From time to time, foreign investors may wish to secure loans made to South African property owners by means of mortgage bonds registered in one of our Deeds Registries. In some cases, these lenders may require, or even insist that, for whatever reason, the mortgage bond reflects the amount of the loan in a format with which they are familiar, i.e. a foreign currency of their choice.
Similarly, a transaction for the purchase of a South African land parcel by a foreign national may be concluded in a foreign currency. Again, the transferee may insist that the purchase price of the immovable property be disclosed in the deed of transfer in such foreign currency.
Registrars of Deeds have never raised any material objection to the disclosure of a foreign currency in deeds and over the years many of these deeds have indeed been registered.
With increased opportunities for foreign investment in South Africa over recent years, and given the security that our registration system provides the investor, we could in fact see an increase in the number of these “foreign” deeds presented at our Deeds Registries.
However, there have always been some additional factors to be considered during the registration process of these transactions. First of all, before the payment of stamp duty on mortgage bonds was abolished, the amount of stamp duty payable could not be assessed in South African Rand (hereinafter referred to as “ZAR”), without an accurate indication of the relationship, at time of registration, between the foreign currency and the ZAR, i.e. “the exchange rate” .
To facilitate the calculation of stamp duty, a practice was introduced whereby the lodging conveyancer would obtain documentary proof of the exchange rate from a recognized financial institution and submit it to the Deeds Registry. From the Registrar’s perspective, the exchange rate certificate should ideally be issued on the day of execution. However, for practical reasons this may not always be possible. Conveyancers have nevertheless always tried to obtain the certificate as close as possible to date of execution.
With the inception of the Deeds Registration Trading Account, Registrars of Deeds used the exchange rate certificate both for calculating stamp duty and to accurately determine the applicable tariff prescribed in the Schedule of Fees of Office. Consequently, and despite the abolition of stamp duty, the exchange rate certificate is still required to this day in respect of every transaction where the registration fee is based on a monetary value disclosed in the deed.
Logic would suggest a practice whereby examiners would raise a note on the deed along the following lines: “Submit certificate of exchange rate to Registrar of Deeds at execution” . In Deeds Registry parlance, this is a so called “B/E” (“before execution”) note.
In the case of a mortgage bond, examiners will disclose the foreign currency in the bond endorsement on the title(s). This would be the more logical approach, especially in view of the fact that the parties specified the disclosure of the foreign currency in the deed itself.
The examiners would not complete the fees endorsement, however. Instead, they must affix a red sticker in a conspicuous position on the front cover of the deed and write the words “B/E Note” in bold across it. The note itself must remain open right up to execution where the Registrar of Deeds will receive the certificate from the conveyancer. S/he will file the certificate as a supporting document with the deed, calculate the correct registration fee and complete the fees endorsement.
During the data capture process, when electronic “billing” of the conveyancer’s account takes place, the data capturer simply has to follow the fees endorsement in the normal manner.
Currently, the Deeds Registration System software (DRS), caters only for ZAR. All monetary figures are entered using only the numeric characters, as the system automatically defaults to the South African currency symbol “R”. The reason for this is simple – all financial statistics compiled from the DRS database would be inaccurate unless they are based on a single currency.
Registrars of Deeds are obliged to calculate registration fees correctly. By employing the practice outlined above, s/he can be assured that everything possible is done to achieve this.
In terms of RCR 30 of 2015 the matter of Notarial bonds was resolved and it was held that a new conversion certificate is needed in cases where a notarial bond, in which the bond amount is expressed in foreign currency, is to be registered in more than one deeds registry.
In terms of RCR 20 of 2009, however, Conference ruled where a deed of transfer or mortgage bond expresses the purchase price or amount borrowed in a foreign currency, the registration fee must be calculated according to the exchange rate as at date of registration. With regard to deeds of transfer this ruling is respectfully incorrect. Transfer Duty will be calculated on the exchange rate as at date of the transaction and the consideration clause in the deed will disclose that the purchase price is a foreign currency being the equivalent of the exchange rate as on date of the transaction. The registration fee will thus be calculated as at date of the transaction on the Rand value.
Allen, is there any authority that can be quoted for the requirement of the certificate issued by a financial institution alone, or will a conveyancer certificate be sufficient?