What to look out for when purchasing real estate property
If you’re in the process of buying a commercial or residential property, and whether the property is for personal use or you intend to be the landlord, you need to take the necessary precautions to safeguard yourself from becoming a victim of real estate fraud.
So how can you protect yourself when buying real estate property?
A sale of immovable property is usually conducted through an Estate Agent. Legitimate Estate Agents in Zimbabwe are registered with the Estate Agents Council of Zimbabwe therefore one must first inquire if the Estate Agent conducting the sale is registered. However, in some cases, a seller may personally sell their property. Property may be held either under title or under cession. If the property is held under title this means that the seller is in possession of the Title Deeds for the property. To check the authenticity of the title deeds and establish whether they are any encumbrances against the property for example mortgage bonds, caveats, or endorsements you must conduct a Deeds Search at the offices of the Registrar of Deeds in Harare or Bulawayo. Alternatively, you can conduct an online search by going to https://zimeservices.pfms.gov.zw registering on the platform, selecting the Online Services section, expanding the Companies and Deeds menu and selecting Deed Registry Search.
Cession
Cession of rights, title, and interests over immovable property, on the other hand, results in the transfer of personal rights. Cession passes limited rights which fall short of ownership, as ownership remains with the local authority or an individual pending transfer.[1] The cessionary acquires personal rights against the sellers but will only on transfer get real rights over the property. Cession is usually utilized before the property has titled deeds. It is important to confirm the ownership, status and terms of the cession to avoid becoming a victim of a double sale (a double sale occurs where a seller has fraudulently sold his/her immovable property to two different buyers and both buyers paid the full purchase price for the property).This is done at the municipal offices in the area in which the property is located as the seller is not the owner of the land but has rights to the land.
Caveats
A caveat is an endorsement on the title deed showing that there is a third party with interests in that property such as a creditor. The risk of purchasing a property with encumbrances is that title will not be passed to the purchaser. Creditors have rights over the property and can attach it if the seller defaults on payment. Buyers must avoid purchasing properties with caveats until these have been lifted to protect themselves from creditor claims over such properties.
Prohibited Purchases
A subdivision is a piece of land that has been divided, removed or separated from a larger piece of land. A subdivision permit has to be granted by the municipal or local authority of the area in question. An application should be made in terms of section 40 of the Regional Town and Country Planning Act [Chapter 29:12] for a subdivision permit. The law prohibits the purchase of subdivisions unless the seller is in possession of a subdivision permit.[2] If an agreement of sale is entered into by a seller and purchaser before the permit is issued the agreement of sale will be invalid. To check the authenticity of the permit the buyer must approach the local planning authority that issued the permit.
The purchase of a deceased person’s immovable property unless authorised by the Master of the High Court is prohibited.[3] If the Master has authorised the sale, then the executor must be in possession of a document called a Consent to Sell signed by the Master. To check the authenticity of a consent to sell the buyer must inquire at the offices of the Master of the High Court.
The Sale Agreement
The parties if in agreement concerning the property must then sign a Sale Agreement. The Sale Agreement may be drawn up by Seller’s Estate Agent, or the Seller’s or Buyer’s lawyers depending on what the parties agree. Before signing the agreement, the Buyer must understand whether the purchase price is inclusive of value-added tax, mode and manner of payment, the stage at which risk will pass, date of occupation and variation of the contract. If the Buyer is unavailable to sign the agreement they may appoint an Agent through a Power of Attorney to act on their behalf in signing and completing the transaction. An agent may be a family member, relative, or friend.
Change of Ownership
When land is held under a title deed, the change of ownership is done by a conveyancer through the Deeds Registry Office. The conveyancer is chosen by the seller and the conveyancing fees which are approximately 3% of the purchase price are paid by the buyer.[4] The buyer is obligated to make payment of the Stamp Duty which is approximately 4% of the purchase price.[5] If the property is commercial the buyer must make a 15% Value Added Tax[6] payment unless the Purchase Price is VAT inclusive.[7] Additional costs paid by the seller include the Estate Agent’s commission, arrear rates, utility bills and Capital Gains Tax. Capital Gains Tax is 5% of the value of the property if the property was acquired before February 2009 and 20% if the property was acquired after February 2009.[8]
Change of ownership Cession
Zimbabwean law does not prescribe any formalities for a valid cession. However, the subject matter of the cession should be capable of being ceded by the cedent. The right sought to be ceded must fall within the estate of the cedent and a cedent may only cede existing rights. He may only cede rights that he is entitled to dispose of. The person disposing of the right must have the capacity to do so.[9] Further, the parties do not have to inform or gain consent from third- party debtors. Cession of rights in an immovable property usually requires registration of the cession at a local authority.
Once registered, the cession serves as proof of cessionary rights. Once the cession agreement is complete the cessionary (buyer) becomes entitled to performance therefore it is wise to inform third-party debtors of the cession to avoid them discharging their debt to the cessionary. Once a cession has taken place, the cessionary steps into the shoes of the cedent and the thing ceded becomes part of the cessionary estate. A cession is not a mode of transferring real rights.
Registration of Sale Agreement
The conveyancer will lodge transfer documents in the Deeds Registry. If a bond is registered over the property, the documents will be lodged at the Deeds Office together with the transfer documents. The documents will be examined in the Deeds Office. The process will take not more than ten working days. If the Deeds Office is satisfied with the accuracy of the documents, the transfer will then be registered.
Conclusion
We established that property may be held either under title or under cession. In both instances it is important to conduct a search to establish the authenticity of the title deeds or cession. One must always be cautions when purchasing a subdivision or property belonging to a deceased person’s estate. Lastly as a buyer ensure that all agreements are registered at the Deeds office to safeguard against real estate fraud.
If you interested in purchasing a real estate property at JPLP we have a lawyer ready to assist you. Visit us today at No. 7 Edmonds Avenue, Belvedere, Harare.
- Van der Merwe, Contract, General Principles, 4th Ed, Juta at p 386
- Section 39 Regional, Town and Country Planning Act [Chapter 29:12]
- Section 91 Administration of Estates Act [Chapter 6:01]
- Law Society of Zimbabwe By-Laws SI.24/2013
- Schedule to Chapter II Finance Act [Chapter 23:04]
- Section 15 of the Value Added Tax (VAT) Act (Chapter 23:12)
- Section 69(1) of the Value Added Tax (VAT) Act (Chapter 23:12)
- Zimbabwe Revenue Authority (zimra.co.zw)
- Madzima v Mate (HH 86-17 HC 10225/13) [2017] ZWHHC 86