24 Oct

Occupancy Certificates and their Importance in Property Transactions

When it comes to buying or selling immovable property, there are various legal intricacies that need to be considered to ensure a smooth transaction. One of the most important documents that both buyers and sellers should be aware of is the occupancy certificate.

An occupancy certificate is a legal document that certifies that a building (as defined, this means basically any improvement to an erf which requires building plans) has been constructed according to the approved building plans and complies with all the necessary building regulations and by-laws. This certificate is issued by the local authority or municipality and is required for all improvements, including residential and commercial properties.

It is important to note that an occupancy certificate is required before occupying (or using) any such improvements.

To obtain an occupancy certificate, a building inspector must inspect the “building” (as defined) and confirm that it meets all the necessary requirements. Once the building has been certified, the certificate is issued to the owner of the property.

If there are any changes or alterations made to the building after the certificate has been issued, a new inspection may be required to ensure that the building still complies with the regulations and standards.

The sale of immovable property

Oddly enough, it is not a requirement in law in South Africa, that a seller must be able to produce an occupancy certificate before a property may be transferred. But undertaking improvements and then not obtaining one is an offence.

How they may affect the registration of mortgage bonds

We have noted a marked increase in bonds being approved on condition that an occupancy certificate and approved building plans are obtained.

If the seller does not have an occupancy certificate, then the seller needs to obtain one in order to satisfy the bank’s bond requirements. However, the question that then arises, is who must pay for this? The answer is – the purchaser – because it is after all, a bond condition. To obtain an occupancy certificate can cost thousands of rands. However, if the seller had undertaken in the offer to purchase to provide one, then the seller is of course liable for the costs. This can cause delays in the transaction and may even result in the buyer losing out on the property if they are unable to obtain the certificate within the required timeframe, or at all.