How to sell a home – Here’s how your bond is cancelled
Selling your home is as exciting as it is stressful. Do you appoint an estate agent or try going solo? Whose offer do you accept if you get multiple offers to purchase? What regulations do you have to comply with before your home can be transferred?
4 Costs, tax and cancelling your bond
Although you can appoint the transferring attorney, the purchaser is responsible for payment of their fees, disbursements and the transfer duty. The purchaser is also responsible for the bond attorney’s account.
The seller will however be responsible for the cancellation attorney’s costs. The standard fee as prescribed by the Law Society is approximately R2,500 for the first bond to be cancelled and R400 for every subsequent bond. We deduct this amount from the proceeds of the sale and you do not need to pay us in advance. If, however, there are insufficient funds available from the proceeds after all the other expenses have been deducted, we may request advance payment of this cost.
As you will discover from this document, there are other expenses for which the seller is also liable, for example the electrical, gas, and electric fence certificates.
Cancelling your existing bond
The existing bond over your property has to be cancelled to enable the unencumbered transfer of your property into the name of the purchaser. Even if the bond is paid up, it still has to be cancelled at the deeds office. The cancellation of the existing bond will be effected simultaneously with the transfer of the property at the deeds office.
As your transferring attorney we obtain the outstanding balance (cancellation figures) from your bank and ensure that guarantees are issued by the purchaser’s bank in favour of your bond account. Only on receipt of these guarantees will your bank consent to the cancellation of your bond.
In terms of the National Credit Act the bank may charge you penalty interest if it is not given 90 days’ notice of your intention to cancel the bond.
If the bond is cancelled during the 90-day period, pro rata penalty interest will be charged for the remainder of the penalty period. The penalty interest per month is equal to a month’s interest payable on your bond.
You can give written notice to the bank of your intention to cancel, but as standard practice we also notify the bank accordingly on receipt of the instruction to transfer your property. The bank holding the seller’s bond will only be able to provide us with the cancellation figures once we can provide them with your bond account number. We can therefore not proceed with this request if you do not provide us with your bond account number.
If you are worried that you will be liable for penalty interest you are, even before you receive an offer to purchase, welcome to send a request together with your bond account number to firstname.lastname@example.org, where after we will notify the bank of your intention to cancel your bond.
Once cancellation figures have been requested you will not be able to access any additional funds from your bond account.
Dear Mr Taxman
Value Added Tax (VAT) – VAT is only payable on your transaction if you, as the seller, are a property trading enterprise registered for VAT at SARS. Usually it is only developers and speculators that will be liable for the payment of VAT. You should contact your auditor if you are uncertain about whether you are liable for VAT.
Transfer duty – If you are not registered for VAT, the purchaser will be liable for the payment of transfer duty. The transferring attorney collects the transfer duty from the purchaser and pays it to SARS. In exceptional circumstances it is possible to add the transfer duty (together with other legal costs), which would normally be for the purchaser’s account, to the purchase price to assist the purchaser, but it is not recommended. The bank then effectively finances the transfer duty and legal costs of the purchaser. In exceptional circumstances, however, the bank will consider such an application. The addition of transfer duty and costs to the purchase price must, however, be mentioned in the deed of sale and disclosed to the bank.
Banks, for various reasons, are generally not keen to finance the purchaser’s costs. If you do accept an offer of this nature it will most probably result in the bank declining the bond or only granting a loan to the amount excluding the transfer duty and legal costs (the true purchase price). Should you receive an offer where the transfer duty and legal costs are included, it is therefore advisable to add a condition in terms of which you can require that the purchaser expedite the bond approval.
Capital Gains Tax (CGT) – CGT may be payable as a result of the transfer of your property. CGT is payable by you at the end of the tax year together with your income tax. Unlike transfer duty or rates and taxes we do not administer or pay CGT to SARS. Contact your auditor or tax consultant in this regard if you are uncertain whether CGT is payable by you or not.
Income tax – To enable us to register your transaction, we have to prove to the deeds office that the transfer duty has been paid by the purchaser. Even if no transfer duty is payable, a supporting document to this extent has to be obtained and lodged at the deeds office.
Although you, as the seller, are not directly involved in paying transfer duty, you should take note that all systems at SARS are integrated and accordingly no transfer duty receipt will be issued if you do not have an income tax number or if your income tax matters are not in order. This can delay the transfer of the property indefinitely. If you resolve these issues timeously you can save yourself a lot of frustration at a later stage.
Next time: What compliance certificates apply; why your council account needs to be paid up; and understanding occupational rent