To answer this question with any sense of authority, we need to understand some of the basics first-
Ø What is conveyancing?
Conveyancing relates to the legal process that transfers ownership of the home from the seller to the buyer. The conveyancer (who is an attorney) is usually appointed by the seller, but paid for by the buyer (due to the nature of the transaction, the seller is at greater risk and this appointment is therefore a general rule of thumb).
Ø What is the role of the conveyancer?
A conveyancer performs a vital function when completing a property transaction. In fact, you would not be able to call yourself the “owner” of a new property without one. Conveyancers attend to the process of actually transferring legal ownership of fixed property from one person (or a company or trust) to another. In a nutshell, this process amongst other things, involves ensuring the deed of sale meets all the legal requirements, including requesting and collecting supporting information (such the mortgage bond, cancellation figures, title deeds, compliance certificates, and the amounts from the municipality for a rates clearance certificate). The conveyancer is also tasked with drafting all the necessary documentation (such as a “power of attorney to pass transfer” for the seller to sign, a declaration in respect of marital status, ID Number as well as the bond registration documentation for the purchaser when registering the bond) that needs to be lodged with the deeds office to finalise the registration of the sale.
Basically the term “conveyancing”, describes the administrative and legal procedures necessary to transfer ownership (and other rights therein) in immovable property from seller to buyer. And the professional responsible for this process (aka the conveyancer) is an admitted attorney who passed an additional written examination and has been admitted to practice by the High Court of South Africa.
Only a conveyancer (who is an expert in their field) may prepare and execute certain deeds and documents for registration in the deeds registry. This is because a conveyancer has detailed knowledge not only of property law but also of company law, insolvency law, the law of succession and matrimonial law (to mention but a few).
One might say that a conveyancer is absolutely necessary, crucial and tantamount to the property buying and selling process. With that said, when looking to sell your property you want to get as much bang for your buck as possible.
For most people, it is not only their family home, but oftentimes, a relatively sound investment too. And with your home being one of your most prized possessions (and one of your most valuable resources), when you make the big decision to sell it, you want to ensure you do it correctly and to your overall benefit.
And that is often easier said than done
Especially given the weak economy and falling house prices. From 2007 to 2019, house prices rose by only 57% but when adjusted for inflation, real prices actually fell by 18%. According to ABSA, South Africa’s house prices fell a further 1.22% (adjusted for inflation) during the first quarter of 2020, with a nominal house price rise of 2.79%. Quarter-on-quarter, house prices increased by a meagre 0.11% and fell by 1.45% in real terms. And with demands for housing remaining weak (considering what the world is currently going through), it is enough to make any person considering selling their home or property, a touch more concerned.
Selling your property by utilising the correct people has never been more crucial. Especially when the property is for investment purposes.
Whilst questions often arise as to what the conveyancing procedure entails, (in summary), we feel that it is important to discuss some more valuable and business-centric topics. Especially considering the current economic climate.
But, the short answer to the initial question posed – whether a real estate investor needs a conveyancer – is a simple answer. YES! Every single person in the buying and selling property process does.
Should a real estate investor have multiple or one single conveyancer?
This is a twofold answer. Firstly, we need to understand the normal process before we can apply the same thinking to when one real estate investor owns multiple properties.
Under normal conditions
Under our common law, it specifically states that a seller is the party who is entitled to nominate who the transferring attorney is in a property purchase transaction.
Why? Well, the seller is at more risk than the purchaser – it is the seller, (as the owner of the property to be transferred), who stands to lose more than the buyer and therefore has a stronger claim to the appointment of the conveyancer. There is therefore the belief that the seller’s transferring attorney will have their best interests at heart.
Which then begs another question – why, if the buyer of a property is paying the conveyancing attorney, does the seller have the right to appoint him?
Well, as described above, the answer is simple – it is just common practice.
But, if the seller does not have his or her own conveyancer in mind, the buyer is entitled to nominate a conveyancing attorney – provided the parties come to a mutual agreement.
However, it must be pointed out that there may be a slight conflict of interest when having one conveyancer act on behalf of both the buyer and the seller.
Why? Well, it can be tough to look after the best interests of both the seller and buyer if any dispute should arise between them. Even without a (real) dispute, the likelihood that a conflict of interest could arise is high. For example, if the buyer wants to take possession of the property before the finalisation date, the conveyancer would be unable to advise the seller that this arrangement is not in their best interest, because the buyer’s best interest is also involved.
It is important to keep this in mind when thinking about having one conveyancer acting for both buyer and seller.
An obvious statement but worth saying – all conveyancers are professionals and will practice not only responsibly but will act neutrally on behalf of both parties. At all times. Therefore if both parties are ok with using the same conveyancer, then a mutual agreement can be reached and one conveyancer can be used. No mess, no fuss.
What about the situation when one real estate investor has multiple properties?
The question as to whether a real estate investor should have multiple conveyancers or just one is a little more complicated to answer definitively. But there are a few things that should be taken into account…
Firstly, time is a very important consideration. The amount of delays and rescheduling that are experienced at the Deeds Registry and the inconveniences being faced by property transfers due simply to infrastructure, man power and other constraints are just some of the problems that most home buyers face when doing property transfers.
The Property transfer process requires patience. A lot of it. Because it always takes longer than anticipated. There are many factors that can cause this delay, but if you have the right conveyancer on your side, one that is able to foresee these delays and understand the process, you will save yourself time and keep your sanity intact.
One ring to rule them all?
Avoiding surprises (as much as you reasonably can) will be key. And having one conveyancer attending to all of your property transfers (especially if you are an investor with multiple properties), may not help in the delay department. With only one set of hands attending to all the transfers, each with their own set of complications, will require commitment, time and diligence from your conveyancer and if faced with multiple transfers for one client (all happening simultaneously), expectations may not be met.
But….
On the other hand, having only one conveyancer deal with all your property transfers will diminish the amount of people you will be required to deal with, a trust relationship can be developed and you may even be able to negotiate conveyancing fees for the transfer of multiple properties.
So considering it is not regulated (whether or not you can have more than one conveyancer) practical considerations must be taken into account – time, whether they will have your best interests at heart, reliability, trust, convenience of only dealing with one conveyancer and possible conveyancing fee reductions.
In most occasions, the decision will be an easy one.
A prime example of using only one conveyancer can often be seen with estate agents. Whilst estate agents are legally bound to inform the sellers that they have the choice as to who they want to appoint, the sellers more often than not will take the estate agent’s suggestion on which conveyancer to use. Often the relationship of trust that has been built between estate agent and conveyancer over a number of transactions is a factor. And this does offer a level of comfort.
So, give this some thought and shop around until you find your perfect fit – it’s not a one size fits all situation.
What about body corporates and their relationships with conveyancers?
Again, let’s answer some basics first –
What is a Sectional Title?
A Sectional Title Development Scheme usually referred to as a “scheme”, provides for separate ownership of a property by individuals. For example apartments and townhouses would be referred to as units within the scheme. These schemes fall under the control of the Sectional Titles Act 95 of 1986 (which came into effect on 1 June 1988).
Nesting
When you buy a property that is part of a scheme, you own the inside of the property i.e. the space contained within the inner walls, ceilings & floors of the unit. You are entitled to paint, decorate or undertake alterations as desired within those four walls but not anywhere else (such as in the common areas) and provided those alterations do not infringe on any municipal by-laws.
A unit is demarcated as such on a sectional plan and each unit is defined by an imaginary line, called the median line, which runs through the middle of the walls, doors, windows, floor and ceiling that form the physical boundaries of that section. If the unit includes an unenclosed area, such as a balcony or veranda, the division between the enclosed section and the open area will be demarcated with dashed lines.
Exclusive use areas such as parking bays and garden areas do not form part of the ownership of the unit and must therefore be mentioned in the Agreement of Sale. An exclusive use area is defined by the Sectional Title Act as
‘a part or parts of the common property for the exclusive use by the owner or owners of one or more sections…”.
Accordingly, such exclusive use areas forms part of the common property and do not form part of a unit (or section).
It is important to remember that in terms of section 25 of the Sectional Titles Act, a developer may reserve the right to extend the scheme on the common property and in order to do so will, upon the establishment of the scheme in the deeds registry, reserve such a right in terms of section 25 of the Act. In terms of the Act, should such a right have been reserved by the developer, the seller is obliged to disclose such reservation to the purchaser in the sale agreement failing which the purchaser has the right to withdraw from the sale.
Special levies (in addition to the monthly levies) imposed by the body corporate are payable by the owner of the unit at the time when the special levy was imposed. This may need to be negotiated with the buyer.
What is a body corporate?
The body corporate is the collective name given to all the owners of units within the scheme. It is also a separate legal entity of which each owner, by default, is a member. It comes into existence as soon as any person (other than the developer) becomes a registered owner of a unit.
The law states that a scheme must be controlled and managed by a body corporate in terms of the rules. There are two sets of rules applicable to the scheme – management rules and conduct rules. The management rules deal with the management of the body corporate and the scheme and the conduct rules deal with the conduct of the owners and other occupants of the unit (tenants for example).
In a nutshell, every owner of a unit in the scheme is deemed to be a member of the body corporate and is thus bound by the body corporates rules. A member cannot resign from the body corporate. However, the day-to-day administration of the scheme (such as the collection of levies, payment of services (lights and water), maintenance of the common property, insuring the buildings and ensuring that the owners comply with the rules of the scheme) is vested in the trustees who are appointed by the body corporate.
Any major decisions regarding the scheme are made by the body corporate, usually at the annual general meeting (AGM), or at a special general meeting (SGM). At these meetings, matters which affect the scheme are discussed, budgets are approved, rules can be changed and trustees are appointed. Each member of a body corporate is entitled to vote at these meetings, provided that the member is not in arrears with levy payments or in serious breach of the rules. It is often beneficial for the trustees to outsource the management of the scheme to a managing agent, with suitable experience and qualification. And this is standard practice.
But what role does the body corporate actually play in the appointment of a conveyancer?
The only role the body corporate has to play is in the confirmation that all moneys due to the body corporate (if one has been established) by the seller of the unit have been made in full or provisions have been made to the satisfaction of the body corporate for the payment to be made at a date so agreed.
As each owner of the unit has a real right in respect of that portion of the unit they are selling, they are entitled to appoint their own estate agent and conveyancer, in a manner similar to that as if the sale of a free standing home or property was to occur.
But whatever way you look at it – whether you are a property investor with multiple properties, the owner of a sectional title unit (and by default, a member of a body corporate) – the appointment of a conveyancer will always be necessary. Whether you use the same conveyancer for both buyer and seller (it can be mutually agreed upon) or whether you use one or many conveyancers for multiple properties, the choice must be based on practicality and must be according to law.
The basic concept is this – when buying or selling a property, a suitably qualified and experienced conveyancer will always be required. There are no exceptions.
