How to Protect Yourself in Property Transactions: Essential Legal Checks in South Africa

Property transactions are among the most significant financial commitments you’ll make, whether you’re buying your first home, investing in real estate or selling a property. Given the complexity and potential risks involved, it’s essential to protect yourself by conducting thorough legal checks. This article outlines the key legal steps you should take to ensure your property transaction in South Africa is secure and legally sound.

1. Verify the Seller’s Ownership and Authority

Before proceeding with a property transaction, it’s crucial to confirm that the seller is the rightful owner and has the legal authority to sell the property.

Steps to Take:

• Title Deed Verification: Obtain a copy of the title deed from the Deeds Office. This document confirms who the legal owner is and whether there are any restrictions on the property.

• Check for Power of Attorney: If the seller is acting on behalf of the property owner (e.g. through a power of attorney), verify that the power of attorney is valid and properly executed.

2. Investigate the Property’s Title

Ensuring that the property has a clean title is essential to avoid future legal disputes. A clean title means the property is free from encumbrances, such as liens or disputes, that could affect your ownership rights.

Key Checks Include:

• Title Deed Search: Conduct a title deed search to verify the legal ownership and check for any encumbrances, such as bonds, servitudes, or caveats.

• Property Boundaries: Verify that the physical boundaries of the property match those described in the title deed. Boundary disputes can lead to costly legal battles if not resolved upfront.

3. Conduct a Municipal Rates Clearance Check

Before a property can be transferred, the seller must obtain a municipal rates clearance certificate. This certificate confirms that all municipal rates and taxes have been paid up to date.

What to Verify:

• Outstanding Rates: Ensure that all outstanding rates, taxes, and utility bills have been settled. The rates clearance certificate is usually valid for 60 days, so the transaction should be completed within this period.

• Special Levies: If the property is part of a sectional title scheme or homeowners’ association, check for any special levies that may be due. These can significantly impact the overall cost of the transaction.

4. Review the Offer to Purchase (OTP) Carefully

The Offer to Purchase (OTP) is a legally binding contract between the buyer and the seller. It outlines the terms and conditions of the sale, including the purchase price, payment terms and any special conditions.

Important Clauses to Consider:

• Voetstoots Clause: Many OTPs include a voetstoots clause, which means the property is sold “as is.” Be cautious of this clause, as it limits the seller’s liability for defects. Ensure that you conduct a thorough inspection of the property before signing the OTP.

• Suspensive Conditions: These are conditions that must be met for the sale to proceed, such as the approval of a home loan or the sale of another property. Ensure that these conditions are clearly stated and understood by both parties.

• Deposit and Payment Terms: Verify the amount and payment terms for any deposit required. Ensure that the deposit is held in a secure trust account by the estate agent or conveyancer.

5. Inspect the Property Thoroughly

A thorough property inspection is essential to identify any defects or issues that could affect the value or usability of the property.

Inspection Tips:

• Hire a Professional Inspector: Consider hiring a professional property inspector to assess the structural integrity, plumbing, electrical systems, and overall condition of the property.

• Create a Snag List: If you’re buying a new or off-plan property, create a snag list of any defects or incomplete work. Ensure that these issues are addressed before the transfer is finalized.

6. Understand Transfer Duty and Other Costs

In addition to the purchase price, there are other costs associated with property transactions, such as transfer duty, conveyancing fees, and bond registration costs.

Financial Considerations:

• Transfer Duty: This is a tax payable by the buyer on the purchase of the property. The amount depends on the property’s value and must be paid before the transfer can be registered.

• Conveyancing Fees: These are legal fees paid to the conveyancer handling the property transfer. Ensure that you budget for these costs and understand what they cover.

• Bond Registration Costs: If you’re financing the purchase with a home loan, you’ll also need to pay bond registration costs. These fees are payable to the conveyancer who registers the bond.

7. Engage a Qualified Conveyancer

A conveyancer is a specialized attorney who handles the legal aspects of property transactions. Engaging a qualified conveyancer is crucial to ensuring that the transfer process is smooth and legally compliant.

Role of the Conveyancer:

• Drafting and Reviewing Documents: The conveyancer will draft and review all legal documents, including the OTP, transfer documents, and bond registration papers.

• Conducting Searches: The conveyancer will conduct various legal searches, including title deed verification and municipal clearance checks, to ensure that there are no legal obstacles to the transfer.

• Registering the Transfer: Once all legal requirements are met, the conveyancer will lodge the necessary documents with the Deeds Office to register the transfer of ownership.

8. Check for Compliance with Building Regulations

If you’re buying a property with existing structures, it’s important to ensure that all buildings and improvements comply with local building regulations and zoning laws.

Compliance Checks:

• Building Plans: Request approved building plans from the seller and verify that the property matches these plans. Unauthorized structures can lead to fines or even demolition orders.

• Zoning Laws: Confirm that the property is zoned for its intended use, whether residential, commercial, or agricultural. Non-compliance with zoning laws can limit your ability to use the property as planned.

9. Consider Future Development Plans

It’s wise to research any future development plans in the area that could affect the value or desirability of the property.

Research Tips:

• Municipal Development Plans: Check with the local municipality for any planned infrastructure projects, such as new roads, schools or commercial developments, that could impact the property’s value.

• Environmental Considerations: If the property is near environmentally sensitive areas, investigate any restrictions or future plans that could affect your use of the land.

Conclusion

Protecting yourself in property transactions requires careful planning, thorough legal checks, and the guidance of experienced professionals. By following these essential steps, you can minimize risks and ensure that your property purchase or sale is secure and legally sound.

At Barter McKellar, our team of experienced conveyancers and property law experts is dedicated to safeguarding your interests in every property transaction. Contact us today for personalized legal advice and support to ensure your property dealings are handled with the utmost care and professionalism.