Property law in South Africa

The biggest mistake that buyers of international properties can make is thinking that the property buying process is the same in South Africa as in their home country. When buying property abroad you must endeavour to find out about the associated costs and legal differences. The opportunity to purchase a Cape Town property can mean a fantastic lifestyle, as well as some good investment opportunities,  but it also contains pitfalls which you must avoid.

If you are considering buying a property in South Africa there may well be some fundamental differences to the property law in South Africa then that of your home country. SAHomeBuyers, as a property buyers consultant, takes the time to help ensure you are familiar with aspects of the law that may have a profound effect on your purchase.

There are a few aspects of the property law in South Africa that you need to consider and below we discuss some of the more pertinent ones.

The role of the Estate Agent

In South Africa the estate agent maintains a somewhat puzzling role in many of the property sale transactions. Employed by the seller to obtain the best price, they are often also the party giving advice to the buyer. A split role that could bring up conflicts of interest. In reality their primary role is to assist sellers in marketing their property and selling it for the highest possible price under the best terms.It is only a retained buyer’s consultant, such as SAHomeBuyers, that is focused (with no conflict of interest) on assisting buyers by helping them purchase property for the lowest possible price under the best terms for them.

In the case of a selling agent helping both the buyer and seller, there becomes confusion with this dual role. Traditionally, the broker (estate agent) represents the seller, and has a fiduciary duty to the seller. If the estate agent suggests to the buyer that he will help them negotiate the best price, then just who are they working for? In the USA this is termed as practising undisclosed dual agency, which is unethical and illegal in all states.

So whilst there is an ethical and moral responsibility on behalf of the selling agent to the buyer, make no mistake whom they work for – the seller!

Does the property law in South Africa require a Home Inspection?

Law in many countries, a home inspection is one of the very minimum of requirments and constitutes an integral part of the purchasing process. It offers the buyer a safeguard that they are buying what they think they are buying. Not a property with unforseen issues.

In South Africa there is no such requirement and indeed the only inspections carried out are 1. Electrical, 2. Beetle and 3. Water and gas compliance certificates.

At SAHomeBuyers we continue to be amazed at just how little protection there is for the buyer, it seems we are not isolated in this view, below is an extract from the EAAB (Estate Agents Affairs Board) website.

“In the United States and in Britain properties being sold need to pass inspection by an independent, accredited expert before the prospective buyer can obtain a home loan. Although the system was initially introduced to give financial institutions peace of mind, a successful inspection holds big benefits for both buyer and seller. In the United States and elsewhere there have been great advances in the sales of residential properties through the pre-qualifying analysis of both buyers and sellers to ensure trouble free deals and fast property transfers.”

Home inspection as a service industry has been available in the USA and Canada for the past three decades. It is growing so much in popularity that Entrepreneur Magazine has predicted that 90% of all homes purchased in the next few years in the USA will be subject to proper inspections. At present the percentage for the USA is approximately 66%. In other words 66% of all second-hand homes are inspected before they are sold.

It is for these reasons that the home inspection business in many parts of the world is now a vital part of the property industry.

No such requirements are within the property law in South Africa and there exists many a horror stories of unfit properties being purchased by unsuspecting buyers.

Making an offer to purchase

  • Your offer to purchase is a legally binding document, once all the conditions have been met. It is not simply a statement of intent as in many other countries.
  • Most houses are sold “voetstoots”, which means, roughly, sold “as is” – a concept that rightly frightens many prospective purchasers.
  • There is no cooling off period in most offer to purchase agreements.
  • In most cases you are expected to complete this legal offer to purchase agreement with the estate agent selling the property. Yes the very same one who is obliged to get the best terms and conditions and price for the seller. Whose there to help you, the buyer?
  • Please also remember it is not just what is in the offer to purchase document, but what is not in it. Clauses and suspensive conditions cannot be added later. In short there is no going back and they need to be inserted in the offer to purchase agreement upon completion of it.

Legal representation

Even though you pay the appointed attorney, it is the seller of the property in South Africa that usually appoints the attorneys who will deal with the transfer of property into your name . The property law in South Africa does not require you to have independent legal representation.

With SAHomeBuyers our retained attorney checks all title deeds, for potentials issues and this is a mostly standard suspensive condition (inserted by us) on all our offer to purchase agreements.

These are just some of the reasons you should use a property buyers consultant – as the estate agents affairs board state on their website:

“Buying a home is probably the largest investment decision most consumers will ever make, yet they often take less time when doing so than they would when, say, buying a new car. That is because buying immovable property is unfamiliar territory to most people who, as a result, really do not know what questions to ask.

Working with a registered estate agent is critical to ensure that you make informed decisions.”

We, at SAHomeBuyers totally agree. In fact we also believe that the type or role of the estate agent you work with is just as importamnt, if not more so. It must be someone looking after your interests and making sure that you understand what you are legally committing yourself to. Simply put if you are buying a property choose a Property buyers consultant, not an estate agent that is ‘acting’ for the buyer and seller.

Contact a property buyers consultant

If you want to find out more about the property law in South Africa and working with an estate agent who acts only for you and in your best interests then email us here or phone + 27 (0) 83 265 8800.