The property market in South Africa at the moment is a cutthroat one.

Rental properties are in short supply, while the demand for homes is ever increasing as people struggle to raise the appropriate home loan to buy a property. This demand often leaves potential tenants arriving at a rental property only to find they are competing with 15 others, all applying for the same property to rent.

While this creates a difficult situation for potential tenants, landlords are forced to filter several applications trying to figure out who the “best” tenant might be.

Meyer de Waal, an owner of a rental property, recently faced this exact problem;

“I recently advertised a flat to rent and had 12 potential tenants all arriving at the same time, with 5 of them begging me to rent the apartment.”

Meyer was forced into the challenging task of working out who to rent the apartment to.

“I couldn’t judge the application on appearance alone,” Meyer went on to say. “ The risk of accepting a tenant on the spot, without first checking into their financial situation, ability to pay a deposit or references from previous landlords, is simply too great.”

The pitfalls of renting don’t stop with the application process.

Often potential tenants are required to pay an upfront rental deposit, of 1 or 2 month’s rental to secure the property. This leads to severe cash-flow problems for the tenant as they most likely paid a similar deposit on their existing rental property, which their current landlord will most likely only release 7-14 days after they have vacated the current premises.

“I recently applied to rent an apartment in Tamboerskloof,” Mandy B said. “I was asked to pay an upfront deposit of R20 000, equal to 2 month’s rent. The problem was my previous landlord only released my current deposit 14 days after I moved out of that apartment and it meant I had to have R 30 000 available as rental deposit, which included  one month’s rental payment upfront, to secure my new apartment.”

Starting a Revolution

The comprehensive revolutionary new service aims to solve this problem by:

• Streamlining the entire rental process
• Pre-approval and checking of Tenants before ever applying. This way landlords and agents not only get the best possible tenants but also cut down on the time taken to run all the necessary checks that usually occur after they receive an application.

• Comprehensive Fulfilment Process
• An A-Z process on-behalf of the tenant and landlord. Supported by a stringent due diligence process, each tenant is screened for credit worthiness and their monthly affordability, ensuring that their commitment to landlord can be kept and maintained for the duration of the lease agreement.

• Rental Income Guarantee & Legal Costs cover provided, to ensure:
• Rental to be paid on the first day of each month,
• Rental income is covered for 3 months in case of default,
• All legal eviction costs are covered, should one need to evict the tenant.

• Deposit headaches solved
• A Credit Line is available to raise finance for the required rental deposit and relocation costs for the tenant.

• Lease Agreement
• A comprehensive, fully compliant lease agreement is made available, underwritten by a trusted Rental Guarantee Company.

We’ve taken on board the best market leaders as partners to revolutionise the world of modern day property rental says Meyer. The leading peer-to-peer marketplace in South-Africa, backed by Barclays Africa, made available access to a credit line of R100 million to provide tenants with transparent and affordable finance, with personalised interest rates matching their affordability. The finance offered includes up to two months upfront deposit and the first month’s rent instalment as well as relocation costs.

A rental guarantee company with more than 12 years track record will underwrite and guarantee the landlord’s rental income for up to 3 months through the rental guarantee component, before the tenant takes occupation.

“We’re building the next generation rental marketplace, matching pre-qualified tenants to the criteria of landlords,” de Waal went on to say. “Both sides of the table are protected and taken care of as our entire process is frictionless, cost effective and sustainable to the property market.”

This revolutionary service offering relieves both the tenant and landlord of their financial, administrative and practical concerns in a way that simply isn’t offered by the current market.

What About Buying?

There is always an ambition to buy one’s own home and we assist to realise this.

Many tenants rent with the dream to buy their own home at a later stage, either once they have raised enough money for a deposit or they simply need time to improve their affordability or credit score. As an additional value-added service, aspiring home buyers subscribing to the offering will also be supported to prepare themselves to buy their own home in the future.

The tenant rents the property first, securing the option, over time, to buy the property. The product also facilitates the opportunity for a tenant to build up a deposit from a portion of the rental paid and the track record of the tenant is used to support his home loan application, at the end of the Rent2Buy period, to support the home loan application.”

“Rent2Buy is essentially buying a property by renting it first,” Meyer says. “We work with the seller and the potential buyer, helping both to achieve their goal.

For more information contact Meyer de Waal 021- 461 0065 or  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Many South Africans have seen their dreams of owning their own home dashed over the last few years due to the difficulty in obtaining a home loan and the cost thereof. But, says Meyer de Waal of Oosthuizen & Co Meyer de Waal Attorneys, South Africans should not abandon their dreams of owning a home, but should rather look for solutions to the challenges they are facing.

A major challenge is that banks are declining almost half of all home loan applications, and those who are self-employed have very little chance of obtaining finance. The availability of finance for buying a home is likely to become even more constrained if the government's proposed credit amnesty comes into effect, which will make the banks even more stringent in their credit criteria as they will be unable to assess consumers' full credit histories. 

It is also expensive to get a home loan, because the banks are no longer lending at the prime rate, which now stands at 9%, but apply prime plus rates, which impact the monthly repayments significantly. This often makes the repayments unaffordable in light of consumers' already tight budgets, given the skyrocketing costs of living, as well as the high level of South Africans' debt-to-income ratio. The recent surprise interest rate hike may well signal the upturn in the interest rate cycle, with higher interest rates coming sooner than expected, and this will further increase monthly home loan repayments. 

 In addition, prospective buyers must have substantial savings, because the banks are demanding deposits as high as 15%, and buyers must also cover the significant costs involved in buying a property, such as transfer duty and bond costs.

 However, says de Waal, there are a number of ways in which South Africans can overcome these challenges. "The first is to manage your money prudently, ensuring that you can save a little every month after paying all your expenses and build a solid credit track record. This will significantly improve your chances of getting a home loan approved. The second is to look for alternatives, such as the Rent-to-Buy approach and instalment sales." 

 The Rent-to-Buy (R2B) concept allows home buyers to secure and occupy the home they want now, even though they cannot obtain a home loan. Essentially, the home buyer rents the property at a higher than average rental for a year or two, with the option to buy the property at the end of the rental period, but at a purchase price fixed at the beginning of the rental period. Over the rental period, the potential homeowner builds up a solid track record of paying a monthly rental amount equivalent to monthly bond instalments, which will provide the banks proof that the buyer can afford the bond repayments. In addition, the monthly amount paid above the market-related rental can be used to build up a deposit. In this way, buyers can secure and occupy their dream home now, while building up a payment track record and saving up a deposit which will greatly improve their chances of obtaining a home loan at the end of the rental contract.

Another option is an instalment sale, in which the buyer offers to pay the seller monthly instalments over five years to settle the purchase price. Often, 
the buyer will simply take over the seller's current bond repayments, with a commitment to settle the full outstanding bond amount within five years, either by paying additional amounts into the bond over the five-year period, or by obtaining a loan to settle the much-reduced balance before the end of the five-year period. 

 This approach is made possible through the Alienation of Land Act, which provides solid protection for both the seller and the buyer through a specialised contract between the parties. The benefit to the buyer is that he/she does not have to obtain a home loan, while the benefit for the seller is that the property can be sold immediately, which is often the most important consideration for many distressed sellers who can simply no longer afford the property, need to relocate urgently for work purposes or want to vacate the premises as soon as possible following a death or divorce. 

De Waal suggests that South Africans who are serious about owning a home and cannot obtain home loan finance should seek expert help to make their homeownership dreams come true. "Don’t simply abandon your dreams of owning a home. There are alternative approaches beyond getting a bond application approved, and with the right expertise and assistance, you can make your dream a reality."

Prospective homeowners who want to improve their chances of obtaining a home loan can join the MyBudgetFitness (MBF) Club at www.budgetfitness.co.za, which includes rehabilitating credit records, setting up and maintaining a monthly budget through a mobile app (Mobile2Budget.co.za) and online resources, as well as benefiting from the guidance and assistance of a personal MBF trainer. 

If you are interested in the Rent-to-Buy concept, visit www.irent2buy.co.za, where you can download a brochure on how to get started and view properties already available on this basis. For more information about instalment sales contracts, please visit www.oostco.co.za.

The face of home ownership in South Africa is continuing to change as more black middle class homeowners move into the increasingly affluent suburbs; while the previously disadvantaged now comprise more than 50% of home buyers. Although strict loan requirements remain a hurdle to be overcome for those wishing to get onto the first rung of the property ladder, structures such as Rent2buy in affiliation with My Budget Fitness, are paving the way to a more prosperous future. Rent2buy was developed to assist frustrated sellers and buyers who fail to conclude a purchase and sale transaction of a property as a result of the decline of the home loan application of the buyer. Through the rent2buy concept, the buyer gets the opportunity to secure the property, with a right (an option) to buy the property say 6- 12 or 24 months later, once the buyer had the opportunity to improve his affordability and or credit profile,depending the reason why the bank declined the bond in the first place. During the rent2buy period a higher rent than the normal market related rent is usually paid – close to a bond repayment instalment – and the additional rent is credited towards a deposit for the buyer – with the result that once the buyer is ready to exercise the option to buy – he now has a much improved credit profile and affordability, plus a deposit, which all will improve his chances to secure a home loan. The buyer is assisted during the rent2buy period with a mentor and education how to go about to buy and eventually own his own home, plus budgeting tools developed exclusively by My Budget Fitness for this purpose. The education and mentorship on budgeting and home ownership continues after transfer of ownership is taken, to ensure sustainable home ownership for the new home owner.

Never a Better Time to Buy

Buying is almost always preferable to renting. After all, paying rent for a property which will never be owned, instead of paying a comparable amount for a house is logically more beneficial. Property is not getting cheaper and it is very much a buyers’ market right now with mortgage rates at their lowest for the last 4 decades. Investing in property now means that in 15 years’ time, most homeowners will have made a significant dent in reducing the capital borrowed to fund the purchase. While borrowing is reduced, the home is also increasing in value resulting in a win/win situation.

While it may be slightly cheaper to rent rather than buy at the present time, the economic models on which statistics are based assume that renters could invest their money elsewhere. However, given that the rate of saving has declined since the 1970’s (when it stood at around 6.6%) to negative levels in today’s market, this is unlikely. Over a 10-15 year period, renters will spend slightly less than they would on mortgage payments, but would have nothing to show for it. At the current time, investing in buying a home means that buyers could end up at the end of a comparable period with an asset worth double the original purchase price you paid for it.

Home Owners Insurance

As part of the agreement for the mortgage bond granted to you by the bank, homeowners will be required to take out a comprehensive insurance policy equal to the value of your home, usually with the bank itself. This is so that the cost of repairing or rebuilding the house is covered in the event of catastrophe. Home owners insurance will not only cover the structure of the building, but also eventualities such as: burst geysers and any consequential damage; fixtures such as bathrooms and fitted kitchens; as well as often being extended to cover garages, greenhouses and other external features such as walls and fences. The usual criteria is that if the fixture cannot be easily removed and ported to a new home, it will be covered. The insurance also allows for temporary re-housing in the event of the home being uninhabitable for the duration of any repair work which may prove necessary.

There are a number of advantages to taking out home owners insurance with the bank that grants the bond. Usually the bank’s premiums are very competitive and often less expensive than buying elsewhere. It is easy to apply for the insurance because it is linked to the bond, with no administrative or review fees payable, neither will there be any penalties for previous claims or for submitting a claim in the event of a problem.

Black Property Ownership

With total home ownership in South Africa standing at 65%, much higher than, for instance, Germany and on a par with the United States where ownership stands at 66%, ever increasing numbers of people are choosing to take the step up to owning their own home. Between 1994 and 2011, the government has built over 3 million houses, predominantly for black households, and banks have been focused on paving the way for black ownership with most banks giving 100% loans to households with earnings of under R16,000 a month.

Black ownership of South Africa’s primary residential market stacks up to 41.7%, emphasising the radical change which has taken place in the market place since the mid 1990’s.

Johannesburg has seen the largest shift in home buying, which is favoured for its proximity to Soweto. Suburbs such as Ormonde, Meredale, Kibler Park and Ridgeway have all seen significant rises in black middleclass home ownership. The greater Randburg area has seen a rise in middle income black buyers working in both financial and corporate sectors. More than 50% of buyers are now from the black middle class demographic.

Home ownership is a failsafe method to assist aspirant first time home owners living especially in townships to escape the poverty trap. This is the message of MEC for Human Settlements, Minister Bongikhaya Madikizela at the launch of the Consumer Housing Education Programme in Khayelitsha last week.

Minister Madikizela referred to the difficult task of local government providing sufficient housing and related services particularly in the Western Cape area. The Western Cape currently has inflows of thousands of people migrating into the Western Cape region every month, which puts massive strain on local services. The WC Government main focus is to first provide the basic needs like water, sewerage and sanitation services before they can embark on a proper housing scheme for those living in shacks.

Minister Madikizela lauded the initiative by private companies and stakeholders in the property industry to get together stand together and develop a Consumer Property Education programme for first time buyers as well as sharing their skills and their resources. Currently, no housing education exists for first time buyers or new homeowners in the GAP market.

The attendees of the Khayelitsha forum were all hand-selected stakeholders from Local Government, City of Cape Town and other Municipalities, ward counsellors, NGO organizations, community leaders, banking and finance institutions, property developers, mortgage originators, and representatives in the corporate and private sector.

• Meyer de Waal CEO of My Budget Fitness introduced the Consumer Property Education programme for first time home buyers in “Six Easy Steps” to the stakeholders.
• Solly Molefe, Owner of Setsmol followed up and shared his experience on the importance of Consumer Property Education, flowing from his 11 years as educator and mentor in the Consumer Education environment.
• Gary Power, Marketing Manager of Power Developments focused on the importance of a property developer’s role of creating a community of new home owners. Through Consumer Property Education it can empower new homeowners with information to take action and for them to understand their rights and duties as a prospective property owner. Research done by Power Developments also highlighted the need for consumer education for homeowners.
• Daphne King, from the City of Cape Town welcomed the collaboration of role players in the private sector to work with Government and Local Authorities in partnership to expand the concept of consumer education for First Time Home Owners. The City of Cape Town has already implemented consumer education for the BNG type housing, but realised no such product exists for the Gap Housing segment of the market.

The contributors to the ‘Consumer Property Education’ programme for First Time Buyers are:

• Blue Oak www.blueoak.co.za
• Credit Health www.credithealth.co.za
• Law Property www.lawproperty.co.za
• Lightstone www.lightstone.co.za
• MoneySmart www.moneysmart.co.za
• My Budget Fitness www.budgetfitness.co.za
• Inspect-a-home www.inspectahome.co.za
• ICALL ASAP www.1callasap.co.za
• Real Estate Investor Magazine www.reimag.co.za
• Setsmol www.setsmol.co.za

The rollout of the first Consumer Education for first time buyer seminars and workshops will be held on the following dates:

• 26 June 2013 Mmbatho/Mafikeng – completed with great success
• 18 July 2013 Khayelitsha • 20 July 2013 Observatory
• 27 July 2013 George • August 2013 Blaauwberg
• August 2013 Langebaan

Pictures of the event can be viewed;

• on our website – under “press” - www. consumerhousingeducation.co.za
• or on Facebook www.facebook.com/#!/ConsumerHousingEducation?fref=ts

For more information:

You are welcome to contact Meyer de Waal – This e-mail address is being protected from spambots. You need JavaScript enabled to view it to arrange for your own clients to receive an invite to such seminars, or if required, to host a seminar under your exclusive “branding”.

The importance of financial literacy in buying and owning a home – flowing from the comments by Pravin Gordhan

Finance Minister Pravin Gordhan launched a strong attack on financial institutions, which he referred to as “greedy monsters” that put profits before the wellbeing of the people they are supposed to serve.

The problem

He referred mainly to the economic meltdown in 2008 but failed to mention the current crises being created by short term and unsecured lending. I t appears that lenders are favouring “fast” money. These credit lines are characterised by high interest rates (reaching up to 60% per annum) for unsecured loans repayable over shorter periods which range from 3 months to 5 years. In comparison, a bond repayment period is usually extended over 20 years, with interest rates currently ranging between 9 and 12% per annum. Recent statistics reveal that the rand value of unsecured lending is on equal par to that of secured lending.

With some 2,2 million South Africans in need of a home, it is a concern that mortgage approvals rose by a mere 4% in the past two years. This stands in stark contrast to unsecured lending which rose by 54% over the same period. We are unsure how the National Credit Act and ‘risky’ lending policies are applied. My Budget Fitness has therefore introduced the Home Owner Property Education School as a service to prospective buyers to improve their chances of obtaining home loan finance. Attendees are shown how to improve their credit rating and affordability.

They will learn how to increase cash flow by reducing monthly credit commitments through hands on education and training. We regularly encounter clients who have unsecured loans that are 4 to 5 times larger than their monthly salary. Prospective buyers who are over indebted with unsecured loans will quite often find their home loans declined. It appears that, since the introduction of the NCA, the general public is not necessarily receiving more protection against reckless lending, but rather just faster ways to obtain debt as lending institutions have developed advanced technology to expedite the approval of an unsecured loan.

One recent example is a client whose home loan was declined due to debt impairment and over-indebtedness. Joe (not his real name) borrowed R 9 000.00 from A Bank to pay back a loan taken out from C Bank 2 months ago. The loan from the first bank was a 4 month loan and cost him R2 400 per month. When Joe realised that he was struggling to pay the R2 400 per month, he then took up a new loan of R9 000 with another bank, with a repayment period of 8 months, which costs him R1 600 per month. His new monthly repayment is now less that the first loan, but in effect the new loan will cost him R12 800 in interest over and above the capital of R9 000.00 that has to be paid back by the end of the loan term. It will come as no surprise if he borrows a larger amount after 8 months to pay back the balance then due.

The rapid increase in unsecured lending increases the debt burden and has a negative effect on the credit profile of the people who are most desperate to own their own home, those that want to buy a house in the price range between R250 000 to R600 000.

In the current “affordable home loan” market, for every 1000 interested buyers, a property developer can expect to convert an average of only 40 into home owners. The search for mortgage finance by a prospective home owner may start with online research on how to obtain a home loan, as some websites offer home loans even to “blacklisted” customers. If you visit your bank or work through a mortgage originator you will find that banks are in an extensive campaign to out-do its competitors to provide more attractive banking packages. However with interest rates being the lowest in many years, in the affordable home loan market more that 65% of all home loan applications are still turned down. Property developers say that they have to sell the same house three times before the bank will approve the buyer for a home loan. The lack of affordability to service the required bond repayments and impaired credit behaviour appears to be the main reason why bonds are declined in the affordable market, such being household incomes that earn below R16 000.00 per month.

The solution

We conducted a study over the past 4 years to show why home loans are declined and decided to offer a service to prospective buyers by guiding them through the basic steps on how to buy a home. We realised we need to introduce education and budget behaviour which started the concept of ‘Home Owners Property Education School’.

In the School we show the prospective buyer how to buy a home with reference to the A B C, such being special focus on Affordability, Behaviour and Castle, the latter being the property and or deposit offered as security if required.

As the foundation, home ownership education to the prospective buyer is supported by Setsmol, a company specialising in home ownership education for clients of Standard Bank, ABSA, FNB, and Anglo Mines. The service and experience of Setsmol, who has been involved in home ownership education for more than 10 years, is invaluable as Setsmol has trainers throughout South Africa, and can perform the training in most of the official languages. E- Learning, which was recently introduced through the collaboration of another group, expands the service and enables the participant to work through a series of web-based training modules in support of the home ownership education.

We need to enable a client who participates in the education programme to change his credit spending behaviour. First we discuss the client’s goal – and then work out a plan to reach the goal. The goal of the client is usually linked to the purchase price of the property he wants to buy.

With the client’s collaboration we then analyse and capture his monthly budget and debt exposure through a Budget Calculator. A revised budget will be prepared for the client with the aim to meet his goal. Not every goal and time period will be the same as each client has different debt exposure, income and surplus funds that need to be worked with. The client usually participates for a period of 6 months or longer in the programme and receives mentorship and education on a regular and structured basis.

A tool to track expenses through a mobile phone was developed. We found that few clients actually have a budget and manage their salaries and expenses on a structured manner. We thus had to provide a tool to assist the clients to make the budgeting easy, which is why we developed the mobile2budget tool to capture each rand that you spend through your mobile phone. Since not every customer has a smart phone the challenge was to develop a tool that can relay a budget expense through a USSD or a WAP message to ensure that any type of phone can use it. With Mobile2budget you can first create your own budget, and then capture each rand that you spend by using your mobile phone. Messages are sent in an electronic format to a ‘back office’ electronic bookkeeping system that captures each expense in a particular category, such as food, entertainment and petrol and 25 other expense categories. You can view your expenses by logging into the website and soon adjust your expenses as you become more aware of your actual spending.

To enable you to stay within your budget, your personal trainer and mentor will engage with you on a regular basis to assist with planning and suggest changes to ensure that you stay within your budget. Only once you really know how much money you waste on unnecessary items can you start to adjust and trim your budget. In doing so you will start to reduce your debt and thus improve your credit rating and profile. We are amazed how our clients change their behaviour and regularly phone us to announce, “I have just received extra money and used this money to reduce debt that used to keep me awake at night – I am now closer to reach the dream of owning my home.” Prior to enrolling in the education programme, they would have spent that extra money over the weekend.

Rent2Buy

The concept to rent a property with the option to buy also forms part of other products developed over the past few years. With rent2buy, the prospective buyer will rent a property and pay rental that is equal to a bond repayment, plus rates and taxes. Additional rental payments, over and above the market related rental, can be credited to the purchaser to enable him to build up a savings account during the duration of the rental period. It is required that the rent2buy tenant participates in the budget fitness rehabilitation for the duration of the rental period. Not every client whose bond has been declined will be able to rent a property with an option to buy, as the client must first pass the rent2buy required affordability and credit behaviour test.

During the 6 month period in the School, the client receives the assistance of the budget fitness mentor, a bespoke personal budget, a budget calculator, home ownership education, E- Learning and the mobile2budget tool. These work together to support the quest to become a responsible borrower who will understand the responsibilities of managing a budget, servicing a mortgage, rates and taxes and understands the obligations of a home owner. One of our main objectives is that, once a property is purchased, the owner must not lose the property. After all, your home is your castle! One major bank has already engaged in a pilot project and many property developers are also participating. They realise the value of education, which is the key to responsible and sustainable lending.

What is an Occupancy Certificate?

An Occupancy Certificate is a document that is issued by the Building Control sub-directorate in accordance with the National Building Regulations to certify that a building has been completed in accordance with the approved building plan and all other relevant City Council requirements (for example, the installation of fire fighting equipment to the approval of the Fire Department, payment of all fees and contributions, approved water and electricity connections etc.).

Arrange with the Chief Building Inspector for your area for the issuing of an Occupancy Certificate once your building work is complete, a final inspection has been conducted by the Building Inspector, and all other Council requirements have, to the best of your knowledge, been complied with.

Occupation Certificates – who needs them?

An Occupation Certificate is compulsory for every building before occupation, as required by the National Building Regulations and Building Standards Act (1977).  This is to show that all requirements have been met and to safeguard the owner.

The Occupational Certificate specifies the type of building – freestanding, terraced, cluster complex, town house complex, apartment or commercial building. The Certificate is required before water and electricity deposits can be accepted for newly built properties.

It is against the law to occupy a property without 1) a full set of approved plans / planning permission from Council and 2) an Occupation Certificate.  An illegal / uninspected building is not insured, this could lead to substantial losses in the event of fire / flood etc.  After a month’s grace to submit building plans – property owners can be fined up to R1000 a day for not complying with the Act.

In order to get an Occupation Certificate from Council you will need:

1. Approved building plans from the Municipality, plus any documentation from Town Planning regarding rezoning, building line relaxation, consent etc., and if necessary, an approved Site Development Plan (SDP).
2. Completion Certificate from a registered structural / civil engineer – this is for the foundations, concrete slabs, staircases, wooden / suspended floors, steel work, soofs, freestanding walls over 2.1m high, swimming pools and all structures built without prior planning permission.
3. Certificate (Roof Truss) – your truss supplier / installer should provide you with certification, alternatively consult your engineer.
4. IOPSA Certificate of Compliance (Institute of Plumbing South Africa) – this is required for all plumbing / drainage / sewerage work.  It can only be issued by a registered plumber – for more information visit www.iopsa.co.za
5. Glazing Certificate – your glazier will supply you with Certification.
6. Electrical Certificate of Compliance – this can only be issued by a registered Electrician.
7. Fire Certificate – this is required for all public buildings and buildings using flammable materials e.g. wood or thatch roofs.

To avoid delays / additional engineering fees etc. at the end of your building project – it is best to contact the Building Inspector prior to starting your building.  The Building Inspector will want to conduct the following inspections:

1. Trench / Foundation Inspection – prior to concrete being poured.
2. Wall / Structure Inspections – at floor level, lintel height and roof level.
3. Drain Inspection – before connection to the municipal water / sewerage system   and prior to infilling.
4. Concrete Slab inspection (if applicable) – before concrete poured.
5. Roof Inspection.

Your local Municipality, Builder or Architect will provide you with your Building Inspectors contact details.  It is best to call for appointments etc. before 10am whilst they are still in the office.

Once you have got your Occupation Certificate you will need to lodge copies with your bank (if the property is mortgaged) and your home / property insurance provider.  This will save a lot of time in the event of a fire / flood etc.

NATIONAL BUILDING REGULATIONS AND BUILDING STANDARDS ACT NO. 103 OF 1977

14 Certificates of Occupancy in Respect of Buildings(1) A local authority shall within 14 days after the owner of a building of which the erection has been completed, or any person having an interest therein, has requested it in writing to issue a certificate of occupancy in respect of such building-

(a)   issue such certificate of occupancy if it is of the opinion that such building has been erected in accordance with the provisions of this Act and the conditions on which approval was granted in terms of section 7, and if certificates issued in terms of the provisions of subsection (2) and where applicable, subsection (2A), in respect of such building have been submitted to it;

[Para. (a) substituted by s. 7 (a) of Act 62 of 1989.]

(b)   in writing notify such owner or person that it refuses to issue such certificate  of occupancy if it is not so satisfied or if a certificate has not been so issued and submitted to it.

(1A) The local authority may, at the request of the owner of the building or any other person having an interest therein, grant permission in writing to use the building before the issue of the certificate of occupancy referred to in subsection (1), for such period and on such conditions as may be specified in such permission, which period and conditions may be extended or altered, as the case may be, by such local authority.

[Sub-s. (1A) inserted by s. 7 (b) of Act 62 of 1989.]

(2) Any person licensed or authorized by a local authority to carry out the installation, alteration or repair of any electrical wiring connected or of which connection is desired with the electrical supply or distribution works of such local authority or any statutory body, shall, at the request of the owner of a building of which the erection has been completed or of any person having an interest therein or of the local authority, issue a certificate if he is satisfied that the electrical wiring and other electrical installations in such building are in accordance with the provisions of all applicable laws;[Sub-s. (2) substituted by s. 4 (a) of Act 49 of 1995.](2A) Upon completion of the erection or installation of-(a) the structural system; or(b) the fire protection system; or(c) the fire installation system,of any building the person appointed to design such system and to inspect the erection or installation, shall submit a certificate to the local authority indicating that such system has been designed and erected or installed in accordance with the application in respect of which approval was granted in terms of section 7.

[Sub-s. (2A) inserted by s. 7 (c) of Act 62 of 1989 and substituted by s. 4 (b) of Act 49 of 1995.]

(3) Any person who for the purposes of subsection (1)-

(a) submits a certificate contemplated in subsection (2) or (2A) which is substantially false or incorrect, knowing the same to be false or incorrect; or

(b) in a  fraudulent manner issues or obtains a certificate contemplated in subsection (2) or

(2A),shall be guilty of an offence.

[Sub-s. (3) substituted by s. 4 (c) of Act 49 of 1995.]

22 of 127 NATIONAL BUILDING REGULATIONS AND BUILDING STANDARDS ACT NO. 103 OF 1977 (as amended )

permits the occupation or use of such building-

(i)   unless a certificate of occupancy has been issued in terms of subsection (1)(a) in 

 respect of such building;

(ii)  except in so far as it is essential for the erection of such building;

(iii) during any period not being the period in respect of which such local authority has granted permission in writing for the occupation or use of such building or in contravention of any condition on which such permission has been granted; or,

(iv) otherwise than in such circumstances and on such conditions as may beprescribed by national building regulation, shall be guilty of an offence.

[Para. (b) deleted by s. 7 (d) of Act 62 of 1989.]

(5) The Minister may, on such conditions and for such period as he may think fit, by notice in the Gazette suspend the application of this section in the area of jurisdiction of any local authority.

Copyright © 2008 – M. Keuter – Licensed under Creative Commons Attribution-Noncommercial-No Derivative Works 2.5 SouthAfricaLicense.

A trust is a legal entity with its own distinct identity. It has the contractual capacity to acquire, hold and dispose of property and other such assets for the benefit of its nominated beneficiaries. All trusts are governed and administered in terms of the Trust Property Control Act, and formed and governed in terms of a trust deed, a written agreement concluded between the trustees and the founder of the trust.

Perhaps the most significant purpose for establishing a trust is the separation of ownership, which is often desired for reasons including asset protection, risk mitigation and limiting ones tax liability. In order for the trust to transact, a trustee(s) are duly appointed in the trust deed who are thereby authorised to act on behalf of the trust. A trustee may act on behalf of a trust provided that he has been duly appointed to act in this capacity in the trust deed, that the trust has been registered with the Master of the High Court and the Master has authorised such appointment in writing by issuing Letters of Authority to this extent. Further, the trustees’ powers to transact are set out in and may be limited by the trust deed.

There are various advantages related to purchasing property in a trust as opposed to buying it in your personal capacity of which the following are the most prominent:

A trust is a flexible vehicle, capable of catering for various changes and uncertainties occurring in one’s life over time e.g. a larger family, death, insolvency, legislative and financial changes and other circumstances.

Since the property is not registered in your name, the value of your personal estate upon death is reduced. The direct implication hereof is a reduction in your estate duty exposure. Also, should the asset value have increased over time, this growth will be excluded from your estate and the capital gains tax (“CGT ”) payable on your estate is reduced accordingly. Executor’s fees pertaining to these assets will also be eliminated.

Provided that you do not establish your trust(s) with the intention of prejudicing creditors, purchasing or transferring a property into a trust helps to protect the specific asset from creditors.

It is advisable to create and operate a trust with appropriate tax advice. In this way a trust will enable you to mitigate your tax liability with specific reference to income tax, CGT, estate duty, donations tax and transfer duty.

Trusts are excellent succession planning tools as a property bought in a trust can remain in the trust indefinitely. Consequently, there is no need to transfer the property from the deceased into the name of his heir. In turn this saves on unnecessary transfer costs and CGT duty.

When finance is required to purchase a property in the current “market” the banks are less likely to grant a 100% bond to a trust and demand a deposit of up to 20% when a trust acquires a property. It appears in some instances individuals may receive up to 100% property finance.

Looking at the downside, the following count under the most burdensome disadvantages of purchasing property in a trust.

All trusts are taxed at an income tax rate of 40%. Consequently, it seems to be more favourable to buy a property in your individual capacity rather than in a trust. Here is why: CGT on the growth of the value of the property comes into play once a property is sold.

Trusts are subject to the highest inclusion rate. 66.66% of the net gain must be included in the trust’s taxable income for the year in which the property is sold. Consequently trusts are taxed at an effective rate of 26.6%. This is compared to individuals who are subject to an inclusion rate of 33.33% and a maximum effective rate of only 13.33%. However, if the profit or gains are distributed to the beneficiaries of the trust during the same tax year, the tax payable may end up being the same amount, as if a natural person is disposing of a second property.

Another downside of the trust owning the property is that the founder does not enjoy control over that property as the trust will be the legal owner of the property and the trustees will have the power to administer same.

Therefore based on the above, if administered correctly, one can benefit tremendously from the exercise of purchasing a property in a trust. It is, however, crucial to determine whether the addition of a trust to your portfolio is necessary and beneficial based on your individual needs and circumstances.

The easiest way to determine the boundaries between properties is to consult the official town planning diagrams kept by the local authority in control of the area. In the event of a dispute over the dividing line between two properties, the first point of reference would be the official property plans (diagrams). One can refer to the title deeds of the properties concerned to ascertain plan numbers and with which deeds the plans are filed.

In the absence of proof that a boundary wall or fence is entirely on one of two adjoining properties, it is presumed to half on one property and half on the other. Some legal authorities state that each part is separately owned by the owner of the property on which it stands, but that there are reciprocal servitudes of support. Other authorities state that the wall is jointly owned by the owners of the adjoining properties.

It is important to take note that the law relating to such encroaching boundary walls reflects the influence of both trains of thought and does not concretely swing in either direction. An owner who transfers his property automatically transfers his joint ownership.

Neither owner may without the consent of the other remove, raise or lower the boundary wall or tamper with it in any way except in an emergency, although in terms of common law a neighbour is allowed to break down a wooden fence and replace it at own cost with a more expensive partition.

Either owner my re-erect a boundary wall destroyed by an act of God, such as fire or flood; the other owner would have to contribute half the cost – if he or she will derive any benefit from it. Each owner is obliged to contribute to the maintenance and repair of the wall, although an owner can refuse to contribute to the cost of an unreasonably expensive new wall. Also, an owner is under no obligation to replace with a similar structure a boundary wall that was unreasonably expensive when it was originally erected.

Although both parties are entitled to reasonable use of the boundary wall, this right does not include reducing its strength or making it unstable but does however include improving and altering the appearance of the side that fronts your property. Subject to local authority regulations, either owner my use his side of the boundary wall as support or a beam or for water pipes and may even build on it if it is strong enough.

Title deeds might determine who is responsible for repairing shared walls or fences. A servitude could also make a single owner entirely liable for the costs of upkeep. If one neighbour refuses to make essential repairs, anyone who is entitled to enforce the servitude may obtain an estimate of the costs of repairs, though it is unlikely that a contractor will undertake to handle the repairs if the person responsible for payment refuses to do so.

The owner of a wall who is not bound by a servitude is usually under no obligation to carry out repairs. However, in the case of deterioration that is likely to prove dangerous to the public, a local authority might order the owner(s) of the property to carry out repairs. Should no servitude exist, repairs must be carried out by agreement between the two owners.

PRACTICAL APPLICATION

In both the High Court judgments of Van Bergen v Van Niekerk & Another and Passano v Leissler, the court reiterated the same stance in accordance with the principles laid down in Voet’s Commentarius ad Pandectas.

The respective courts held that in case of doubt, a wall intermediate between two adjoining properties is presumed to have been built on the common boundary. Such a party wall belongs to both the owners of the adjoining properties, irrespective of who built it. Although this is not co-ownership in the accepted sense of the term, the owners of neighbouring properties do have rights against each other.

One view which was taken was that the owners have the rights of co-owners in the sense that each is entitled to the maintenance of the wall encroaching on his neighbours property, as well as the part standing on his own property. Another view is that while each owner has no right of ownership in the portion of the wall standing on his neighbour’s ground, each owner is entitled to demand that the other co-owner should keep his half of the wall in a proper state of repair.

The courts seemed to favour the view that each owner owns half of the wall on his side of the median line with reciprocal servitudes of lateral support. Accordingly both neighbours are liable for the cost of the maintenance of the wall and both must refrain from doing anything which my detrimentally affect the stability of the wall.

Mortgage Bonds: Is the TIFFSKI Judgment  a bank's worst  nightmare?

A recent judgment handed down by the Supreme Court of Appeal on 30 September 2011 has laid bare the effects of non-compliance with the requirements of Section 34 of the Insolvency Act and should arguably sent shivers down every buyer, banker’s and conveyancing attorney’s spine. 

Not only was the sale and transfer of the assets of a business, which was subsequently liquidated, declared void ab initio, but so too the mortgage bonds registered in favour of the bank financing the transaction. 

A proper due diligence investigation into all relevant issues is thus of utmost importance when assisting a buyer or a bank evaluating it’s security. It proves that “possession cannot be regarded as “10 points of the law” and possession and even ownership and the security of a mortgage bond can be set aside by a ruling of a court. A bona fide buyer or bank are most likely to be un-aware of a pending liquidation or insolvency of a seller, which liquidation or sequestration can take up to six months to come to conclusion after the sale and full payment of a purchase price has taken place. 

The facts of the case can be summarised as follows:
FACTS

• Tiffindell Ski Limited (the company) concluded an agreement of sale with Tiffski Property Investment (Pty) Ltd (Tiffski) on 12 July 2007 in which it sold to Tiffski the immovable property on which it conducted a hotel and resort enterprise along with the said business enterprise (the subject matter).
• The written agreement of sale contained terms quite common in many such agreements and to the effect that possession, occupation and control would be given to Tiffski on the date of transfer, that the agreement would not be published in term of Section 34 of the Insolvency Act, that the company would continue to conduct its business pending transfer and that the agreement represented the entire agreement between the parties.
• Registration of transfer subsequently took place on 16 September 2008 simultaneous with the registration of two mortgage bonds in favour of the State Bank of India Limited (the Bank).
• The company went into liquidation on 23 October 2008 and its liquidators challenged the validity of the transfer of the subject matter and the registration of the mortgage bonds against themselves, arguing that it was void as against them on the grounds that (1) the company went into liquidation within 6[six] months from the transaction (2) the transfer was not in the ordinary course of business (3) the transfer of the business was not for the purpose of securing the payment by the company of its debts and (4) the required notice was not published as set out in Section 34 of the Act. 

COURT’S FINDINGS
Upon accepting the liquidator’s arguments, the court rejected Tiffski’s contentions that it was not a “trader” as defined in the Act, that the transaction was in the ordinary course of business, that the transfer fell outside of the 6 month window contemplated in the Act and that due to the transaction being common knowledge it was not necessary to advertise. 

It placed specific emphasis on the Bank’s role when considering the validity of the mortgage bonds and rejected the claim by the Bank that it was unaware of the company’s financial difficulties at the time it approved the disputed mortgage bonds. The Bank further contended that the bonds passed by Tiffski over the immovable property transferred from the company constituted real rights in the said property that served as its only “real security” for the monies lent. Thus any order voiding the mortgage bonds would cause it irreparable financial harm. 

The Bank sought to rely on a number of court decisions for the proposition that the validity of a mortgage bond duly registered in the Deeds Office is not dependent on the validity of the antecedent contract, a contention that the court also rejected. According to the court in this instance, it is trite that no legal consequence flow from a void jural act. The court stated that “As Tiffski did not acquire ownership of the company’s immovable property – on account of the voidness of the transfer – it must logically flow that Tiffski could not in turn grant any rights, let alone real rights, in the immovable property to the Bank”.

The court then further slammed the Bank saying that it should have insisted on publication of a notice in terms of Section 34 and this being expressly excluded in the agreement of sale must have been done with the Bank’s approval or acquiescence. It was the opinion of the court that to uphold any argument advanced by the Bank in its defense would “defeat the very purpose which the Legislature wished to achieve in enacting Section 34 (1) and benefit the Bank at the expense of the company’s creditors. The Bank must accordingly be taken to have consciously assumed the risk of the transfer of the company’s business to Tiffski falling foul of the legislative requirements and nevertheless agreed to advance moneys to Tiffski fully aware of the risk in doing so. 

CONCLUSION
In future, any bank or money lending institution should do well to take head of the court’s hardline approach applied in this case and as the usual remedies relied on in cases of this nature fell on deaf ears in favour of the rights of the company’s numerous creditors. It could in fact signal the start of a growing trend to protect creditors and restrict lending even further, warning any bank to tighten its mechanisms for due diligence, information control and mortgage bond approval criteria even further. 

Conveyancing attorneys who attend to the registration of mortgage bonds must also be aware of the risks associated with the registration of a mortgage bond when a court rules the security void, due to non compliance of legal requirements.

With special thanks to Daan Steenkamp.

“Court warns developers not to rely on local authorities to know the correct zoning of their property”

Historically municipalities were indemnified against liability for negligent omissions (failure to perform a duty that is legally due). However, one merely has to look at our case law to see that this has been done away with.

All bodies (public or private) exercising public power owe a duty of care to the public. In addition to this, section 33 of the Constitution of the Republic of South Africa (the Constitution) provides that everyone has a right to an administrative action (as defined by section 1 of the Promotion of Administrative Justice Act 3 of 2000) that is lawful, reasonable and procedurally fair. Therefore administrative actions such as decisions given by local authorities are subject to scrutiny so as to ensure compliance with legal principles.

As per the judgment in Faircape Property Developers (Pty) Ltd v Premier, Western Cape 2002 6 180 (C), a property developer who suffers a loss as a result of a local authority having exercised his/her statutory duties negligently has recourse against that local authority.

Judgments such as the above are in line with our Constitution, which is the supreme form of law in South Africa. Our Constitution is founded on values such as the values of democratic government to ensure accountability, responsiveness and openness. The value of an accountable government is promoted by ensuring that citizens have some form of relief against their government when the latter causes them harm.

Davis J In the Faircape Property Developers case said the following:
“… to find that a party who would be gravely prejudiced by gross negligence of an official enjoined to consider such an application, should be without any remedy and thus left to suffer considerable financial consequences of such a wrongful decision would offend the principle of accountable…”

In addition to the above, it is also important to note that when interpreting any legislation in South Africa, every court must promote the spirit, purport and objectives of the Bill of Rights. Section 195 (1) of the Constitution provides that public administration must be governed by the democratic values and principles enshrined in the Constitution, including a high standard of professional ethics, accountability and transparency. Section 152 (1) of the Constitution provides that the objects of local government include the provision of democratic and accountable government for local communities.

It is due to the above that I submit that the warning that was recently sent out by South African Property Owners Association (SAPOA)- court warns developers not to rely on local authorities to know the correct zoning on their property, can be deemed as superfluous; the public will always have recourse against a public official whose negligent conduct causes them harm, financial or otherwise.

The Consumer Protection Act (CPA) and municipalities:

• The application of the CPA to municipalities was delayed so as to give municipalities a chance to get their affairs in order. However, municipalities with high capacities such as Cape Town, Johannesburg and Tshwane were never exempted i.e. the CPA applied to these      municipalities with high capacity as soon as it came into effect.

If you would like a detailed article on the above, please contact the author.