When Buying Property - Know The Difference Between Occupation & Possession

Property buyers and sellers often misunderstand the distinct difference between occupation and possession -which has very serious legal implications for the period between the conclusion of the sales agreement and the transfer of the property into the name of the new owner.

Furthermore, possession and formal transfer of ownership are often thought to be the same thing. However, it's extremely important to remember that there are 3 distinct stages or events that occur during a transfer of property, each having important legal implications.

3 Different stages of transfer of ownership

• The actual transfer - transfer of ownership is registered in the deed's office
• Possession - the possessor now becomes liable for maintenance and repair of the property, runs risk of accidental damage or loss to the property and is also entitled to the benefits of the property such as rental income
• Occupation - physically moving into the property and occupying it

Below is an example which serves to clearly explain the principle of "possession".

Party A sells a house to party B for the total amount of R1 million. The sale takes place on the 1st of January while the contract stipulates that occupation and possession will pass on to party B on the 1st of March. 

The date of transfer was agreed to be on the 1st of April.

However, through no fault of the purchaser, the house burns down on the 10th of March, which happens to be just a few days after party B moved into the house.

Take note, that this disaster strikes after possession and occupation has been granted to the purchaser, but before the actual transfer of ownership has taken place.

Now, the question is, who will bear the risk of damage and loss? The answer is quite simple in this case; because the purchaser was already in possession, the loss is his. He will still be liable to pay the purchase price of R1 million.

What if the contract was different?

If the contract made other provisions with regards to possession, the end result could have been different.

For example, if the contract stipulated that possession is only granted after the transfer has been finalised, then, in a case such as the one described above, the seller would bear the loss incurred.

Both parties are then relieved from their relevant and respective obligations which were stipulated in the contract because they were unable to carry out the agreement. However, there is one exception to this rule and that is when the purchaser is in mora.

Date of transfer

If both parties agree on and specify a date for possession in the agreement, that date will prevail. 

However, the law automatically takes over if the contract does not specifically stipulate anything about date of possession.

This law stipulates that possession is given to the purchaser as soon as the sale becomes perfecta, which generally means that all suspensive conditions have been fully met by all the relevant parties involved. 

Possession on transfer of property

The most logical and practical way to approach this matter is to make sure the contract stipulates that possession will be passed on transfer.

This method marries possession with actual transfer, rather than a calendar date. If possession is passes sooner than the actual transfer, it's crucial to make the purchaser aware of the risk of damage and loss as well as any other implications that come with possession before transfer. 

In such a case it would be advisable for the purchaser to be properly insured.