In South Africa, property law makes use of the deeds registration system (Schindlers, 2016; Joubert Galpin Searle, 2017). There are ten Deeds Offices across South Africa which record the ownership of property, bonds attached to the property and other property rights. In South Africa, titleholders rely on the accuracy of records and deeds that are lodged at the Deeds Office. In addition, the security of title that South African property owners possess is a result of the collaboration between the national Deeds Offices and conveyancing attorney professionals. This is due to the fact that all documents related to the transfer of the property are the responsibility of the conveyancers involved and once examined and lodged, their safekeeping is in the hands of the Deeds Office (SAHomeLoans, 2017).
3.4 The South African Real Estate Transaction Process
The process of buying and selling a property in South Africa can involve up to 15 different stakeholders, including the buyer and the seller. The entire duration of this process, from the date that the Offer to Purchase is signed to the date that the new title deed is executed and registered, will usually take just over three months, or 13 weeks. The process can be extended further, and the transaction made more complex if for example, the purchase of one property depends on and involves the sale of another. If the process is initially looked at from a high-level point of view before breaking it down into its intricacies, one can identify five main stakeholders and an overall sequence of events. These stakeholders are the buyer, the seller, the bank, the conveyancing attorney and the Deeds Office. The process begins with a homeowner (seller) wanting to sell their property and a buyer identified. If the seller still has an outstanding bond on the property that is being paid off, and the buyer is to take out a bond for the purchase of the property then both respective bonds will be cancelled and registered with the bank. In the average property transaction, most cases will see bonds being held and registered. Once this has occurred the title deed is transferred into the buyer’s name at the Deeds Office. This process is managed and linked by conveyancing attorneys. Both the buyer and the seller will deal with the conveyancing attorneys throughout the duration of the deal (Amadi-Echendu, 2013; Schindlers, 2016).
The following discussion elaborates on the different processes involved in a South African real estate transaction, describing what activities occur and the data on which they rely. A series of diagrams through a ‘W5’ ‘What’ and ‘Who’ model, as outlined in Sections 2.4, illustrate the actors (stakeholders) involved, the data needed as inputs for each process, as well as the resultant outputted data (Figures 3.1–3.7). This culminates with an ‘ERD Which’ model illustrating a holistic view of all the data points involved (Figure 3.8). The purpose of the What model is to understand what business activities need to be completed. This model incorporates elements from the Who and the Which model, acting as the bridge between all three models. A skeleton of the What model has been provided in Figure 3.1 to ensure that the reader understands the entries made in subsequent What models (see Figure 3.2 – 3.6). In Figure 3.1 the main business processes are detailed. The subsequent What models focus on each of these main processes in isolation, breaking them down into their sub-process. This is done to differentiate between the main processes for the purpose of simplification as well as space restrictions in the document.
3.4 The South African Real Estate Transaction Process
Figure 3.1: South African Real Estate Transaction Process: WHAT Model
Figure 3.2: South African Real Estate Transaction Process: WHAT Model – Offer to Purchase
The South African property transaction process begins when a prospective buyer and seller for the same property have been identified. These two stakeholders can choose to work through a real estate agent who will assist them throughout the process, or these stakeholders can begin the transaction in a private manner. In support of the latter process, there are online listings for sellers to privately sell their property which negate the need for real estate agents.
3.4 The South African Real Estate Transaction Process
However, these private services (such as the “No Agent6” listing website for South African private sales), often involve online agency, registration, and commission fees. The agency costs in both scenarios do not significantly differ (Amadi-Echendu, 2013; Louise Tonkin Inc, 2013; Chas Everitt International Property Group, 2017). Once a genuine buyer has been identified, an offer to purchase will be signed by both the buyer and the seller (Section 3.5.1). This document will be arranged and overseen by the transfer attorney. It is at this stage of the transaction where the relevant conveyancing attorneys are appointed. Every property transaction must consist of a transfer attorney who assists both the buyer and the seller throughout the duration of the transaction. The transfer attorney will be selected and appointed by the seller, with the buyer being made responsible for conveyancing fees and transfer costs (Joubert Galpin Searle, 2017; SAHomeLoans, 2017). If existing bonds on the property are to be cancelled and new bonds are to be registered, then bond registration attorneys (representing the buyer) and bond cancellation attorneys (representing the seller) must be appointed. However, this is dependent on the specifics of the transaction.
Once the conveyancers have been appointed and the offer to purchase has been signed, the transfer attorney will request a copy of the current title deed. This will either be sourced from the seller (if the property is fully paid off) or from the financial institution (if there is still an outstanding bond figure owed by the current owner). In both of the aforementioned cases, a copy of the title deed will be sent to the transfer attorney for inspection (Chas Everitt International Property Group, 2017). However, upon lodgement and registration of the sale, the transfer attorney will request the original title deed from the relevant source. If there is still an outstanding bond amount, this will need to be settled and cancelled. This means another stakeholder to the transaction will be introduced, a bond cancellation attorney. Next, the transfer attorney will need to obtain the Financial Intelligence Centre Act7 (FICA) documents from both the buyer and the seller (Schindlers, 2016). The transaction cannot progress without these documents. FICA is an anti-money laundering legislation which aims to ensure safety in transactions. FICA helps transfer attorneys to fully identify who they are dealing with. The documents needed from each party include proof of identification, proof of residence, marital status, tax number, and a salary slip. The conveyancer, on behalf of the seller, will also need to obtain a rates clearance certificate (RCC), an electrical compliance certificate (ECC), and a SPLUMA certificate from the municipality and other relevant stakeholders (Section 3.5.4).
6https://noagent.co.za/
3.4 The South African Real Estate Transaction Process
Figure 3.3: South African Real Estate Transaction Process: WHAT Model – Obtain Title Deed
The transfer attorney will now start drafting the new title deed in the buyer’s name. If the buyer is to purchase the property by means of taking out a bond, this process will need to get underway. This requires the buyer approaching a financial institution to begin the process of registering a bond. The bank in question will select a bond registration attorney from their panel (banks have panels of attorneys, often more than one attorney firm, and will appoint conveyancers from their panel to carry out bond registration and bond cancellation tasks) to oversee and manage the process on behalf of the buyer. If the buyer is not taking out a bond, then they will arrange with the estate agent (if applicable) or the transfer attorney to make the payment to the seller. Proof of funds and availability to purchase without a bond will need to be presented to the transfer attorney. When paying either by cash or through taking out a bond, the purchaser or the issuing bank will first settle any guarantees and then the remaining purchase price (profit) into the conveyancer’s trust account and the conveyancer will then distribute the funds to the seller (Louise Tonkin Inc, 2013; Chas Everitt International Property Group, 2017; Joubert Galpin Searle, 2017). The process of taking out a bond involves a collection of documentation as well as a collaboration between all the conveyancers involved in a property transaction which are the bond cancellation attorney, the transfer attorney, and the bond registration attorney (Section 3.5.3). Once the new bond is issued and old bond settlements are in place, the bank of the new bond will present guarantees for payment and ensure that the old bond has been settled (if applicable). Alternatively, if the purchase is made in cash then the purchaser’s bank will settle any guarantees (if applicable). Next, the transfer
3.4 The South African Real Estate Transaction Process
attorney will prepare the transfer documents and finalise the new title deed which will be registered in the buyer’s name. The transferring attorney will then request a deposit to be paid by the purchaser. This deposit, however, depends on the offer to purchase agreement and what was stipu1lated. In most cases, sellers will want a deposit to be made as a means of guarantee and security to show that the buyer is not going to opt out of the transaction. Transfer duty fees will then need to be paid to the receiver of revenue, the South African National Revenue Services8 (SARS) in order to obtain the transfer duty receipt (Section 3.5.5) (Schindlers, 2016).
Once this is done, the relevant conveyancing attorneys will need to arrange to physically meet with one another to ensure all documentation and information is in order. This will commonly involve the transfer attorney, the bond cancellation attorney, and the bond registration attorney. These attorneys will then arrange to lodge their documents (transfer documents, bond registration documents, and bond cancellation documents) which apply to the property transaction at the Deeds Office. The transfer documents will need to be signed by the buyer and the seller (SAHomeLoans, 2017). The lodgement will need to be done simultaneously and thus all conveyancing attorneys need to be physically present at the same time (transfer attorney and transfer documents, bond registration attorney and registration documents, and bond cancellation attorney and cancellation documents). All the documentation and information mentioned in previous steps are pre-requisites for the lodgement at the Deeds Office. These documents then undergo an examination process at the Deeds Office in a practice that takes between eight to ten working days (Section 3.5.6). Once the relevant documents have passed inspection, they will be put forward to the chief registrar of the Deeds Office for registration. The transfer of the property, the registration of the new bond, and the cancellation of the old bond are all executed and registered by the chief registrar. The final execution and registration of the transfer can take up to seven working days. Once the transfer is registered the buyer and the seller will receive a letter of transfer completion from the transfer attorney. Before the transfer attorney can finalise the transaction, they will need to take the funds from the conveyancer’s trust account and distribute them accordingly. In addition to this, final payments of conveyancing fees will be settled as well as estate agent commission (if applicable). The new title deed will now be registered, and ownership changed. All old title deeds are kept at the Deeds Office for a period of five years before being (physically) discarded. A digital copy will be made but the Deeds Office still requires that