INTRODUCTION
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 guaranteed. Property can be owned individually, jointly in undivided shares or by an entity such as a company, close corporation or trust or a similar entity registered outside South Africa.

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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. Contracts most commonly take the form of an Agreement of Sale or Offer to Purchase which once accepted constitutes an Agreement of Sale. Once an Agreement of Sale has been signed by both parties it represents a valid and binding document from which neither party can withdraw without incurring legal consequences, save for certain instances where:

• the agreement is subject to certain conditions which are either fulfilled/not fulfilled;
• the purchase price is less than R250 000.00 and certain additional criteria in terms of the Alienation of Land Amendment Act are present entitling the Purchaser to "cool off".

The de facto ownership of property can also be obtained by means of acquiring the shares/members interest and loan claims in a company/close corporation respectively which company/close corporation is the registered owner of a property. These contracts, strictly speaking, need not be in writing and can be concluded verbally which, although legally binding, is not advisable and it is recommended to record the agreement in writing to ensure that the material terms agreed to are accurately recorded.

It is important, furthermore, to note that only a natural person can acquire the members' interest in a close corporation. Accordingly, if it is intended for a non-resident company or trust to be the ultimate purchaser, provision can be made for the close corporation to be converted to a private company at a nominal expense to facilitate same and this should be a condition of purchase.

Accordingly the decision to enter into and sign an Offer to Purchase/Agreement of Sale is not a decision to be taken lightly and it is recommended that an inexperienced purchaser obtain independent legal advice if uncertain in any respect.

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FINANCIAL ASSISTANCE
There are restrictions on loans to non-resident purchasers of property. In brief, the non-resident may only borrow up to a maximum of the amount invested by the non-resident into the purchase of the property, which translates into a 50% to value borrowing ratio. Such loans are, however, subject to foreign exchange approval by the SA Reserve Bank which approvals are efficiently handled by all South African Commercial Banks offering financial assistance. Financial assistance is granted in the form of a loan secured by a Mortgage Bond to be registered in favour of the Bank granting the loan. Where the sale is subject to financial assistance, this should be included in the Agreement of Sale/Offer to Purchase as a suspensive condition. There are stringent restrictions and prohibitions imposed where the property is owned by a company and financial assistance is sought to finance the acquisition of shares and loan accounts in the property-owning company.

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TRANSFER PROCEDURE
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 to attend to the registration of transfer of a property sold, whilst

• the costs attendant on same are for the account of the purchaser, unless contractually agreed to otherwise.

The conveyancer prepares the requisite transfer documentation that, after signature by the purchaser and the seller, is lodged together with the cancellation of any existing mortgage bonds and new mortgage bonds to be registered in a regionally located Deeds Registry. The deeds are subject to an intense examination process whereafter they are made available for registration. On 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. The above procedure does not apply in an instance where the shares/members interest and loans are acquired in a property-owning company/close corporation where no change in ownership is recorded in the Deeds Registry. It is important to note that upon transfer to the new owner, any liabilities in respect of the property incurred by the previous owner, remain with the previous owner and not necessarily pass to the new owner, unless otherwise agreed to.

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COSTS
Brokerage is payable where an estate agent is responsible for concluding a sale of property. Brokerage is customarily payable by the seller who mandates the estate agent to procure a purchaser for the property. The seller is also responsible for the cost of procuring a 'beetle free and electrical compliance' certificate. The purchaser is responsible for the payment of transfer costs and the costs of registering any new mortgage bonds over the property purchased. Transfer costs include transfer duty payable to the Receiver of Revenue calculated using the following formula, payable to the Receiver of Revenue:

• R0 - R150 000 Exempt
  5% between R150 001 – R320 000
  8% on the balance above R320 000
• where a natural person purchases the property, shares or members interest in a residential property owning entity; or
• 10% of the purchase price
• where the purchaser of the property, shares or members interest in a residential property owning entity, is not a natural person. Attorneys' fees for attending to the transfer and registration of mortgage bonds are calculated according to a tariff. Further sundry charges are imposed by the Deeds Registry and the Bank granting financial assistance.

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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. This is sometimes inconvenient and it is possible, and often advisable, to leave a General Power of Attorney in favour of an entrusted person within South Africa to assist in this regard. Where the purchaser is married, which marriage is governed by the laws of a foreign country and a mortgage bond has been applied for, please note that the spouse of the purchaser will be required to assist the purchaser in signing the mortgage bond documentation. Marriages according to the laws of the England and Scotland are exceptions to the aforegoing rule.

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THE OFFER TO PURCHASE/AGREEMENT OF SALE
The Offer to Purchase/Agreement of Sale will contain certain of the following standard provisions:

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PURCHASE PRICE
A deposit is not mandatory but serves as a gesture of good faith on the part of the purchaser and an indication of financial ability. This amount will be invested by the estate agent/conveyancer in an interest-bearing trust account for the benefit of the purchaser.

Provision will be made in the Agreement for a guarantee to be called for in respect of the balance of the purchase price. In general, a guarantee will only be acceptable if issued by a local financial institution which means that the funds will actually have to be remitted to South Africa in order for a local bank to issue such a guarantee or, alternatively, arrangements must be made between a foreign and local bank for a back to back guarantee to be issued. It is, however, possible to negotiate the issue of a Standby Letter of Credit from an overseas institution in certain circumstances.

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OCCUPATION, POSSESSION, TRANSFER AND OCCUPATIONAL RENTAL
Occupation is the physical occupation of the property whereas possession is generally deemed to be the date upon which the purchaser assumes responsibility for the property and it is customary for the risk of ownership to pass on the date of possession. Transfer refers to the actual date of registration of ownership in the Deeds Registry in favour of the purchaser. Occupational consideration is the rental payable by the party occupying the property belonging to another where the date of occupation and date of transfer differs, which is better expressed in Rand terms or as a percentage of the outstanding balance of the purchase price.

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VOETSTOETS
This is a standard inclusion in all deeds of sale and implies that the property is bought 'as is.' 'As is' means 'in the exact condition in which the property is found'. However, all patent and latent defects present in the property within the sellers' knowledge must be brought to the attention of the purchaser. It is not standard in South Africa to conduct property surveys but these can be arranged with the assistance of the estate agent or an attorney and should be included as a condition of the purchase.

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ELECTRICAL AND BEETLE-FREE CERTIFICATE
The property owner is required by law to be in possession of a valid 'electrical compliance certificate' certifying that the electrical installation at the property meets certain statutory safety requirements. The beetle-free certificate certifies that all accessible parts of the property are free of infestation by certain defined beetle and this certificate, whilst a standard inclusion in the Agreement of Sale, is neither a legal requirement nor included in sales of sectional title units. The cost of attending to the necessary repairs in order for the aforesaid certificates to be provided, is generally accepted as being for the account of the seller, although, the parties can contractually agree otherwise.

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FIXTURES AND FITTINGS
A property is sold together with all fixtures and fittings of a permanent nature situated thereat. Generally fixtures and fittings include anything which is attached to the property or which by virtue of its considerable mass accedes to the property. In the event of any uncertainty, the purchaser is cautioned to ensure that all items intended to be included in the purchase price are specified in writing in the Agreement of Sale.

The format of agreements concluded for the acquisition of shares/members interest and loan accounts in property-owning companies/close corporations contains many of the aspects discussed above, although it is substantially different and includes numerous warranties and indemnities granted by the seller to the purchaser who acquires the property-owning entity together with its financial history.

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EXCHANGE CONTROL/REPATRIATION OF FUNDS
All funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated together with any profit on resale of the property, provided, the title deed of the property has been endorsed "non-resident". Similarly, funds introduced to acquire shares in a company/members interest in a close corporation may be repatriated together with any profit on resale, provided, the relevant securities have been endorsed "non-resident". Funds, introduced into South Africa in the form of a foreign loan to fund acquisitions of corporate entities which own property in South Africa, may be repatriated in terms of the original loan approval by the Reserve Bank. The profit on resale may also be repatriated, provided, the relevant securities have been endorsed "non-resident".

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INCOME TAX
South Africa follows a revenue-based income tax system meaning that income earned from a South African source will be subject to ordinary income tax. Non Residents are liable for tax on a more limited basis and their liability is dependent on the source of their gross income being a South African source.

Any rental earned by non-residents in respect of South Africa properties will be subject to income tax and it is the responsibility of the non-resident to register as a South African Tax Payer.

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CAPITAL GAINS TAX
South African residents are liable for the payment of Capital Gains Tax ("CGT") on the disposal of any asset, subject to certain limited exceptions. Non-residents, however, are only liable to pay CGT on the disposal of the following:

• Immovable property situated in South Africa, including any right or interest in immovable property (this also includes an interest of at least 20% in a company where 80% or more of the value of the net assets of the company is attributable, directly or indirectly, to immovable property in South Africa);
• Assets of a permanent establishment of a non-resident through which trade is carried on in South Africa.

CGT is payable in the year in which the asset is disposed of and is calculated by adding 25% of the capital gain, or profit, to the individuals income for that year and taxing that income at the individuals marginal rate of income tax. The maximum marginal income tax rate for individuals in South Africa is presently 40% (reached at taxable income levels above R270 000). The capital gain is calculated and disclosed in the individuals' income tax return for the year in which it is sold. Thus, if a non-resident disposes of an immovable property in any year of assessment and is not already registered as a South African taxpayer, he or she will have to register as such and submit an income tax return reflecting the calculation of the capital gain and will be liable for the payment of CGT on that gain.
CGT became effective on 1 October 2001 and is thus payable only from that date. The amount of a capital gain is calculated either by deducting the value of the property as at 1 October 2001 (together with the costs of acquiring and improving the property) from the proceeds on disposal of the property or by apportioning the amount of time the property was owned between the period before 1 October 2001 and the period after that date.

South African residents do not pay CGT on the first R1-million of profit made on the disposal of their primary residence. However, non-residents will not qualify for this exemption if their primary residence is not in South Africa.