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19 October 2012

Sars toughens up on property transfers - Property

Sars toughens up on property transfers

Transfers will be delayed unless all parties have their taxes in order.

From this month (October 2012), a new system introduced by the SA Revenue Service (Sars) means that the transfer of any property will be subject to delay unless all the parties involved - including the estate agency - have their tax affairs in order.

A new transfer duty e-filing system is being introduced that requires the transferring attorney to fill in not only the tax numbers of the property buyer and seller, but also that of any estate agency involved - and to provide proof that those tax numbers are valid.

Clearly, Sars wants to ensure that the tax returns and payments of everyone involved in a property sale are up to date.

The tax authority has for some time now been checking to see that property sellers have paid any and all tax amounts owing before it will issue the transfer duty receipts required for transfers to be finalised.

It also has the power to instruct a transferring attorney to first pay any amount to tax that is outstanding before a property seller can receive the remainder of the proceeds of the sale.

Similarly, Sars has taken a dim view of homebuyers who are trying to acquire a property while they have any tax debts outstanding - and now, it seems, transfers could also be delayed or even stopped if the estate agency involved has not paid all its taxes - or unless it makes an arrangement to pay all or some of the commission due from the sale towards its tax debt.

*Berry Everitt is MD of the Chas Everitt, international property group

Rules of renting when government owns the property

Rules of renting when government owns the property

What are the rights of a tenant living in a dwelling owned by either the national, provincial and local governments, or by social housing institutions?

Is there a difference between a private landlord, the government or social housing institutions in respect of a residential tenancy?

Social housing institutions receive subsidies from the government to provide rental housing, with tenants as beneficiaries of subsidised rentals.

Rights do not exist without responsibilities, so the question may be re-phrased as: "What rights does the government or social housing institutions have regarding a tenant?"

Section 26 of the constitution stipulates that every citizen has the right of access to adequate housing and the government must take reasonable legislative and other measures to make this right a reality - as long as it has the resources to do so.

The Rental Housing Act, 50 of 1999, refers to the government's responsibility to create mechanisms to promote the

e-mail government, as landlord, must maintain the dwelling.

In this tenant-governmentlandlord relationship, either party can lodge a complaint with the provincial Rental Housing Tribunals to terminate an unfair practice.

The government can claim arrear rentals through the tribunal, or obtain a ruling to stop overcrowding.

An aggrieved tenant can approach the tribunal to compel the government to carry out repairs, or to maintain the dwelling.

Parties can also exercise their common law rights, or follow legal guidelines laid down by the courts.

Should the government fail or refuse to carry out necessary repairs, the tenant can place the landlord on terms. A letter or notice should give a 14-day period for the landlord to do the repairs.

If the landlord refuses or fails to respond, the tenant can attend to the repairs himself/ herself and deduct the costs of such repairs from the rent, or claim a rental reduction.

Receipts and cash sale slips are important for proof of money spent.

Other options available to a tenant include cancellation of the lease or suing the landlord for breaking the lease contract.

However, such repairs or maintenance should not be merely to remedy an inconvenience, but where the use and enjoyment of the dwelling would be impossible without the repairs.

Repairs may not be an excuse to prevent or delay the landlord from exercising his rights, for example, lawful eviction, claim for arrears and nuisance.

It would be wise to consult an attorney for advice or lodge a complaint with the tribunal.

Where the tribunal issues a notice to parties for mediation, or summons to appear before it for a hearing, the body must maintain its independence.

Tribunals presently have the name of the department of housing/human settlements on the letterheads and other documents.

Tenants become "suspicious" of receiving a fair and just resolution to their disputes if the party against whom they complain is inseparably linked to the commissioners or members involved in adjudication or mediation.

Tenant Issues
Dr Sayed Iqbal Mohamed
Chairperson, Organisation of Civic Rights
Daily News

15 October 2012

Property transfers: who gets the interest?

Hi Readers

This is extremely interesting to me because it highlights the need for parties to property transactions to engage the use of industry experts with proven track records when selecting a conveyancing attorney.

I simply can't fathom why this should be an issue and yet less than a week before this my father referred me to a similar article in a magazine.

If the attorney truly acts on behalf of his/her clients and has their best interests at heart, the SURELY he/she should ensure that the client (buyer and seller) exit the transaction with the best financial result possible.  This appears to me to be so self-evident that I fail to understand how attorneys can possibly act differently.

(At Shepperson Attorneys, we continually seek the best Section 78(2A) products for our clients and ensure that as soon as possible after being instructed our Clients are presented with the necessary Mandate for us to invest in such an investment on their behalf as soon as the funds arrive in our Trust Account.  Isn't that logical?)

However, it seems as if it is not that logical because apparently many attorneys operate differently as you will see from the article below. (P.S. Be careful its quite a long post.)


Property transfers: who gets the interest?

Buying a property is an involved and often daunting process, even if you're an experienced buyer. Probably the last thing on your mind is the interest your money earns while it is held in trust until the transfer is finalised.

Interest certainly wasn't top of mind for Gareth and Jenny Richards when they handed R2.6 million to self-employed conveyancer Lana Ebersöhn to pay for their home in Langebaan on the Cape West Coast last year.

But the following clause in the offer to purchase had not escaped the couple's attention: "The purchase price shall be payable to the transferring attorney ... to be held in a special interest-bearing trust account ... until date of registration of transfer ... with all interest to accrue to the purchaser, save for an administration and finance charge fee not exceeding R100."

Although the interest rate wasn't stipulated in the offer to purchase, the Richards expected to earn about R17 700 while their money was invested for the two months they assumed it would take for the transfer to be effected. (Their money had been earning R11 500 a month in a money market fund, which was paying interest of about 5.3 percent a year. In two months, they would have earned R23 000.) So you can imagine the Richards' shock when they were offered a paltry R369 in interest - or 0.01 percent - for the two months that their money was invested by Ebersöhn.

When the couple questioned Ebersöhn about this apparent error, they were told it was "the correct amount of interest ... calculated in accordance with the rules between the Law Society and the banks. It is totally out of our control."

Trust account banking is regulated by the Attorneys Act. The Act says that unless you specifically instruct an attorney in writing that the interest earned on money that the attorney holds on your behalf is for your benefit, it accrues to the Attorneys Fidelity Fund (see "Where does the interest go?", below).

Ulrik Strandvik, conveyancer and director of Gunstons Attorneys in Cape Town, says you, as a buyer, must instruct a conveyancer to invest your money on your behalf if you want to receive the interest. "Although the offer to purchase may state that the deposit is to be paid to the attorney and interest is to accrue to the purchaser, it is important that the purchaser gives the attorney written instruction to invest the funds," he says.
It is standard practice for a conveyancer to have the buyer sign an "instruction to invest" document, Strandvik says.

He says a conveyancer is entitled to charge you a fee for administering your investment. This takes the form of an administration fee, or a percentage of the capital invested, or a percentage of the interest earned. However, not all attorneys charge a fee for administration.

It would be unethical for a conveyancer not to draw your attention to a clause in an offer to purchase relating to how your money is invested, he says.

The interest rate that applies to money invested on your behalf is negotiated by the conveyancer and the bank. It is usually based on call rates and on how much is invested, Strandvik says.

When the Richards questioned Ebersöhn about the interest they earned, she referred them to Absa's Vredenburg branch, which gave them a schedule of the interest rates that apparently applied in Saldanha, Vredenburg and Langebaan. According to the schedule, investments of more than R100 000 would earn interest at a rate of 1.1 percent a year. But the Richards were offered interest of about 0.08 percent a year.

Ebersöhn says when she queried this with Absa, she was told the interest rates had changed and that the bank had informed only its larger clients.

Absa says the Richards' money was invested in a call account that Ebersöhn opened via internet banking, "where a generic system rate of 0.01 percent was applied". Arrie Rautenbach, head of retail markets at Absa, says Absa was not notified by Ebersöhn that the account was a section 78(2A) account (see "Types of trust accounts", below).

"The general practice in Absa for attorneys is that they indicate which accounts are opened in terms of section 78(2A), and the third-party details [the purchaser's details] are captured under the account name.

The rates on these accounts are negotiated based on the portfolio holding of the attorney.

"Absa also offers a fully automated Attorney Management System (AMS) where attorneys can open, manage and close section 78(2A) trust accounts online. Mrs Ebersöhn, however, is not a user of AMS."
Ebersöhn says up until now Absa has prevented her from using AMS, and the bank told her that her business was too small to be accepted on the system.

Richards says he and his wife want only what is due to them. He says he holds Absa morally liable for having had the benefit of his money and Ebersöhn liable for unprofessional conduct. He has laid a complaint against her with the Cape Law Society (CLS) for failing to show due care when investing his money. He says Ebersöhn had a duty to ensure that the return on his investment was fair and reasonable.

"When money is held in trust, a trustee is expected to show a greater duty of care to those funds than they would to their own money. Do you expect me to believe that if she had an investment of this magnitude, she would place her own money without asking what interest she would receive?"

Richards has issued Ebersöhn with a demand for payment of R12 000 in lieu of the interest he believes he should have earned. This is the maximum amount that can be claimed in the Small Claims Court. Ebersöhn believes she is not liable.

Frank Dorey, acting director of the CLS, says the matter has been referred to the society's disciplinary committee for consideration at its meeting next month.

According to the Guidelines for Conduct of Property Law Matters, found on the society's website (www.lssa.org.za), one of the duties that a conveyancer has to a buyer is to: "Invest all moneys paid by the purchaser towards the purchase price in an interest-bearing account in terms of section 78(2A) of the Attorneys Act, as is normally provided in the agreement of sale or, if not, with the written consent of the purchaser as stipulated in the said Act. Ensure that the requirements of the Act are complied with and remember that you have a duty of care in this regard."

Ebersöhn says she was informed by Peter Pearson, legal officer in the disciplinary department at the CLS, that "this matter is now much more than just a complaint against me. They have now involved Absa, as there are more firms (members) in the same position that I am."

Ebersöhn says she has provided proof to the CLS that the account "makes reference to section 78(2A), as well as the name of Mr Richards".


Buyer beware: unless you stipulate that you want to be paid the interest your money earns when you entrust it to a conveyancer, the interest may be paid to the Attorneys Fidelity Fund and, in effect, be used for attorneys' indemnity cover.

The Attorneys Fidelity Fund website (www.fidfund.co.za) says the fund and the legal profession have negotiated "special arrangements on a national basis with most of the commercial banks" for money invested in trust accounts where the interest is paid to the Attorneys Fidelity Fund.

"Where the interest is paid to the Attorneys Fidelity Fund" means these special rates apply only to money in attorneys' trust accounts or money invested on behalf of the fund. In other words, these rates do not apply to money invested on your behalf - and you will receive the interest earned on your money only if you explicitly instruct a conveyancer in writing to invest your money on your behalf.

Gareth Richards describes as "legalised theft" the fact that you could lose the interest your money earns.
"Why should attorneys effectively have their malpractice insurance paid by unsuspecting clients?"
Last year, Richards entrusted to conveyancer Lana Ebersöhn R2.6 million to be invested in an interest-bearing account until transfer was effected.

Ebersöhn invested Richards' money with Absa in an account where the interest was for his benefit, but where it earned only 0.08 percent. At the time, Absa was paying interest of 4.1 percent a year on amounts exceeding R1 million held in trust accounts where the interest is paid to the Attorneys Fidelity Fund.

Although attorneys' clients are not entitled to the same rates that the fund has negotiated with the banks, you may be forgiven for expecting your attorney to negotiate similar rates for you.

Andrew Stansfield, finance executive at the Attorneys Fidelity Fund, says it is not part of the mandate of the fund to negotiate interest rates on section 78(2A) client investments. "This query should be directed to the law societies in their capacity as regulators of the profession."

Stansfield says the interest paid to the fidelity fund is used to provide a base layer of professional indemnity insurance and to compensate you in the event that the money you entrust is stolen by an attorney.

The protection provided by the Attorneys Fidelity Fund is to encourage the public to use the services provided by legal practitioners with confidence.

Ulrik Strandvik, conveyancer and director of Gunstons Attorneys in Cape Town, says with trust accounts where the interest accrues to the Attorneys Fidelity Fund, attorneys pay the interest to their local law society. The law society then pays it over to the fund.


The Attorneys Act provides for three types of bank accounts for money held in trust:

* Section 78(1) - current bank accounts;
* Section 78(2)(a) - investment accounts for trust money of various clients; and
* Section 78(2A) - investment accounts for client money.

Frank Dorey, acting director of the Cape Law Society, says interest that accrues in terms of sections 78(1) and 78(2)(a) is payable to the Attorneys Fidelity Fund, whereas interest that accrues in terms of section 78(2A) is payable to the person on whose behalf the funds are held.

Andrew Stansfield, finance executive at the Attorneys Fidelity Fund, says every practising attorney is obliged to channel all entrusted funds via a section 78(1) trust account, before opening individual section 72(2A) accounts for the benefit of clients. "This provides an audit trail."

He says an attorney may transfer a portion of the pooled balance in his or her section 78(1) account to a section 78(2)(a) account in order to improve the interest return to the fund.
Regardless of the type of trust account used, you can claim against the Attorneys Fidelity Fund should you suffer a loss if, for example, an attorney steals your money, Stansfield says.


Ulrik Strandvik, a conveyancer and director of Gunstons Attorneys in Cape Town, has this advice for buyers who put down a deposit:

* Make sure that when you pay your deposit to the conveyancer - or as soon as possible thereafter - you sign an instruction to the conveyancer to invest your funds. The conveyancer should have a standard instruction form for the buyer to complete.

* Find out from the conveyancer the interest rate you will earn on your deposit so that there will not be any nasty surprises down the line.

The conveyancer may not be in a position to negotiate with the bank on your behalf, but some conveyancers have the option to invest with various banks and can shop around to invest with the one that offers the best interest rate.

* Ask your own attorney to check the offer to purchase before you sign it. He or she will be able to guide you as to what questions to ask the conveyancer about the deposit and how it will be invested.

Angelique Arde
Personal Finance

Lack of loans lead to lower property prices and rising rents

Lack of loans lead to lower property prices and rising rents

In the past few years there have been dramatic changes in global property trends, and SA has not been unaffected.

In relatively stable and sought after areas such as the Durban suburbs of Durban North and La Lucia, the property market has plummeted to a low then gradually recovered to a stable but slow pace, according to Carol Reynolds, Pam Golding Properties' area principal for these suburbs.

"The US housing crisis is finally coming to an end, as economists note a small but positive rise in house prices and general, renewed buyer confidence. South Africa's residential market has been through some troughs, but on the whole, we have managed to buffer ourselves somewhat from much of the travesty on the global front."

Reynolds says sentiment is a key driver in market activity and the outlook this year has been more positive than that last year. However, conservatism is the "new normal" and buyers and developers are adopting a conservative approach to purchasing property. The banks are tightening their lending criteria when it comes to developments, and there is still an air of caution concerning risk assessment.

"Perhaps the most notable trend is the increased activity in rental housing. Although house prices have stagnated with very little yearon-year growth, rental returns on residential property have risen notably. In 2008, returns were sitting at 4 to 5 percent, whereas we are now seeing an increase in demand for rental stock, and a consequent rise in rental income.

"Landlords can expect returns of about 6 percent, and depending on the area, some nodes will generate returns of 7 or 8 percent. However, with new municipal regulations on utilities landlords are responsible for outstanding municipal debts, so they are opting for managed leases rather than procurement leases because the administration involved is becoming so onerous.

"We have noted an increase in the installation of meters for utilities as landlords try to alleviate the burden of liability for their municipal accounts. Indeed, we are recommending that investors who have a portfolio of rental properties equip each unit with an electricity meter.

"Companies have also started offering water meters, and we expect these will become the norm."

Reynolds says units in complexes and security estates offer the best returns on investment. Security continues to play a substantial role in influencing price trends.

Most corporate tenants won't even consider freestanding houses - and prefer to sign leases in secure estates and complexes. Investors would do well to buy homes in estates and complexes that offer solid prospects from a rental income perspective.

Reynolds says that although the banks have relaxed their lending criteria this year, there are still many unqualified buyers who are unable to secure home loans and are obliged to rent. This drives house prices down and rental income up.

"The reduction in the lending rate has certainly been welcomed and we hope it will facilitate more property buying. We are certainly starting to see signs of renewed activity. Whether this is driven by ... low interest rates, or by a seasonal shift into the summer months, the spirit of optimism is noticeable.

"In the perennially popular suburbs of Durban North and La Lucia, buyers are active in the R1.5 million to R3m market. This sector is buoyant and there are stock shortages in certain nodes. However, finance is the Achilles heel in this sector.

"An encouraging sign is that for the first time in two years, the upper end of the market is also beginning to recover. Homes priced at over the R5m mark are attracting interest at last, and this is a very positive indicator... It's interesting to note that this price range is driven by cash sales or sales with smaller bonds, so finance is not an issue.

"The big issue in this tier of the market is unrealistic pricing. Sellers are still expecting high prices for their homes, and buyers at this level are extremely... knowledgeable about market trends, so only homes that are correctly priced are being sold.

"To summarise, although house prices have remained relatively flat this year, the rental market has shown noticeable growth.

"We expect more activity in the last few months of the year across the board, particularly for rental properties."

Weekend Argus (Sunday Edition)

Number of home loans fall to all-time low!

Number of home loans fall to all-time low

The number of mortgage bonds issued fell to an all-time low of about 9 000 a month in the third quarter from a peak of more than 50 000 a month in 2007, according to property analysts Lightstone.

Tony Clarke, the managing director of the Rawson Property Group, said yesterday that while this might look discouraging, those in the property market took heart from other data that showed the loan to value ratio was improving steadily for all the major banks except Investec, which was coming off a very high base.

Clarke said this data showed banks were willing to approve bigger loans and the average value of bonds approved had risen steadily, from about R400 000 in 2004 to about R800 000 this year. The value of second bonds had also increased, to an average of R350 000 from about R300 000 last year, he said.

Clarke said the government would be encouraged by the 16 percent year-on-year increase in the number of bonds issued in the affordable category, where house values range from R250 000 to R700 000. The number of bonds approved for township properties had also increased by 13 percent.

"Over 45 percent of all bonds now issued are for homes valued at under R1 million, indicating that the wealth imbalances in South Africa are being slightly ironed out," he said.

Clarke said the Lightstone report revealed that the big four retail banks in South Africa - Absa, FNB, Nedbank and Standard Bank - plus Investec and SA Homeloans, had to a large extent solved the 2008/9 unpaid mortgage crisis.

However, he said, this had resulted in the very significant cutback in the number of loans approved, which was the major factor preventing a full-scale recovery in the residential property sector.
Clarke added that there had been a steady decline in sale in execution notices and in the actual sales carried out following such notices.

He said the number of sales in execution had dropped to a few hundred a month by the third quarter, from more than 3 000 a month in 2009. In the second quarter of 2009, sales in execution were still above 2 500 a month, he said.

Clarke said Nedbank had the largest number of properties in possession in 2008/09 but all banks were now at almost the same level. This big improvement had resulted in less than 5 percent of sale in execution notices now resulting in the home being sold, he said.

The latest Lightstone survey revealed that home prices were rising by 6.5 percent year on year and Clarke believed the recovery would continue.

Business Report