Useful tips for South African citizens to consider when entering into a property transaction with foreign nationals.
The buying and selling of property can be a stressful procedure. The transfer of ownership requires a large amount of legal paperwork which can be a complicated experience.
The process can be further complicated should the buyer be a non-permanent resident of South Africa, but following the right steps can help ensure a timeous and efficient transaction with non-residents.
Consider the help of a specialist:
The transaction procedure and documentation required varies in accordance to the country the buyer or seller may reside in. For this reason, it’s essential to appoint a specialist conveyancing attorney with experience in this field, in order to conduct a successful transaction process.
Doing so, will provide you with the necessary expertise to ensure that the process is handled in the correct manner.
According to Danielle Abrahamson, Conveyancing Attorney at Mcloughlin Clark Incorporated, it is often small oversights that impede the successful conclusion of a deal.
“Just one missing signature or incorrect document can delay or even compromise a sale, and the repercussions can be costly.” says Abrahamson.
To ensure an effortless procedure, it is essential for estate agents and conveyancing attorneys to be well-informed of the relevant laws that apply when conducting a property transaction for a foreign national. Buyers and sellers also need to be aware of the following:
Spousal signatures:
A spouse’s signature is only required for non-residents selling property in South Africa. It is not an obligation for non-residents purchasing property in South Africa, although the transfer document must state by which country’s marriage laws their union is governed.
Signing of transfer documents:
The signing of all transfer documents can be done at a South African embassy or consulate for buyers and sellers who reside outside of South Africa, but this option can be expensive or impractical if an embassy is too far away, or is entirely absent from a country.
The Hague Convention an international treaty which sets out how documents can be verified and an Apostille is the certification. It is an alternate option for buyers who reside within a country that is a member of the Hague Convention. Buyers can sign in front of a Notary Public and an Apostille will be attached.
For countries who are not members of the Hague Convention, such as Saudi Arabia or Ghana, an apostille will not be accepted. In this instance, notarised documents need to be sent to the Department of Foreign Affairs for authentication.
To avoid difficulty, the most convenient choice is for a buyer to sign a Special Power of Attorney. By doing so, the buyer authorises a person in South Africa to act on their behalf in signing the various documents required during the time that the he or she is out of the country. Withholding tax on purchase price
Capital Gains Tax (CGT) is a requirement for any property sold in South Africa that holds a value of R2 million or more. Purchasers are legally obligated to retain a percentage of the purchase price to ensure that CGT is settled.
CGT amounts payable for various entities:
- 5%: if the seller is a natural person
- 7.5%: if the seller is a company
- 10%: if the seller is a trust
For sellers who have appointed a conveyancing attorney, the funds are paid directly to SARS by the legal representative. In the case of the seller receiving the full purchase price, it then becomes the buyer’s responsibility to settle the CGT payment required.
Non-resident buyers who intend to take the proceeds of a sale out of South Africa are expected to provide a deal receipt which is a record of the foreign funds received by the South African bank.
The impact of missing a step:
According to Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, it takes just one mistake in the transaction process to jeopardise a sale.
“Working with an experienced estate agent can make or break a sale, especially in regions like Cape Town where according to a report just released by FNB Property Economist John Loos, the percentage of foreign property ownership is approximately 3% higher than the national average of around 5%, and the possibility of entering into this type of transaction is more likely.”
According to Geffen, estate agents and conveyancing attorneys who are well-versed in the industry can play an essential role in identifying and preventing any potential mishaps along the way. This however, shouldn’t be the only form of protection to rely on.
It is just as important for buyers and sellers to be well informed by asking relevant questions and arming themselves with as much information as possible.
Geffen says agents should advise attorneys if the foreign party is leaving South Africa soon after signing the offer to purchase, determine whether both spouses want to own the property despite the prevailing law of the land in which they reside and advise both parties about withholding tax in order to avoid confusion down the line.
Following the correct procedure and taking the right steps will help to ensure a smooth and efficient property transaction with a non-resident buyer or seller.