DUE DILIGENCE CHECK PRIOR TO PURCHASING A PROPERTY
By Rose Mhlanga | Kanokanga & Partners
Purchasing an immovable property is a very important and fundamental decision that should not be rushed into. There are many factors that have to be considered before signing the agreement of sale. Due to the rise in fraudulent sales in Zimbabwe, it is very important that a due diligence search be conducted on the property first. It is advisable that the due diligence be conducted by the purchaser’s lawyers as some of the issues that need to be identified may not be easily accessible or recognizable to a lay person.
VERIFICATION OF THE EXISTENCE OF THE PROPERTY BEING SOLD
This is the golden rule in purchasing a property. A purchaser should go and view the immovable property being sold. It is advised that the purchaser do it personally. However, if that is not possible a trusted third party can do the viewing. Virtual or Digital tours are not advisable as the purchaser may view a property that does not exist or is not the actual property being sold. By viewing the property one can ascertain that the property does exist and also identify any defects that the property may have.
There have been incidents where vacant stands have been sold to people on for them to discover that that land was set aside for ZESA or TELONE equipment or that the land in question is a road servitude or wetland. If the stand does not have pegs identifying where the land begins a purchaser may need to search for the stand at the Surveyor General’s office to make sure that the property was not set aside for other purposes
VERIFICATION OF IDENTITY OF REGISTERED OWNER OF THE PROPERTY
There has been a rise in the fraudulent sale of properties by people who claim to be owners of a given property. In light of this purchasers must satisfy themselves that the person selling is the rightful owner. Where possible it may be a good idea for the purchaser to have a chat with the neighbours regarding the property and its owner. Important information may be gained from this as most neighbours know if the owner passed away or resides in the diaspora.
Purchasers should extremely cautious when purchasing a vacant stand in an area that has been fully developed over a number of years as such stands are easy targets for fraudsters.
It is of paramount importance that a potential purchaser has sight of proof of ownership by the owner of the property be it by way of title deeds or cession documents from the municipality. Further, it is of grave importance that the purchaser meets the seller in person, if possible, as well as see the seller’s National Identity Document. The reason behind this is for the purchaser to ascertain if the seller is the actual owner of the property.
If the registered owner of the property is a company, the purchaser should ask for the Company’s CR14 papers as well as the company resolution stating that the shareholders agreed to the disposal of the property.
VERIFICATION OF INFORMATION PROVIDED BY OWNER WITH THE DEEDS REGISTRY
In addition to the above, the purchaser should have sight of the title deed and the purchaser’s I.D. Thereafter, a deeds search must be conducted at the Deeds Registry. The purchaser should look at the title deed to see if the identity information matches that provided by the seller and whether the property description given by the seller is the same property on the title deed.
Through a deeds search, one is able to establish whether there are any encumbrances on the property such as a caveat, notarial or a mortgage bond. A caveat is an endorsement on the title deed showing that there is a third party with interests on that property such as a creditor.
The term comes from the Latin maxim of Caveat Emptor which essentially means “Let the buyer take care”. This maxim summarizes the rule that the purchaser of a thing or article must examine, judge, and test it for himself, being bound to discover any obvious defects or imperfections.
The risk of purchasing a property with encumbrances is that title will not be passed to the purchaser for as long as the encumbrance is in place. As such a property can and will be attached by the creditor in the event of default in payment by the seller and the purchaser cannot do anything to stop the sale. The purchaser will have to recover their purchase price from the seller in the event that the property is sold. In that event the chances of recovering the purchase price from the seller are slim. It is best not to enter into an agreement of sale until the caveat or mortgage bond has been uplifted or measures have been put in place to protect the purchaser.
VERIFICATION OF OWNERSHIP WHERE PROPERTY IS UNDER CESSION
Not all immovable properties have title deeds. Properties that have been purchased from a municipality may take time to have individual deeds registered for landowners. This means that ownership has to be established at the municipal offices in the area in which the property is located. The seller’s name will be endorsed in the municipality records if they are the registered owner. Title deeds are only issued to persons who are stated as owners according to the Municipal records.
PURCHASE OF A PROPERTY WHERE THE OWNER OF THE PROPERTY IS DECEASED
It is prudent for a purchaser to ascertain from the seller if the owner of the property is alive. In the event that the owner is deceased, it is important to ask if the Estate of the deceased has been registered. Most importantly a purchaser should find out whether the Master of the High Court has consented to the sale of the property. This is proven by a document called Consent to Sell that is signed by the Master. Please note that only the executor/executrix can sell the property from a deceased estate. Thus there is need to also see the letters of administration granted by the Master of the High Court authorizing the person to represent the estate as the executor/executrix.
PURCHASE OF A SUBDIVISION
Most purchasers seem to face hurdles when purchasing this type of immovable property.
A subdivision is a piece of land that has been divided, removed or separated from a larger piece of land. For a property that was originally one piece of land held under a title deed to be subdivided, there are a few legal processes that need to be followed. Firstly, a subdivision permit has to be granted by the municipal or local authority of the area in question. An application should be made in terms of section 40 of the Regional Town and Country Planning Act [Chapter 29:12] for a subdivision permit. If an agreement of sale is entered into by a seller and purchaser before the permit is issued the agreement of sale will be invalid.
Section 39 of the Regional Town and Country Planning Act states as follows
SUBDIVISIONS AND CONSOLIDATIONS
No subdivision or consolidation without permit
(1) Subject to subsection (2), no person shall—
(a) subdivide any property; or
(b) enter into any agreement—
(i) for the change of ownership of any portion of a property; or
(ii) for the lease of any portion of a property for a period of ten years or more or for the lifetime of the lessee; or
(iii) conferring on any person a right to occupy any portion of a property for a period of ten years or more or for his lifetime; or
(iv) for the renewal of the lease of, or right to occupy, any portion of a property where the aggregate period of such lease or right to occupy, including the period of the renewal, is ten years or more;
It should be noted that there are a few instances where a due diligence search may not identify potential hazards that a purchaser may face. However, it is better to be as cautious as possible before taking the big step of purchasing a property.Next Step