IMPORTANT NOTICE REGARDING NOMINEE PURCHASERS

Section 16 of the Transfer Duty Act, which states as follows:

(1) Where property is sold to a person who is acting for some other person, the person so acting shall disclose to the seller or his agent the name and address of the principal for whom he acts:

(i) if the sale is by auction, immediately upon acceptance by the auctioneer of his offer; or

(ii) is the sale is otherwise than by auction, immediately upon conclusion of the agreement of sale.

(2) Any person who fails to comply with the provisions of sub-section (1) shall, for the purpose of the payment of the duty payable in respect of the acquisition of the property in question, be presumed, unless the contrary is proved, to have acquired the property for himself".

With effect from 1 September 2003, the Receiver of Revenue for the Western Cape Region adopted a strict interpretation of the above section. "Immediately" is now deemed to mean "the same day" and, as from 1 September 2003, all nominations made in terms of a nomination clause in a deed of sale must be made and accepted on the same day that the sale was entered into, in other words, by midnight on the date of sale.

If the nomination is made after the midnight deadline, the transferee will have to pay double transfer duty.

The reason for this was speculation amongst members that the right to nominate process was being abused by certain property dealers who were making increased use of nominee purchasers to avoid the payment of transfer duty and/or VAT on re-sale.

The effects of the ruling are as follows:

1. It will no longer be possible to nominate as transferee a Trust which is not yet in existence.In terms of the Trust Property Control Act, no agreement may be entered into on behalf of a Trust until it has been duly registered by the Master of the High Court and Letters of Authority issued in favour of the Trustees.

2. Where a purchaser wishes to nominate as transferee a company or close corporation not yet in existence, the purchaser will have to sign the deed of sale "on behalf of a company or close corporation not yet in existence" and the deed of sale will have to be ratified by the directors or members of the company or close corporation once it has been registered.