Purchase and ownership of vacant land

Building on vacant land has unmatched possibilities when creating your dream home. There are, however, a few other aspects to consider when purchasing vacant land.

Verbal vs. written contracts for conveyancing

Location

The area in which a vacant stand is located will of course need to be considered when planning to purchase, as the local municipality has by-laws which regulate what is allowed in certain areas. It is wise to research the relevant by-laws to determine if these impact on the intended building or use of the property.

A potential purchaser should also see if there are any conditions in the title deed which may restrict or regulate how their property is developed. These restrictions are normally in place to protect the aesthetics and nature of the area.  

This is also true of a large number of gated estates which have their own rules. For instance, the homeowners association might only allow a certain style of house to suit the rest of the development.

Loans for the purchase of vacant land

Financial institutions are less likely to offer 100% financing for buying vacant land as it is considered a riskier investment, however, this does not mean that it is not possible. This size of the property and the area in which it is located will impact the decision on whether to finance the purchase.

In addition, if a larger deposit is payable, approval of the bond will also be more likely. It is also wise to have additional funds available should unforeseen expenses arise.

Costs and process

While it is often considered to be cheaper to buy land and build a house, one must be mindful and take all costs into consideration. Architectural and building fees are key costs that should be examined as these need to fit your overall budget. It is common for building costs to exceed the initial plan if not carefully considered, monitored and agreed upon by all parties beforehand.

That said, transfer duty is one area where buying vacant property can result in a saving. Currently, properties with a selling price of less than R900k are exempt from transfer duty. It is also possible to buy land and not build on it immediately, which means one can potentially wait until sufficient capital has been generated to begin construction.

When it comes to the transfer process though, all relevant steps remain unchanged compared to the transfer of a property with an existing building. All relevant supporting documents and clearance certificates are still to be obtained.

Services and maintenance

The vacant erf will incur lower service costs as the municipal rates are charged on its estimated value. Your charges on water and sanitation will be relatively low as usage is also minimal.

Whilst undeveloped land has a lower overall value, there is also no need to worry about any defects or immediate maintenance. However, city councils are strict regarding the upkeep of vacant stands to ensure a clean and healthy area. For example, this may include regularly clearing overgrown vegetation.

Whilst there are certain risks that accompany the purchase of vacant land, doing a bit of research might be the difference between purchasing a potential asset or liability. The best course of action will be to approach a real estate agent who knows the area where the vacant stand is located and can provide you with valuable insight and advice.

Follow Snymans on Facebook for more legal information, tips and news about property.

Recommended for you

Minors and immovable property
Contractual Matters

When ownership of immovable property is vested in a company[post_view before=""]

There are instances where ownership of land is vested in a company. Typically, a company is registered, usually with one or two directors, and such company then takes transfer of the immovable property. The land is then held in the name of the legal entity (being the company), with the individuals or directors who intend to stay there holding shares in the company.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

An ethical approach to fee discounts[post_view before=""]

Legal fees are regulated by tariff guidelines, which are issued by the Rules Board in terms of the Legal Practice Act. Although these tariffs are guidelines, they are typically followed in the conveyancing industry. As a result, if fees are ever queried, they can usually be backed up by the regulations issued in the Government Gazette from time to time.

Read More
Minors and immovable property
Contractual Matters

The Property Practitioners Act 22 of 2019: what you need to know[post_view before=""]

In 2017, the Government undertook to interrogate the Estate Agency Affairs Act and replace it with one it deemed more suitable. The result was the Property Practitioners Act (PPA), which came into effect on 1 February 2022. In this article, we’ll be touching on some of the highlights – or lowlights, depending on your point of view – of this new act.

Read More
Minors and immovable property
Contractual Matters

Suspensive conditions revisited in the Cape Royal case[post_view before=""]

South Africa’s law of contract provides several ways in which contracting parties can protect and enforce their contractual rights. The most essential principle of contract is party autonomy – parties to a contract are free to conclude what they have agreed to, and the courts have a duty to enforce this agreement as far as possible provided it is not against the law.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Pay with complete peace of mind[post_view before=""]

With cybercrime on the increase globally, the team at Snymans is increasingly aware of the importance of safeguarding both our clients and our business against cyber criminals when it comes to making and receiving electronic payments. In fact, phishing crimes have become such a cause for concern in South Africa that the Legal Practitioners’ Fidelity Fund has declared that it will not make good on insurance claims arising from these types of crimes.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Purchase and ownership of vacant land

Building on vacant land has unmatched possibilities when creating your dream home. There are, however, a few other aspects to consider when purchasing vacant land.

Verbal vs. written contracts for conveyancing

Location

The area in which a vacant stand is located will of course need to be considered when planning to purchase, as the local municipality has by-laws which regulate what is allowed in certain areas. It is wise to research the relevant by-laws to determine if these impact on the intended building or use of the property.

A potential purchaser should also see if there are any conditions in the title deed which may restrict or regulate how their property is developed. These restrictions are normally in place to protect the aesthetics and nature of the area.  

This is also true of a large number of gated estates which have their own rules. For instance, the homeowners association might only allow a certain style of house to suit the rest of the development.

Loans for the purchase of vacant land

Financial institutions are less likely to offer 100% financing for buying vacant land as it is considered a riskier investment, however, this does not mean that it is not possible. This size of the property and the area in which it is located will impact the decision on whether to finance the purchase.

In addition, if a larger deposit is payable, approval of the bond will also be more likely. It is also wise to have additional funds available should unforeseen expenses arise.

Costs and process

While it is often considered to be cheaper to buy land and build a house, one must be mindful and take all costs into consideration. Architectural and building fees are key costs that should be examined as these need to fit your overall budget. It is common for building costs to exceed the initial plan if not carefully considered, monitored and agreed upon by all parties beforehand.

That said, transfer duty is one area where buying vacant property can result in a saving. Currently, properties with a selling price of less than R900k are exempt from transfer duty. It is also possible to buy land and not build on it immediately, which means one can potentially wait until sufficient capital has been generated to begin construction.

When it comes to the transfer process though, all relevant steps remain unchanged compared to the transfer of a property with an existing building. All relevant supporting documents and clearance certificates are still to be obtained.

Services and maintenance

The vacant erf will incur lower service costs as the municipal rates are charged on its estimated value. Your charges on water and sanitation will be relatively low as usage is also minimal.

Whilst undeveloped land has a lower overall value, there is also no need to worry about any defects or immediate maintenance. However, city councils are strict regarding the upkeep of vacant stands to ensure a clean and healthy area. For example, this may include regularly clearing overgrown vegetation.

Whilst there are certain risks that accompany the purchase of vacant land, doing a bit of research might be the difference between purchasing a potential asset or liability. The best course of action will be to approach a real estate agent who knows the area where the vacant stand is located and can provide you with valuable insight and advice.

Follow Snymans on Facebook for more legal information, tips and news about property.