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31 Mar 2017

Bad Bureaucrats – Threaten Them with Personal Liability

Whilst the vast majority of state officials are competent and honest, and deserving of our full support, there will always be a few “bad eggs” to contend with.

We’ve all had our run-ins with state bureaucracy, and where it causes you significant loss of any sort, ask your lawyer if you can sue.  Act quickly; a 6 month time limit applies.

Of course first prize is always to avoid the hassle and risk of litigation by motivating an obstructive official into doing his/her job properly in the first place.  And whilst threatening to go the legal route should help, there’s a problem here.  If you win, government pays your damages and legal costs.  In other words, it’s not the errant official who risks having to cough up; it’s you and I as taxpayers.

The good news is that our courts have signalled clearly that they will not tolerate the actions of that minority of state officials who seem to think that they can trample all over our constitutional rights with impunity.

How the “Social Grants Crisis” judgment helps

The Constitutional Court case around the social grants crisis finds the Social Development Minister at risk (as at date of writing) of having to pay the many millions in legal costs at stake in that case “from her own pocket”.

She has to show cause on affidavit why that shouldn’t be ordered, and it will be interesting to see what argument she advances in light of the Court’s reference to her “extraordinary conduct” and its finding that:  “The office-holder ultimately responsible for the crisis and the events that led to it is the person who holds executive political office.  It is the Minister who is required in terms of the Constitution to account to Parliament.  That is the Minister, and the Minister alone.”

Regardless of the outcome, errant state officials and their superiors have now been given an unambiguous warning by the highest court in the land – they risk personal liability for legal costs caused by their dereliction of duty.

In the High Court: The “bull in a china shop” doctor

A recent High Court decision illustrates the sort of unacceptable conduct that will expose a state official to the risk of paying costs personally –

  • A specialist radiology practice, operating in an academic hospital, obtained two interim court orders against a provincial Department of Health which had tried to close them down by removing their equipment and locking them out.
  • Disputes over the validity of a lease of equipment and over the practice’s rights to treat private as well as public patients led to litigation.
  • Whilst the litigation was still pending, two senior Departmental officials (both doctors) “decided to act as prosecutor, judge and executioner on the legal issue . . . thereby taking the law into their own hands”.
  • Much “harassment and intimidation” later, the practice’s equipment was unlawfully seized and removed by one of the officials, accompanied by a “platoon” of security guards.  In defiance of court orders the Department failed to return the equipment and prevented access to the practice.  Most alarmingly the state doctor in question, again with a platoon of security guards, was found to have intruded on a “life-threatening, intricate and complicated procedure” in an operating theatre.
  • He had, said the Court, “acted like a bull in a china shop” and is perhaps lucky that an application to have him committed to prison for 90 days for contempt of court could not be pursued.
  • And it certainly didn’t help the Department’s case that the radiologists were specialists with “rare skills” who mostly treated public patients, nor that the officials had acted in a “high-handed, arrogant and aggressive manner”, had displayed an “arrogant, foolhardy and recalcitrant attitude”, and had acted “in flagrant disregard of the laws of our country”.
  • The Court confirmed both orders against the Department with a punitive attorney and client scale costs order, but the real victory for the public lies in the Court’s clear indication that – had it been asked to do so – it would have ordered the errant officials to pay the legal costs personally.

So the next time a “bad egg” bureaucrat abuses your rights…

When you bump heads with one of the “bad eggs” try this – have your lawyer formally warn him/her (and their superiors) that you will do everything you can to hold them personally liable for all your costs.  Our courts are behind you!

31 Mar 2017

Religious Discrimination in the Workplace

Another warning to employers to pro-actively avoid any form of unfair discrimination comes from a Labour Court’s award of compensation to an employee found to have been discriminated against because of her religion.

Discrimination and automatic unfairness

The Labour Relations Act (LRA) renders dismissal automatically unfair if the reason for dismissal is – amongst others – discrimination, direct or indirect, “on any arbitrary ground, including, but not limited to race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility.”

However “a dismissal may be fair if the reason for dismissal is based on an inherent requirement of the particular job”.

Forced to work on the Sabbath

A company manager refused to participate in stock-taking on Saturdays because as a Seventh-day Adventist she was unable to work on a “Sabbath” (Friday sunset to Saturday sunset).

She had however participated in stock-taking on other days, she had worked overtime outside the Sabbath, and her employer was generally satisfied with her work.

A senior manager had been derogatory in public about her religious affiliation.

Although her contract of employment obliged her to work overtime as and when necessary, it did not specify that stock-takes were scheduled for Saturdays nor that she was to work overtime on Saturdays.

She was awarded compensation of R60,000 for unfair discrimination, the Court dismissing the employer’s defences that the dismissal was based on incapacity rather than religious discrimination, that Saturday stock-takes were an essential requirement of the job itself, and that the employee’s dignity had not been impaired because the senior manager’s abuse was a once-off event.

31 Mar 2017

Property Buyers/Sellers and Budget 2017

Transfer duty rates

A sliver of good news in Budget 2017 was the 20% increase in the transfer duty threshold from R750,000 to R900,000.  That should help both first-time and buy-to-let buyers, and hopefully it will help stimulate the property market overall.  Even for buyers at the high-end of the market, the very fact that transfer duty wasn’t increased is in itself good news.

Have a look at the table below for details –

 

Non-resident sellers

If you aren’t resident in South Africa and sell property for over R2m, the buyer has to keep back, and account to SARS for, “withholding tax” at a specified rate.  In some circumstances you can apply for a tax directive to withhold tax at a lower or even zero rate – ask your conveyancer about this.  And if your actual tax liability is in due course assessed at less than the amount withheld, you will be due a refund for the balance.

With the general tax increases applicable from 1 March

 

 

31 Mar 2017

Robot Rights and the Law

It may sound like science fiction, but soon we are all going to have to follow the European Parliament’s lead in thinking about how our society, our law and our insurance industry must adapt to the rise in Artificial Intelligence.

How long will it be before we recognise legal rights and duties for “electronic persons”?

“Robot rights: at what point should an intelligent machine be considered a ‘person’?” by Kyle Bowyer on The Conversation is an interesting look at how, with artificial intelligence meshing ever more pervasively into our daily lives, we will soon have to contend with some very strange new concepts.

Our law already recognises “natural persons” (you and I) and “juristic persons” (companies, close corporations, bodies corporate, trusts etc).  “Electronic persons” could be just around the corner.

Time to prepare for the future!

31 Mar 2017

Property: What Are Your Rights to Views and Privacy

“Diligence is the mother of good fortune” (Miguel de Cervantes)

Another warning to do your homework before you buy or develop property comes from a recent High Court decision to set aside a municipality’s approval of building plans.

From sea-view balconies to walled-in courtyards

  • A 17-storey inner city building incorporated residential apartments on its higher floors, the municipality having passed plans for several apartments to be constructed with balconies or windows overlooking the common boundary with a neighbouring building.  Some of these apartments provided city and sea views over the top of that building.
  • Subsequently the developers of the neighbouring building obtained municipal authority to build several levels upwards, flush against the common boundary, right up against those apartments with balconies and only 3 metres from those apartments with windows.
  • The effect of the added levels would have been “to change the character of the areas that were designed to be balconies into small courtyards confined between towering walls”.
  • When they realised what was happening the affected apartment owners, who had not been given notice of the building plan application, rushed to court and obtained an interdict to stop construction pending a judicial review of the plan approval.
  • On review, the Court set aside the approval of the building plans and ordered the municipality to reconsider them.  In other words, Round 1 goes to the apartment owners, but the jury is still out on whether they or the neighbouring developer will ultimately emerge as the victors here.

Lessons for buyers:  Legal restrictions and “legitimate expectations”

Note that this case, as the Court put it, was “not about any alleged right to a view.  It arises out of allegations concerning what the applicants contend would be the unduly intrusive and objectionable character of an aspect of the building extension”.

What follows is a very simplified summary of a very complicated subject, not helped by some very divergent court decisions in the past.   So take full legal advice on your particular circumstances.  But work on the basis that you have no automatic entitlement to retain amenities like privacy, access to light, views and the like, so to stop your neighbour from building to your prejudice you will generally have to prove either –

  • That the building is in contravention of a legal restriction – think title deed conditions, town planning/zoning/building restrictions and the like; or
  • That the building, although complying with all legal restrictions, is “so unattractive or intrusive that it exceeds the legitimate expectations of the parties”.

What won this round for the apartment owners was the Court’s finding that the municipal officials had, through a misunderstanding of the law, “failed to consider and address the question whether a reasonable and informed purchaser ….. would foresee that the regulating authority, having approved balconies along the common boundary would permit the development of the adjoining erf in such a manner as to effectively destroy the utility of the balconies as such, and with the degree of overbearing intrusiveness that allowing a three storey solid wall to be built up hard against them would unavoidably occasion.”

That was a close shave for the apartment owners, so the important thing is to do your due diligence before buying a property.  Factor in that your neighbour may in the future decide to take full advantage of his/her rights to develop and build, and if that happens you will find it difficult to complain.  In this case for example the apartment owners “might reasonably have expected the views from those apartments to be blocked by future development ….. if regard were had to what was permitted in terms of the applicable zoning scheme regulations”.

A lesson for developers

Although generally it should be enough that your proposed new construction/development complies with all “legal restrictions”, there are exceptions.  Make no assumptions here; they could be both mistaken and expensive.

29 Mar 2017

Regulation of Agricultural Land Holdings Bill

WHITE FARMERS AND FOREIGNERS IN THE FIRING LINE OF THE GOVERNMENT’S FIRST SALVO OF RADICAL ECONOMIC TRANSFORMATION

“WHEREAS there is a need to redistribute agricultural land more equally by race and class, raise agricultural output and food security and to advance social justice and political stability by obtaining agricultural land to support and promote productive employment and income to poor and efficient small scale farmers”

This is how the Bill starts! One could of course spend forever analyzing and debating all the assumptions set out above but that would be for another day. Let me rather take you forward and highlight some of the major components of the Bill.

  1. Establishment of a Land Commission. As if we don’t have enough government departments and expenditure the government is going to create yet another department which will no doubt be staffed by an endless number of grossly overpaid ANC cadres. The purpose of the land commission is to administer the Act which will flow from this Bill. This includes the obligation to create a register of all agricultural land. Whether the commission will have the technical ability to administer such a register efficiently and accurately remains to be seen. It is equivalent to trying to recreate a significant portion of our existing Deeds Registry. A monumental task! Recent disastrous efforts by government to create less complicated registers in other sectors entitle one to be cynical. Some politically connected service provider is no doubt licking his chops!
  2. Restrictions on Foreigners. Foreigners (who are defined as someone who is not a citizen; whose continued presence in South Africa is subject to a limitation as to time imposed by law; or not ordinarily resident in South Africa) will as of the date of this Bill becoming law, not be permitted to purchase agricultural land. They will only be allowed to enter into long leases in respect of the land. Long leases must be for a minimum period of 30 years or for the lifetime of the lessee with a maximum period of 50 years. Foreigners who already own land will not be obliged to dispose of the land but when they decide to do so they are obliged to first offer it for sale to the government.
  3. Disclosure of present ownership. Every owner of agricultural land (foreigners and locals alike) will be required to submit a form to the land commission within 12 months from date of commencement of the law providing prescribed information relating to their land. Such information must include the race, gender and nationality of the owner; the size and use of the agricultural land and any real right registered against and licence allocated to the agricultural land holdings. Foreigners are politely excused from a racial interrogation! This is reserved for locals only.
  4. Ceilings for agricultural land holdings. The government will set limits on how much agricultural land any one person may own. This will probably be done regionally. In setting the limit, the government should give consideration to amongst other factors land capability; capital requirements; expected household income; annual turnover and the relationship between product prices and price margins. Any land owned by anyone in excess of the ceiling set by the government will constitute “Redistribution Agricultural Land”. A better term would have been “distributable agricultural land”. Such land will be discussed in the next item. Before proceeding I think it is important to note that this portion of the legislation is probably the most provocative and “radical”. Whether it will be found to be Constitutional remains to be seen. At the end of the day one is driven to ask why it is necessary to set such a ceiling. The government already has the power to expropriate land for purposes of redistribution, when it wants to and limiting the power and privilege of a white person to own more than one farm or a farm larger in size than what the government deems to be reasonable, seems pointless and in fact somewhat vindictive. My biggest fear is that the government (as it is inclined to do) will get it wrong and set the ceilings incorrectly. Such an error will destroy our commercial farming industry and affect our ability to feed ourselves and export of produce.
  5. Redistribution Agricultural Land. After the government prescribes the ceiling for agricultural land ownership and as discussed in the previous paragraph the excess land is described as Redistribution Agricultural Land. The owner of such land is then obliged to inform the commission of the identity of that land and thereafter obliged within periods set by the government to offer it for sale (at a price set by the owner) to black people. If no black person buys the land within a given period, the government must purchase the land. If the government and the owner cannot agree on price, then the government will use the Expropriation Act and its procedures to expropriate the land and resolve the matter of price. This is another radical portion of the legislation. The question which needs to be asked and answered is where on earth the government will find the money to buy all the “Redistribution Agricultural Land” in one go. Perhaps the answer lies in the fact that our government intends to amend our Constitution and remove the obligation to pay compensation for expropriated land. There’s been much “talk” in the media by members of our government on this topic recently including a speech made by our president. Time will tell but one thing is clear, radical times lie ahead!

Milton Koumbatis
Director

16 Mar 2017

GhostTracker

“An informed client is a happy client” – (Milton Koumbatis)

As you might have learnt fraudsters have identified the conveyancing process as a potential source of income. What they are doing is hacking into the mail accounts of buyers and sellers of properties, fraudulently generating correspondence pretending to be one of the parties involved in the transaction and providing false bank details for payments which might be due. To fight this practice and protect you, we have acquired two tools.

  • The first is the certification of all our emails sent by ordinary email accounts, such as Outlook.  In other words a small rosette emblem appears on all our mail which guarantees that the mail comes from us and that there has been no tampering with the content. You can obtain further information about the certificate at this link: Information Guide to Email Certification
  • The second is a program called GhostTracker.

GhostTracker is an online secure platform which serves a number of purposes including:

  • keeping you updated on the progress of the property transaction;
  • allowing for the sending and receiving of secured messages and attachments between us (active from 2 December 2016).

Once we have received your transfer or bond instruction, you will receive an email from us via GhostTracker inviting you to log in via the internet to GhostTracker and initiate access to your account. Please ensure that you do this without delay so that you may benefit from totally secure communication between us. In this regard we will communicate sensitive information via the GhostTracker System.

GhostTracker will also be sending you a weekly report on the current status of your property transaction to keep you well informed.

07 Mar 2017

Withholding Tax for Non Resident Sellers

Withholding tax is an amount that must be deducted, by the buyer of a property, from the purchase amount paid to the seller, which the buyer must then pay to SARS.

Withholding tax is a government requirement and an attempt to prevent tax evasion, especially in the case of property sales by non-residents that are not liable for South African Income Tax.

This tax serves as an advance payment towards the final income tax liability, to Sars, by the seller.

If a non-resident sells a property for more that R2 Million, then 7.5% of the selling price needs to be paid over to SARS according to section 35A

You might not know, but if a non-resident holds 20% or more of the shareholding of a South African Company (or CC) then 10% needs to be withheld as a “provisional capital gains tax payment”.

TAX DIRECTIVE

The seller may apply to the Commissioner at SARS that no amount or the reduced amount be withheld by the purchaser (section 35A(2))

Section 35A(3) provides that the amount withheld from payment to the seller is an advance towards his normal tax liability for the year of assessment during which the property is disposed by him.

07 Mar 2017

Transfer Duty

What is it?

Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company.

These are the Transfer Duty rates applied to properties acquired on or after 1 March 2017, and apply to all persons (including Companies, Close Corporations and Trusts):

​VALUE OF ROPERTY (Rand) RATE
 0 – 900 000  0%
900 001 – 1 250 000 ​ 3% on the value above 9000 000
1 250 001 – 1 750 000 ​ 10 500 + 6% of the value above 1 250 000
1 750 001 – 2 250 000 ​ 40 500 + 8% of the amount above 1 750 000
​2 250 001 – 10 000 000 ​80 500 + 11% of the amount above 2 250 000
​10 000 001 and above ​933 000 +13% of the value exceeding R10 000 000

Who pays Transfer Duty?

  • For acquisitions:
    • The person acquiring the property
  • For renunciations:
    • The person in whose favour or for whose benefit, any interest in or restriction upon the use or disposal of property has been renounced.

Should supporting documents be required, it will be requested of the Conveyancer to upload such electronically. Once satisfied, the application will be approved. If no payment is required, the system will automatically release the receipt after approval.

Should a payment be required, the Conveyancer will make such electronically after which the receipt will be issued.

The usual turnaround time for transfer duty applications to be processed is between 5 and 10 working days.

It is advised that all parties ensure their tax affairs are in order as property transfers are used in an attempt to ensure tax compliance across all taxes. If, for example, you are not registered or you have outstanding tax returns or payments, you will be given the opportunity to correct matters with SARS. Should matters not be resolved, steps will be taken to ensure compliance and this may delay the transfer of the property. One such step that may be taken is the appointment of the Conveyancer or any other person as an agent with the instruction to pay SARS from the proceeds of the sale. It is further recommended that you ensure that your personal details (ID number, Income Tax/VAT number) on our systems are correct as any disparity could also cause delays.

A taxable supply is a supply on which VAT must be charged at the standard rate (currently 14%) or at the zero rate. To be a taxable supply, the supplier (seller or transferor) must be a “vendor” and the supply of the property must be in the course or furtherance of an “enterprise.”

The supply of an entire enterprise with all its assets (including any fixed property) as a “going concern” may qualify as a zero-rated taxable supply if all the conditions in section 11(1)(e) of the VAT Act are met. Refer to Interpretation Note 57: Sale of an enterprise or part thereof as a going concern and VAT News 15 – August 2000 for more details in this regard.

When should it be paid?

Duty is payable within six (6) months from the date of acquisition. If the Transfer Duty is not paid within this period, interest calculated at 10% per annum for each completed month. A completed month is calculated as the first day from the expiry of the interest free 6 months period to the date of payment.

Interest will be charged at the “prescribed rate”. However, these specific provisions did not come into effect from

1 October 2012 when the Tax Administration Act became effective, but will come into effect way of Presidential Proclamation in the Government Gazette at a later date.
Remember that in the case of conditional sales the period of 6 months commences from the date on which the transaction was entered into (i.e. the last date of party signature to the agreement), and not the date when the contract becomes binding upon the parties (i.e. the date the conditions are fulfilled.)

What constitutes “property” for the purpose of Transfer Duty?

Property includes:

  • Land and fixtures;
  • Real rights in land, excluding rights under mortgage bonds or leases;
  • Rights to minerals or rights to mine for minerals including leases or sub-leases to mine for minerals;
  • A share or interest in a “residential property company”;
  • A contingent right to residential property or a share or member’s interest in a “residential property company” held by a discretionary trust (not a special trust), where the acquisition of the right is in consequence of an agreement for consideration in relation to property held by that trust; or accompanied by a change in the debt or security structure of the trust; or accompanied by a change in the trust’s trustees; and
  • A share in a share block company

by Lisa Moore

07 Mar 2017

WHAT DOES IT MEAN TO BE IN POSSESSION OF “A VALID FFC” IF YOU LEAVE ONE AGENCY TO JOIN ANOTHER?

We have recently received a number of enquiries from agents and principals alike, wanting to know what happens when they leave one agency to join another:

Can one legally earn commission whilst waiting for a new FFC under the name of the new employer?

The regulations dealing with FFCs state that if a FFC was issued to an agent and such agent ceases to be employed by the same agency, the agency shall, within fourteen (14) days of such agent ceasing to be in its employ return such certificate to the Board. It is implied that the Board will be informed of the new employer of the agent concerned and that a replacement FFC will then be issued.

It is important to note that no additional payment to the Board is required for this replacement FFC.

The question which is effectively asked and is needing an answer, is whether the regulations referred to above mean that when an agent leaves the employ of an agency, the FFC issued to the departing agent loses its validity.

This is an important question to answer, as Sections 26 and 34A of the Estate Agency Affairs Act cumulatively and effectively prohibit anyone performing the duties of an estate agent or collecting commission if a “valid” FFC has not been “issued” to them.

We believe that the FFC does not lose its validity and that the agent to whom it was originally issued can still legitimately trade. We base this opinion on the decision in the Supreme Court of Appeal matter of RONSTAN INVESTMENTS v LITTLEWOOD 2001.

In this court case, the court observed that the true purpose of Sections 26 and 34A was to ensure that only qualified persons and only those who had paid for the benefit of being insured by the Estate Agents Fidelity Fund could trade as estate agents. With this background, the court quite sensibly found that an FFC, once issued, was valid for the entire year of issue. Put another way, “a certificate is a certificate” and it does not matter where the agent chooses to work from time to time.

We also point out that the legislature in Section 28 of the Estate Agency Affairs Act dealt with the circumstances under which FFC’s can be withdrawn or when they will lapse. If the Regulations dealing with the return of an FFC to the Board were intended to cause the FFC to be withdrawn or to lapse, the legislature could and should have said so in Section 28; it didn’t and this supports our view.

In conclusion then, it is our view that failure to return the FFC for amendment, or, after having returned it and not yet being in receipt of a replacement one, does not prohibit an agent from continuing to work and earn commission. It might result in disciplinary steps being taken by the Board – but this has nothing to do with the fact that the agent has been issued with an FFC for that year.

Robert Krautkrämer

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