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The difference between types of property registrations

The difference between types of property registrations

When considering a property purchase, new concepts such as bond fees, transfer fees, bank approvals and conveyancers could be confusing. In addition, properties could be registered in either a close corporation (CC), a company (Pty Ltd) or even in a trust.

To help clear the confusion, we focus here on a property which is registered in a person’s name, as well as a property registered in a close corporation, and then examine the impact on transfer costs.

If a property is registered in a person’s name (therefore natural person), the owner acquires a real right to the immovable property. However, where the property is registered in a close corporation (CC), the owner has a member’s interest in the corporation. In laymen’s terms, it basically means that the close corporation (CC) is the owner of the property.

Therefore, when a person decides to sell a property registered in a close corporation (CC) he/she is desirous to sell his/her 100% member’s interest in the corporation to the said purchaser. This means that the purchaser buys the member’s interest, and such member’s interest will be transferred to the purchaser.

It is very important to know exactly how the property is registered. Why? Because the deed of sale will be different when a person is purchasing it from another person (natural person from natural person) or purchasing it out of the close corporation (CC) (legal entity to a natural person). If you purchase the close corporation (CC), a sale of member’s interest must be used instead.

The significant importance arises, when comparing transfer costs. For example, in the case of the purchase of a N$ 5 million property, the transfer fees are calculated at approximately N$ 396 000 when registered in a person’s name. Whereas purchasing the member’s interest in the close corporation (CC), the transfer fees will be calculated at roughly N$ 59 000. This is a significant difference in the amounts. (These amounts are rough estimates for demonstration purposes only. Please consult with a conveyancing attorney to obtain the exact amount.)

Most readers then ask themselves, why would I buy a property which is not registered in a close corporation (CC)? Surely everyone desires to save on cost, as much as possible. Firstly, your dream property, which fits all your criteria, might not be registered in a close corporation (CC). Secondly, as a close corporation (CC) is a registered business with BIPA, you will need to submit your financial statements every year. This means extra costs and appointing an accountant to assist you.

When dealing with such decisions, it is important to use an experienced and registered real estate agent to assist you with the correct decision.

The Brand Realty Team. Always a deal.

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