Despite ongoing coverage on property transactions in the business and trade media, conveyancers handling the buying and selling of residential property find that a surprisingly large number of those with whom they deal are partially or wholly ignorant of the steps to be taken to complete a property transaction.
Property deals are involved and complicated. Several government and/or municipal departments play a part in them and there are pitfalls all along the way. Those who enter into property transactions without professional advice, all too often end up being badly hurt.
As a conveyancer, I regularly encounter:
•Failure to appreciate all the costs involved.
Frequently the buyer will not realise that he has to pay transfer duty when called to do so by the conveyancer. This date can often be several weeks ahead of the date that transfer actually takes place. Late payment can cause serious holdups. If the purchaser has not made provision for these payments this can cause problems.
Quite often the buyer will be waiting for the sale of his current home to go through before paying transfer duty. If, for whatever reason, this is delayed, he may feel entitled to delay taking transfer on his newly purchased home – but this is almost never condoned by the contract.
Similarly the buyer may either not appreciate – or resent – that he has to pay both transfer and bond registration costs to the attorney involved. However, failure to do this at the agreed time will also hold up transfer as the conveyancer will in most instances refuse to register the transaction until his fees are paid.
A good estate agent will see to it that these obligatory costs are understood at the outset. Regrettably, because the conveyancer becomes involved only after the sale has been agreed to, he is not usually in a position to forestall difficulties here.
•A second big mistake made by many is to neglect to get the electrical, plumbing, gas and borer beetle certificates. This should be done as soon as the sale agreement is signed. Without these the sale cannot go through.
Obtaining these is the seller’s duty and it is usually the electrical certificate that is most problematic. What happens all too often is that the seller will have a prior electrical certificate but as these are valid for only two years (provided no further electrical work is done) it may be out of date. Many sellers do not understand this and often incorrectly insist that the out of date certificate is used, which often causes delays.
When a new electrical inspection is finally agreed to the seller may point out that many of the repairs which the electrician deems essential for issuing a certificate have been dealt with at some previous stage.
Electricians, it has to be said, can and do sometimes maximise the “necessary” work, often forgetting that their task is not to put the whole home’s electrical network in A1 order but merely to make it compliant with the regulations.
In these circumstances the home seller can appeal to the Electrical Board and/or get new quotes.
Again, however, much time may be lost and the conveyancer may have to act in an advisory role – for which he is probably not compensated. The situation may be further complicated by the fact that certain banks will not pay bond finance until they, too, have received a certified copy of the electrical certificate.
•A third major cause of holdups is that those involved are often ignorant of the rates legislation.
On registering a transfer, the Deeds Office will give the municipality the details of the new owner. The registration can, however, only take place if the seller has paid the rates owed to date and advance collections for rates and services. This will often result in a refund becoming due to the seller because transfer usually takes two months and the rates are paid for four months. However, sellers and buyers often do not appreciate that amending the Council’s records can take anything up to four months after the transfer. This means only then will the purchaser get his new rates account and the seller will be able to claim his refund. Often this process is misunderstood and conveyancers have to field rates queries – which should be directed to the Council and not to the lawyer.
•A fourth issue which frequently causes delays and distress is the confusion over the date of transfer and the date of occupation.
It has to be realised that the date of transfer is an estimated date and cannot be guaranteed in advance – there are no hard and fast rules governing when this occurs and often the transfer date will not coincide with the occupation date.
For this or other reasons, he says, the seller will often agree to the buyer taking occupation prior to transfer – paying a bond related occupational rental until transfer occurs.
This can be a very satisfactory arrangement but it can also have one major drawback: on moving into the home, the buyer may find 101 faults that escaped his notice on his original inspections – and he may then try to force the seller to put these right, illegally delaying transfer to achieve his ends.
This attitude ignores the fact that in the vast majority of sales the voetstoots clause applies and this can only be overruled if it can be proved that the seller deliberately hid a problem, which is very difficult to prove in the courts.
In nine cases out of ten the wise course to follow is to ensure that the occupation and transfer dates are the same – and, if this involves the buyer finding temporary accommodation, that cannot be helped.
This is what I advise wherever possible – and I also advise sellers, buyers and the agent to do a final inspection before occupation and then draw up a list of defects as observed by all to avoid any unnecessary litigation in future. This will obviously not prevent a purchaser claiming for serious misrepresentation.
My main message to clients, however, is before you sign any agreement, ensure that you are aware of all the contractual obligations. Although there are cases where clients deliberately try to manipulate contracts, most of the problems are caused simply by ignorance.
And my advice to agents:
Become as familiar as you can with the legal aspects of property transfer and ensure that your client does not make the mistakes outlined above.
*Ulrik Strandvik is a director of Gunstons Attorneys.