In terms of the Alienation of Land Act, 68 of 1981, an agreement of sale of immovable property, also known as an Offer to Purchase (OTP) in the industry, must be in writing and signed by the parties thereto. In addition to this crucial element, there are further key considerations for buyers and sellers to into account.
A seller must be aware that until such time as this type of condition contained within the Offer to Purchase is met (typically relating to the approval of a buyer’s bond application or the sale of a buyer’s existing property), the fulfillment of the agreement is uncertain. As such, if the condition is not met within the required timeframe, the contract will become null and void and the seller will need to explore further avenues to conclude the desired property sale.
Again, it becomes important to clearly state the agent commission that the seller agreed to pay, including whether this amount (usually in the form of a percentage of the sale price) is VAT inclusive or exclusive. If not stated, it is deemed that the commission value is VAT inclusive.
This agent commission is payable upon registration of the transfer. However, should either party cancel the contract once it has become unconditional and prior to registration, the agent is entitled to claim commission from the defaulting party.
VAT and Transfer Duty
All sales will be subject to either VAT or Transfer Duty. The general rule is that if the seller is registered for VAT, the sale will be subject to VAT. Commercial property transactions will typically be subject to VAT.
Individuals, Companies and Trusts
If a legal entity such as a company or trust buys immovable property, the legal entity must be represented by an individual or individuals with the necessary capacity to act on behalf of the company or trust by way of a resolution. This would normally be a director in the case of a company, or a trustee in the case of a trust.
The sale of a property can be a complex transaction and the written agreement of sale will need to reflect all the relevant requirements and be tailored for each particular sale. As such, this should be handled with a property professional to ensure all relevant information is accurately recorded in the necessary documentation.
Find out more about the Terms of the Agreement.
Written by Wessel de Kock