Guideline 6

6. THE RELATIONSHIP WITH THE RECEIVER OF REVENUE, LOCAL
AUTHORITIES AND OTHER PARTIES WITH A VESTED INTEREST IN THE CONVEYANCING PROCESS

6.1 Relationship with the Receiver of Revenue

In terms of Section 92(1) of the Deeds Registries Act 47 of 1937, no transfer of land shall be registered unless accompanied by a receipt or certificate from a public revenue officer that taxes and duties payable on the property have been paid. The main duties payable are transfer duty, imposed and collected in terms of the Transfer Duty Act 40 of 1949 and Value-Added Tax, which is imposed in terms of the Value-Added Tax Act 89 of 1991 and collected in terms of Section 9(15) of the Transfer Duty Act. It should be noted that SARS has the power to declare a conveyancer an agent for the purpose of collecting outstanding taxes that have been assessed in respect of a party to a conveyancing transaction and that certain obligations flow from such an appointment. The conveyancer interfaces between Revenue and the person responsible for the payment of the taxes or duties. The conveyancer has a positive duty to uphold the revenue legislation and to ensure that what is due to Revenue is paid to Revenue. A conveyancer may not assist a purchaser or seller to enter into a scheme to evade the payment of property taxes. Lawful avoidance of the payment of taxes is acceptable; evasion is unlawful and a conveyancer may not advise or assist a purchaser or seller to act unlawfully. An example of the legal avoidance of the payment of "double" transfer duty is the tripartite agreement. In a typical situation A has sold to B and prior to the registration of that transfer B sells to C. These are 2 separate transactions and there must be 2 transfers and transfer duty is payable on both transactions. The provisions of Section 5(2)(a) of the Transfer Duty Act allow for this to be circumvented by a tripartite agreement whereby A,B and C agree that the sale A B and the sale B C are cancelled and that A sells directly to C. There is then only 1 transfer and transfer duty is only payable once. This is lawful and the Receiver has in fact provided guidelines as to how the saving may be achieved. A conveyancer may not be party to any arrangement whereby the purchase price is deflated in the deed of sale and side agreements are entered into between the purchaser and the seller and even third parties with regard to the payment of funds. With regard to the collection of Value-Added Tax, the Transfer Duty Section of the SARS has indicated that it intends discontinuing the practice of issuing a transfer duty exemption certificate in respect of a vatable transaction without an undertaking from the conveyancer that the Value-Added Tax due in respect of the transaction will be paid on registration of the transfer.

6.2 Relationship with local authorities

Section 118 of the Municipal Systems Act 32 of 2000 prohibits the transfer of property without the production to the Registrar of Deeds of a prescribed certificate issued by the municipality in which the property is situate certifying that all amounts due, in connection with the property, for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of the application for the certificate have been fully paid up. Regulation 63(2) of the Deeds Registries Act provides that "all deeds, bonds, diagrams or documents necessary in connection with the examination, execution or registration of any deed, bond, power or other document lodged in a Deeds Registry, including all receipts or certificates required by law to be produced, shall accompany such deed." The Municipal Systems Act has caused immense problems for conveyancers and purchasers and sellers given the wide interpretation of the words "and other municipal taxes, levies and duties" by local authorities. At present, most local authorities will not issue a rates clearance certificate unless ALL charges levied have been paid. In the interim, conveyancers will have to collect and pay over the local authority the amounts required to enable a transaction to proceed.

6.3 Relationship with parties with vested interests in the conveyancing practice process

6.3.1 Estate agents
In a property transaction requiring the transfer of property, the seller is usually the client of the conveyancer and not the estate agent appointed by the seller for purposes of the sale. It is therefore the prerogative of the seller to nominate the conveyancer. It is recognised that in practice the estate agent often recommends the conveyancer to be nominated by the seller. Such recommendation should be based on the quality and efficiency of professional services rendered. No undue influence may be exerted on the seller or estate agent by the conveyancer whether it be in the form of monetary or other improper inducement. Such conduct, apart from the disturbing fact that it may in certain instances constitute corruption, severely affects not only the prerogative of the seller to nominate but also the independence of the profession. This is not in the public interest and will be severely dealt with by the Law Society. In certain situations, the relationship between the conveyancer and the estate agent may be that of attorney and client. However, the conveyancer's role is to effect registration of the transfer in terms of the deed of sale. If for some reason a conflict situation arises, the conveyancer may find himself torn between his duty to the seller and his estate agent client, in which event, he/ she must disclose the fact that there is a conflict and, if necessary, withdraw. As the conveyancer is, in the normal course, not a party to the deed of sale, it is advisable that the conveyancer obtains written authority from the seller to pay the agent’s commission out of the proceeds of the sale upon registration of transfer. In general, once the conveyancer has been instructed, the Conveyancer will liaise with the estate agent insofar as fulfilment of any suspensive conditions is concerned and the beetle and electrical inspection of the property,advise the agent of any delays or problems and ensure that the agent is paid the commission due in terms of the deed of sale in registration of the transfer.

6.3.2 Mortgage Bond Originators
Although the Law Society is not in principle opposed to the concept of mortgage or bond origination,the methods used and the basis on which some of these originators operate, may be a cause for concern. The objection mainly relates to the fact that add-on commissions and charges are sometimes being levied by mortgage originators, not only against members of the public but also banking institutions and ultimately attorneys which inflates costs for members of the public. Such charges may be tantamount to hidden or secret commissions and this is not in the public interest. The Council has resolved that participation by a conveyancer in the activities of mortgage originators by making payment to them of a fee for services ostensibly to be rendered by originators is a contravention of Section 83(6) of the Attorneys Act, 1979, Rules 82 and 89.1 of the Society's Rules and is a criminal offence in terms of Section 83(7) of the Attorneys Act, 1979.

6.3.3 Managing agents or body corporates issuing of levy clearance certificates
In terms of Section 15B(3) of the Sectional Title Act 95/1986, the registrar of deeds shall not register the transfer of a unit unless there is produced to him/ her a certificate from a conveyancer in terms of Section 15B(3)(a)(i)(aa) certifying that as at date of registration of the transfer all monies due to the body corporate by the seller have been paid or secured. If you have undertaken to pay the levy against registration of transfer,you must then do so.In order to enable the conveyancer to issue this certificate, the conveyancer must liaise with either the managing agents or the chairman of the body corporate to ascertain what amounts are outstanding in order to enable the managing agent or the body corporate to issue the levy clearance certificate. Conveyancers may not rely on the say so of the seller that all amounts owing to the body corporate have been paid. The managing agent will often require the completion of a "questionaire" by the conveyancer to be forwarded to the managing agent on registration of the transfer which questionaire is used by the managing agents to update their records. The conveyancer should co operate with the managing agent in this regard.

6.3.4 Suppliers of beetle- and electrical certificates of clearance
In many instances the agent liaises with the above suppliers to arrange for the inspection of property. The reports and clearance certificates are forwarded to the conveyancer who often arranges that the suppliers are paid for the inspection and the report and any work done from the proceeds of the sale. In certain instances, the conveyancer may be requested by a seller (or purchaser) to arrange for the necessary inspections to be done. In particular, with the issuing of Electrical Clearance Certificates, the conveyancer should ensure that the supplier is of sound reputation. A conveyancer should not recommend a particular firm to do the work if that firm is paying the Conveyancer a commission or referral fee, unless the payment of the commission is disclosed.