Occupational Rent In South Africa: What You Need To Know

The payment of occupational rent is a standard clause in many property sales contracts and you may be familiar if you have ever purchased or sold a home. However, if you haven’t dealt with occupational rent before, the further specifics can be unclear. By definition, “occupation” refers to the date whereon a seller is obliged to give possession of the property to the purchaser. This blog article will cover some of the most important aspects of understanding occupational rent.

What is occupational rent?

“Occupational rent” by definition, is the amount payable by either party that occupies the property when it is registered in the name of the other party. Typically, the purchaser pays occupational rent to the seller in the event that the property is occupied before the date of registration.

There is no official rule or percentage occupational rent scale, and so the parties can negotiate and come to agreement on any amount. It is highly advisable for the occupational rent amount to be negotiated in the Purchase Agreement, even when the occupation date is set for registration.

Based on the number of days in occupation, occupational rent is calculated pro rata. Rent will be due and payable prior to the purchasers taking occupation of the house if they move in before registration. Normally the occupational rent is handled by the conveyancing lawyers so that they may calculate the fees on a pro-rata basis on the day the property is registered. 

The purchaser will not be able to open a utility account in his/her name at the local authority prior to registration. Therefore, the seller will be liable for the payment of the utility account until the property is registered. An agreement must be reached by the parties, regarding reimbursement for consumption by the purchaser.

When can you move in?

In the Purchase Agreement, when the parties agree to give occupation on a specific date, they are legally and contractually bound to the same, unless an addendum is entered into at a later stage. It is not permissible for the transferring attorney to change any conditions unilaterally, or on the instruction of either party.

The parties must agree contractually on the requirements to be in place before occupation can take place. Some examples of these requirements include obtaining loan approval and payment of the deposit.

AWD Law will monitor the process to ensure that all requirements are complied with before the purchaser can take occupation. Kindly be advised that the eviction of unwanted occupants should the transaction not proceed, is a time-consuming and costly exercise. 

What to look out for in the occupational rent agreement

The rental amount payable will be one of the criteria outlined in the occupational rent clause, and a purchaser shouldn’t be hesitant to negotiate the amount if it looks excessive based on what comparable residences in the neighbourhood are renting for. A purchaser should study the sale contract to make sure that it has no undesirable clauses, such as one that holds them liable for paying rates and taxes. Rates and property taxes are generally the responsibility of the property owner, unless otherwise mentioned in the contract. The monthly costs of consumable utilities, like water and electricity, are often the duty of the renter or, in this case, the purchaser.

Occupational rent for sectional title developments

A different approach can be taken in occupational rent for off-plan sectional title purchases than it is in freestanding properties. The developer can stipulate that the purchaser must move into the property as soon as the municipality gives the appropriate occupational certificate. This may take place far in advance of the anticipated transfer date and will continue even if the transfer is postponed due to difficulties the developer encounters. Whether or not the purchaser inhabits the property, occupational rent resulting from a sectional title development purchase must still be paid.

Understanding the details of the occupational rent clause in a sales contract is vital for both the buyer and seller. Make sure you get professional property advice before entering into any property transaction. Contact AWD Law for professional property advice.

Kindly be advised that AWD Law does not enter into litigation on behalf of clients. Our conveyancers specialise exclusively in the development of vacant land, property transfers, bond registrations, administration of deceased estates and notarial practice. Should you require assistance with a litigation, kindly contact The Legal Practice Council.