Can a foreigner lease or purchase immovable property in South Africa? And, if this is possible, what are the requirements for such a transaction to be valid? Also, can I lease or sell my property to any foreigner? The answers to these questions are pertinent to landlords and sellers garnering interest of foreign tenants and purchasers.
In South Africa the right of a foreigner to purchase immovable property was restricted in the past by the Aliens Control Act. These restrictions were uplifted in 2003 by the new Immigration Act (“the Act”) which repealed the Aliens Control Act and many of its restrictive provisions and now clearly defines who a legal foreigner is and who is not. In short, a legal foreigner is a person in possession of a valid temporary residence permit or a permanent residence permit approved by the Department of Home Affairs.
The new Act makes provision for various temporary residence permits to be issued to foreigners, including amongst others:
- A visitor’s permit
- A work and entrepreneurial permit
- A retired person permit
In principle a landlord or tenant can legitimately lease or sell immovable property to any person recognised under the Act as a legal foreigner.
Importantly, if a foreigner needs to secure funds to buy immovable property in South Africa, he may borrow only up to a maximum of 50% of the purchase price from a South African financial institution. The balance of the purchase price must be made up of foreign funds, which the foreigner will have to transfer to a South African bank account and the non-resident will need to provide proof of earnings as well as comply with the Financial Intelligence Centre Act.
That said, foreigners working in South Africa with a legal work permit, are not regarded as “non-residents” by the South African Reserve Bank. They are considered to be residents for the duration of the period of their work permit and are therefore not restricted to a loan of only 50% of the purchase price.
It is also important to take note that the Act criminalizes the letting or selling of immovable property to an illegal foreigner by making this transaction equivalent to the aiding and abetting of an illegal foreigner and is such an act classified as a criminal offence in terms of the Act.
In conclusion, a legal foreigner may let or buy immovable property in South Africa, provided that he is the holder of either a legal temporary residence permit or a permanent residence permit approved by the Department of Home Affairs. Ensure that you enquire from your potential tenant or purchaser whether they are legally present in South Africa and obtain the necessary proof from them before entering into any transaction with a foreigner. Also take account of the restrictions on local financing, particularly where the procurement of financing is a condition precedent to the agreement.
