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Monthly Archives: December 2012

The clock is ticking down…

time_BIf you purchased your property in a Trust, Close Corporation (CC) or Company you have until 31 December 2012 to dispose of that property. The disposal will be to your name or the name of a beneficiary or shareholder without paying transfer duty, dividends tax (DT) or capital gains tax (CGT).

Part of the reason why SARS has given this tax break is that SARS requires the de-registration of the trust, company or CC once the transaction is complete. This then reduces the number of trusts, companies and CC’s in existence and makes SARS’ administration and enforcement of tax compliance somewhat easier. Of course, if your residence is in an entity as part of a long term strategy it may not be in your interest to avail yourself of this opportunity.

When you dispose of your residence CGT is triggered and the CGT is significantly lower if the property is registered in your personal name. The effective rates of CGT are as follows:

For an individual it is 13,3% ( this is assuming that your marginal rate of income tax is at the maximum of 40%). Individuals also get a “primary residence exclusion” of R2 000 000 plus a

R30 000 “annual exclusion”.

For a company and CC it is 18,6%.

For a Trust it is 26,6%.

To further illustrate the above let us take a Capital Gain of R2 000 000 and apply this to the various entities below:

CGT PAYABLE BY THE SELLER

Individual                           Company/CC                                     Trust

R0                                       R372 000 approximately                      R 532 000 approximately

The savings above speaks for itself.

With a trust you may be able to reduce the CGT substantially by having the profits taxed in the hands of a beneficiary with a lower tax burden.  A “special trust” created solely for the benefit of a person suffering from a mental illness or a person suffering from a serious physical disability is treated as an individual.

FAQ’s

Who Qualifies? Not everyone, so seek professional advice. However, if the property is mainly used for domestic purposes it is a good beginning

If I qualify, will I benefit? One must take professional advice on this and consider estate planning, asset protection, conduiting a trust’s distributions to a beneficiary with a low tax burden

Does my holiday home qualify? Yes

What are the costs? There is no transfer duty payable and the CGT is rolled over. There are conveyancing fees, bond cancellation fees and possibly bond registration fees applicable plus costs to deregister the entity.

How long to de-register the Entity? Six months from the disposal of the residence

Anything else? If there is a mortgage bond registered over the property you must consult with your bank as the bond will be cancelled and a new bond will have to be registered. Be aware of the 90 day notice period to cancel the bond and ensure that the individual who receives transfer will qualify for the new bond and at what interest rate.

There could be significant advantages available to you if you proceed with such a disposal. The deadline looms so act now as after 31 December 2012 the opportunity is lost!!

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Posted by on 13/12/2012 in Content

 

Buying a property? Here are 11 tips to keep in mind:

buying_BWith the banks being ever so slightly more generous with approving applications for mortgage bonds, more people out there are (again) considering to purchase property.  Whether the property you are considering to purchase is the highest valued asset in your estate or merely one of many in your portfolio, it remains of utmost importance to take the necessary care when approaching this transaction.  What follows, are 11 handy hints and tips to bear in mind as a prospective buyer:

1. Contact a mortgage bond originator of your choice to ascertain, approximately, what you can afford (pre-approval).  Consider the amount of a deposit, which should preferably be 15% to 20%.  Consider the availability and liquidity of your funds, as deposits are usually required upon signature or within 5 (five) days of signature of the Deed of Sale.  If your deposit is tied up on a 32 day call account, you should mention this to the estate agent.

  1. Buy within your means.  Do not over extend yourself financially. Interest rates could be increased by the Monetary Policy Committee.  Even though the Governor of the Reserve Bank has kept the repo rate level for some time now, an upswing is expected.   There are also transfer costs, bond costs and banking fees, i.e. initiation fees to bear in mind. Transfer Duty is a part of the transfer costs and must be paid upfront a month before transfer on demand by the conveyancer.  Always conduct diligent financial planning.
  1. Buy by comparison.  Pay attention to the market and what is being listed and sold in your price range. Take note of expired listings. These are listings that have sat on the market week after week without selling.
  1. If you have found your dream home but are unsure of certain aspects of it, e.g. the roof or retaining wall, approach your attorney for advice. Certain clauses can be drafted that afford you greater protection in these instances
  1. Ensure that, when putting in your offer, you are certain as to which fixtures and fittings you are receiving.  List any extras that you wish to have.  A good estate agent will know what is included or excluded as they canvass these issues when they list the seller’s property.
  1. When completing the offer, have a date in mind when you wish to move in.  If this date is earlier than the transfer date you will have to pay occupational interest on a pro rata basis.  This means that you take possession and vacant occupation before the transfer date. If you do not wish to pay any occupational interest then you must state in the contract that you are taking possession and vacant occupation on registration of transfer. If you do take early possession and occupation, ensure that there is a clause in the contract that the seller will continue to insure the property right up to date of transfer. Always insist on possession dates and transfer dates and not to be mutually agreed to.
  1. Inspect the property as best you can. Open the cupboards to ascertain if any dampness has set in – you will immediately smell it. Check the walls for cracks, inspect the geyser, check the wooden floors for any damage, check the window frames and inspect the roof if possible.  Also, do not hesitate to check behind items. This is your most valuable asset! One can also employ reputable companies to do this for you. Some sellers even engage the services of House Checking companies upfront as a means of full disclosure.  Should you require such services, we can make recommendations of companies specializing therein.
  1. If you are buying in a suburb or a complex that has a Home Owner’s Association, ask the agent for the Constitution. This will assist you in realising your obligations as you will be required to become a member and there are monthly fees involved.
  1. With regards to pricing – be careful about “cheeky” offers that are too low. This often irritates sellers who will make a very high counter offer or will just not accept yours. Rather be guided by the agent and come in with a low market related offer. The agent has a better chance of closing the deal on a decent offer than an outrageous one.  An outrageous offer from your side will simply result in either a rejected offer or a very high counter offer.
  1. Ask the agent if any offers have been made and why they did not succeed. This, too, is an excellent guide for you when putting in your offer.
  1. It is always prudent to have a conveyancing attorney peruse your offer and to discuss same with him/her. The conveyancer can assist with extra clauses that afford you more protection in situations that warrant additional protection.

Should you require any assistance or guidance regarding any of the abovementioned steps or procedures, we will gladly assist you.  You are welcome to contact Mark Witzmann (mark@oostco.co.za) or Meyer de Waal (meyer@oostco.co.za) on 021 461 0065.

 
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Posted by on 13/12/2012 in Content

 

First time property buyers: The role of the Conveyancing Attorney explained.

first_property_BThe term “conveyancing” describes the legal process whereby a person, company, close corporation or trust becomes the registered and lawful owner of fixed property and ensures that such ownership cannot be challenged. It also includes the process of the registration of Mortgage Bonds.

The Conveyancer is the transfer attorney who handles the transfer of property rights on immovable properties from sellers to buyers. To act as a conveyancer, attorneys must be qualified in that specific field of law.  The Conveyancing attorney’s main function is therefore to coordinate the transfer of property rights and to ensure that the process is done according to legal requirements.

The transferring attorney and the bond registration attorney can be, and usually are, from two different unrelated firms.  The Seller generally appoints his chosen attorney to attend to the transfer (the buyer however pays the fees involved) while the decision of who attends to the registration of the mortgage bond is the bank’s.

A first time property purchase transaction is usually pretty daunting and the prospective novice buyer should keep in mind that there are two legal processes in the purchase of a property: the first being entering into a deed of sale, drawing up of the transfer documentation and the registration of the property into the buyer’s name. At the same time, in a second process, the bond on the property has to be registered and lodged with the Deeds Office.

One of the most frequently asked questions is why, if the buyer of a property is paying the conveyancing attorney, the seller has the right to appoint him. The most common answer is that it is logical because in a property transaction the seller is far more at risk than the buyer. Most conveyancers’ fees are similar due to the fact that they are prescribed and regulated by the law societies of the region in which the property is situated, however it is not uncommon for the buyer to ask for a specific conveyancer to be appointed because this conveyancer has offered a reduced fee.

After an agreement of sale has been concluded, a conveyancer is appointed and instructions are sent to him by the estate agent, including the names of the buyer and seller, a copy of the agreement of sale, and the passport numbers and marital status of the buyer and seller. The whole process gets under way and the appointed conveyancer then drafts all the necessary documents and arranges for signature thereof by all the parties concerned.

A good conveyancer is definitely worth their fees in more ways than one, because they can save you much more money in the conveyancing process. A conveyancer that provides a full comprehensive service can also cover the entire purchase process in depth, providing support and advice where you need it, when you need it.  It is advisable to consult a knowledgeable attorney or conveyancer even before the deed of sale is signed to make sure that your rights as a first time buyer are protected.

Here are a few foolproof tips to ensure that the right conveyancer is handling your transaction, whether you are the seller or buyer:

  • Choose a firm that specialises in conveyancing, either a stand alone provider, or a dedicated division of a larger firm. Small family practices may have a reassuring bedside manner, but this is no substitute for depth of experience.
  • Word of mouth is often the best way to find a conveyancer. Ask your family and friends who they have used before and what experience they have had. This will make the stress of the whole process mush easier if you can trust a reliable recommendation.
  • You should have a single contact person, easily accessible by a direct line/ mobile and willing to be contacted out of office hours.
  • Conveyancing jargon can be somewhat confusing, so choose a conveyancer who will speak to you in plain English as you do not want to be hassled with bewildering language
  • Always ask to be told about ALL costs up front so that there are no nasty surprises later on.
  • When a conveyancer provides you with a quote, check it carefully, look out for two or three key phrases such as “fixed fee” or “All inclusive” which guarantee value, and be alert to the warning signs of sharp or impersonal practice.

At the end of the day most people will agree that buying a new home is one of the most stressful things you can do so you want to ensure you choose the right people to help guide you through the process.

 
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Posted by on 13/12/2012 in Content

 

OMDW wrapping it up for 2012.

celebration_BWith a very busy 2012 coming to an end, we here at OMDW are still going strong to wrap things up on the business front before we call it a day on the 21st December 2012.

We sincerely thank all of our clients, both existing and new, for all your valued support throughout this year and trust that we will continue our journey in the new year, as we go from strength to strength.

This year we will not be sending out our “End of the year thank you presents” as we, instead, decided to support a charitable vegetable garden project for the SA Children’s Home this year.

You can view some of the early progress by <clicking here>.

The project basically entails 10 big wooden boxes being filled with newly planted vegetables with the assistance of the children.  Sonia Cabano, a renowned chef, who instigated this project then teaches the children how to cook with their very own produce.

If you are interested in contributing to this initiative and be a part of something special – please contact Colleen at our office reception@oostco.co.za or 021 461 0065 for further details.

We wish you a safe and merry festive and holiday season as well as a very prosperous 2013.  Our offices will be opening its doors again on 3 January 2013 and we look forward to assisting you in you future legal endeavours.

Kind regards

The OMDW Team

 
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Posted by on 13/12/2012 in Content