Attorney, Denoon Sampson, talks about how to undo and terminate your ownership of property with another person.
The most common query conveyancers receive is how someone can get their partner’s name off their title deed. This refers to the need to undo, and terminate, the common practice of owning immovable property jointly with another.
What is involved in transferring a half share (or any share) in a piece of land?
Joint ownership also refers to co-ownership and these terms are used interchangeably. There are many articles about co-ownership or joint ownership; but none of them explain the complicated and costly process of cancelling that original joint ownership relationship.
Frequently the circumstances and relationships between the erstwhile co-owners, change over time and they subsequently decide to undo the original co-ownership. This frequently results in transferring a half share to one of them, enabling the beneficiary to become the full and sole owner of the whole property. Alternatively, they may decide to jointly sell and transfer each of their shares in the land to an independent third party.
No, you can’t just delete the name from the title deed.
Most people do not realise that the process amounts to a full-blown property transfer; which quite often is more complicated than the original process of buying the property. It is simply not possible to “just delete a name off a title deed”.
Even the transfer of a half share in a property, requires the payment of advance rates and taxes, advance homeowner’s association levies, advance sectional title levies, mortgage bond cancellation costs and mortgage bond re-registration costs, transfer fees to the conveyancer. All of which must be paid before the documents can be lodged in the Deeds Office. The conveyancer’s job is to collect and reconcile all these payments from the owner/s.
What about transfer duties?
Unless otherwise exempted, transfer duty is also payable by the transferee/purchaser. This is because the acquisition of a share in the property is deemed to be an acquisition of ownership in immovable property by The Transfer Duty Act. So an acquisition tax (transfer duty) is to be paid on the acquisition of even a half share in a property and the conveyancer becomes the tax collector. He has to, in turn, pay the tax over to The Receiver of Revenue, using dedicated online software.
The conveyancer will be required to lodge in The Deeds Office, the various rates and taxes/levy clearance certificates as well as the Transfer Duty Receipt or Transfer Duty Exemption Receipts. The Alienation of Land Act as well as the Receiver of Revenue require a sale agreement in writing, signed by both parties; without which, the transaction will be invalid.
Reconciling finances
Negotiations between the joint owners can be complicated and are always unique to their circumstances. If the bank does not agree to the transferee “taking over the bond”, they will have to agree to cancel the bond first and they might have to raise funds (take a second mortgage loan) to pay off the first bond.
If they agree to sell the whole property to a third party, they would typically use the purchase price to pay off the existing bond to zero and to also pay the estate agent’s selling commission. So only the nett proceeds would be split between the parties. The conveyancer would arrange these payments.
Transferring a half share to the other half share owner
Attorney fees
A conveyancer’s fee is based on the market value of the property, in terms of industry recognised guidelines.
For a half share transfer where the Conveyancer is only transferring half of the property, the attorney’s fees are calculated on the market value of the half share. If the whole property is valued at R 1 000 000,00 then the transfer costs are calculated on the lessor value of R 500 000,00.
The first step is to obtain two estate agents’ valuations (which must be on an estate agent’s letterhead and signed by the estate agent before SARS will accept them). The fees and duties are calculated on the current market value of the property. Invariably the Receiver will choose the highest valuation upon which to calculate the transfer duty.
Transfer duty calculations
The transfer duty tables can be found on the SARS website.
If the whole value of the property is less than R750,000 (R900 000 on property acquired on or after March 2017); then transfer duty is exempt and no transfer duty is payable.
However if whole property is valued at more than R750,000 (R900 000 on property acquired on or after March 2017), then transfer duty is payable. There is a two-step process in calculating the amount.
Firstly, one takes the combined value of the shares in the whole property in order to ascertain the transfer duty applicable; if the whole property is sold. Secondly, the transfer duty for the value of the whole property is divided in half, to arrive at the transfer duty for the acquisition of a half share in the ownership. The exact formula is contained in Section 2 of the Transfer Duty Act.
Current transfer duty rates for property acquired on or after 1 March 2017
Updated Transfer Duty Rate from 1 March 2017
When is the transfer duty exempt?
If the property is to be transferred in terms of a divorce or will, then the transfer duty is completely exempt.
Existing mortgage bonds
Most banks will allow the incoming purchaser to take over the existing mortgage bond debt of the seller. This called a section 57 substitution of debtor.
The first step will be to submit an application to the bank for the approval of the "substitution of debtor", as the bank must authorise the transaction. Once the relevant bank has received an application for a substitution of debtor, it will do a credit check to ensure that the person taking over the property, is able to afford paying the whole bond. Once this is approved, the bank will forward an instruction along with the original title deed to a conveyancing attorney on their panel to attend to the substitution at the Deeds Office. The Substitution is done by the Registrar of Deeds making a handwritten note on the mortgage bond.
The conveyancer is expected to charge a conveyancing fee to draft and register the substitution in the Deeds Office.
This article was supplied by Denoon Sampson Ndlovu Inc, Conveyancing Attorneys