Land rights and registration in South Africa

We often get asked about land rights and the protection thereof in South Africa. Cliffe Dekker Hofmeyr, a prominent law firm in South Africa, published a guide to doing business in South Africa that should answer most questions.

Right to Property

The right to property is enshrined in the Bill of Rights contained in the Constitution of the Republic of South Africa Act, 1996. Section 25 of the Constitution provides that no one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

Section 2 records that the Constitution is the supreme law of South Africa. Any law or conduct that is inconsistent with the Constitution is invalid, and the obligations imposed by the Constitution must be fulfilled.

Registration of Title

The registration of rights in land and other immovable property is regulated by the Deeds Registries Act, 1937. The transfer of ownership in land is effected by registration in a deeds registry in accordance with the provisions of the Deeds Registries Act.


South Africa boasts a sophisticated and efficient system of land registration. The system is one of registration of title as opposed to a system of registration of deeds, as is found in many western countries. Although the system of registration may be described as a negative system, that is one in which the state does not guarantee title, disputes as to the validity of title are few and far between. The South African system of registration effectively provides the registered owner of land with security of title.


This security of title is the result of the respective responsibilities carried by professional land surveyors (under authority of a Surveyor-General), the deeds registries established throughout South Africa (each under authority of a Registrar of Deeds, with a Chief Registrar of Deeds exercising authority on a national basis) and an independent attorneys’ profession. In the latter case, the preparation and execution of deeds requires the services of an attorney in professional practice, who has passed a specialist examination in the law and practice of conveyancing, and has been admitted to practice as a conveyancer by the High Court of South Africa.


The reliance placed on the title afforded an owner by due registration is aptly summarised by Hoexter J A, in the Appellate Division case of Frye’s (Pty) Ltd v Ries (1957(3) 575 AD), where he said the following (at 582):


“As far as the effect of registration is concerned, there is no doubt that the ownership of a real right is adequately protected by its registration in the Deeds Office. Indeed the system of land registration was evolved for the very purpose of ensuring that there should not be any doubt as to the ownership of the persons in whose names real rights are registered. Generally speaking, no person can successfully attack the right of ownership duly and properly registered in the Deeds Office. If the registered owner asserts his right of ownership against a particular person, he is entitled to do so, not because that person is deemed to know that he is the owner, but because he is in fact the owner by virtue of the registration of his right of ownership.”


Land Tenure and Rights in Land

Although South Africa still recognises an historic system of 99 year leasehold, the primary real right in land is that of ownership, akin to the English concept of ‘freehold’ title, and most land in South Africa is privately held by outright ownership.


Whilst the common law ownership of land includes the ownership of all fixed improvements erected on the land, South African law also recognises separate ownership of buildings or parts of a building. Such ownership is regulated by the Sectional Titles Act, 1986. Sectional title ownership is also registered in a deeds registry.


Statutory rights in land are also provided for in the Share Blocks Control Act, 1980. This form of tenure entitles the holder of shares in a share block company to the use and enjoyment of land owned or leased by the share block company. This form of tenure is not registered in a deeds registry and the rights attaching thereto are protected by the Share Blocks Control Act.


South African law recognises various limited rights in land, the most common of which is the relationship of landlord and tenant. Leases are capable of registration in the deeds registry and, in such instances, afford the tenant greater rights than in the case of an unregistered lease. Various servitudes recognised under South African common law, and capable of registration in a deeds registry, confer limited rights in land, such as for example, the right to use land and/or to enjoy the fruits of land.


Rights to minerals in South Africa are regulated by the Mineral and Petroleum Resources Development Act, 2002. The Act makes provision for equitable access to and development of the nation’s mineral and petroleum resources, and recognises the internationally accepted right of the State to exercise sovereignty over all the mineral and petroleum resources within the Republic. Provision is made in the Act for guaranteeing security of tenure in respect of prospecting and mining operations. The registration of mineral and petroleum titles and other related rights and deeds is effected at the Mineral and Petroleum Titles Registration Office, in accordance with the provisions of the Mining Titles Registration Act, 1967.
Rights in land are subject further to regulation relating to environmental issues and concerns. Applicable legislation such as the National Environmental Management Act, 1998, is aimed inter alia at preventing pollution and ecological degradation, promoting conservation and securing ecologically sustainable development and use of natural resources while promoting justifiable economic and social development.
Certain activities require authorisation before they may be conducted. For example, an environmental impact assessment and environmental authorisation may be required under the National Environmental Management Act’s Environmental Impact Assessment Regulations, 2006, where a landowner intends to develop his or her property.


Taxes, Duties and Fees

Transactions relating to the acquisition and disposal of land are subject to payment of taxes and duties. Fees are payable to a deeds registry in respect of each transaction registered. Professional fees are also payable to a conveyancer.


In the case of the acquisition of land or any real right in land (as well as certain transactions involving companies, close corporations and trusts that own residential property), a transfer duty is, subject to certain exceptions, payable prior to registration in the deeds registry. This duty generally amounts to 8%of the value of the land or right in the case of companies, and a lesser sliding scale applies where an individual is concerned. Certain transactions are exempt from transfer duty. This is regulated by the Transfer Duty Act, 1949.


In terms of the Value-Added Tax Act, 1991, value-added tax (VAT) (currently at the rate of 14%) is payable, subject to certain exemptions, on the supply by a vendor of goods or services supplied by him in the course of an enterprise. Goods include fixed property and any real right in fixed property. Certain transactions relating to fixed property are subject to VAT at a rate of 0%. The acquisition of land in terms of a transaction that is subject to VAT is exempt from transfer duty.


Copyright – Cliffe Dekker Hofmeyr “Doing business in South Africa”

Some tips to save money on property transactions

A “funny” place to save money is through the way that you structure the purchase of multiple units. Don’t let your estate agent write one contract for more than one property at a time.

For example, if you buy two flats for R500 000 each and purchase them together on one Deed of Sale (Offer to Purchase) you will then pay R37 641 transfer and attorney fees. However if you were to buy them on two separate contracts you would only pay R8 021 each (R16 042).

The saving comes from not paying transfer duty below R500 000 and reduced attorney fees at the lower rate.

However, when it comes to the bond application putting as many properties together as possible is the way to go. Two R500 000 bonds would cost you a total of R11 268 while a single R1m rand bond would only cost R9 114.

While we never suggest that you should negotiate the attorney’s fees we often find that if you stick to one attorney and do a number of transactions with them that they are prepared to offer you a reduction in their fees because you are a good customer. So perhaps it does not pay to shop around but rather to stay with the same transferring attorney if the seller will allow you.

Everyone wants to do everything as cheaply as possible, but be careful. Sometimes penny-wise is pound-foolish.

Going to the estate agency that offers the lowest commission will not necessarily mean that you will get the cheapest selling price. Are they able to assist the seller in putting their property into the market at the “right” price or will they simply take the price that the seller asks for?

Many estate agents do not look at recent sales when giving the seller advice on the likely selling price of their property but rather just add their fees to the seller’s asking price.

A good estate agent will explain the selling process to Sellers including how buyers compare properties before buying the one that suits their needs best at the best price. This is vitally important for investment properties where buyers are looking for a financial return (net return on income after expenses – rental less letting fees, less rates and taxes, less levies, less allowance for maintenance etc). After all they are buying an investment.

Good estate agents may well have a better selection and more realistically-priced stock. They will also have their favourite investor clients who will hear about the “good buys” before other possible buyers.

*Mike Spencer recently on Realestateweb.co.za

Budget 2008 – Good news?

Well, there is good news and bad news.

The bad news is that Minister Manuel chose not to make use of all the suggestions of this blog in his 2008 budget. For instance, he did not make any changes to the rate and thresholds on transfer duty. Furthermore, the capital gains tax exemption, which has been steady at R1,5 million since 2007, has also been left as is. This was probably to be expected if one considers that the state coffers have been receiving less from the property market in recent times as a result of the slowing of the property market.

However, Minister Manuel always seems to be able to put a smile on many faces and this year was no different. There was some good news for individuals in his Budget also. The annual exclusion in respect of capital gains/loss for individuals is raised from R15 000 to R16 000. The primary rebate for individuals will also be increased from R7 740 to R8 280 and the secondary rebate from R4 680 to R5 040. This has the effect that the tax threshold for individuals below age 65 has been increased from R43 000 to R46 000 and from R69 000 to R74 000 for individuals 65 and older. Furthermore, the tax exemption on interest and dividends has once again been increased to encourage savings and assist those who rely on interest income. The exemption has increased from R18 000 to R19 000 for taxpayers under the age of 65 and from R26 000 to R27 500 for taxpayers 65 years and older.

What all of this basically mean is that an individual tax payer will have some more money in his pocket again. Our advice would be to utilise the additional disposable income to reduce your current debt instead of purchasing new property. This hold true especially if you’re finding yourself with a very thin buffer after all your debts have been paid.

The greatest thing about Trevor’s budget speech for the property market is probably his expectation that inflation was expected to fall back within the 3% to 6% target in 2009. That will obviously put an end to the current increasing interest rate cycle, which will impact positively on the affordability of property when rates start to fall again.

At Terblanche Thomas Property Solutions we give you honest advice because we wish to your partner with you when you consider your next property investment. Drop in for a chat about the Budget or anything else. We’re ready to meet you.

What we would like Trevor to address in the Budget

Trevor Manuel, the Finance Minister of South Africa, unveils the national budget of South Africa today. Honestly, we can probably do with some reassurance after the recent Eskom woes, the leadership issues in this country, the National Credit Act and so forth.

Here is the Terblanche Thomas February budget wish list:

1) We would like Minister Manuel to take steps to help boost overall confidence in the country and to put some money back into the pockets of those keen to get onto the property ladder for the first time.

2) We would also love an adjustment to the thresholds at which transfer duty becomes payable. Transfer duty is a tax you pay when you buy property. Currently transfer becomes payable when the property being transferred is sold from around R500 000. Our opinion is that this should be raised to at least R900 000 to take cognisance of current average property values. This should make the costs of buying property less prohibitive for many people who want to get into the property market.

As an example: You will pay at least R25 000 transfer duty when you buy a house of just under R1m, assuming a deposit and that you are buying in your own name (legal entities will pay around R80 000). Other fees associated with registering a bond and the property can add about R20 000 to that total on a property of that value. Of course, there are further costs to take into account when you buy a home, like removal costs and occupational rent.

3) We would like Minister Manuel to bring in a tax break that rewards home-ownership, like a tax incentive connected to interest repayments or insurance on a property. Imagine what it would do for your pocket – and property values – if you are allowed a tax deduction of the interest on mortgage bonds.

4) Alternatively, not taxing interest at all would really encourage savings. Currently you are taxed on interest income above R18 000 per annum.

5) Most important, it would be just fantastic if Minister Manuel could put in a word with Tito Mboweni (the Governor of the SA Reserve Bank) to lower the interest rates.