30 Jul TRANSFERRING OF PROPERTY: NZ V SA
As an ex-South African lawyer now employed as a Legal Executive at RMY Legal in New Plymouth (until I am allowed to practise as a solicitor in NZ), I have seen first-hand how different some legal processes are in NZ as compared to SA. I thought it necessary to provide my fellow South African expats, now living in NZ with a few tips on the processes of purchasing and transferring property in NZ. The content should not be construed as legal advice but merely as an attempt to help you with some of the terminology and the differences in processes. If you would like more particular advice on your circumstances, please do contact me at RMY Legal.
Land, Buildings and Houses:
In SA, it is referred to as immovable property while in NZ it is referred to as real property or real estate. Movable property in NZ is called personal property.
Matrimonial and/or relationship property is a topic on its own and there are a number of automatic rules that apply to how this type of property is shared between relationship partners.
SA mainly has full title (freehold) and sectional title properties whereas NZ mainly has freehold, cross-lease and unit title properties. In some areas, there are also leasehold properties, where you own the buildings and improvements on the property, but you rent the underlying land.Agreements:
In SA, you will sign an “offer to purchase” while here in NZ you will sign an “Agreement to Sale and Purchase of Real Estate” (“ASP”). All sale and purchase of real estate must be in writing with certain legal formalities.
We refer to the “seller” and the “purchaser” in SA while in NZ they are called the “vendor” and the “purchaser”.
Trust as purchasers:
In SA, when property is purchased for a trust, the property will be registered in the trust’s name (e.g. ABC Family Trust). However, in NZ the property will be registered in the trustees’ names even though it is still actually held on trust. The law of trusts is a topic on its own…
Date of registration:
In the ASP, the vendor and purchaser agree to a settlement date, which is when the purchase price is paid and the property is transferred into the name of the purchasers. In SA, you basically never know when the transfer will take place. A settlement in NZ can be as soon as 5 to 20 working days after signing of the ASP (depending on the suspensive conditions e.g. land information reports, finance, building reports etc.) In SA, it can take up to 6 months if, for example, SARS and the city councils take their time with their processes.
The transfer process in NZ is way more streamlined as it is basically all done electronically. In SA, it is still a manual process where the deeds must be lodged at the deeds office.
Lawyers (also known as barristers and solicitors in NZ)
Both the vendor and purchaser have their own lawyers in the transfer process in NZ. Unlike in SA, legal firms don’t have to be on “panels” of banks to attend to the registration of a mortgage (mostly called a bond in SA) on behalf of the purchasers or the discharge of the mortgage (bond cancellation) for the vendor. For these reasons, the vendor’s lawyer will attend to part of the transfer and discharge of the mortgage (if any) while the purchaser’s lawyer will attend to part of the transfer and registration of the mortgage (if any). In some instances in SA, there will three different legal firms attending to the transfer, registration of bond and cancellation of bond separately.
No transfer duty is payable by any of the parties in NZ. Capital gains tax or residential land withholding tax may be payable when you sell your house within a certain period after you purchased it or you (as vendor) are based overseas when you sell. Once again, a topic for another day.
Some real estate agents in NZ charge a flat fee whereas most agents in SA charge the seller approximately 7.5% of the sale price.
I find the transfer costs (including transfer duty) cheaper in NZ than in SA. Currently in SA the purchaser will pay approximately R80 000 towards the transfer of a R2m property. It does not include the registration of the bond which will be R38 000 extra (total of R118 000). When purchasing a property in NZ it will cost the purchaser approximately $1 800 (R18 – 19k). For the seller it will cost basically the same.
In general, it takes approximately 2-4 days to obtain rates figures from the district and regional councils in NZ.
We do not need to get any figures or consents from the IRD for a property transaction which saves a lot of time. All purchasers and vendors will need a New Zealand IRD number, however. In SA, a transfer duty receipt is required in the majority of cases.
If you are fortunate enough to have KiwiSaver, you may be able to use some of the funds to buy your first home subject to your service provider’s terms and conditions.
Should you require any detailed advice on your particular situation and/or circumstances, you are welcome to contact me at 06 769 8054.
As they say here in NZ, be kind to each other.
20 June 2020