Occupational rent – are you covered?

Reading the fine print and ensuring that every eventuality is covered in an agreement of sale is one of the most crucial aspects of buying or selling property.

This is the advice given by Adrian Goslett, the CEO of RE/MAX of Southern Africa who says that according to the laws governing property sales in South Africa, everything has to be reduced to writing and anyone who wants to conclude a sale without any complications should bear this in mind before signing any agreement.

“Although a sales contract normally has a section discussing occupational rent, many buyers and sellers do not realise its importance,” he says.

Goslett explains that essentially, this clause is intended to protect both parties as it covers the seller when the buyer moves into the premises before transfer has taken place, or the buyer should the seller stay in the property after it has been transferred into the buyer’s name. The clause should clearly state how much occupational rental must be paid each month.

While a buyer may have no intention of moving into a property before it is registered in his/her name, situations may arise where early occupation has to take place. Goslett says that delays at the Deeds Office and problems with obtaining rates clearance certificates are just two of the factors that may delay the transaction.

Likewise, a seller who initially didn’t plan to move out before the transaction has been completed may have to leave a property simply because they didn’t factor delays in transfer into the equation, or they might need to stay on for longer for a number of reasons.

Although frustrating, those who have foreseen such problems are in a far better position to deal with them than those who have simply chosen to ignore the occupational rent clause.

Both sellers and buyers, says Goslett, who do not ensure that the required occupational rent amount is stipulated in the agreement of sale leave themselves wide open. “Buyers do not call the shots in this area and the seller needs to ensure that the amount of occupational rental reflected in the sales contract covers the actual bond repayments that he has to continue making until the sale has gone through.”

On the other hand, the seller cannot be unreasonable in these cases by demanding a figure well in excess of the market-related value of the property and the bond amount owing.

“It is imperative for the buyer and seller to agree upon a figure that is fair to both parties. The main objective of any sales agreement is to clearly set out the intention of the parties so that there can no argument later on.”

Generally speaking it is normal practice for an agent to insert an amount that ensures that the bond amount that the seller is paying is fully covered. However, some agents put in an amount equal to 1% of the purchase price. This can result in seller losing money in the event that he is servicing a high bond.

Goslett warns that it is vital for both the buyer and seller to read the sales contract in its entirety, thereby ensuring that every eventuality is understood and taken care of adequately. “Buying and selling property is an emotional time for everyone and adopting a ‘things will work out for the best’ approach could end up in conflict, costing money and souring what should be one of the most exciting moments of your life.”

Please contact us if you require any further information or would like to apply for finance:

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011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Purchasing a home and registering a bond can be quite confusing. However with Mortgage Plus, your consultant will simplify the process, keeping you informed throughout the property transfer and will be on hand to give you professional advice until the day you move into your new home.

Here are some pointers that describe the house buying process and your involvement in it, as well as give you insight into some of the behind the scenes activities.

Assess your financial position
As buying a property can be the biggest purchase you make in your lifetime, assess your financial position first and make sure you are ready for this commitment.

See how much you can afford
It’s very important to know exactly what you can afford before you start house hunting. Mortgage Plus can offer you a free affordability assessment. We will also explain all the costs involved in buying a home, including up-front payments, monthly repayments and any other costs that may occur as a part of the property transaction. Follow the guide on the Cost of Financing a Home to obtain an understanding of the costs involved in buying a home. It is important as the new National Credit Act wants to ensure you do not overspend and we can assist with a basic guideline on how to calculate the loan amount you can afford to repay monthly.

Choose an agent and view properties
Register with a few agents to ensure you are exposed to a variety of properties in your chosen area. Visit a number of homes before you make a decision. A Mortgage Plus consultant can assist you in finding a suitable agent in your area and will explain the different ownership options to you.

Sign an Offer to Purchase
Once you have decided on a property and signed an Offer to Purchase and the seller has accepted the offer and signed the document, the offer becomes binding by law and the transfer process can begin. There is however a cooling off period of 5 days for properties which are sold for less than R250 000, to allow you a grace period to review the property and the costs involved.

Obtain finance through Mortgage Plus
Your Mortgage Plus consultant will submit your application and the relevant FICA documents to one or more banks, which will assess the value of the property as well as your financial position. The bank will apply the credit assessment criteria as required by the National Credit Act and the financial risk criteria as stipulated in the bank’s terms and conditions for lending.Your Mortgage Plus consultant will then advise you of the offers they have obtained for interest rate and available loan amount, and will give you an informed recommendation.

Pay your deposit
Once you have chosen a bank, you will then (in most cases) be expected to pay your deposit to the attorneys dealing with the registration of your bond.

The property transfer begins
The bank will grant the loan and instruct the attorneys to start with the registration of the bond and transfer of the property into your name, as well as the cancellation of the seller’s bond. They will also obtain the title deeds and the transfer and tax clearance certificates. Registration, transfer and cancellation take place simultaneously and require the services of up to three different specialised attorneys.

Transfer documents signed and fees paid
The attorneys will complete the necessary administration. You and the seller will need to sign the transfer documents. At this time you will be expected to pay the transfer costs, registration fees and an estimated share of the rates.Registration documents are lodged at the Deeds Office. This is where the property will be registered in your name. Congratulations, the property now belongs to you!

Home loan comes into effect
Once you have received notification of the registration, your bank will pay the seller, or their bank, and your home loan will come into effect. The bank will notify you of this in writing and inform you when your first monthly instalment is due.

Taking occupation
You may take occupation as per the date agreed on your sales agreement. If you are already occupying the property, you will no longer have to pay occupational rent.

Who is involved in the purchase of a property?

• You (the buyer)

• The seller

• The estate agent

• The transferring attorney (also known as the conveyancer) – appointed by the seller

• The bond attorney – appointed by the bank granting the bond

• The cancelling attorney – appointed by the seller’s bank, to cancel their bond

How can you speed things up?

• Get pre-approval for your home loan

• Provide all requested personal and financial information

• Pay your deposit, if any, as well as bond and transfer costs on time

• Sign all documents when requested

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za