Are you a foreigner or non-resident looking to purchase property in South Africa?
South Africa follows a system of land registration where every piece of land is reflected on a diagram and ownership recorded in one of the regionally located Deeds Registries where documents are available for public viewing. South Africa is reputed to have one of the best deeds registration systems worldwide with an exceptional degree of accuracy and of tenure being granted.
There are no restrictions in respect of property ownership by non-residents. In the event of a non-resident purchasing property in South Africa with the intention of residing for longer periods, a residence permit will have to be applied for.
BUYING A PROPERTY
All contracts to acquire land must be in writing, contain certain prescribed information and be signed by both buyer and seller to be valid and legally binding. Once an Agreement of Sale has been signed by both parties it represents a valid and binding contract from which neither party can withdraw without incurring legal consequences.
The registration of a property transaction is handled by a specially qualified legal practitioner known as a conveyancer. It is customary for the seller to appoint the conveyancer. The costs attendant thereon are for the account of the purchaser. The conveyancer prepares the requisite transfer documentation which, after signature by the purchaser and the seller and receipt of various clearances required by government departments, is lodged in the regional Deeds Registry. The deeds are subject to a stringent examination process whereafter they are made available for registration. On the date of registration of transfer all existing mortgage bonds registered over the property are cancelled, simultaneously with the registration of any new mortgage bonds by the purchaser in favour of the bank granting financial assistance. The purchaser is recorded as the new owner of the property and the purchase price is paid to the seller.
Brokerage is payable where an estate agent is responsible for the sale. The seller is also responsible for the cost of procuring compliance certificates where necessary. If the seller’s property is bonded, the seller is liable for the costs relating to the cancellation of the mortgage.
The purchaser is responsible for the payment of transfer duty, transfer costs and the costs of registering any new mortgage bond over the property.
SIGNATURE OF DOCUMENTS
Documentation prepared by the conveyancer pertaining to the registration of transfer of the property and any mortgage bond to be registered over the property is required to be signed in black ink and must be authenticated if signed outside South Africa.
Where the purchaser is married according to the laws of a foreign country and a mortgage bond has been applied for, the spouse of the purchaser will be required to assist the purchaser in signing the mortgage bond documentation and transfer documents.
HOW CAN FOREIGN FUNDS BE BROUGHT INTO SA FOR A PROPERTY ACQUISITION?
Foreign funds can be paid into any nominated bank account in South Africa. This account will usually be the trust account of the estate agent or transferring attorneys into which the deposit for the property and the balance of the purchase price is paid. These funds will be invested for the non-resident’s benefit. When a non-resident transfers funds from a foreign source into a South African bank account, a record known as a “deal receipt” is kept of the foreign funds received by the South African bank. This is an important document which must be retained for purposes of repatriation of the funds.
CAN MONEY BE BORROWED IN SA TO PURCHASE PROPERTY?
The South African Reserve Bank considers all foreigners not having their domicile in South Africa as non-residents. Non-residents are restricted in their borrowing ratio to an amount equal to the amount paid for in cash.
ON SALE OF THE PROPERTY, CAN THE MONEY BE TAKEN OUT OF THE COUNTRY?
Understandably, this is without doubt the number one concern of non-residents considering investing in South Africa. The answer to this question is simply, yes. Money from a foreign source together with any profit, proportionate to that non-resident’s shareholding in the property, may be repatriated in due course in terms of SA Exchange Control Regulations. If the non-resident owns property together with a SA resident, only his portion may be repatriated, and is limited to the amount which can be proven to have emanated from a foreign source plus the profit on that portion. On transfer of the property to the non-resident purchaser, all deal receipts, a copy of the agreement of sale together with the conveyancer’s final statement of all costs, must be retained by the non-resident purchaser for the duration of his ownership and will have to be presented to the Reserve Bank on sale, when the proceeds are to be repatriated back abroad.