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.

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