Initial Stages:

All types of property in South Africa are normally purchased through an estate agent or broker who should be registered as a member of the EstateAgents Board. The South African Reserve Bank will refer to all overseas investors as „ non-residents“. Should a „non-resident“ be purchasing their property in cash, then the transaction can complete without further intervention from the bank. Should a mortgage be required, then borrowing restrictions are placed on all „ non-residents“. A maximum of up to 50% of the purchase price may be borrowed from a South African bank; the rest must be transferred into the country from a recognised foreign bank.

Non-residents who possess a valid South African work permit are classed as residents for the duration of their permit and thus are not placed under the same restrictions as normal“ non-residents“.

Legal Issues:

Anagreement of sale contract must be signed by both parties to certify that it islegally binding. Once signed, neither party can withdraw without incurring legal consequences unless certain prior agreements have been made. Also, if the purchase price is below R250,000 (approx € 35,000) and additional criteria is met, the buyer is entitled to a „ cooling off“ period. Anon-resident must set up an account at a South African commercial bank in order for loan repayments to commence. This account will usually be funded from abroad or from any rentals received on the property in question provided the bank has a copy of the rental agreement. Should a non-resident wish to make South Africat heir permanent residence, then the Exchange Control Authority may deal with them in the manner of a nationalised resident. In this instance, they are given permission to apply for a 100% mortgage provided they apply for and obtain permanent residence within a period of time agreed by the Exchange Authority.

Note - The Exchange Control Authority is undergoing a process of deregulation in order to make it easier for overseas investors to purchase property in South Africa. The situation is still highly complicated and the Reserve Bank retains considerable control, so expert legal advice is strongly recommended until the process has become more user-friendly.

Land Registration:

South Africa offers an unrivalled degree of ownership certainty and is reputed to have one of the most accuratedeeds registration systems worldwide. Property ownership can be individual, joint or shared between an entity, such as a company, with a high level ofcertainty.

Documentation:

All documentation prepared by the estate agent must be signed in black ink within the boundaries of South Africa. If it is inconvenient for the buyerto be in the country, then they can appoint a Power of Attorney to sign on their behalf. If the buyer is married, then the spouse is also legally obliged to sign the documents or appoint a Power of Attorney too. This law does not apply to those married in accordance with English and Scottish law.

Offer to Purchase:

Once an offer has been made, a deed of sale will be drawn up containing various rules that need to be followed. A deposit is notessential but can act as a gesture of goodwill on behalf of the buyer. It also indicates a certain degree of financial ability. A standard inclusion in all deeds of sale is termed „ Voetstoets“, which implies that the property is to be purchased „ in the exact condition in which it is found“ . Any defects present in the property that the seller knows about must be brought to the attention of the buyer. A survey is not usual practice in South Africabut can be arranged should the purchaser so wish.

Tax Considerations:

South Africa` s income taxsystem dictates that all revenue earned from a South African source will be subject to ordinary income tax rates. So, any rental that a property earns will be subject to income tax, regardless whether the owner is a resident or not.Therefore it is the responsibility of the owner of the property to register as a South African taxpayer or face the prospect of a hefty fine.

Overview:

While the purchasing process is markedly different to that of an EU country, South Africa presents a safe and secure investment option. The banks are all reputable and trustworthy, and land registration is among the most accurate in the world. A salways, expert legal advice will be required, but the whole process should notpose too many significant problems for the investor.