There are various forms of property ownership or rights to occupation in South Africa and understanding the different types is crucial when purchasing a property. In this article we aim to provide you with the features as well as information on the financial aspects of each type.
- FREEHOLD PROPERTIES
(which are also known as conventional / full title properties)
- With a freehold property, you own the land as well as all the buildings erected on the land.
- The property can be used as collateral when raising a mortgage bond to finance the purchase price.
- It is reflected on a general plan or subdivisional diagram which is registered with the Surveyor-General.
- The Registrar of Deeds issues the owner with a title deed to proof ownership.
- Transfer costs are payable to a conveyancer to transfer the property to you and transfer duty will be payable to SARS if the purchase price exceeds R1 100 000,00.
- Rates and taxes are payable to the local authority.
- SECTIONAL TITLE
(more commonly found in apartment blocks and residential estates or complexes)
- As a sectional title owner, you own your section and an undivided share in the common property of the scheme.
- Exclusive use of a specific common property area could be allocated to you in terms of the rules or registered in the deeds office by way of notarial deed.
- The section and exclusive use area (if registered by notarial deed) can be used as collateral to raise a mortgage bond to cover the purchase price.
- A sectional title plan which is registered with the Surveyor-General.
- The Registrar of Deeds issues the owner with a title deed to proof ownership.
- Transfer costs are payable to a conveyancer to transfer the property to you and transfer duty will be payable to SARS if the purchase price exceeds R1 100 000,00.
- Rates and taxes are payable to the local authority and levies are payable to the body corporate.
- SHAREBLOCK
- Regulated under the Share Blocks Control Act, 1980.
- In a share block scheme, the land and buildings are typically owned by the share block company.
- You buy the shares (also known as share blocks) in the company in this allows you to occupy a specific part / space in the building/s.
- The purchase price is usually paid in cash as very few banks offer finance to purchase shares.
- There is no deeds office registration. The directors of the share block company will issue you with a share certificate.
- No conveyancing fees are payable, but there will be a fee payable to the company secretary for the transfer of the shares.
- Transfer duty is payable to SARS if the purchase price exceeds R1 100 000,00.
- No rates and taxes are payable to the local authority but there are levies payable to the share block company.
- HOUSING SCHEMES FOR RETIRED PERSONS
(also known as life rights which are more commonly found in retirement villages and available to persons over the age of 50 years)
- Regulated under the Housing Development Schemes for Retired Persons Act, 1988.
- The land is owned by the developer (or development housing scheme).
- When you purchase life rights in a retirement scheme, you enter into an agreement with the developer which allows you to occupy a specific unit in the scheme for the duration of your life. This agreement is your proof of right to occupation.
- The purchase price must be paid in cash.
- There is no deeds office registration and no conveyancing fees payable.
- There is no transfer duty payable to SARS.
- There is no rates & taxes payable to the local authority but there will be levies payable for the management of the scheme, the use of the facilities and services offered within the scheme.
- Upon termination of the life rights agreement, the purchase price which you originally paid for the life rights is to you, or to your estate, after the developer has sold the right to a new buyer and has received payment of the purchase price.
- TRIBAL LAND
(In KwaZulu-Natal)
- The land is owned by the Ngonyana Trust and administered in terms of the Ngonyana Trust Act, 1994 with the Zulu king as the sole trustee.
- As a buyer, you receive a right to occupy a specific piece of land and is subject to the consent of the Induna / chief of the Traditional Council in the area.
- Certain traditional rituals are to be followed according to custom.
- The purchase price is paid in cash.
- There is no deeds office registration and no conveyancing fees payable.
- There is no transfer duty payable to SARS and no rates payable to the local authority.
- The right (permission) to occupy lapses upon death.
From the explanation above you will note that in some instances you obtain ownership of land and / or buildings and in other instances you merely receive a right to occupy the land and / or buildings.
It is therefore essential to determine which type is most appropriate for your specific requirements.
Article by Karen Britz