Purchasing Information for Foreign Buyers
Property of any kind in South Africa is usually purchased through a broker or Real Estate agent who should be a registered member of the Estate Agencies Board.
In South Africa, all contracts to purchase property must be in writing, must contain certain set information has to be signed by both the buyer and seller of the property and has to be signed by two witnesses, for the contract to be legally binding. These contracts usually take the form of an Offer to Purchase or an Agreement of Sale. Once this has been signed by both parties is a valid binding document from which neither party can withdraw without incurring legal consequences. Accordingly the decision to enter into and sign an offer to Purchase / Agreement of sale is not something to be taken lightly. It is recommended that an inexperienced purchaser obtain independent legal advice if uncertain of any aspect.
The offer to purchase will contain certain of the following standard provisions:
Purchase price : A deposit is not compulsory but it serves as a gesture of good faith on behalf the part of the purchaser and indicates financial competence. 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. 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
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 must be brought to the attention of the purchaser.
Electrical and Beetle 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 requirements. The beetle free certificate certifies that all accessible parts of the property are free of infestation by certain defined beetle. (These certificates are usually only compulsory in coastal regions)
Fixtures and fittings : A property is sold with all fixtures and fittings of a permanent nature situated thereat. Generally fixtures and fittings include anything with 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.
Besides individual or joint ownership, property can also be obtained by means of acquiring the shares / members interest and local claims in a company / close corporation respectively which company is the registered owner of a property. These contracts must also be in writing. Only a natural person can acquire the member's 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 the same should it be a condition of the purchase.
Find out about how tax in South Africa and exchange control can affect your property purchase as a non-resident.
Read more about how buying property across borders can be a great venture when using financial assistance.
Allow ooba to guide you through the process of buying a home as a non-resident of South Africa with useful information and a hands-on approach.
Learn about all the costs involved in the South African context of property purchasing.