The recent headlines about high-profile estate agent Wendy Mechanik have prompted many prospective property buyers to question how they can protect themselves when they invest in a new home.
Buying a home is a complex business, with a range of legal aspects to be considered before you even sign an offer to purchase. Here is a step-by-step guide to your legal obligations and rights at each stage of a property purchase.
1. Making the offer
If you laid your eyes on the home of your dreams while house-hunting and you're ready to make an offer, make an appointment to inspect the property thoroughly.
Ask the current owners (or their agent) if there is anything that would hinder the transfer process. If you're happy that the property is unencumbered, sit down with the estate agent to sign an offer to purchase.
2. Signing the offer to purchase
All contracts for the buying and selling of properties must be in writing, contain certain information, and be signed by both buyer and seller to be binding.
Typically, you'll sign an offer to purchase, which will become an agreement of sale if the seller accepts your offer. Once you've made an offer to purchase, you are bound by it if the seller accepts your offer.
These contracts are fairly standard in their content and structure, but you're advised to get advice from an independent lawyer if you are buying a property for the first time to ensure you understand the implications of the documents you are signing.
It is worth noting that the Consumer Protection Act, which will come into play on 1 April, forces agents to ensure property sellers and buyers understand the wording and legal effect of all contracts they enter into. Agents will also not be able to use the "voetstoots" clause in most agreements of sale as a defense for non-disclosure of information about faults and flaws in the property.
3. Effecting the transfer
The registration of a property transaction is handled by a legal practitioner known as a conveyancer, who is usually appointed by the seller. The buyer is usually responsible for the conveyancer's fees as well as for transfer duties paid to the government.
The conveyancer prepares the documentation that is lodged with the Deeds Office to affect the transfer of the property to the new owner. A conveyancer appointed by your bank will register your bond with the Deeds Office. A separate law firm will cancel the owner's bond on the property with the Deeds Office.
You will be registered as the new owner of the property and your deposit and money from your bond will be paid to the seller (or the seller's bank, if he or she has a mortgage).
You will usually need to personally sign documents with the various conveyancing firms. If you live abroad, you may be able to grant a general power of attorney to someone who can sign on your behalf.
4. What about the deposit?
A deposit is not mandatory, but is a sign of good faith and also serves as an indication of financial ability to the seller and the bank granting your bond. (In present climate many sellers are struggling to secure bonds without a deposit of at least 10% of the property's purchasing price).
To safeguard your deposit in, ensure that it is paid to the conveyancer handling the transfer rather than to the estate agent. All attorneys are covered by a Fidelity Fund which guards against theft or negligence by attorneys. You can claim from this insurance if the attorney is unable to come up with the money when it is due to the buyer (or due to be returned to you because the transfer falls through).
Until the transfer goes through, the money will be held in an interest-bearing account. The interest will be paid over to you once transfer takes place.
5. Taking occupation
By mutual agreement with the seller, you can take occupation of the property before the transfer is affected. At this point, you usually assume all risks and responsibilities associated with the property. If you take occupation before the transfer takes place, you will pay a monthly rent at a rate that both parties have agreed to.
Closing words
There are a number of potential pitfalls to look out for when buying a new home and a mistake can cost you dearly. If you have any concerns about your prospective purchase, seek legal advice to ensure that you make informed decisions throughout the process.