Not the right way to stretch your dollars...

We all like to save some cash when the opportunity arises, but I am sure you will all agree that sometimes saving money in the short term leads to bigger bills later down the line.

The reason I bring this up is that into today’s economic climate where cash is so tight and transfer fees and capital gains tax on property transactions can be the deal breaker, more and more clients are tempted to take a short cut.

There are certain agents who will offer their clients the option of lowering the Purchase Price on an agreement of sale in order to lower the cost of Capital Gains Tax payable by the seller and Transfer Fees payable by the purchaser. The rest of the Purchase Price is paid “under the table” and the Seller, Purchaser and Estate Agent all benefit by avoiding the full cost of taxes. Sounds like a win-win situation, if you don’t consider the moral implications of tax evasion!!!!

However, the down side, (Yes- you knew it was coming!) is that the Purchaser is not advised properly by the agent. If you lower the Purchase Price on the agreement of sale when you buy the property, it means when you come to sell it in a few years’ time at the correct market value, your “Capital Gain” will be much higher, and you will have to pay 20% of this gain. Your saving at 7% of the lower purchase price maybe a few thousand dollars, but your tax bill when you sell the property could be tens of thousands.

The only person who really gains by lowering the Purchase Price in the long run is the seller, and he will be long gone by the time you sell your house and pay his tax bill for him. Remember that all properties bought pre 2009 only pay 5% tax on the FULL Purchase Price. Post February 2009, all sale of property incurs a 20% tax on the capital gain of the property.

Say NO! to lowering the Purchase Price – it will save you money in the years to come and you won’t have the guilt of tax evasion on your conscience.

On that note, I would like to wish all our valued clients, friends and supporters a peaceful, safe Christmas period and a prosperous, dream fulfilled 2013!

Love from all of us at

Page Properties…

Rethinking the title of your property...

Back in the infamous Zim dollar days, everyone wanted to put their property into company names. This way, the buyers avoided transfer fees and the sellers avoided paying capital gains tax. There were other reasons too, but these are probably too shady for a reputable agent such as myself to know about...

It now seems that there are more disadvantages to owning a property in a company name than the financial advantages of transfer fee avoidance for your future, potential buyers. I have listed some of the points below, but by no means is the list comprehensive:

1. The myth of not having to pay capital gains tax on the sale of a property owned by a company OR TRUST needs to be debunked as soon as possible. The sale of shares of any description is liable for a 20% capital gains tax. You may be able to find a clever account to perform some creative accounting to avoid the tax, but somewhere down the line these loop holes will be closed and you will be liable for the tax.

2. If you are over 55 years old and the property you are selling is your principal primary residence (your home, in layman's terms!), then you may apply to ZIMRA for Capital Gains Tax exemption. If the property is in your name, then it is much easier to explain to ZIMRA that it is in deed your home and you are eligible for the exemption. If it is in a company name, then there will be all sorts of questions and at the end of the day, you may not get the exemption, as a company can't have a home, because although a company may be a legal entity: it does not need to sleep somewhere!!!!

3. If the owner of the house was to die, the family would not have to pay death duties on the principal primary residence (yes, the home), but only if the property is in the deceased person's name. If it is in a company name, the Master of the High Court will demand his pound of flesh, at the most vulnerable time in the grieving family's life. The last thing you need is trying to find money for the death duties on your home when you have lost a loved one.

4. There is the ever present fear of the 51% indigenisation bill. Personally, I don't see this reaching as far a shelf companies which own houses, but then I am the eternal optimist and this is Zimbabwe, so anything goes, and generally the more unexpected the more likely the event will occur. (What a conundrum that is!)

5. The last point, which comes to mind is the fact that most banks will not loan you money to buy a house in a company name, and so as a buyer you will still have to pay transfer fees to put the property in your name. This whole process thus defeats the reason for the company name and the proposed transfer fee avoidance.  Banks are also reluctant to lend you money against a property in a company name. This is because ownership of the company can be transferred without it affecting the change of ownership on the title deeds.

My advice therefore, is to put your own home in your personal name. If you buy and sell properties as investments then I don't think it matters which way you choose as you will be selling it on. But remember even if you put it in a company name, you will still have to pay tax on the sale of the shares.

The truth about commission paid to Estate Agents

Commission is the percentage charged by an estate agent or property negotiator to either sell your property or manage it, in the case of rentals.

An estate agent's job is really to introduce a buyer to your property, in the case of sales, who is willing to buy the property. By law, this is all that is required of an agent to be entitled to their commission. However, a good estate agent will ensure that both parties are happy with the deal and follow the sale right through to the eventual transfer of title to the new owner. Some agents want their commission as soon as an agreement is signed, or at the very latest when the purchase price has been paid.

In my experience, paying the commission on signing is foolish as the sale may still fall through, and most people don't have the money upfront without first being paid for their property. The second option which is paying the commission once the full purchase price is paid, is generally the preferred scenario for most agents. However, I feel this is ethically too soon to accept payment of the commission because the negotiators lose interest in the sale and won't check up on the transfer of title.

The best time to receive payment of commission is when title is transferred to the buyer. There is no law to enforce this, as commission is due on introduction, by law. But, a good estate agent should never be chasing their commissions, they should complete the sale to the very end, and when all parties are satisfied, then they should have their commission.

Now, there are two different types of mandates in Zimbabwe which you can give an agent. An open mandate allows more than one agent to sell your property. Whichever agent introduces the property to the buyer, that is the agent who is entitled to commission. Open mandates are quite tricky, as a non mandated agent may approach you to sell the house, and although you have not asked them to sell your property, you may think it is ok to let them. Your mandated agents can all demand commission if a non mandated agent sells your house. So a word of warning, only let those, who you have mandated, sell your property. You don't want to be paying double commissions or have to deal with quibbling agents.

The second type of mandate is a sole mandate. This means you have given one agent the mandate to sell your property. When that agent introduces the buyer, they are entitled to commission. When you decide to pay the commission as discussed above, is an issue you need to negotiate with your agent.

There is a big difference between a sole agency and sole selling rights. Sole selling rights are not very common in Zimbabwe. Sole selling rights entitles the agent to be the only person allowed to sell the property. This will also prevent the owner from selling the property himself. Basically, an agent with sole selling rights will be entitled to commission when the property is sold, regardless of whether that agent introduced the buyer. My advice is to avoid this type of mandate completely.

According to the estate agents' governing bodies the recommended commission structure is 5% plus 15% VAT on sales. 15% plus 15% VAT on residential rentals and 10% plus 15% VAT on Commercial and Industrial rentals.

You may charge 3% plus VAT on sales but nothing lower. You may charge as high a commission as you like, say 7,5%, but you must have a written acknowledgement from the seller stating they are aware that they are being charged above the recommended scale of fees.

Commission is costly, so make sure you have chosen a reputable agent who will put your interests above their own. Don't be bullied into paying commission early, but on the flip side, remember you are obliged to pay commission if your agent has introduced a buyer. If both sides are honourable, the business transactions will go smoothly.

Visit my website www.pageproperties.co.zw  or leave a comment here and I will be sure to reply to you!