qualify as improvements to the property; estate agents' commission and VAT on commission; attorneys' fees including VAT; and other fees for other professionals such as architects, draughtsmen, and beetle, electrical, gas and plumbing inspectors. However, costs for routine maintenance, such as painting the property, may not be deducted.

"Nevertheless, the increase in the rate of CGT on properties owned in legal entities continues to make it financially prohibitive to own property in this way. Owners need to make sure that they carefully consider the merits of owning property in legal entities.

"The tax amnesty period for properties to be transferred out of entities and into individual ownership is still available until December 31.

"Owners of properties in trusts, companies and close corporations would be well advised to consider taking advantage of t he amnesty before it expires," Jawitz says.

Weekend Argus (Saturday Edition)

R4 billion property develpment planned for V&A

R4 billion property develpment planned for V&A

Several sites at the V&A Waterfront - SA's most valuable piece of real estate - will undergo a multibillion-rand facelift over the next two decades and will boast more luxury hotels, high-end flats and stylish new office blocks.


An artist's impression of the proposed new development behind the Clocktower precinct.


Today, the Cape Argus can reveal how, over the next 10 years, more than R4 billion will be spent on redeveloping parts of the precinct.

The new construction, including a high-rise residential building - which will double the number of hotels and office blocks - is just part of the massive development planned.

The vision is for the area to become a place for people to work, live and play.


Construction work behind the old grain silo.


The granary, including the massive silos at the back-end of the Clock Tower precinct with their cathedral-like stature, will become the centrepiece where huge office blocks are to be constructed.

Construction has already started and it's expected that this part of the development will cost in the region of R1.5bn.

Another development, near the Buitengracht Street entrance to the Waterfront, will cost up to R2bn and will include high-rise blocks of flats and offices.

Within the next few years, nine new hotels - in addition to the 10 already on the precinct - and blocks of flats will be built on Granger Bay.

The cost of these has not yet been calculated.


An area map of the V&A Waterfront.


Of the 600 000m2 of land at the Waterfront, 380 000m2 has been developed. The remaining 220 000m2 will be developed over the next two decades.

The 80 000m2 area at the back of the Clock Tower would change the derelict side of the historic working harbour into a magnificent area to live, work and play, said Waterfront chief executive David Green.

At 18 000m2, one of the city's biggest office blocks is currently under construction. It will house one of the largest privately-owned Cape Town-based investment management companies.

There were also plans to build 1000 residential units and a number of office blocks at the entrance to the Waterfront, said Green.

It's been just over a year since Growthpoint and the Public Investment Corporation (PIC), representing the government employees' pension fund, jointly bought the Waterfront for just more than R9.7bn.

The deal between them and previous owners, Dubai World's Istithmar PJSC, London & Regional Consortium and a BEE consortium which bough the Waterfront from Transnet in 2006 for R7bn, was signed in June.

Green said they were first concentrating on developing the area around the Clock Tower before moving to the Gateway (near the Buitengracht Street entrance) and further down the line to Granger Bay, where some of the hotels and residential units would be built.
The Granger Bay development would be linked to Somerset Road in Green Point.

"In starting our development in and around the grain silos, we've focused on how the precinct will embrace the historic landmark, the former grain elevator and silo buildings," he said.

"We have land available for development and are doing it in a considered manner while honouring the initial vision for the Waterfront and ensuring it remains the most desirable place for Capetonians to live, work, shop, play, stay and eat.

"Our growth strategy has always been to grow the Waterfront property in precincts, starting small in the biggest possible way, concentrating our initial development to avoid random growth.

"Currently there are already nine precincts within the Waterfront development."

Development at the V&A Waterfront was market-led and meticulously planned, he said.

On the silos, Green said: "These buildings will be the centrepiece of a public plaza. We have not yet determined the use for the grain elevator and silo building, however we are looking at a variety of exciting options and are open to proposals which incorporate a combination of public civic space and commercial development and embrace the landmark historic buildings.

In keeping with the city's policy of "densification", at least one of the buildings at the Gateway will be a high rise, built close to the under-construction Portside, but not rivalling what will become the city's tallest skyscraper.

In November 1988, the V&A Waterfront was established as a wholly owned subsidiary by Transnet to redevelop the docklands around the Victoria and Alfred basins as a mixed-use area with a focus on retail, tourism and residential development, with the continued operation of a working harbour.


In 2006, Transnet sold the Waterfront to Dubai World's Istithmar PJSC, London & Regional Consortium, and a BEE consortium for R7 billion. it was South Africa's most expensive single property transaction.

Last February, the Public Investment Corporation (PIC), owned by the Government Pension Fund, and Growthpoint Properties Limited, announced they had bought the Waterfront for just more than R9.7bn.

About 64 percent (383 833 square metres) has been developed, and about 36 percent (220 035 square metres) remains available for development.

About 21 million people visit the Waterfront annually.

Cape Argus

State rent arrears hurt property owners

State rent arrears hurt property owners

A central Johannesburg building occupied by government entities might be closed down by its owner because of failure to pay rent, Rick Curry, the managing director of property management company Curry Group, said yesterday.



The old JSE building in central Joburg.


Statistics SA and the SAPS have leases on offices in the Stock Exchange Building, off Diagonal Street. Curry said Stats SA owed R1.74 million for rent and had not paid since September 26 last year, and the SAPS owed R1.8 million, with the last payment being on November 10 last year. The owner of the building is Hostprops 85.

Government office accommodation is leased by the Department of Public Works on behalf of client departments.

Lebo Lebiya, who works at the leasing section at the department's regional office in Johannesburg, said yesterday that the department was facing challenges when it came to leases as these had been moved from the regional offices to the national office in Pretoria.

"Top management are taking time to respond in terms of giving us a mandate. It is a national issue and is beyond our control. Decisions are coming from above our level, causing serious problems," he said.
The Department of Public Works is technically under administration by the National Treasury. This is because of several bunglings on leases, including the controversial R1.6 billion police headquarters under former public works ministers Jeff Doidge and Gwen Mahlangu-nkabinde.

In a statement on November 8 last year, the department said that Public Works Minister Thulas Nxesi had a briefing with top management and described how in a short space of time after his appointment he had come to regard the whole area of lease contract management as potentially liable to controversy.

In response, Nxesi had, with immediate effect, instructed the acting director-general, Mandla Mabuza, to withdraw all procurement delegations in the department with regard to the signing and approval of all leases, as well as procurement of certain items.

The statement said an operational task team made up of property management experts would in the interim advise both the department and Nxesi regarding such requests and ensuring there were no backlogs and that service delivery routine was not compromised.

"The minister's action, among others, has been prompted by the public outcry around procurement of office accommodation and other moveable assets for client departments, and this was confirmed by the outcomes of investigations instituted by the government in acknowledgements of certain doubts and misgivings so publicly expressed," it said.

Curry said the statement by Lebiya that the department was facing challenges was unbelievable. He said the Curry Group had issued summonses against the department, which now had 10 days within which to respond.

Curry said: "We are pursuing vigorously the court action. The landlord might give us authority to close the building down. The department ignores our e-mails."

Estienne de Klerk, the executive director of listed Growthpoint, said his company did not have a huge exposure to government leases. However, he added: "Public Works is known to be a difficult client but we are resolving the issues."

Business Report

15 March 2012

Possible plea bargain in Machanik case

Possible plea bargain in Machanik case


Former estate agent Wendy Machanik's case was postponed by the Commercial Crime Court in Johannesburg on Wednesday for a possible plea bargain agreement.

The postponement to May 7 was to allow for negotiations in terms of section 105(a) of the Criminal Procedures Act, which permits a guilty plea in exchange for information, the court heard.

Bail for Machanik and her co-accused Bruce Bernstein was extended. Bernstein was also allowed to have his passport back so he could travel to the United States to see his sick brother.

"The state is in no fear that he is a flight risk," prosecutor Adele Carstens said.

On May 7, a date for confirmation of a plea bargain, if reached, would be set, or if the negotiations failed, a trial date would be set.

The two were arrested last year on charges of conspiracy to commit fraud, failure to keep accounting records and failure to reflect over 100 transfers between the company's trust and business accounts.

The amount involved is around R28 million.

Sapa

14 March 2012

Implications of the Consumer Protection Act on property

Implications of the Consumer Protection Act on property

A tidal wave of press comment on the implications of the new Consumer Protection Act has hit the media in recent months - and among those most concerned about it are South Africa's estate agents and their principals.

For this reason Gunston Attorneys' Commercial Director, Trudie Broekmann, has investigated the impact of the act on estate agents' mandates.

In terms of the act, said Broekmann, the mandated estate agent supplies services and possibly, goods, to the principal, as well as to the potential purchaser, tenant or even seller, where the agent was mandated to find a property for a purchaser to buy. The agent is consequently a 'supplier' as defined in the act, and in that role, needs to ensure that he or she complies with the many relevant provisions of the act when interacting with buyers, sellers and tenants.

"The mandate deals with the relationship between the agent and the principal, and may not contravene the act. In addition," said Broekmann, "it can and should also be used to protect the agent against some of the most onerous legal risks in the act."

The new act, she added, is aimed primarily at protecting individuals and vulnerable consumers. For this reason it will only apply fully to a transaction where the purchaser is a juristic person (defined to include a company, close corporation, trust, association, partnership and body corporate) which has assets and turnover below R2 million, or an individual or individuals. The financial position of the purchaser entity at the time of concluding the agreement is relevant, as well as the position as at date of transfer.

A big question now, said Broekmann, is what estate agents can do to protect themselves under the new legal conditions. This, she said, is necessary because the act contains several 'radical' provisions to protect consumers which did not previously form part of South Africa's body of legislation. The first of these provisions is that, unless both seller and agent are juristic persons, the seller now has the right to cancel the mandate he has signed at any time (even one day after signing) provided he gives 20 business days' written notice to the agent. This right overrides any period signed for in the mandate document. The agent can provide for a cancellation penalty in the mandate, but it must comply with the principles in the regulations to the Consumer Protection Act.

As it now stands, added Broekmann, the act also appears to have the effect that a mandate is automatically renewed on its expiry, so that it runs on a month-to-month basis. Redrafting of mandate agreements will, therefore, said Broekmann, be necessary to resolve the uncertainties here and ensure that mandates can effectively come to an end at the time agreed between the agent and the principal.

Equally radical, said Broekmann, is section 48 of the act which stipulates that all prices and terms affecting the consumer have to be fair, reasonable and just. "This wording," said Broekmann, "is obviously hard to interpret in a particular factual situation, and it is still too early to know how the National Consumer Tribunal will interpret it."

Giving an example, Broekmann said that until now estate agents have sometimes been able to claim commission on signed sales agreements negotiated by them where, through no fault of theirs, the sale did not materialise, e.g. if the buyer absconded. This practice will now in all probability be deemed unfair to the consumer (the seller). An unfair, unreasonable or unjust clause is void, and in certain cases, can mean the entire contract becomes void.

Similarly, said Broekmann, when an agent even in these difficult times is able to sell a very high priced property in a very short space of time the Tribunal (if appealed to) might judge that the agreed commission was not fair, reasonable or just, as it was too easily earned and could authorise a reduction in it. It has to be understood, said Broekmann, that the act will supersede written agreements.

Yet another radical section in the act, said Broekmann, imposes a duty on the supplier (the agent) to draw to the attention of the consumer (usually the seller) 'in a conspicuous manner' and before the agreement is signed any condition which limits the liability of the supplier or imposes a risk or liability on the consumer. Furthermore, the consumer has to sign or initial the condition to show his or her assent.

Section 22 of the act stipulates that estate agents' mandates (as well as all other relevant documents) must be written in 'plain' language so that a consumer with 'average literacy skills' and minimal experience in selling property can be expected to understand it 'without undue effort'.

"These provisions of the act," said Broekmann, "necessitate careful redrafting and layout of agreements and the setting up of a watertight procedure to be followed by the agent before a consumer is asked to sign."

Broekmann added that any statement, whether made verbally or in the course of direct marketing or in any marketing literature, has to be totally free of statements that could be deemed to be misleading. If it can be shown later that the buyer was misled in any way, or even that the agent made a statement without reasonable grounds for believing it to be true, then not only can the agent be held responsible, but also possibly the seller, and the penalties for breach of the act are severe. Broekmann recommends that principals insist that an indemnity in their favour is included in the mandate, in case the agent contravenes the act.

The act stipulates that the agent has to provide a written sales record (which complies with section 26 of the act) to every consumer to whom he or she has provided services or goods. This record would include such details as the agent's full name, VAT registration number, if any, their address, the dates on which the agreement was concluded and the services were rendered or goods supplied, a description of the goods or services and the price.

The agent's services will now also have to comply with certain 'warranties of quality'. Here the act calls for the 'timely performance and completion of services' as well as 'timely notice of any unavoidable delay in the performance of these services'. It also stipulates that the manner and the quality of these services should be what the consumer is 'entitled to expect'.

"An interesting aspect of this section," said Broekmann, "is that a demanding seller might read it as giving him the right to complain to the National Consumer Commission if a sale does not materialise or if the sale takes too long. This would be a difficult proposition to defend - but it is a possibility."

Just how serious non-compliance with the act might be is shown by the penalties that the Tribunal is entitled to impose. These can amount to 10% of the agency's annual turnover in its previous financial year or R1 million, whichever is greater.

Furthermore, section 113 of the act provides that the principal is 'jointly and severally' liable for the misdemeanours of his estate agents. This is yet another reason why Broekmann recommends that principals insist on an indemnity before signing a mandate.

"Estate agents, for their part," she said, "must familiarise themselves with the act, have their documents redrafted by a consumer law expert and take professional advice if they want to avoid landing themselves in serious difficulties."

Gunston Attorneys Press Release

Concourt sends tenants in lease row to tribunal

Concourt sends tenants in lease row to tribunal

A group of tenants whose leases were cancelled to make way for more expensive apartments must take the matter back to the Gauteng Rental Housing Tribunal, the Constitutional Court has ruled.

"The tribunal is empowered to determine whether a landlord committed an 'unfair practice', and it might accordingly rule in the tenants' favour," said Justice Edwin Cameron.

Aengus Lifestyle Properties, which specialises in buying old Joburg buildings and revamping them into modern apartments, had given notice to tenants of Lowliebenhof, Braamfontein, leases.

Aengus wanted to revamp the building so it offered the tenants alternative accommodation, with the option to stay on but paying higher rent.

The tenants lodged a complaint with the tribunal, a body established under the Rental Housing Act, but mediation was unsuccessful.

When the landlord brought eviction proceedings against them in the High Court in Joburg, they withdrew their case and challenged their eviction.

Cameron, reading the majority judgment, said when the matter was escalated to the High Court and Supreme Court of Appeal, those courts found the Rental Housing Act did not apply and that the landlord was entitled to terminate the leases with written notice.

However, the Concourt found the two previous courts failed to give adequate weight to the act and that the landlord's conduct may have amounted to an unfair practice. The tenants had not withdrawn their complaint of unfair practices, and so that complaint and any other the landlord might have about the rental rate should be considered by the tribunal.

The court gave the tenants until May 2 to lodge a complaint with the tribunal.

Pretoria News

13 March 2012

Joburg residents complain about illegal buildings and land use

Joburg residents complain about illegal buildings and land use

The lack of by-law enforcement, especially around illegal buildings and land use, is the main concern for residents living in Joburg's Region B, which covers Sandton and Alexandra.

At a mayoral roadshow held to hear residents' main concerns in their area, the issue of the flagrant disregard for building regulations by property owners came to the fore.

Residents of suburbs such as Riverpark in Alexandra and Orange Grove complained that nothing was being done about illegal buildings and the erection of shacks.

Riverpark residents said the number of shacks going up in the area was of concern because it was leading to overcrowding and illegal land use.

There were also no toilet facilities, which was leading to shack dwellers using the Jukskei River for their ablutions.

In suburbs such as Lombardy East, property owners were building back rooms and renting them out at a handsome profit.

In one case, a court order was obtained for the demolition of the rooms, but this was ignored by the owner, who simply continues renting out the rooms.

Other areas of concern that Alex residents raised were: the lack of an integrated master plan for Alex; failure to manage and allocate housing; basic service delivery issues such as water leakages, dumping, littering and illegal connections; uncontrolled land invasion; the ratio of toilets versus the number of people who use them, and dilapidated sewerage infrastructure; rodent control; and illegal dumping.

In the wider Region E areas, ineffective law enforcement was the main gripe.

The invasion and overcrowding of abandoned houses that were leading to unhealthy living conditions; illegal activities; incorrect billing; the inability of people's centres and the Joburg Connect centre to assist residents in resolving their queries; neglected provincial and councilowned property; and vagrancy were the main issues. City of Joburg member of the mayoral committee for finance Geoff Makhubu addressed the gathering, standing in for mayor Parks Tau.

He said all the concerns would be conveyed to the relevant departments.

Makhubu expressed concern at the high number of residents complaining about the lack of building by-law enforcement.

"I can see how widespread this problem is - it cuts across all areas," he said.

The Star

12 March 2012

Building index climbs most in nine months

Building index climbs most in nine months

"Investors are seeing opportunity" – analyst.

Construction-stocks gauge rose the most in nine months on expectations that the outlook for the industry is improving.

The ten-member FTSE/JSE Africa Construction & Building Materials index climbed 2,5% to 44,81 at the close in Johannesburg, its biggest increase since June 7. Pretoria Portland Cement Co led gains.

“The construction sector may have bottomed” after the index fell 26% last year, Henre Herselman, a derivatives trader at Nedbank Group’s BoE Stockbrokers in Johannesburg, said by phone. “Investors are seeing opportunity.”

President Jacob Zuma announced plans for a “massive” infrastructure drive in his February 9 state-of-the-nation speech to help spur investment and support growth in the continent’s biggest economy. The Treasury allocated R844,5 billion to telecommunications, energy, transportation, housing and water projects in the three years through March 2015.

Pretoria Portland Cement, South Africa’s biggest cement producer, rallied 4,1% to R31,35, bringing its gain this year to 14%. Murray & Roberts Holdings, the second-largest construction company, rose 3% to R29,25. Group Five added 1,7% to R27,72 rand while Aveng advanced 1,9% to R36,70.

Sapoa mulls court action on surcharge

Sapoa mulls court action on surcharge


The South African Property Owners Association (Sapoa) is on the verge of taking the eThekwini Municipality to the High Court in a legal effort to have the development surcharges that are being levied against property developers declared illegal and thus withdrawn from implementation.

Developers of commercial and multi-unit residential property are having to shell out for this development fee, which the municipality says is a surcharge for infrastructure, as well as the traditional development charges for new projects. This is affecting the feasibility of such developments as well as making the cost of buying property in the Durban area extremely high.

In November 2010, Sapoa made written representations to the municipality on what were then its 2010/11 tariffs, which included a development surcharge.

Sapoa says the surcharge is indistinguishable from the development charge proposed in the draft policy. When this was repeated in the 2011/2012 tariffs, Sapoa took a stand on the matter, and is in the process of challenging the legality of what was described in the draft policy as a "development charge".

"Notwithstanding what Sapoa considers to be the illegality of the development surcharges, a review conducted on its behalf shows that the inclusion of a development surcharge tariff, unique to ethekwini, makes i t the most expensive municipality in which to undertake a number of types of commercial development," says Sapoa's legal services manager, Portia Matsane.

The review tracked the municipal tariffs associated with four development scenarios, namely residential, regional retail centres, commercial office blocks and large industrial factories.

"This represents a significant challenge in the city's efforts to attract new investment and development. If the surcharge is not included in ethekwini's tariff structure, the municipal area compares very favourably to the other major metropolitan areas and also compares favourably from the point of view of consumption charges," Matsane says.

Sapoa believes that negotiations with government and organs of state on key policy issues affecting property developers and owners will be critical in improving property development in SA, as there are many and varied stakeholders that are key players in the property sector.

Sapoa says in the past it has engaged constructively with ethekwini Municipality on many issues, trying to foster the best interests of both the municipality and developers, and to find solutions to the challenges of infrastructure investment.

"We are doing so now in relation to the draft development charges policy, and remain willing to do so in the future," says Matsane.

"The decision to pursue litigation against the municipality has, however, been forced upon us by the unlawful nature of the surcharge, its major financial implications for development, and the fact that, contrary to past practice, the municipality has not at any stage consulted or engaged with Sapoa or the broader development community on its imposition."

Call Matsane on 011 883 0679.

Weekend Argus (Sunday Edition)