Occupational rent is one of the payments associated with the purchase or sale of a property. To put it simply, during the transfer process, if one party occupies the property whilst the other is still the registered owner, payment of a monthly rental must be made to the owner.
So, if the buyer takes occupation of the property before registration of the transfer is complete, they will have to pay occupational rent to the seller until that date. If, for whatever reason, the seller remains in the property after the registration of transfer, they will pay the buyer the occupational rent.
How Does It Work?
In South Africa, occupational rent ceases or begins on transfer of the property. It is not uncommon for delays to occur in the transfer process. Occupational rent is not an unexpected fee – it should be one of the things stipulated in the Offer to Purchase, and so shouldn’t come as a surprise to either the buyer or the seller.
1. Whom do you pay?
Occupational rent is paid to your estate agency or to the appointed conveyancer, or directly into the buyer or seller’s account, if so agreed.
2. How much will you pay?
In South Africa, those who wish to buy or sell property are legally required to put all contractual agreements into writing. Make sure that the occupational interest is stipulated in the Offer to Purchase. Your estate agent will help you come to a fair amount that is usually a percentage of the buying price. Most real estate experts agree that the payment should not exceed that of a typical rental amount for a similar property. A reasonable occupational rental is usually 1% of the purchase price.
The Benefits of Occupational Rental
The most evident benefit of occupational rent is that it protects the interests of both parties. Since delays in the transfer process often takes place, it is important to know what conditions are in the Offer to Purchase.
The buyer and the seller should negotiate the occupational rental terms and conditions carefully. A common situation is that the seller buys another house and is still waiting to occupy their new property when the transfer of his old house goes through. This means that it is not convenient for the seller to move out and they stay at their current residence after the transfer takes place and for longer than is expected. What recourse does the buyer have? Does your Offer to Purchase address this eventuality?
Before you sign the Offer to Purchase, you should get a clear indication of what to expect in certain circumstances. This helps to avoid conflict and unexpected expenses, making the process of both buying and selling residential property in South Africa less stressful.