SEAMLESS PROPERTY INVESTMENT WITH STBB: KEY CONSIDERATIONS FOR FOREIGN & NON-RESIDENT PURCHASERS
With its scenic landscapes, favourable climate, and competitively priced real estate, South Africa is a popular choice for savvy foreign investors. At STBB, we regularly handle property transactions involving foreign and non-resident purchasers and sellers. Currently, there are no formalised restrictions on the ownership of immovable property by foreigners or non-residents. Nevertheless, prospective purchasers should familiarise themselves with various key considerations to ensure a seamless property transaction.
The sale agreement
According to section 2(1) of the Alienation of Land Act, a sale agreement to purchase immovable property must be reduced to writing and signed by both the seller and purchaser – or their duly authorised representatives – to be legally binding. Despite the convenience and ubiquity of electronic signatures, section 4(3)–(4) of the Electronic Communications and Transactions Act confirms that such agreements may not be signed electronically. An experienced property law attorney and conveyancer is best-suited to draft a watertight agreement to minimise the risk of error and ensure a dispute-free transaction.
Foreign funds
It is permissible for foreign funds to be paid into any nominated bank account in South Africa. Usually, this is the trust account of the transferring attorneys. Importantly, these funds are invested at a favourable interest rate for the non-resident’s benefit, provided the conveyancer attending to the transfer has been expressly mandated to do so. When a non-resident transfers funds from a foreign source into a South African bank account to cover the purchase price, an essential document known as a ‘deal receipt’ is issued. Crucially, this document must be retained if the purchaser intends to eventually sell the property and repatriate the proceeds.
Mortgage bond considerations
Subject to commercial banks’ specific requirements, non-residents are generally allowed to borrow up to 50% of the outstanding purchase price of the property locally. However, the initial 50% of the purchase price, as well as the transfer fees and transfer duty, must be introduced into South Africa from a foreign source.
Signature of documents
When signing documents outside of South Africa, all purchasers must comply with various legal formalities for authentication to ensure the validity of documentation intended for lodgement at the Deeds Registry.
Transactional costs
Unless otherwise agreed, every purchaser is liable for the payment of transfer duty to SARS (unless VAT is payable by the seller), the transferring attorney’s conveyancing fees, sundry charges, such as Deed Registry fees, and bond registration costs, if applicable.
Residency
Non-resident purchasers intending to stay in South Africa long-term must apply for a residence permit. Unfortunately, the ownership of property does not guarantee the receipt of a residence permit.
Remittance of funds
While the South African Reserve Bank strictly enforces the Exchange Control Regulations, which limit the transfer of funds abroad, non-residents are permitted to remit their available proceeds overseas, in line with the applicable regulatory requirements.
Thinking of investing in property? For further information and sound legal guidance, contact our property law specialists at info@stbb.co.za today and let us handle all the legal complexities – from start to finish.
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