If you’re buying or selling a half share of a property, you may think the process will easier than buying a property outright, which is a common misconception. There are many legal intricacies, valuation considerations, and co-owner agreements that play pivotal roles.

This article relates specifically to the buyer of a half share transfer, and their cost and financing considerations.

What is a half share transfer?

A half share transfer is basically when the owner of a property wants to sell a portion of a property to a buyer. ‘Half share’ is used often, but it can be any portion.

Here are some examples where a half share transfer may be required:

• a person who owns 50% of a property wanting to sell their 50% share to the other co-owner (releasing them from ownership and any bond repayments);
• in the event of divorce, where one spouse decides to buy the 50% share of the other spouse to become the sole owner of their joint property;
• in the event of death of a spouse, where the previously co-owned property must now be transferred to the windowed spouse in its entirety;
• a person who has inherited a share of a property in a will or by default;
• a person who owns 100% of a property now wanting to add their spouse (married out of community of property) – they may sell a 50% portion of the property to their spouse so that the couple can have joint ownership of the property.

Half share transfers do not apply when a person owns a property and gets married in community of property (COP), in the absence of an antenuptial contract or Will. In this scenario, the property will automatically become a 50/50 owned property with the COP spouse, regardless of the title deed only reflecting one owner.

What is the process for a half share transfer of a property?

Many people wanting to sell their half share in a property are unaware that the process amounts to a full-scale property transfer; which quite often is more complicated than the original process of buying the property. It is simply not possible to “just delete a name off a title deed”.

As with any typical property transfer process, the conveyancer will be required to lodge in The Deeds Office, with the various rates and taxes/levy clearance certificates as well as the Transfer Duty Receipt or Transfer Duty Exemption Receipts. The Alienation of Land Act as well as the Receiver of Revenue require a Sale Agreement in writing, signed by both parties.

Because a half share transfer typically takes place between parties that know each other, or are related, the property likely wasn’t “sold” on the market, and a fair market value of the property must be determined. Two independent valuation reports will typically be required to prove to the conveyancers (and SARS) that the property was sold for a fair market value. The absence of these reports can result in queries or delays when applying for the transfer duty receipt/exemption from SARS.

Due to the legal implications and complexities involved with half share transfers, it is strongly recommended that an attorney drafts the Sale Agreement for the parties to sign. An experienced property law firm and conveyancer, like Aucamp Incorporated, can assist with the process from drafting the agreement right through to registration.

Costs of transfer (for the buyer)

As the transfer of ownership and/or bond will need to be registered in the Deeds Office, there will be fees involved for the purchaser, with the main ones including:

• Transfer attorney fee – calculated on the value of the half share;
• Transfer duty (SARS) – calculated on the total (fair) value of the property, but divided by two for the half share portion; and
• Bond registration attorney fee (only if applicable) – calculated on the value of the new bond to be registered;

Transfer duty is not payable in two specific scenarios:

• when the new owner has inherited the property (or share in the property) and will take transfer as a consequence; or
• when transfer is passed in terms of a Divorce Order.

In a typical transfer of property, the buyer would be liable for the above costs. However, due to other considerations in a half share transfer, usually involving buyers and sellers who know each other, or are related, alternative arrangements can be made and should be noted as such in the Sale Agreement.

Options for financing the half share

Depending on the circumstances, there are two scenarios, with various options, when applying for a mortgage for part or all of the property purchase price:

1. No existing bond: The purchaser of the half share can simply apply for a new home loan, as per a normal application, for the amount required. They have the option to use a broker and apply to all the banks and for multiple competitive offers to choose from.

2. Existing bond:  In the event of an existing bond on the property, the purchaser has two options for finance:
3. 1. Take over the existing bond (Substitution of debtor): This will be done in terms of an application to the Deeds Office to this effect in terms of Section 57 of the Deeds Registries Act 47 of 1937. The bondholder will have to consent to this application and the new bondholder must be approved by the bank (affordability and risk assessment passed). The benefit of a substitution of debtor is that costs can be slightly lower that if cancelling the old bond and applying for a new one. However, not all banks consent to substitute debtors and some will insist that the existing bond be cancelled and a new bond registered.

1. 2. Cancel the existing bond and apply for a new bond: the existing bond can be cancelled and a new bond registered in the name of the remaining sole owner. The advantage of this option is the new owner can apply for a new principal loan amount and utilise a broker to apply to all the banks for multiple competitive offers to choose from.

The buyer’s upfront costs listed above (transfer costs) can also be included in the new bond application and added to the home loan principal amount. Any changes to the existing loan amount will require the old bond to be cancelled and a new bond application process to be initiated.

Use a reputable mortgage broker

Using a mortgage broker to finance your half share purchase of a property should include a comprehensive discussion of your situation, including marital status, residency status, income and expenses. Full disclosure is important for your broker to give you the most accurate advice – and remember, they work for you, not the banks!

Using a reputable broker will ensure you get more value out of this free service – including the full-scale service, professional advice, utmost confidentiality and respect with your personal information, speedy approvals and priority with banks.

Phoenix Bonds is a premium mortgage broker in South Africa, with a proven track record (check out our reviews on Google).  For expert advice and personalised service, fill in your details HERE and one of our experienced Consultants will be in touch.