VAT increase and the effect on property transfers and the registration of transfers before and after 1 April 2018.

The increase was announced in the Minister of Finance’s Budget Speech on 21 February 2018. The standard rate of VAT will change from 14% to 15% on 1 April 2018 (the effective date). 

How will this VAT increase affect property transactions, property registrations and estate agent commissions?

Question 1: How will the rate increase work generally for fixed property transactions?

The rate of VAT for fixed property transactions will be the rate that applies on the date of registration of transfer of the property in a Deeds Registry, or the date that any payment of the purchase price is made to the seller – whichever event occurs first. (See, however, the exception in Question 2 below where registration (delivery) of the fixed property occurs on or before 23 April 2018.)

If a “deposit” is paid and held in trust by the transferring attorney, this payment will not trigger the time of supply as it is not regarded as payment of the purchase price at that point in time. Normally the sale price of a property is paid to the seller in full by the purchaser’s bank (for example, if a bond is granted) or by the purchaser’s transferring attorney.

However, if the seller allows the purchaser to pay the purchase price off over a period of time, the output tax and input tax of the parties is calculated by multiplying the tax fraction at the original time of supply by the amount of each subsequent payment, as and when those payments are made. In other words, if the time of supply was triggered before 1 April 2018, your agreed payments to the seller over time will not increase because of the increase in the VAT rate on 1 April 2018.

Example:

A vendor sells a commercial building and issues a tax invoice to the purchaser on 10 January 2018. If the property will only be registered in the Deeds Registry on or after 1 April 2018 and payment will be made by the purchaser’s bank or transferring attorneys on the same date, then the time of supply will only be triggered at that later date. In this case, VAT must be charged at 15% as the rate increased on 1 April 2018 which would be before the time of supply. It does not matter that an invoice or a tax invoice was issued before the time of supply and before the VAT rate increased. The tax invoice in this case would also have to be corrected as it would have indicated VAT charged at the incorrect rate of 14%.

See also the next questions below for the rate specific rule that provides an exception for the purchase of “residential property” or land on which a dwelling is included as part of the deal.

Question 2: Is there a rate specific rule which is applicable to me if I signed the contract to buy residential property (for example, a dwelling) before the rate of VAT increased, but payment of the purchase price and registration will only take place on or after 1 April 2018?

Yes. You will pay VAT based on the rate that applied before the increase on 1 April 2018 (that is 14% VAT and not 15% VAT). This rate specific rule overrides the rules as discussed in Question 1, which applies for non- residential fixed property.

This rate specific rule applies only if:

  • you entered into a written agreement to buy the dwelling (that is “residential property”) before 1 April 2018;
  • both the payment of the purchase price and the registration of the property in your name will only occur on or after 1 April 2018; and
  • the VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes:

  • an existing dwelling, together with the land on which it is erected, or any other real rights associated with that property;
  • so-called plot-and-plan deals where the land is bought together with a building package for a dwelling to be erected on the land; or
  • the construction of a new dwelling by any vendor carrying on a construction business;
  • a share in a share block company which confers a right to or an interest in the use of a dwelling.

Question 3: How will the VAT increase affect the seller of the property and estate agent commission?

Two possible scenarios can apply:

Scenario 1:

Should the contract of sale read that a percentage commission plus VAT is payable, that will be calculated at 14% if transfer takes place before 1 April 2018 and at 15% when registration takes place on or after 1 April 2018.

The net result is that the seller (who sold prior to 31 March 2018) will receive a lower net amount on the selling price because of the increased VAT, should transfer take place after 31 March 2018.

Scenario 2:

Should the contract of sale refer to a fixed commission amount inclusive of VAT, the opposite will apply. The seller will receive the same amount, but the agent will receive less because of the increased VAT.

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For more information on the VAT Increase, download the SARS VAT Increase general guide and FAQs here:

Please contact us should you have any specific questions.

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)

How to get divorced if it’s your only option

B1If a married couple has decided on getting divorced, the process may seem daunting and uncomfortable. However, it can be done efficiently, but there may still be a lot of emotional difficulty involved. It’s important to note that divorce is a last resort in a marriage. If it’s a civil marriage, it needs to be dissolved by a court, and like a court case, good grounds for the divorce have to be given. Divorce isn’t a do-it-yourself matter.

What reasons are good reasons?

  1. Firstly, and most importantly, you have to be absolutely certain that divorce is the only option for you and your spouse. This is because you would have to prove to a court that you and your spouse can’t live together anymore and there is no possibility of reconciliation or for you two to love one another again. An unconsciousness or mentally ill spouse, for example, could also be a valid reason for divorce.
  2. Other forms of proof or grounds needed for a divorce are evidence that you and your spouse haven’t been living together for a very long period of time, one of the partner’s cheated, one partner left or that there was abuse involved in the relationship, such as physical abuse.

Steps to take

  1. The first step is to prepare a summons for a court. Going through a Family Court will be cheaper than a High Court. The summons would include details such as who will have custody of the children and how the other parent will see the children, if there are children involved. Other details would include maintenance and how property will be split.
  2. You can consult an attorney beforehand to help you with the divorce summons and the court proceedings. The Sheriff of the Court will serve the summons to the other spouse or ‘defendant’. In some cases, the defendant may decide to oppose the summons, in which case their attorney will send back a plea (answer to the summons).
  3. The two parties may try reach a settlement agreement before the hearing. Regardless of whether or not the they have reached an agreement the case will still be heard in a court before a decree of divorce is issued. As mentioned earlier, divorce has to go through a court.
  4. After the summons has been submitted to the court a hearing date will be set. A divorce order will be granted after the judge at the hearing has settled everything and confirmed what has been presented as grounds for the divorce.

References

  • Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.
  • Westerncape.gov.za. Western Cape Government. Getting Divorced Page. [online] Available at: https://www.westerncape.gov.za/service/getting-divorced/ [Accessed 25/05/2016].

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)

The Rental Housing Tribunal: I have a complaint against my landlord/tenant

B2Formed in 2001, the tribunal is comprised of five members (including a chair and vice chairperson) appointed by the Provincial Minister of Human Settlements, who each have expertise in property management, housing development and consumer matters pertaining to rental housing.

The tribunal seeks to:

  1. Harmonise relationships between landlords and tenants in the rental housing sector.
  2. Resolve disputes that arise due to unfair practices.
  3. Inform landlords and tenants about their rights and obligations in terms of the Rental Housing Act.
  4. Make recommendations to relevant stakeholders.

How do I lodge a complaint?

  1. First complete the relevant forms available from the Rental Housing Tribunal.
  2. The Rental Housing Tribunal will investigate the matter and find out what the problem is and try to resolve it amicably and as soon as possible.

What will the Rental Housing Tribunal do?

  1. They will establish whether there is any dispute between the landlord and tenant.
  2. They will try to resolve the matter through mediation – if the dispute cannot be resolved it should be referred to a hearing.
  3. They will conduct a hearing, where the landlord and tenant will be summoned for hearing by the Tribunal.
  4. A just and fair ruling will be made.
  5. Where a mediation agreement has been concluded, make such an agreement a ruling of the Tribunal. This ruling is binding on both parties.
  6. The Tribunal may make a ruling as to who pays whose costs.

What happens after I have lodged a complaint?

  1. After a complaint has been lodged with the Tribunal until the date of the ruling on the matter, the:
  2. landlord may not evict the tenant;
  3. tenant must continue to pay the rent; and
  4. landlord must maintain the property.

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)

How to apply for spousal maintenance?

B3Maintenance is the obligation to provide another person, for example a minor, with housing, food, clothing, education and medical care, or with the means that are necessary for providing the person with these essentials. This legal duty to maintain is called ‘the duty to maintain’ or ‘the duty to support’.

The duty to maintain is based on blood relationship, adoption, or the fact that the parties are married to each other.

An application for maintenance can be made against a defendant (person who must pay maintenance) at any Maintenance Court (“court”) in the district where the complainant (person who applies for maintenance) or the child, on whose behalf maintenance is claimed, resides or works.

The parents, guardians and/or caregivers of a child can apply for maintenance on behalf of such a child.

What should a person take to court when applying for maintenance?

  • Identity document of the complainant.
  • Complainant’s contact details, such as telephone numbers and home and work addresses.
  • If maintenance for a child is claimed, the birth certificate of that child.
  • If maintenance for the spouse is claimed, the marriage certificate or divorce order where maintenance order was granted.
  • A full list of expenses and any proof of same, such as receipts.
  • The complainant’s payslip and proof of any other income.
  • As much detail as possible regarding the defendant, such as telephone numbers, home and work addresses, list of known income and expenses, and so on.

What happens after the application has been made?

  • The maintenance officer will inform the defendant of the application and will hold an informal enquiry with the complainant and defendant being present.
  • The defendant must take any proof of his/her income and expenses to the informal enquiry.
  • The purpose of the informal enquiry is to assist the complainant and the defendant in reaching a settlement.
  • If a settlement is reached, an agreement will be entered into between the complainant and the defendant, which will be made an order of court.
  • If a settlement cannot be reached, the maintenance officer will place the matter before court for a formal enquiry to be held.
  • The court will consider the facts and evidence of the claim and decide, by way of a maintenance order, whether maintenance should be payable and the amount of such maintenance.
  • The complainant and the defendant must both be present at the informal and formal enquiry, and will be allowed to have legal representation.
  • If the defendant fails to appear at the formal enquiry in court, an order may be given in his/her absence.
  • It will not be necessary for the complainant and/or defendant to appear in court if they consent in writing to the maintenance order being granted.

Reference

  • Justice.co.za
  • Legalwise.co.za

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)

 

 

Reference

 

Justice.co.za

Legalwise.co.za

 

Cancelling a lease agreement early

B4If you want to end your contract early, this can only be done “in situations where the Consumer Protection Act or Rental Housing Act apply” – or if there’s a clause in the contract that allows for early cancellation, or if both parties agree to it.

If, on the other hand, one of the parties wants to cancel because the other is in breach of the contract, then certain notice periods come into effect – the first of which being, of course, that the aggrieved party is required to “give written notice for the breach to be remedied. Failure to remedy the breach in the stipulated time period, will entitle the innocent party to cancel the lease and (where relevant) claim damages suffered from the offending party.”

A tenant has the RIGHT to cancel a lease agreement, be it in the 1st month, 4th month or second-to-last month of the lease agreement. He cannot be ‘punished’ for doing this and the cancellation does not constitute a breach of the lease agreement.

What must an agent do if a tenant decides to cancel?

1. Obtain the cancellation in writing from the tenant.
2. Ensure the cancellation gives the requisite 20 business days’ notice.
3. Charge rental until the end of the 20 business days (even if this is not a full month’s rental).
4. Log on to TPN and end the lease as at the end of the 20 business days.
5. Keep in mind the lease now ends as at the end of that 20 business days.
6. Should the tenant remains in the premises a new lease MUST be signed as once cancelled, a lease cannot be revived at law. If you fail to do this, you essentially have no long-term lease in place.
7. Begin advertising the property immediately- the onus is on the agent/landlord to find a replacement.
8. Keep all invoices from the advertising as this is one of the costs you may pass along to the tenant in terms of a ‘reasonable cancellation penalty’.

What can an agent charge the tenant that cancels early?

The idea behind this reasonable cancellation penalty is not to penalise the tenant, but to recover any actual loss suffered by the landlord as a result of the cancellation. The following cost could be applicable:

  • Credit check costs for any prospective replacement tenants (even those who are not accepted);
  • Advertising costs (only the actual amounts on the invoices);
  • Rental – the exact number of days that the unit remains vacant after the tenant vacates.

It is important to keep in mind that all calculations of the penalty can only be made once a replacement tenant has been found. It must also be kept in mind that where a tenant cancels, for example, in month 10 or 11 of a 12-month lease, you cannot charge the tenant the full remainder of the lease as this would negate the cancellation. The principles behind cancellation penalties lie in our law of undue enrichment. A landlord/agent cannot make a financial gain or benefit off of a tenant’s cancellation.

References:

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)