Why the Deeds Office Matters
Category Newsletter: Ceo's Message
In a recent Podcast 'The Property Pod' with Suren Naidoo we gained insights on our Deeds Office in an interview with Kirsty de Sousa, a professional support lawyer in the real estate department of Cliffe Dekker Hofmeyr.
Read the interview below:
If you have ever bought or sold a property you will have an idea that the Deeds Office is a key part of South Africa's established property rights.
The country has 11 Deeds Offices which play a crucial role in ensuring the legality and security of immovable assets, according to law firm Cliffe Dekker Hofmeyr Inc. To share more insights on the significance of the Deeds Office is Kirsty de Sousa, a professional support lawyer in the real estate department of Cliffe Dekker Hofmeyr.
A simplistic question to kick off - what is the Deeds Office and why do we need one?
"I think a lot of people often ask that. Our South African Deeds Offices are government institutions. They're responsible for the registration and the management of all immovable property transactions and rights in land in our country.
We need the Deeds Offices and rely on them as they ensure the legal transfer of property ownership. Of course, they maintain accurate public records of the various title deeds and mortgage bonds, servitudes and other real rights, etc, in land.
Each region in South Africa has its own Deeds Office that actually oversees the properties within its jurisdiction, so it does also help that it's a little bit more bespoke for each Deeds Office.
It's not a situation that someone who lives in Cape Town has to drive up to Joburg. Each jurisdiction actually has its own Deeds Office - and there are 11 of them."
As a real estate lawyer, your industry deals almost daily with the Deeds Offices across South Africa. Can you share a bit of history behind the Deeds Office and the role it plays in the property market - a little more detail?
"Our Deeds Office system is actually pretty old. The system we know today was established in 1937 under the Deeds Registries Act of 1937. So if it isn't broken, don't break it - I think that's what most of the property sector has maintained for 80/90 years. We have found that what works, works, so we've stuck to it ...
The most important role that the Deeds Office plays in the property market is obviously maintaining the records and their very strict examination duties.
So, it's not a situation that you are just going to have a property transferred because you walk in and you say, well, 'I'm selling my property to Mr So-and-So' and then the registrar just stamps it. It doesn't work that way. There are very, very strict examination procedures.
Obviously keeping these records and having these strict examination duties helps protect and maintain the stability and reliability of our property system."
Talking about those processes, can you share some insight into the ins and outs of the registration process at the Deeds Office? Has it become easier or more bureaucratic over the years, because we've heard some interesting things about delays at different Deeds Offices in the country?
"Yes. Look, the registration process still takes time. With regard to the ins and outs of the processes it still takes time. As to how long it took 20 years ago, 40 years ago, 60 years ago - there has definitely been progress, if we put it that way.
The process itself still takes long because we have to touch base with various institutions. We still need to communicate with institutions such as Sars [South African Revenue Service] or municipalities and obtain the necessary certificates and consents, exemptions or receipts.
All of those documents still have to be lodged in the Deeds Office. So the process is still time consuming, the fault not necessarily being on the shoulders of the Deeds Office itself.
I think that's unfair and I most certainly in my industry won't say that burden or name in the industry should be laid on the Deeds Office's shoulders. There are so many other government institutions, private institutions and associations that we need to deal with in order to obtain the necessary documents for a transfer or a bond registration."
Delays rack up
"If there is a one-week delay at Sars, and a one-week delay at the municipality, and a one-week delay because let's say the purchaser is out of town and can't sign the documents, all of those delays rack up. So, a person then sees this transaction as being heavily delayed. But the last step is the Deeds Office. So the assumption is that it is only with it that the delay has sat, and the reality is that it's not always the case.
There have been times in the past where the Deeds Office has been very backed up. It doesn't happen that often anymore, to be honest with you. Not in my experience. [Backups are] few and far between in comparison to what they potentially were 15 or 20 years ago. It has definitely got better."
What is being done that you are seeing in relation to streamlining the registration process and reducing some of the delays?
"Something that has definitely assisted in streamlining is the fact that we in the industry are making use of much better automation platforms. These platforms have evolved significantly in comparison to what they were when I entered the market 15 years ago to what they are now. There have been such wonderful advancements. Those specific automation platforms are much more integrated with third parties, so, for example, Sars and various municipalities.
Ten years ago, you would approach a municipality with a handwritten application asking for clearance figures, and subsequently a paper-based document is handed in asking for the certificate with the receipt. So all of that would've been very paper-based ...
Nowadays we're making use of these third-party platforms where we're automatically connected to Sars via e-filing or the municipality via these platforms."
So our applications, submissions and receipt of the certificates are actually done electronically. That's definitely something that has dramatically helped streamline the whole transfer procedure.
There's still room for [improvement], obviously. We are a very technologically driven society. So there's still room for growth, but the growth has definitely, definitely been seen and felt in the industry in the past 15 to 20 years, for sure."
How can conveyancers better educate clients on the importance of accurate documentation, et cetera, when registering or when there's a case of change of ownership at the Deeds Office?
"I think the first step is always clearly explaining the property-transfer or bond-registration process, especially with first-time purchasers - providing easy-to-understand guides. For me personally, in checklists or the initial letter when it goes out to a client, I like to list everything that I'm going to require from that client from the get-go.
So, you already know that these 10 or 15 documents or answers need to be provided, and, in that way, you can get going, [instead of asking] for three or four things now, and then another two later, which definitely not only delays the process but I think confuses a lot of people because they're constantly sending information in.
So, I would say probably one of the biggest things with educating is letting people know what is going to be required from them from the get-go. And of course, regular communication.
I think people absorb the information that is being given to them better when it is being communicated on an ongoing basis. That makes a big difference. I think one of the best bits of advice that I can give to the listeners is to not be afraid to ask questions if you're not quite sure.
If I'm asking you for a copy of your marriage certificate and a copy of your antenuptial contract, you may wonder why I want that; it doesn't make sense. 'I'm married out of community of property, and you shouldn't want that. I'm telling you now my estate is mine.'
Ask me why I've asked you for that information because understanding why I have asked for it will also help in understanding the various processes and potential delays.
"There is a knock-on in that regard. If you don't want to send me that information, and it's not going to come in that initial email that you've sent with the information, that delay means I need to ask for it again.
So that knock-on effect can occur when people don't quite understand the process - and how better to understand a process than to ask? So please don't be fearful of asking your conveyancer questions. We are always happy to answer them."
How do outstanding municipal rates and taxes impact the property market? That might be related more to the owner, but perhaps you want to share some insight on possible municipal delays and what can be done to address some of these challenges.
"[It is] a tricky one sometimes. There is the age-old reference to 'Death and taxes'. There are certain things that will always, always affect you. Property taxes are no different. Municipalities rely on the income generated from these taxes to maintain the municipal jurisdictions that they oversee. These monies go towards further expanding or developing the infrastructure in that specific jurisdiction.
So, there is a great reliance on these taxes, and failure to secure these taxes negatively affects the successful functioning of that municipality.
The reality is further that these taxes don't go away. They remain held over the property and subsequently the owner, until the owner decides, well, they want to sell the property - and then they are saddled with this high bill that has to be settled before they can transfer the property.
We must, as property lawyers and conveyancers, lodge what's called a 'clearance certificate' in our lodgement at the Deeds Office. The Deeds Office will not allow that property to be transferred to a new owner unless the municipal rates and taxes have been settled in full.
So that reality is that it doesn't go away. I think a lot of people assume, 'Okay, when I pass away, it might go away'; but it doesn't. When a person passes away, the deceased estate is then left to settle the account, and oftentimes there's simply not enough money to cover that cost and the property ends up being sold, which is probably not what the deceased had intended to happen to the property.
In my opinion, something which I think should be considered to help address this is education, educating communities. Personally, I believe that [for] the youth - a standard in high-school training [should be] training on the practicalities of owning property in South Africa. Not the theoretical side but the actual practicalities, the responsibilities and the ramifications of non-compliance, property insurance, property taxes, [and] various services. That education I think is paramount ..."
Just to conclude, the last question here is about South Africa's greylisting. There has been an issue where the legal fraternity has been cited as possibly slow to comply with certain elements for SA to deal with its greylisting as a country. Do you have some insight and comments around that? Are things getting better?
"[We are] very, very, very strict about everything and anything in that regard. I can without a doubt say [at] Cliffe Dekker Hofmeyr we drill it into our staff members, and it is of paramount importance.
But speaking on the greylisting topic in general in relation to the property market, South Africa's greylisting has led to increased scrutiny in our property market due to the heightened monitoring requirements that we just mentioned, which are aimed at combating money laundering and terrorism financing.
There's heightened monitoring which affects the sector because it's now imposing stricter regulations.
Those regulations relate to financial transactions and, by extension, include transactions that are related - real estate, purchases or sales, foreign investment. It makes it so much more cumbersome and obviously less appealing to investors.
So, both buyers and sellers now obviously face more rigorous and strict due diligence procedures and requirements from the various banking institutions and ourselves as law firms. With that additional due diligence come additional compliance costs because we do need to obviously make use of third parties to verify the information that we've received."
Because of this, South Africa's greylisting may reduce the foreign investment that we see coming into South Africa, which has a knock-on effect in slowing down the property market activity. Once again, that knock-on effect will negatively impact the overall liquidity in our property market.
So, it's not that the property market has caused greylisting; it's more a knock-on effect of the greylisting almost perpetuating the fact that the property market does end up taking a knock because of the additional and much stricter due diligence and double-checking requirements we now have in place."
Author: Suren Naidoo - The Property Pod
