Buying real estate is a financial investment that requires scrupulous planning and consideration. Not least of these considerations are the additional costs of the transaction over and above the selling price of the property.
When it comes to these additional costs it is important to discuss two terms that often get confused: transfer costs and transfer duty. These two terms are not interchangeable, and will apply to your real estate purchase to differing degrees.
Transfer Costs
Transfer costs can be summed up as your attorney’s fees and the costs of the disbursements they incur that are directly related to the property transfer and bond registration processes. Attorneys’ fees are regulated by the relevant Legal Practice Council, with sliding scale tariffs that are determined according to the purchase price.
Disbursements generally include postage, petty expenses, deeds office registration fees, and rates clearance costs, to name but a few. They may also include the costs incurred during levy clearances from sectional title schemes and homeowner’s associations. Disbursement amounts will thus vary from transfer to transfer. Attorneys generally provide buyers with a detailed breakdown of these costs at the inception of the process, though this will only be in the form of a proforma invoice of which the final costs may vary slightly.
Transfer Duty
Whenever the ownership of a property changes hands, SARS imposes a tax on the transaction, which is referred to as transfer duty. As of 1 March 2020, this tax is only levied against property transactions with a value of R1 million or greater. This new threshold was announced during the 2020 Budget Speech. However, any property transaction with a date of sale before 1 March 2020, will still fall under the previous threshold of R900 000, and will not benefit from the new exemption.
The table below illustrates the structuring of transfer duty applicable to each property’s price/value:
| Property Value | Transfer Duty Rates |
| R1 – 1000 000 | 0% |
| R1 000 001 – R1 375 000 | 3% of the value above R1 million |
| R1 375 001 – R1 925 000 | R11 250 + 6% of the value above R 1 375 000 |
| R1 925 001 – R2 475 000 | R44 250 + 8% of the value above R 1 925 000 |
| R2 475 001 – R11 000 000 | R88 250 +11% of the value above R2 475 000 |
| R11 000 001 and above | R1 026 000 + 13% of the value above R11 million |
Transfer duty is calculated individually for each transaction, on either the purchase price or the property value, whichever proves to be the highest. The duty rates are applicable to property transfers of all kinds, including those headed by companies, close corporations, and trusts. Transfer duties must be paid to SARS within the first six months after the sale, whereafter penalties and interests will be charged to the buyer.
Other exceptions to transfer duties are outlined in the Transfer Duty Act No. 40 of 1949, and includes the acquisition of property through VAT-subjected transactions and through inheritance.
Whether you are looking at purchasing a home for your family or a new storage space for your business, when you find a property that falls squarely within your budget, additional costs need to be taken into consideration to ensure that no surprises await you on your journey.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)