select
|

Occupational rent explained

Regardless of whether someone is on the selling or buying end of a property transaction, it is imperative that they are familiar with all the conditions that the offer to purchase stipulates, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

According to South African legislation, those who would like to either sell or buy a property are required by law to reduce all contractual agreements to writing. Goslett says that the aim of this is to reduce the risk of any ambiguity during the transaction and to have a clear guideline as to what each party is entitled to and what they are responsible for.  “Since the Consumer Protection Act was signed into law in 2011, contractual language has become easier to comprehend. However, that said, it is still vital that both the buyer and seller go through the offer to purchase and agree with all conditions and provisions mentioned in the contract before they sign it, especially when it deals with aspects such as occupational rent,” advises Goslett. 

He adds that the clause relating to occupational rent is vital as it protects both parties in the contract. Essentially what the clause does is ensure that the seller will be financially compensated if the purchaser moves into the home before the transfers occurs. Equally, it will also provide financial compensation if the transfer takes place and the seller is still occupying the property.

Goslett says that the occupational clause in a sales agreement is often overlooked because the majority of buyers only plan to move into the home once transfer has happened. In most instances buyers want to avoid having to pay occupational rent and therefore wait for the property to be registered in their name before taking occupation. “However,” says Goslett, “sometimes life doesn’t always go according to plan and the buyer might find themselves in circumstances that force them to move into the property sooner than anticipated. Buyers will often have to give notice at their current residence before moving to their new home. If notice is given and the transfer of the property is delayed, they could find themselves occupying their new home while it is still owned by the previous owners.  In an instance such as this knowing what the contract says about occupational rent will become of paramount importance.”

According to Goslett, it is not only the buyer that could find themselves paying occupational rent. If the seller has sold their current property to purchase another and are waiting for the transfer to go through, they could end up staying in their current residence longer than expected. This would mean that they could end up paying occupational rent to the new owners of the property.  Although these situations are not ideal, it is in these instances that knowing and understanding the terms of the occupational rent clause that will allow the parties involved to know what is expected and not be caught unaware. 

Goslett says that in the event of either possibility happening, it is imperative that the occupational clause in the sales agreement states the amount of occupational rent that should be paid. Even if the date of occupation is listed as the date of transfer, the occupational rent amount should still be put into the agreement in writing.  This will ensure that conflict or any misunderstandings are avoided. “While the rental amount is ultimately the seller’s decision, both parties will need to decide and agree upon the occupational rent amount prior to them signing any agreement. The rental amount should be market related and should ideally be enough to cover the bond repayment,” says Goslett.

He concludes by saying that by understanding the sales agreement and its conditions, buyers and sellers can avoid any unnecessary conflict, which will make the entire process of buying or selling a home a far less daunting one.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 25 Apr 2018
      Whether you are a seasoned seller or new to the game, putting your home on the market is an exciting moment. To ensure you get the best possible outcome these 8 value adding additions to your home is worth the effort.
    • 25 Apr 2018
      After four years of unprecedented growth fuelled by semigration, the Southern suburbs market faced a number of challenges in 2017, including dwindling affordability and a marked slowing in house price growth with many sellers forced to lower their prices in order to secure a sale.
    • 25 Apr 2018
      Mall of Africa, is celebrating its second year of sensational success. This splendid super-regional shopping centre first opened on 28 April 2016, and has grown in popularity, performance and profile since then.
    • 25 Apr 2018
      While the role of trustee in a sectional title scheme is a voluntary and unpaid position, it is one that comes with huge responsibility. Trustees have a fiduciary duty towards their scheme, says Chinelle Hewit, Operations Manager at sectional title finance company Propell.
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK