Is the deposit clause in your Property Sale Agreement up to date?
When a purchaser is obliged to pay a deposit to conveyancers pursuant to a sale of property agreement, the sale agreement should provide for the deposit to be invested on behalf of the purchaser pending registration of transfer.
The conveyancers can only invest the monies on behalf of the purchaser to earn interest if they have received the purchaser’s FICA documentation and a signed mandate by the purchaser to do so. Often the mandate is included in the body of the sale agreement.
From 1 February 2019 sale agreements should refer to these investments being made in terms of Section 86(4) of the Legal Practice Act 28 of 2014 (the Act) and not in terms of section 78(2A) of the Attorneys Act 53 of 1979 (the latter has been repealed).
Although most of the interest will accrue for the benefit of the purchaser while the monies are invested on the purchaser’s behalf, certain deductions may be made from the interest. 5% of the accrued interest will be paid monthly to the Legal Practitioners Fidelity Fund (“LPFF”) and a small administration fee to the attorneys arranging the investment (which fee differs for each firm).