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31 Oct 2017

Closing Down the Guesthouse Next Door: Notes for Owners and Neighbours

“You can be a good neighbour only if you have good neighbours” (Howard E. Koch, playwright)

You decide – for whatever reason – that your neighbour’s new guesthouse is definitely not first prize in your sleepy and peaceful suburb, so you investigate.

You find out that the local municipal zoning scheme doesn’t allow anyone to trade as a guesthouse without a special departure permit, and that your neighbour doesn’t have one.

What are your rights and what must you prove to get assistance from our courts? Must you prove, for example, that you have suffered some form of damage or is it enough to prove only the lack of a permit?

A recent High Court decision illustrates, and would-be guesthouse owners as well as their neighbours should take note.

Shattering the peace – wild parties and nuisance guests

  • Residents of a quiet suburb with ‘single residential’ zoning asked the Court to interdict their neighbour from running a guesthouse next door.
  • They alleged a number of nuisance disturbances including a wild party of over 50 people “drinking, swearing, yelling and urinating in the street”. That all-nighter was, they said, only temporarily interrupted by a visit from SAPS at 3 a.m. – it finally ended at 7 a.m. after a second police intervention. Other allegations related to disruptive behavior by guests arriving and departing in buses, taxis, trucks and construction vehicles.
  • The guesthouse was being operated without the special permit required by the local zoning bye-laws.
  • The guesthouse owners said that they had twice applied for special permission in the correct format and had twice been given consent to continue operating the business pending final approval. This was hotly disputed and in any event, held the Court, “such informal authority cannot be the authority … envisaged by the relevant ordinances and regulations in this regard. After the proper procedure had been followed, and in particular after proper notices have been given to the property owners in the vicinity of the guesthouse, and notices in the local Newspaper, only then after proper consideration may consent be granted for the special use as a guesthouse. Up until that stage the guesthouse on the property is being run illegally.”
  • Nor did it help the owners to deny the allegations of nuisance behavior by guests. Such denial, said the Court “does not detract from the continued illegality of [their] use of the property.”
  • The owners also argued that a complaining neighbour has no right to ask for a court’s intervention without proving that it suffered some “special damage”. The Court disagreed – zoning schemes confer rights on affected property owners and they “are entitled to require that neighbouring owners comply with the applicable zoning scheme”. That’s an important decision – it makes it a lot easier for affected neighbours to get redress.
  • The Court also rejected the guesthouse owners’ application for a suspension of the interdict pending the outcome of their permit application.
  • The end result is that the guesthouse must close (after a short grace period to allow longer term residents to find alternative accommodation).

Opening a guesthouse? It boils down to this …

Each municipality will have its own bye-laws in regard to exactly what is and what isn’t allowed in each zoning category. Where a formal municipal permit is required to operate a guesthouse, that permit must be applied for and must be granted before the business opens. Otherwise your neighbours can ask a court to close down you down, proving nothing more than the lack of a required permit.

First prize is always to negotiate all your neighbours onto your side from day one, and in any event it’s worth getting legal help for your permit application to ensure your position is unassailable.

And a final note for suffering neighbours

Stand up for your rights, although of course even if you are 100% in the right, going to war with your neighbours should be the very last resort – there are no winners in a fight like that. But if a polite request to “please close your doors” or “please stop disrupting our peace” doesn’t help, seek legal assistance immediately.

P.S. What about Airbnb?

There are grey areas around how zoning restrictions apply to short-term lets in South Africa, and municipalities all have their own requirements for bed and breakfast and other types of guest accommodation. Take advice on what your local council’s requirements and limitations are.

31 Oct 2017

Creditors and Debtors: Important New Prescription Judgement

“Running into debt isn’t so bad. It’s running into creditors that hurts” (Unknown)

Debts prescribe (become uncollectable) after a specified period of time – 3 years for most run-of-the-mill debts but 30 years for others such as judgment debts, mortgage bond debts, property rates and tax debts. Various other periods apply to specific statutory debts and a few other exceptions – take advice if you need more detail.

It’s important to know that the prescription period can be “delayed” in certain cases. For example where the debtor is a minor or insane, or under curatorship, or out of South Africa etc (there’s a long list).

Prescription can also be “interrupted”, most commonly by serving summons on the debtor or by the debtor making an “express or tacit” admission of liability.

It’s that last scenario we’re going to discuss, because of course it’s both an opportunity for creditors to extend the prescription period, and a danger for debtors waiting hopefully for their debts to prescribe. Unscrupulous but savvy debtors will accordingly try their utmost to avoid making any form of admission of liability.

A very prejudicial “without prejudice” admission

Now a new SCA (Supreme Court of Appeal) decision has just added a significant twist that both creditors and debtors should take note of.

It revolves around the principle that during settlement negotiations we can safely make admissions “without prejudice”. The idea is that, in order to encourage us to avoid the expense, delay, hostility and inconvenience of litigation, we can speak frankly without fear that our admissions can later on be used against us in court. The only exception to that rule has (until now) been that an “act of insolvency” can be proved by admissions made by a debtor in without prejudice negotiations.

Developer v estate agency – R2m at stake

  • An estate agency claimed R2.147m in sales commissions from a property developer.
  • The developer in turn sued the agency for R1.023m for a variety of counterclaims against it.
  • During settlement negotiations the developer admitted its liability for the commission claims but suggested, on a without prejudice basis, that the two sets of claims be set off against each other, and tendered payment of the net balance.
  • The agency rejected this offer, a court battle ensued, and the developer raised the defence that most of the agency’s claims had prescribed as being older than three years.
  • The SCA rejected the prescription defence, holding that the three year period had been interrupted by the developer’s admission of liability – despite it having been made without prejudice.

That’s new law, and it’s important both –

  • For creditors to recognise the new opportunity they now have to extend prescription, and
  • For debtors to recognise the new danger of hiding behind the “without prejudice” shield when making admissions.
    • The end result – the claims haven’t prescribed and the developer must fight on in the main action.

Note that the new exception to the without prejudice rule is limited solely to interrupting prescription. Admissions made without prejudice still can’t be used to prove that you owe money, nor to prove how much you owe. They can only be used to interrupt prescription, and even then as the Court put it: “The exception itself is not absolute and will depend on the facts of each matter. And there is nothing to prevent the parties from expressly or impliedly ousting it in their discussions.”

Lessons for creditors and debtors

Creditors: Prevention as always is a lot better than cure, so avoid arguments over prescription arising in the first place. Don’t delay in collecting debts, suing for damages or recovering any other form of claim. Serve summons on your debtor before you lose your claim forever.

Debtors: We should of course all try to honour our debts. As the Roman writer Publilius Syrus pointed out over two millennia ago “A good reputation is more valuable than money”. But if you plan to fight any claim against you, you lose a valuable defence if you in any way admit liability, “without prejudice” or not.

31 Oct 2017

Employer v Employee: Can You Use Evidence Obtained under Threat of Prosecution?

“… you are going to be a very sorry man you (sic) probably going to sit in jail tonight” (a “dirty dozen threat” quoted in the judgment below)

When we hear of employers and employees at loggerheads with each other in our court system, we normally think of labour disputes – strikes, disciplinary hearings, unfair dismissals and the like.

But at times such disputes end up in our normal civil courts, dealing with issues which potentially apply to all civil claims. An interesting SCA (Supreme Court of Appeal) case provides a good example.

An accused diamond thief sued for R6m

  • A business which processes mine dumps to find and then sell rough diamonds employed a ‘Final Recovery Manager’ in a senior position of trust.
  • Monitoring of workplace CCTV surveillance raised suspicion that the manager had been stealing diamonds.
  • Confronted, he made a videotaped confession, signed a R5m acknowledgment of debt, paid over R530,000 cash as part proceeds of stolen diamonds, and assisted in the recovery of other stolen diamonds. He later gave his employer a copy of his full confession to the police and also consented to a second interview, similarly recorded.
  • He was prosecuted but acquitted after the criminal court found that his statement to the police had not been freely and voluntarily made. The CCTV surveillance footage was not put in as evidence at the criminal trial – relevant because the civil court later found it to provide evidence of theft.
  • The employer then sued the manager for R6.015m. He objected to the admission in evidence of his various confessions, admissions and statements on the grounds of unlawful duress.
  • The High Court however allowed the admissions in as evidence, a decision upheld on appeal by the SCA.

“Spilling the beans” after the “dirty dozen” threat

In his first interview the employee initially denied the allegations of theft, but “spilled the beans” after he was exhorted to tell the truth and was presented with a “dirty dozen” option, including threats of arrest, prosecution, and adverse publicity if he lied.

The SCA held that –

  • “The admissibility of evidence in a criminal trial stands on a different footing from a civil dispute”, partially because “a criminal matter is a contest in which the might of the State is pitted against an individual. In a contest of this kind, a bad result for an accused person may lead to a loss of freedom. Such a consequence is incomparably different from any outcome in a civil dispute.”
  • “An employer is not only entitled to confront an employee about an allegation of wrongdoing, but is also obliged to do so, even before a formal disciplinary hearing is convened.” That’s because of the basic rule in our law that both sides of a story must be heard and taken into account.
  • There were no threats of physical violence nor of anything unlawful.
  • What was said to the employee immediately before he began to confess to his theft was not extortion or blackmail, nor was it contra bonos mores (against public policy) – “it did not result in [the employer] exacting or extorting something to which it was not otherwise entitled.The contrary is true.”
  • “Even in our law of criminal procedure an exhortation to tell the truth will not exclude a confession … Not even a threat of the probability of arrest constitutes undue influence … After all, the test is whether there is ‘any fair risk of a false confession.’”

The employee had therefore failed to prove that his admissions were obtained by any “legally recognised duress”, nor had his constitutional right to a fair trial been breached.
Clearly, it will depend on the facts of each case whether a threat of prosecution and/or adverse publicity constitutes unlawful duress. Take legal advice before making accusations or relying on any admissions flowing from such threats.

31 Oct 2017

Child Maintenance in Arrears? The Contempt of Court Enforcement Option

“It has regrettably become all too common in divorce litigation that allegations are traded back and forth between the parties, with scant regard for the obligation to comply with orders issued by the court … The rights of the child become relegated to matters of secondary, or sometimes no importance, while the battle between the spouses takes centre stage” (Extracts from judgment below)

Our law, in protecting the interests of children in particular, provides you with an array of options when it comes to enforcing payment of maintenance orders. One of them is to ask the court to jail the defaulter for “contempt of court”.

The idea of course is that the threat of a stint behind bars is likely to extract payment out of even the wiliest of maintenance dodgers.
How does it work and what must you prove? A High Court case illustrates –

“Pay up or go to prison” – what you need to prove

  • A husband was ordered by the High Court to pay his wife R10,000 p.m. as maintenance for her and for their minor son, pending finalisation of protracted divorce proceedings.
  • After he had run up arrears totalling R393,500 the wife asked for him to be jailed (on a periodical imprisonment basis) for contempt of court.
  • The Court was on the facts totally unimpressed with the husband’s pleas of poverty, and in any event pointed out that our laws require compliance with court orders which, “whether correctly or incorrectly granted, have to be obeyed until they are properly set aside”. If the husband was genuinely unable to pay he should have applied for a variation of the original maintenance orders.
  • Note that to succeed with a contempt of court application you need to prove two things beyond reasonable doubt, namely that the defaulter has both –
    • Deliberately and wilfully disregarded the court order, and
    • Acted “male fide” (in bad faith) to deliberately and intentionally violate the “court’s dignity, repute or authority”.

Finding that the wife had on the facts succeeded in this regard, the Court ordered the husband to pay, within 30 days, the R393,500 arrears, an outstanding R161,000 contribution to costs, arrear interest, and legal costs on the punitive “attorney and client” scale. Failure means him spending 30 days’ worth of weekends (from 5 p.m. on Fridays to 7 a.m. on Mondays) in a prison cell.

31 Oct 2017

5 Ways to Stay Mentally Strong When You Think You’re About to Crack

Stress – it’s good for us up to a point, but an overload won’t just reduce our work performance and make our lives a misery, it’ll eventually kill us. Where’s the balance? Have a look at Uplift’s ‘Stress:Performance Curve’ in “The Difference between Good Stress and Bad Stress” here.

Then take 39 seconds to watch Time Magazine’s video “5 Ways to Stay Mentally Strong When You Think You’re About to Crack” here

23 Oct 2017

Newsflash! 2nd Dwelling – Tax Questions Answered!

We recently put out a Newsflash dealing with the right of property owners in single residential zones to build an additional dwelling on their property. This Newsflash has elicited quite a response and we have received numerous questions about the tax implications of exercising the right, either by way of subdividing (if allowed) or by way of Sectional Title. If you haven’t read our earlier Newsflash we recommend that you do so before reading this one, as without it some of the content hereof might not be particularly clear. Our prior Newslash can be found at: 2nd Dwelling Restrictions

Here are some of the questions which we received along with our reply:

  1. If I exercise my right by building a second dwelling and I sell it immediately as a sectional title unit for a profit what will the tax consequences be for me?
    • Answer – Income tax is applied to all profit made in the process of a deliberate business activity even if it is a once-off activity. When you do this, you are no different from a traditional developer who also pays income tax on the profits made from the sale of properties he has built. SARS will assess your profit as being the result of a business activity and the profit will be added to all your other taxable income and subjected to income tax. Personal income tax for individuals tops out at 45% once you earn more than R1.5 million per annum.
  2. Would it be different if I didn’t apply the sectional title solution and managed to rather obtain the right to subdivide and then built and sold?
    • The answer would be the same
  3. If I exercise my rights by converting my existing dwelling ownership into sectional title, reserve to myself the right to build an additional dwelling and then sell that right immediately what will the tax consequences be for me?
    • Answer – The consequences will be exactly the same as in question one above. SARS will conclude that you made all these changes with the view to making a quick business profit and will add it to your existing taxable income and subject it to income tax.
  4. What if I implemented the steps set out in question three above but didn’t sell the right to build the additional dwelling immediately and kept it as a long-term investment hoping that it would become more valuable as time goes by .
    • Answer – Once again the consequences will be exactly the same as per questions 1 – 3. The fact that you do not intend to sell it immediately and make an immediate profit does not detract from the fact that you implemented this solution with the view to selling the right and making a profit. The profit (when it is finally realised) will be subjected to income tax.
  5. What if I exercise my right by building a second dwelling as contemplated in paragraph 1 or 2 above and then decide to keep it as an investment and lease it out on a monthly basis to make a rental return on my investment ?
    • Answer – You will pay income tax on the profit which you make from your rental enterprise. In other words, after deducting from the rental any costs of ownership of the 2nd dwelling such as maintenance, the interest included in any bond payment, rates and taxes and insurance et cetera the balance will be profit subjected to income tax.
  6. What if after a while as per my question 5 above I decide that I no longer want to be bothered with tenancies and rental collection and the like and sell the 2nd dwelling that I built and make a profit on the sale?
    • Answer – That profit will not be subjected to income tax. There is another tax waiting for that profit namely capital gains tax. That is fortunately a much lower tax than income tax. Capital gain tax is applied to the profit which is made when you sell an asset which you never acquired initially for purposes of resale.
    • The classical example is if I buy a fruit tree with the intention to sell the tree I will pay income tax. If I buy the fruit tree with the intention to sell the fruit I will pay income tax on the fruit sales. If I decide to get out of the business of selling fruit and then sell the tree I will pay capital gains tax on the gain I make when selling the tree.
    • The determination of which tax applies depends on the state of mind of the taxpayer. Having said this SARS will be extremely suspicious if you maintain your rental business for only a month or two and then sell. In such circumstances SARS will suspect that it was your intention when you built the second dwelling to sell it for a profit and your profit will be subjected to income tax. The calculation of the capital gain tax which you will have to pay is quite complex but as a rule of thumb for human beings you will pay a maximum of 18% of the total profit/gain as tax, (and then only if you already earn more than R1.5million a year).
    • In determining your profit/gain you will deduct from the sale price of the second dwelling the costs of constructing it and of course the costs of establishing the sectional title structure and estate agents commission.
  7. What if along the way in any of the circumstances stated in the questions above I decide to sell my original home?
    • Answer – You will not pay income tax and will only pay Capital Gains tax on any amount that exceeds R 2 million net gain. (i.e. the first R2million net gain is exempt from CGT on a primary dwelling). The net gain will be calculated in the same way as above.
    • NB – If capital gains tax is payable then, along with your other usual income tax, it is payable at the end of the financial year in which the sale occurred (not date of transfer!)

Lastly, there Is a special rule applicable to non-residents. As SARS is afraid that non-residents will take their profits and leave the RSA, conveyancers are obliged (if the sale price is R2 million or more on any sale of immovable property) to retain a portion of the purchase price of the property on transfer (it ranges from between 7.5% for individuals; 10% for companies and 15% for Trusts). The seller is then required to go to SARS and to calculate the correct amount of capital gains tax to be paid and to obtain a written ruling.The conveyancers will then pay that to SARS and pay the rest (if any) to the seller. The effect of this on non-residents is that they have to pay the capital gains tax immediately.

If you wish to read up more on the topic of CGT v income tax, visit this hyperlink: http://www.dejure.up.ac.za/index.php/en/volumes/45-vol-1-2012/82-notes2.html. The bottom line is that a proper financial analysis with a tax expert is advised, before you embark on this journey. Either way though, if you end up paying more tax, it means you are making more money – The question you ought to ask yourself is which structure will result in the least amount of tax!

Kindest regards,

Milton Koumbatis (Consultant); Robert Krautkramer (Director)
Miltons Matsemela Inc

20 Oct 2017

Second Dwelling Restrictions Lifted

Do you know that as from 1 July 2016, all owners of erven that fall within the City of Cape Town municipality, and which are zoned as Single Residential 1 (SR1), now have the automatic right to erect a second dwelling on their erven?

Prior to 1 July 2016, you would either have had to apply to the City for a Consent Use or have your property rezoned to a zoning category which permits of a second dwelling. None of the aforesaid applications would necessarily have succeeded and both would be time-consuming and expensive.

Having said that the second dwelling right is now automatic there are a few cautionary notes that should be considered namely:

  1. Your title deed might contain a condition which prohibits a second dwelling. This condition trumps your new rights and if you wish to exercise your new rights you will have to apply to the person/party in whose favour this condition was imposed, for permission to remove the condition from your title deed. That could mean time; money (a lot usually) and risk. Applying for the removal of a title deed condition is not the simplest process and you will be very well advised to seek the assistance of a Town Planner to do it for you if you have the appetite for the application! Determining whether a title deed condition is restrictive of second dwellings is furthermore not always straightforward.
  2. Secondly you must be aware of the fact that when you have built the second dwelling you cannot sell it and retain ownership of your existing dwelling. Both buildings will be on one undivided Erf and if there is to be a sale, the entire Erf (with both buildings on it) must be sold and transferred. Remember that you get a title deed for the Erf – not for each improvement on the Erf. There are two ways to overcome this particular problem namely;
    1. To subdivide your Erf and thereby create two separate Erven each with its own number and title deed. One of the Erven will contain your original dwelling and the other will contain the new dwelling. If this is achieved you will be free to sell and transfer ownership of any of the two Erven (with the dwelling situate thereon) to any purchaser. The problem with this is that there is no automatic right to subdivide your Erf. You will have to apply to the City for permission to do so and this process is also lengthy and expensive. You will for example have to install services (water supply; sewers electrical supply). If the title deed to your property prohibits subdivision, then and as mentioned in item 1 above, you will be obliged to also apply for the removal of that condition thereby adding further time and expense to the process. If the City of Cape Town is not in favour of subdivisions in your area the subdivision of your property will in fact prove impossible.
    2. Option two is to convert your ownership from conventional Erf to sectional title. No permission from the City is required for this and title deed conditions prohibiting such a conversion are seldom if ever found. This conversion accordingly bypasses all the problems a sub division presents as described in item 2.1 above. The process is furthermore quick and not particularly expensive. The conversion to sectional title can occur either when you have completed the construction of the second dwelling or before any construction has occurred. If you select the latter option it is possible, in terms of sectional title legislation, to convert your ownership to sectional title based on the original dwelling only and to then create and retain a registered right to construct a second dwelling at a later time. This is called a “right of extension”, and is in fact capable of being sold and transferred. So, you could accordingly, effectively “sell the land” on which the new dwelling is to be built and pass the burden of constructing the dwelling to your purchaser. In this regard the process of reserving the right to build the second dwelling involves filing at the deeds office fairly detailed drawings of the proposed dwelling. Your purchaser will accordingly have to build a dwelling in accordance with those plans and there is therefore no likelihood of you ending up next to a building that does not please you. You should of course in the process of converting to sectional title create exclusive use areas to secure your rights to exclusively use for example, portions of the garden or a swimming pool etc. You would of course similarly cater for exclusive use areas for your potential purchaser.
  3. Having said all the above, the position of your existing dwelling might not leave enough room (bearing in mind building lines and the like) to construct the second dwelling. That does not however mean that you are without options. There is one option which remains namely to add a second story (or reserve the right to do so) to your existing dwelling and to then convert to sectional title as summarised in item 2.2 above. The ground floor would be one section and the next floor would be another. Whether this will be viable from an economic point of view will obviously have to be determined.

Should you want to explore your options , given this change to the law, please contact us so that we can help you through the process and explain matters to you in greater detail. Send your emails to info@miltons.law.za and you will be contacted to arrange an appointment.

ROBERT KRAUTKRAMER
19 October 2017

02 Oct 2017

How the “Historical Rates” Judgement Affects You

“It is declared that, upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property …” (Constitutional Court Order)

How does the recent Constitutional Court decision on “historical rates” affect you in practice?

Understanding the issue

At issue was that some municipalities would force new property buyers to pay the seller’s “old” municipal debts (rates, municipal services etc). So you could buy a house thinking that all you had to pay was the purchase price and transfer costs, and end up having to pay old municipal debts run up by previous owners.

We’re talking potentially big money here – R6.5m in one of the cases in question. And you had to cough up or face losing your home to a sale in execution, as well as threats to disconnect electricity and other services.

Property owners 1, Municipalities 0

In a major victory for property owners, a 2016 High Court decision held that procedure to be unconstitutional. And whilst the Constitutional Court on appeal said there was actually nothing unconstitutional about the legislation in question, it also confirmed that municipalities cannot use it to collect pre-transfer municipal debts from the new owner.

So how does that decision from our highest court affect you?

Buyers

You are no longer the “soft target” for municipalities and you no longer risk having to pay the seller’s historical debts; you are only liable for rates etc after you take transfer. The other side of the coin is that municipal debt write-offs generally are bound to increase, and those losses will be passed on to us all as consumers.

Sellers

To avoid delays in transfer, keep all municipal accounts up to date. Remember you cannot pass transfer without a “clearance certificate” certifying payment of rates etc due for the past 2 years. Debt older than 2 years cannot now be claimed from the buyer so expect municipalities to be extra vigilant from now on in collecting arrear rates and service accounts as they arise. Get legal help immediately if your municipality demands payment of debts older than 3 years – rates prescribe after 30 years, but other debts survive only 3 years.

Agents

This decision has been touted as positive for the property market generally and it certainly will reassure any potential buyers holding back from making offers for fear of having to pay huge hidden municipal debts.

Municipalities

“Historical debts”, said the Court, “exist only because municipalities have not recovered them”. Every municipality is obliged to –

  • “Collect all money that is due and payable to it”,
  • “Implement a credit control and debt collection policy”,
  • “Send out regular accounts, develop a culture of payment, disconnect the supply of electricity and water in appropriate circumstances, and take appropriate steps to collect amounts due”, and
  • “For the sake of service delivery … do everything reasonable to reduce amounts owing”.

You have, in the Court’s words “a full-plated panoply of mechanisms enabling efficient debt recovery” – use them to stop arrears building up in the first place.

02 Oct 2017

Small Bussinesses and POPI: Not Crying Wolf This Time?

“Crying wolf is a real danger” (David Attenborough)

POPI (the Protection of Personal Information Act) will provide welcome protection for our personal information – our names, ID numbers, addresses, medical histories and so on.

But the other side of the coin is that it will expose small businesses in particular to a whole new raft of onerous obligations and risks.

The problem is that there have been so many false alarms as to when POPI’s compliance provisions will actually commence, that many of us have lost sight of just how heavy a burden it will place on our businesses.

But now the process is strongly underway again, and this time it’s not a case of “Crying Wolf”. So here’s what you need to know for now ….

What is required of you and when

There’s a lot to contend with even for big businesses with their vast administrative resources and deep pockets. So since 2014 they’ve been planning ahead and spending fortunes on training for POPI and on preparing their systems for compliance.

But if you’re a typical small business with limited resources you face a real challenge here. You probably have very limited understanding of what POPI is, of how it impacts on you, of the substantial risks it exposes you to, and – perhaps most importantly – what you must do about it and when.

In a nutshell –

  • At long last, an Information Regulator has been appointed, and Draft Regulations have been published for comment by 7 November 2017.
  • So it seems logical that the one year grace period for compliance will run from early next year. So there’s no major panic just yet, but take advantage of this advance warning to understand your compliance burden and to get ready for it.
  • One of your major obligations is to take appropriate and reasonable measures to secure all “personal information” collected, used or stored by you. Don’t think by the way that you don’t hold any “personal information” – pretty much every detail you have or have used for every client/customer, supplier, service provider, employee etc is included in the definition. POPI applies to you!
  • You will have to officially report and explain any suspected breach of confidentiality. Not just a hack or data loss, but any potential data compromise such as the loss or theft of a laptop, cell phone or backup drive.
  • You are also strictly limited as to what personal information you can collect, where you can acquire it from, what you can hold and for how long, and what you can use it for.
  • Amongst a host of other issues you will have to tackle, you must ensure that the information you hold is accurate. The list goes on …

The big risks of non-compliance

  • Breaches of any of these duties lay you open to severe penalties (administrative fines of up to R10m) and prosecution (up to 10 years imprisonment), quite apart from the harm and loss of trust in you that adverse publicity will undoubtedly cause.
  • That’s not all – you can also be sued for millions in damages by anyone whose data has been compromised, and you are limited to a list of specified defences to such a claim. Critically, this is a case of “strict liability” in that no “intent or negligence” on your part need be proved.
  • To give you an idea of the extent of the risk, an SME in the UK was recently fined under similar laws. It must pay £60k (R1m) for failing to prevent hackers from accessing its clients’ personal information.

We’ll let you have some practical guidance on complying once the Regulations (possibly also Codes of Conduct) and effective dates are finalised, but for starters your software, your business processes, and your security systems (passwords, encryption etc) will almost certainly need a major overhaul.

The best thing you can do right now is to start thinking about what personal information you hold, where you hold it, who has access to it, and how secure it is.

02 Oct 2017

Security Complexes: Can You Use Telkom Ducting for Fibre?

“Possession is nine-tenths of the law” (wise old idiom)

Optic fibre is bringing “superfast broadband” to an exponentially-increasing number of South African homes and businesses.

And competition in the field is fierce. Which is great for us as consumers, but if you live or work in a “community scheme” there’s a catch. How does your chosen supplier physically run fibre cabling to your individual properties?

Laying new underground ducting will mean a lot of cost and a lot of disruption, so you’ll want to use existing infrastructure if you can, and Telkom’s ducting is likely to be a prime candidate. But before you rush ahead and use it, consider this recent High Court decision which confirms that Telkom has the right to control who uses its ducting and other equipment … and who doesn’t.

Don’t touch me on my ducting

  • Telkom had, during the initial development of a residential security estate, installed copper cables to individual houses via ducts and associated manholes.
  • The Home Owners Association (HOA) was unable to agree with Telkom on the provision of fibre to the estate and gave the contract to Vodacom, which then asked Telkom for its consent to share its ducting system. A dispute arose as to whether or not Telkom was obliged to share its facilities, and this was referred to ICASA for resolution.
  • Before ICASA had resolved the dispute, the HOA went ahead and allowed Vodacom to use Telkom’s ducting, with the result that Telkom applied to the High Court for a “spoliation order” restoring possession of its ducting to it.
  • Long story short, the Court ordered that – pending resolution of the dispute by ICASA – the HOA had to restore possession of the ducting to Telkom, and Vodacom had to remove all its cabling and equipment.

The bottom line is that until the ICASA dispute is finalised (and, if an appeal is lodged against the Court’s decision, the outcome on appeal) we won’t know for certain the extent if any to which Telkom is obliged by law to share its ducting with other fibre suppliers, and if so under what conditions.

What we do know, for now at least, is that Telkom has been confirmed as being the legal “possessor” of such ducting despite it being installed on private land and irrespective of who has legal ownership. And since our law does not allow you to deprive a possessor of possession without consent or legal process, you need Telkom’s approval before you allow another supplier to use its ducting.

Importantly, the Court also confirmed that Telkom has a statutory right to demand access to the ducting, subject only to it exercising that right “respectfully and with due caution”.

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