The Hidden Costs… | Free Transfer and Bond Cost Quotation | South Africa
Few things are as annoying as having been given an indication of transfer fees and
bond costs only to discover later that there are other costs that nobody has mentioned
to you before. I will attempt to lift the veil of the hidden transfer and bond costs
in South Africa for the purchaser of a residential property.
Most agents and attorneys use a Table of Transfer and Bond Costs that has originally
been issued by the Law Society. It is important to bear in mind that the Table merely
serves as a recommended guideline. The attorneys may deviate from it. Sometimes
attorneys may decide to give a discount where a number of similar instructions were
received at more or less the same time, for example four or five transfers between
the same parties in one sectional title scheme. At other times, the attorneys may
wish to charge more than the tariff where additional work had to be done.
Sometimes purchasers confuse transfer duty and transfer fees. They have heard that
no transfer duty is payable if the purchase price is below R600 000. When they find
out that they still have to pay transfer costs they are surprised and sometimes annoyed.
The reason is that there are still fees and costs payable to the attorneys because
they are entitled to remuneration for their services and the other costs and expenses
are still in place. It is only the transfer duty payable to SA Revenue Services that
has fallen away, if the property value is below R600 000.
Even where the attorneys stick to the recommended tariff mentioned above, you may
find that there are extra’s that you have not been informed about. This is not because
of anyone’s dishonesty but simply because there is not enough space on the one page
used for the Table of Costs to reflect all the possible costs items and secondly
because the Law Society does not prescribe the suggested costs for these other items.
What are these other transfer costs? Well, they are usually small items, but if you
add them up they can make a marked difference. Here follows a list of typical extra’s
with their average fee (which may vary from firm to firm):
The FICA verification has to do with compliance with the Financial Intelligence Centre
Act, 38 of 2001, which requires from the attorneys to verify the identity and address
of the parties and in the case of the purchaser, the source of funds for the transaction.
The Deeds Office search is usually an internet search to verify the details of the
property and the existence or not of bonds and interdicts related to the property.
The contribution towards rates/levy clearance needs to be explained. It will apply
where a municipality or body corporate expects the conveyancers to do the appropriation
or splitting of amounts payable. Usually in terms of the Deed of Sale (Offer to Purchase)
the Seller will pay rates and taxes until date of registration of transfer and the
Purchaser will be liable for the rates and taxes as from the date of registration.
The Attorney has to pay rates and taxes or levies upfront for a couple of months
in advance in order to get a valid clearance certificate from the municipality or
body corporate. Since the attorney does not know beforehand the date of registration
he can only estimate the amount that will be payable by the purchaser. These are
strictly speaking not legal costs but a payment in advance on the rates account,
which should appear as a credit on the next rates and taxes or levy statement.
There are likewise usually additional costs for bonds that do not appear on the Table
First time purchasers are sometimes perplexed that they have to pay legal fees to
two different firms of attorneys. That is simply because there is in addition to
the transfer also a bond to be registered by attorneys instructed by the lending
bank. These attorneys may also charge a FICA verification fee and for a Deeds Office
internet search just like the transferring attorneys.
The initiation fee is what is being charged by the lending bank and to be collected
by their attorney on their behalf. For mortgage bonds the National Credit Act regulations
prescribe the maximum fee that can be charged R1 000 per credit agreement, plus 10%
of the amount of the loan in excess of R10 000 subject to a total maximum of R5 000.