Occupation on transfer or a specified occupation date - which is better?
Category Property24
One of the most important decisions to make, when signing an offer to purchase, is when should the purchaser occupy? The options are either "on registration of transfer" or a specific date, pinpointed in the agreement. The most common option, by far is: "occupation on transfer."
But even so, many Estate Agents have differing views about whether occupation should be on transfer or on a specifically agreed date, normally before registration of transfer. Practically all Owners (Principals) of Estate Agencies prefer a specifically agreed occupation date, to be given before transfer and do not favour giving occupation on the same day, as when registration of transfer takes place.
'Occupation on Transfer'
Occupation on Transfer is the popular choice, as most agents and sellers believe it is much safer to wait for the property to be transferred, before handing over the keys.
Sellers want the comfort of knowing upfront that the whole purchase price and costs have first been paid into trust or at least secured, before giving occupation. One seller recently had a further clause inserted; that the purchaser had to provide proof that he could afford the transfer costs within 7 days of acceptance of the offer.
Also, sellers feel that the purchaser should not be given the opportunity to discover defects in the property before transfer. Some sellers believe that they have a better chance of negotiating or disputing claims for the repair of defects, if the buyer only occupies after registration of transfer.
Of course, purchasers might say they are disadvantaged if they are prevented from making a thorough inspection of the property upfront; but a visit on Show Day provides this opportunity and repeat visits before submitting the offer to purchase, will always be arranged.
The compulsory Property Condition Disclosure signed by the seller should give the purchaser assurances; but sometimes it is carelessly and inaccurately completed and cannot always be relied upon by purchasers. The obligatory Disclosure Document even contains various disclaimers such
as : "this information does not constitute a guarantee or warranty of any kind whatsoever by the Owner....".
So purchasers pay all their money upfront in blind faith, and only after transfer, can they actually discern the true condition of their newly purchased property.
The bottom line is that purchasers are kept guessing, without any opportunity to thoroughly satisfy themselves as to the condition of their purchase.
'Occupation on Transfer a moving target'
One problem with "occupation on transfer" is that the expected date of transfer is a "moving target." Nobody (not even Conveyancers and Deeds Office Staff) have absolute control as to when the transfer will be registered.
Despite stipulating that registration of transfer must be on a certain date; many Cape transfers do not actually register on the planned date; resulting in "blame game" accusations,
counter-accusations and recriminations. For instance, during the Covid Lockdown there was mass disruption, with people having to vacate; only to find that they could not occupy elsewhere, as their sellers decided to stay put.
Also, sellers and purchasers cannot make definite furniture removal bookings and sometimes have already given notice to vacate their previous premises; only to find that they have nowhere to go, because the transfer is unexpectedly delayed.
In another example, a family had to stay in a Bed and Breakfast for a whole month, because the seller refused to sign the transfer documents, before she left to go on holiday. At the same time the seller refused to amend the "occupation on transfer" clause to bring the occupation date forward. The purchasers had already committed to vacating their previous premises and then had nowhere to go; other than to a Bed and Breakfast at their own cost. Their furniture also had to go into temporary storage, causing double removal costs.
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Because the occupation date is ambiguous, parties sometimes try to manipulate the date of transfer to a date that suits them.
Another example: the agreement provided occupation on transfer and the seller wanted to stall the transfer for 5 months to coincide with her planned move to Natal. On the other hand, the purchaser wanted the transfer to be accelerated, because she needed to urgently occupy to set up her Law Practice in the property she had just purchased. I was amazed to receive a Letter of Demand from her, demanding instant registration of transfer.
This problem illustrates that, in the case of occupation on Transfer, both buyer and seller had diametrically opposed expectations of when they could occupy! As far as the Agreement of Sale was concerned, it completely failed to facilitate an agreement between the parties, as to when occupation would be; as it should have done. In fact it initiated a furious dispute between the parties!
'Back to back transfers - depending on each other'
It is common that in order to purchase, a purchaser must first sell his own property to raise the money to pay for his new purchase. So the purchaser, also becomes the seller of his own property. The result is that four people will want to know when can they vacate and occupy?
The common scenario is that both agreements simply record: "occupation on transfer"; on the presumption that both transfers will be registered on the same day; enabling everyone to move in and out on the same day.
However, these days, double or linked transfers are less likely to be registered simultaneously on the same day, as some of the banks require their own bonds to be registered only after the first bond has already been cancelled in the Deeds Office. Also, if there is a third transfer in the chain or some other problem delaying one of the transactions, the other one or two, might go ahead without the delayed problem transaction.
The point is that, it is more likely that the linked transfers will not be registered on the same day and therefore the parties will again be kept guessing as to when they can occupy.
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If the conveyancer tries to stall and synchronise one deal with the others, he is accused of a conflict of interest.
So again, it is vital that a common occupation date is negotiated across all linked transfers to avoid uncertainty and disruption.
Invariably the parties will try, at a later stage, to agree a common occupation date across all linked transfers; but this is not always possible; due to prior agreements (like having already given notice) that limit the options of the purchasers.
Sometimes it is actually impossible to synchronise and have a common date agreed to, as the two transfers are two moving targets out of sync with each other.
Again it is vital, when interlinked transfers are contemplated, that the earliest sale pinpoints the occupation date so that the second one falls in line and carries this date through to all the following transactions.
'The advantage of pinpointing an occupation date - before transfer'
Pinpointing an occupation date - before transfer - really does have its advantages. There is no doubt that an early occupation date will speed up the transfer. This is because the buyer and seller will get ready for transfer much earlier; than they would have otherwise.
Ronald Ennik of Ennik Estates has always preferred specifying an occupation date before transfer. He says it accelerates registration; by bringing all the compliance hurdles to the fore. This makes the seller and buyer focus on their obligations much earlier on in the process.
For example, instead of going on holiday the moment they have sold; Sellers would find themselves focusing on packing up to move, signing transfer documents, arranging Electrical, Gas and Fence Certificates and paying for Levy and Rates and Taxes Clearance Certificates.
The purchaser also feels obliged to pay transfer costs, sign bond and transfer documents to secure the purchase price upfront, because his impending occupation date is looming.
All of this activity concertinas the transaction into a much quicker process for the benefit of the Agent, Seller and Purchaser.
The conveyancer's turnaround times are directly dependent on how quickly the buyer and seller get themselves together. For instance, we can all remember how a transfer has been delayed because the Seller did not arrange his Electrical Certificate of Compliance earlier on - as he was so requested.
Bryan Biehler of Huizemark Real Estate says an agreed occupation date before transfer, gives everybody clarity and prompts people to plan ahead.
So we will all avoid the dramas and stress when a seller is caught by surprise because he did not take note of when the transfer would be coming up for registration and he then refuses to vacate on the day the transfer is registered.
Imagine the stress and anxiety, when the purchaser's furniture van arrives at 14:00hrs on a rainy Friday afternoon to unload and occupy and the seller refuses to let them in! The purchaser is now the new owner and he cannot occupy his new property, and suddenly he has nowhere to go.
The outrage, consternation and chaos is lesson enough to abandon any thought of leaving the parties to accept an occupation on transfer. Biehler makes the point that keeping all the emotions calm by having an orderly, agreed and smooth occupation far outweighs the costs of occupation before transfer.
Discovering defects before transfer
With regard to defects in a second-hand property and the rise of consumer protection expectations; there are very real benefits in making sure that the compulsory Property Condition Disclosure is taken seriously and is properly completed. Here again clarity and honest disclosure is necessary to minimise unexpected surprises.
If sellers make an effort to repair all defects upfront, the transfer will be quick and trouble-free, as is required by the compulsory Property Condition Disclosure. A straightforward transfer far outweighs the cost and delay in having a dispute over whether the seller is liable to repair the defects or not.
Also buyers should make a very rigorous inspection on show day. They can take their experts to the property to inspect, before they sign contracts.
If defects are discovered before transfer, there is time enough to have them repaired or at least agree to a provision that the cost of repair can be deducted from the selling price and "retained" as a provision by the conveyancer, until liabilities and payment are determined.
Occupation on a targeted date of registration of transfer
Jonathan Broekman of Homes of Distinction proposes the best of both worlds; namely occupation on a targeted date of registration of transfer.
He says, "a specified occupation date already works as a target, but even better would be a clause that makes all parties aware of the anticipated date of transfer, so that it is clear and transparent for buyer/seller/attorney."
Esme Thomson of Huizemark much prefers occupation on transfer and will only use conveyancers who give weekly progress reports; so that everyone can plan ahead to meet the expected transfer date and will not be caught by surprise.
In a perfect world this is the ideal proposal. The seller is happy because he remains protected until transfer and the purchaser should be able to rely on the Property Disclosure Report and the Electrical Certificate of Compliance, Gas and Fence Certificates and then can plan for the estimated date of transfer.
READ: What you need to know about title deeds and property transfers
However unforeseen delays are still common, caused by Covid Lockdowns and Municipalities regarding the issue of Rates and Taxes Clearance Certificates.
It is clear that purchasers should be much more rigorous in inspecting the property before deciding to purchase. Customary practise dictates that purchasers must make a thorough inspection of the property.
Bryan Biehler' s agents ensure that the sellers take the Property Disclosure seriously and provide reliable and comprehensive details.
Conclusion
Occupation before transfer, will accelerate registration of transfer of ownership.
Occupation on transfer is a moving target and is subject to too many unforeseen variables for the parties to rely on. It defies accurate planning.
In the case of linked "back-to-back transfers" it is very difficult to get all the different parties to agree to one common occupation date across all the transactions; unless everyone falls in with the date that was stipulated in the earliest transfer.
If Sellers properly disclose all defects in the Property Disclosure Form, and provide reliable and valid Electrical Certificates of Compliance, Gas and Fence Certificates; an occupation date agreed to before transfer and stipulated in the contract, is clearly the best option; (but obviously after the costs and purchase price have been paid).
Author: Property24