A public company is the type of company that you see listed on the stock exchange. You can obviously have thousands of shareholders for these types of companies. Companies are more strictly governed than close corporations. The focus of this section is not to go into accounting and law practices for entities but merely to highlight some of the various entities available for use.

Shareholding in a company and membership in a close corporation are seen as assets in your personal estate and will thus increase the value of your estate at death, which will in turn increase the amount of effective estate duty payable.

This does sound complex but it is quite simple. Before the sectional titles act came to be, if you wanted to buy unit 12 on the second floor, you needed to buy the entire building. You could not separate unit 12 from the rest of the building, you had to purchase the whole building as one entity for say R5 million.

Once the sectional title act came into force and if the building was duly sectionalised, you could purchase unit 12 on the second floor without paying for the entire building. Now we are able to purchase a section of the building at say R500 000 and have your ownership rights to only unit 12 registered.

If you are an owner of a sectional title unit, you need to remember that the occupants form part of a community and the living areas are normally much more densely populated. Therefore stricter rules were written to avoid chaos in these so called townhouse complexes.

There are also a couple of naming conventions a sectional title owner should be familiar with. These are:

The boundaries of your section are the midpoint of all the walls, floor and ceiling. Effectively you only own the half from the midpoint of each of the boundary walls of your section, the half from the midpoint of the floor towards your section and half from the midpoint of the ceiling that form the boundaries of your property.

The roof is not part of your section, it is part of the common property. So is the outer half from the midpoint of your ceiling, floor and boundary walls are in fact part of the common property.

Your Participation Quota = (Floor area of your section / Total floor area of all sections) x 100

If there were 50 units in the scheme, each one measuring 100m² and you owned one unit then

Your Participation Quota = (Floor area of your section / Total floor area of all sections) x 100
Your Participation Quota = (100m² / (50 x 100m²)) x 100
Your Participation Quota = 2%

There are also replacement values for property. This is the value normally used by insurance companies in order to issue an assurance policy for the replacement value of the property. The replacement value is not the market value of the property, but rather the costs that would need to be incurred to replace the property if something happened such as a major fire.

For clarification, in this section we will always refer to the market value of the property.

Each one of these attorneys will charge you a fee for their services. The fee charged is normally between 1 -2 % of the value of the sale or the bond being registered. There is also a recommended scale detailing what these attorneys should be charging.

All the above amounts such as the transfer duty, conveyencer and bond registration fees are payable in cash. In some instances, for first time buyers, some banks include some / all of these fees in their products, but the bottom line is that it will need to be paid before registration takes place.

An example of a servitude imposed on land use is the right of way on a service road that grants access to several properties. The owners of the properties will not be allowed to build or obstruct the road as doing so will limit the use of the road for the neighbours. This type of servitude is normally common on farm land. The properties are sold with this servitude in place, therefore you are purchasing the road, but you are limited in the way you are allowed to use it.

If there are Eskom power lines crossing the property, it is also very likely that a servitude was registered in favour of Eskom in order for them to service the power lines.

When occupation is taken, you the purchaser, effectively takes control of the entire property. If there is a tenant paying rent to the existing owner, when you take occupation, you will be entitled to that rental income. If there are expenses associated with the property like rates and taxes, levies, maintenance and upkeep, when you take occupation you will also be liable for these.

In addition to this, the seller will normally claim what is commonly referred to as “occupational rental”. The more formal term is occupational interest. This is basically money paid to the seller for the beneficial use of the property prior it being transferred to the purchaser.

It was previously accepted that occupation rent payable should be roughly about 1% of the purchase price. Therefore if you purchased the property for R500 000, you would have been liable to pay occupational rental of R5000 per month. As with any contract, these conditions can be changed and agreed upon prior to signature of the agreement.

If the rental amount paid by the existing tenant is only R3500 per month, why should you the purchaser agree to R5000 occupational rental? If you have done your background checks before you submitted an offer to purchase on the property, you would have known that the rental is only R3500 for the unit. Why not stipulate this rental amount of R3500 as the occupation rental for the property.

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