Thread by @n2a2o_jay

Property Ownership Types in South Africa

A thread.

There are various forms of immovable property ownership in South Africa, sometimes people do not fully understand the rights and responsibilities when buying a certain property type.

Let's go through the 3 main forms

1. Full Title Ownership
This type of ownership offers the owner complete control of their property. Ever heard of the phrase? ku kwam'La? my house my rules?
Both the land and building are included in full title. The owner does as they please.

However, this must be done within the bylaws of the local council.
Also, you are responsible for municipal charges, water, electricity, refuse removal and sewage. But no levies!

If the Freehold title house is within a a gated estate, then a levy is paid to the Homeowners Association. This cost covers common property maintenance and security fees. You also have to abide by the rules set out by the home owners association

2. Sectional Title Ownership

This is ownership of a unit within a complex or development. These are typically semi-detached houses, townhouses and apartments that form part of a sectional title scheme.

Sectional title ownership is often more affordable than full title ownership, and many consider it to be more secure and safe. The affordability is as a result of shared facilities, such as security guards, shared play areas and swimming pools. Think of it as bulk buying

This form of ownership is subject to body corporate management which have various rules, some say no pets allowed.

Most importantly, there is an increased limitation on owners when it comes to altering, renovating and expanding your unit. In most cases you're not allowed to change anything, as you require approval from a body corporate which wants to keep uniformity in the scheme

Some Estates have both Body Corporate and HOA. In a case where the sectional scheme in located in an estate with multiple sectional schemes. The shared facilities between the sectional schemes is managed by the HOA or an external company

The portion of the section you own is basically, the house interior, your ceiling, interior walls, and an exclusive use area such a garden or garage. You also have a shre in the common property of the sectional scheme

In this form of ownership you shall pay levies to the body corporate which will pay for security, common property and sometimes exclusive use area maintenance. These are commonly called lock up and go, you can just go and not worry who will take care of it while you're away.

Tip: when buying into a sectional scheme, get a copy of Financials, a healthy body corporate indicates a well run complex, protecting your investment. Badly run ones will incur special levy, on top of your normal levies, a nightmare.

3. Long term Lease.

Three words: Waterfall Country Estate.

See those beautiful estate near mall of Africa? Perfect example of long term lease. When you buy at waterfall, you don't own that land, you lease it for 99 years.

A long term lease is a limited real right form of ownership, it entitled you, the lessee, to a limited real right over a property for an agreed period of time, ranging from 10 to 99 years.

This form of ownership has reduced flexibility, what you do, and the term of your duration are based on terms agreed at the start of a lease.

A long term lease, along with agreement terms is registered and an endorsement is made against the property's title Deed in the Deeds Registry. This protects both the lessor and lessee.

The complication with this type of ownership, is with regards to increases, for any increase to happen an amendment would need to signed.

Some it's monthly lease and in cases such as the Waterfall Estates, then you purchase the land and build your dream house, the 99 years starts when you buy. If you sell, they keep 5 % of your income and the mayors fees is 3%. The new owners starts their 99 year lease from scratch

With that's covered, what are the 4 major ways to buy property?
1. Natural person
2. Close corporation
3. Pty Ltd
4. Trust

1. Natural person

Buying a home in your own name as an individual. Transfer duty will be due according to a sliding scale. Homes between R0 and R900 000 are exempt.

If it's primary residence, you're exempt from capital gains tax on the 1st R2 million profit made when you sell

The disadvantahe is that if you run your own business and get into financial trouble, creditors will come for your house.

2. Close corporation

A cc is a separate legal entity, a cc that owns property faces the same transfer duty, capital gains tax and tax implications of as a Pty Ltd. Ownership if restricted to 10 natural persons, and no audited Financials are required, bringing dwon costs

3. Pty Ltd

Purchasing property incurs transfer duty, but if the seller is Vat registered no duty is paid. But since a company cannot die no estate duty is payable. The benefit of this ownership, it can include up to 50 shareholders, as natural persons, trusts and companies

4.Trusts

The person forming the trust if a founder, they appoint trustees who manage affairs of the trust for the benefit of the beneficiaries

Property held within a trust will not form part of an individuals estate when they pass away,savings from estate duty.
The most important benefit, the properties cannot be attached by creditors when you're in debt. It's a safe protection for your assets.

The disadvantage is that a trust attracts highest capital gains tax, at a rate of 20%.

@Sir_Ngozo Very seldom do I find someone who has my name, pleasure to meet you 👊🏿