Stopforths

Rent to buy? Is it too good to be true?
The South African economy has been stagnant for a while which affected the property market. Buyers are struggling to qualify for home loans and are renting for longer times, especially first-time buyers. Various articles in property related publications preached the benefits of rent to buy transactions to curb this problem. Although it is a workable solution in some cases, it is not necessarily always the case.
How does it work?
A tenant signs an offer to lease with an option to buy the property at a later stage. An extra amount is paid to the owner above the normal rental to add towards a deposit. At the end of the lease period, the tenant applies for finance to purchase the property and will have a better rate of success due to the deposit that has been paid.
What are the pitfalls?
The nature of the deposit: In normal property transactions, deposits are paid into an attorney’s trust account, to be invested into an interest-bearing account, interest to the benefit of the purchaser. If the suspensive conditions, for example bond finance, has not been met, the deposit plus interest is paid back to the purchaser. That is not always the case in rent to buy transactions. A tenant might lose the deposit if they do not qualify for finance at the end of the period, depending on the terms of the agreement.
The nature of an option: An option contracts the landlord to sell the property to the tenant at a specified price at a specified future time. The terms of the agreement are agreed when the contract is signed and cannot be changed at the future date (unless the parties consent). It might be that the circumstances of the landlord and/or the tenant have changed in the meantime.
Transfer duty: The transfer duty act determines that transfer duty must be paid within 6 months after buying a property, irrespective of whether the suspensive conditions have been met. SARS also considers an option contract as a sales agreement. If the transfer duty is not paid within 6 months, a penalty of 10% of the transfer duty is levied together with interest until date of payment.
To ensure that your rent to buy agreement covers these pitfalls, make sure that you consult your attorney beforehand.
It is therefore important not only to look at the terms of your lease agreement but also the terms of the Consumer Protection Act.

Joe van Rooyen
0832657200
[email protected]

Landlords vs Tenant: How can disputes be resolved?
It happens often that Landlords and Tenants have disputes that they cannot resolve. To consult an attorney every time could be a costly exercise.
The Rental Housing Tribunals can assist in resolving such disputes. They are mandated by the Rental Housing Act to speedily resolve issues and protect both from unfair practises and exploitation. It is however only applicable on residential lease agreements.
The further bonus is that the service is free and a mediator is appointed to settle the matter. If the mediator can’t settle the matter, it is referred for a formal hearing. Most disputes, except eviction, can easily be resolved by these processes.
Further information and documentation for the Western Cape can be found on the tribunals’ website: https://www.westerncape.gov.za/public-entity/rental-housing-tribunal

Joe van Rooyen
0832657200
[email protected]

Rental Housing Tribunal The tribunal function is to settle disputes between tenants and landlords. It comprises of five members (including a chair and vice chairperson) appointed by the Provincial Minister of Human Settlements, who each have expertise in property management, housing development and consumer matters pertain...