Blog | First Time Off-Plan Buyer? Beware of Occupational Rental

Picture this: you are a first time property buyer, buying off-plan from a Developer – a brand new home in a secured estate and you are legally exempt from paying transfer duty. You have been saving up for this for months, maybe even years. All costs fit perfectly into your budget – the deposit, bond registration fees, and transfer fees that you mistakenly believed is the same as transfer duty, but you are wiser now. Life is good. You arrive at the transfer attorney’s office, ready to sign the last of the transfer documents. You are handed a statement of account and, within the first 3 seconds of perusing it, it catches your eye – an extra R35 000.00 that you did not budget for – OCCUPATIONAL RENTAL.

Ideally, a Seller and Purchaser would agree that occupation be taken simultaneously with the registration of transfer. This eradicates the need for either party to pay occupational rental. However, it is difficult for a Developer to determine an exact date for registration. If you merely consider the large number of other role players involved, including but not limited to other Purchasers who are also buying in the development – you can only imagine the delays that could be encountered in the process of transferring all units in the a large development simultaneously.

The truth is that once the development is approved for occupation, no Developer wants to have numerous units standing vacant for one or two months. To avoid this, the Agreement of Sale includes a provision obligating Purchasers to take occupation once an Architect has issued a Certificate of Practical Completion to the Developer. By signing the Agreement of Sale, you agree to take occupation on a date stipulated by the Developer whether or not you decide to physically move in on such date. The date might not be set out in the Agreement of Sale but the Developer should notify you well in advance as to the date of occupation, this being largely dependent on the date of issue of the Certificate of Practical Completion. By implication, you agree to pay occupational rental pro rata as from the date of occupation up until the date of registration of transfer. The figure for occupational rental may be determined in relation to the market value of the property and will be confirmed in the Agreement of Sale.

While most Estate Agents will provide full disclosure as to the costs involved in the transaction, it is advisable to guard yourself against human error. To avoid this unexpected surprise, thoroughly read your Agreement of Sale, looking out for all cost clauses and particularly, clauses relating to “occupation” and “possession”. You must then understand that “occupation” refers to one physically moving into the property, while “possession” entails the passing of all risk, liability and obligations, but also ownership rights in respect of the property which typically passes from Seller to Purchaser on registration of the property into the Purchaser’s name.

For the best legal advice and personalised service, let's talk
Subscribe to our monthly newsletters, subscribe