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16 Jan 2019

COMMENTARY ON THE PROPERTY PRACTITIONERS BILL OF 2018 PART 2

TRANSFORMATION OF THE PROPERTY SECTOR

You might recall that the property sector has a Transformation Charter which was finalised in 2017.  In chapter 4 of the new Act it is confirmed that this Transformation Charter applies to all Property Practitioners. When procuring services from Property Practitioners, all organs of state are obliged to use the services of practitioners who comply with broad-based black economic empowerment and employment equity legislation and policies.

The Property Practitioners Regulatory Authority (PPRA) is also obliged to assess the state of transformation within the industry and take steps to speed up transformation.

To fund these efforts, the PPRA has to create a Property Sector Transformation Fund.  The money in this fund can be used in numerous ways to promote the interests of the historically disadvantaged, including providing for training and development.

The Act also establishes the Property Sector Research Centre.  The purpose of this centre is to increase research, promote innovation, develop human potential and generate new knowledge.  The Research Centre is intended to be the central repository of expert knowledge in the property sector.  It is also intended to “support the realisation of South Africa’s transformation into a knowledge-based economy in which the generation of knowledge translates into socio-economic benefits.”  It must also promote consumer awareness and education.

I’m not sure how to interpret this part of the Act.  The ideas seem noble, but whether the PPRA and the Property Sector Research Centre are ever going to be able to do anything to achieve these lofty ideals is yet to be seen.  I fear that this part of the Act might turn out to be a platitude, with very little positive effect.

COMPLIANCE AND ENFORCEMENT

The Act will be policed by inspectors who will have wide-ranging powers of search and seizure.  They will have to identify themselves with certificates of appointment or identification cards.

Inspectors will be entitled to enter business premises (not private residences) without a search warrant and demand access to the business records or other documents.  If an inspector wishes to have access to a private residence from which a business is being conducted, the inspector must give advance notice.

The inspectors’ powers are even greater with a search warrant.

Inspectors are entitled to confiscate and remove records or data which might be used in legal proceedings against the Property Practitioner.

The Act goes into substantial detail as regards the procedures that need to be followed in obtaining and executing a search warrant.  The inspector is entitled to rely on the assistance of the South African Police Services, who can use force to overcome resistance, or to gain entry.

It is intended that the Minister will publish regulations which will distinguish between contraventions of the Act that are of a minor nature and contraventions which are of a substantial nature.  Minor offences can be dealt with by using compliance notices and fines.  There would be no criminal prosecution for these minor contraventions.

The Minister must also set the limits of fines that will have to be paid for contraventions of the Act.  All fines will be paid to the PPRA.

The PPRA will have the authority to utilise any part of the fine to pay compensation to any person who has suffered loss as a result of the conduct of the Property Practitioner.

THE PPRA’S DUTY TO ADJUDICATE ON DISPUTES

The PPRA is also obliged to deal with any complaints that might be lodged against Property Practitioners.  The scope of the PPRA is however limited to complaints relating to financing, marketing, management, letting, hiring, sale and purchase of property.  Once again, it seems as if the business brokers are excluded from this part of the Act.

The Act sets out time limits for the procedures which the PPRA has to follow once it has received a complaint.  Firstly, it has to acknowledge receipt within 7 days and issue a case number.

The PPRA can then either refer the dispute to mediation or adjudication.  If the dispute goes to mediation, the PPRA must appoint a mediator within 7 days and the mediator has a further 7 days to set a date for the mediation, which must be within a 30 day period.

The Act specifically makes provision for the PPRA to deal with disputes between Property Practitioners, on a “cost recovery” basis. It therefore seems that Property Practitioners will have to pay to have their internal disputes resolved in this forum.

For matters where a Property Practitioner fails to comply with a compliance notice, or fails to pay a fine, or where mediation has failed, or where the complaint/contravention is of a serious nature, the PPRA must have the matter adjudicated.

The adjudication will take place before an independent, legally qualified person who may also appoint independent assessors for assistance.

Once appointed, the adjudicator will have 14 days to set the matter down for hearing and this hearing must take place within 60 days.  While the Act specifies that the PPRA must appoint a mediator within 7 days, the Act is silent on how long the PPRA has to appoint an adjudicator.

The decision of the adjudicator will have the same force as a judgement of the Magistrate’s Court.  The adjudicator also has the authority to order the PPRA to pay up to 80% of any fine to the complainant as compensation.

The Act makes provision for an appeal process if any of the parties disagree with the decision of the adjudicator.  The adjudication appeal committee will consist of three independent suitably qualified persons who will have 14 days to set the matter down for hearing.  This hearing must take place within 60 days.

While the drafting of these sections dealing with non-compliance and disputes could have been better, the Act does place a premium on the speedy resolution of matters and this can only be good for the industry.

FINANCES

The Act sets out where the PPRA will be getting its funding from.  This money will come from Parliament, from fees paid by Property Practitioners, from interest generated from the investment of surplus funds, and any other source.

The Act envisages that money or property might be donated or bequeathed to the PPRA.  This seems highly unlikely.

The Act also gives the PPRA the authority to recover costs that it has expended in carrying out inspections, investigations and disciplinary proceedings, or in carrying out audits on trust accounts from the Property Practitioner in default.

The financial year end of the PPRA will be 31 March of each year.  It is strange that the financial year end is not going to coincide with the national tax year end.

 

This ends Part 2 of this commentary on the Property Practitioners Bill.  In Part 3, I will be dealing with the Fidelity Fund and Fidelity Fund Certificates.

Deon Welz
Miltons Matsemela
January 2019

11 Jan 2019

COMMENTARY ON THE PROPERTY PRACTITIONERS BILL OF 2018

As mentioned in my last Newsflash of 2018, this Bill is about to become the law that will replace the Estate Agency Affairs Act, that has regulated the profession since 1976. The Bill has been passed by Parliament and now only has to pass through the National Council of Provinces before it is signed into law by our President. I see no obvious obstacles that will prevent this from taking place before our elections in May. The new Act will substantially change the profession.

The new Act is a substantial piece of legislation, comprising 38 pages and 77 sections. It deals with all aspects of the profession. It is therefore impossible to give it proper coverage in a single Newsflash.

My intention is therefore to break the Act up into sections and to deal with each part in a separate Newsflash. This is the start of our journey.

PART 1

STATED OBJECTIVES OF THE ACT

The stated objectives of the Act go far beyond the old legislation and are ambitious to say the least. They are stated in Section 3 and can be summarised as follows:

  • To regulate “Property Practitioners” – this term is defined later on;
  • To replace the EAAB with another body, the Property Practitioners Regulatory Authority, which will have wider jurisdiction over more players in the property industry;
  • To better protect consumers;
  • To provide for internal dispute resolution in the property market;
  • To provide for education and training;
  • To regulate licensing of Property Practitioners;
  • To create a just and equitable legal framework for the industry;
  • To transform the industry by promoting the interests of historically disadvantaged individuals and small and medium sized enterprises;
  • To create a fund for transformation;
  • To promote home ownership in the affordable and secondary housing market;

INTERPRETATION/DEFINITIONS

The Act starts off with its usual flowery introduction and moves swiftly on to the section which defines terms which are used in the legislation. The definitions make it clear that we will still be dealing with issues relating to “candidate property practitioners”, a “code of conduct”, the Property Practitioners Fidelity Fund, (previously the Estate Agents Fidelity Fund), Fidelity Fund Certificates and Registration Certificates.

More notable however is the definition of a “Property Practitioner”. It is with this definition that the scope of the Act is widened to include a whole host of other people in addition to estate agents. The definition extends over one and a half pages and includes all of those who were previously regulated under the old act.

The expanded definition of Property Practitioner means that commercial brokers who sell businesses will also be included under the umbrella of this Act (although the fact that the Act applies to them is soon forgotten by the draftsman), so will mortgage bond brokers and people who provide bridging finance (unless they work for registered financial institutions).

Also included are property valuers, people doing home inspections for purchasers before a sale, property managers, agents involved in the selling of timeshare and fractional ownership, and anyone else who facilitates or acts as an intermediary with the primary purpose of bringing about a sale of a property or a business.

The definition goes on to include people who manage the business of a Property Practitioner. This will obviously include office managers. It might also include personal assistants.

The definition also specifically includes digital portals that publicly exhibit properties (or businesses) for sale or for rent using electronic means. The definition will therefore bring Private Property and Property 24 under the ambit of the Act. It also includes companies that receive rentals on behalf of others. This might include PayProp.

Also included are employees of Attorneys who act as estate agents, even though they are also covered under the Attorneys Fidelity Fund.

Finally the definition also purports to include persons who were Property Practitioners at the time when they committed an offence under the Act. I believe the purpose of this is to enable a person to be sanctioned under the Act, even after they have left the industry.

The new Act also makes provision for specific exclusions from the definition of Property Practitioner. These are:

  • A person who does not carry out any of these functions “in the ordinary course of business”;
  • A natural person who sells their own property, even if it is in the ordinary course of business. It is notable that the exemption does not specifically extend to the sale of a business or the leasing of a property by the owner thereof, although this might be covered in the first category;
  • Attorneys and Candidate Attorneys and the Sheriffs of the Court.

APPLICATION OF THE ACT

Section 2 of the Act, which is entitled “Application of Act” sums up quite succinctly the broad application of this new law, it reads as follows:

  • This Act applies to the marketing, promotion, managing, sale, letting, financing and purchase of immovable property, and to any rights, obligations, interests, duties or powers associated with or relevant to such property.

But what about businesses? Perhaps the drafters only wanted the new Act to apply to business brokers when the business included rights in immovable property, but they have not said this.

By casting its net so wide the new Act will have the potential to bring in more money to the new regulating Board of Authority that will take over from the EAAB. With all these new people to regulate and police however, I can see that this organisation is going to struggle to act efficiently and to meet its objectives.

THE ADMINISTRATION OF THE ACT

The Act will be implemented through a body called the Property Practitioners Regulatory Authority. This body will replace the Estate Agency Affairs Board. The duty of the PPRA will be to:

  • regulate the conduct of property practitioners and ensure that they comply with the Act;
  • protect and educate consumers;
  • provide for education, training and development of property practitioners; and
  • champion the transformation of the property sector.

The PPRA will be overseen by a board of between nine and twelve non-executive members and the CEO. This board must have a combination of financial and legal experience, and experience as property practitioners. There must also be experience in rural and land reform and consumer interests. With all the skills required. The possibility exists that the board will be dominated by people with little experience in the estate agency field.

The CEO will be responsible for the day-to-day running of the PPRA. This person will be appointed for five years at a time and can serve two terms. The CEO will hire a staff complement to enable the PPRA to carry out its functions.

In the next part of this series, which will be published next week, I will deal with the transformation of the property sector, compliance and enforcement issues, the PPRA’s duty to adjudicate on disputes and the Fidelity Fund.

Deon Welz
Miltons Matsemela Inc
8 January 2019

08 Jan 2019

CASE LAW UPDATE: TRADING WITHOUT A FIDELITY FUND CERTIFICATE – CLAIMING COMMISSION AND ENFORCING A RESTRAINT OF TRADE

There have been two recent cases dealing with agencies that traded without Fidelity Fund Certificates (FFC’s) which we thought would be of interest to you. Here are summaries of the two cases:

CLAIMING COMMISSION WITH AN FFC THAT WAS BACKDATED

What are an estate agent’s rights to claim commission when they have complied with all the requirements but have still not been issued with a valid FFC? This is the question that was decided in the Cape High Court case of SIGNATURE REAL ESTATE (PTY) LTD v CHARLES EDWARDS AND OTHERS in December 2018. In this case the estate agency had applied for the re-issue of its FFC in good time and met all the requirements, but the FCC had not been issued at the time that the lease was concluded. Thereafter the EAAB issued the FCC and back dated it to a date before the lease agreement was concluded. Was this sufficient to enable the agency to succeed with a claim for their share of the commission?

The answer is a resounding NO! The judge found that because the agency did not hold the FFC at the time of the lease it was unable to sue for commission, and the agency was unsuccessful. The Estate Agency Affairs Act sadly does not allow for any leeway. If there is no FFC at the time of lease or sale, that is the end if the matter! The judge was of the opinion that the appropriate thing for any agency to do, when it realizes that an FFC is late, is to bring an application to the high court to force the EAAB to issue an FFC in terms of the Promotion of Administration of Justice Act (PAJA).

The message is therefore clear. If the agency does not have a FFC at the time of the lease (or the sale) of the property, the agency will not be able to sue for any commission, or even a share of the commission where the full commission was paid to the listing agency.  This is the law even if it is the EAAB’s fault that the FFC has not been issued.

This judgment is apparently being appealed and we will advise you if the outcome changes.

ENFORCING A RESTRAINT OF TRADE WHEN AN AGENCY IS NOT IN POSSESSION OF A VALID FFC

Another interesting FFC related judgment was issued in the Bloemfontein High Court on 6 December 2018, in the matter of TRIA REAL ESTATE (PTY) LTD t/a PAM GOLDING v MANDY LABUSCHAGNE, whereby the agency sought to restrain Ms Labuschagne from trading as an agent, in terms of a restraint of trade she had agreed to at the time of her employment.

The crux of her defence was that TRIA was not in possession of a valid FFC. TRIA had converted from a CC to a (PTY) LTD some years ago, but had continued to receive FFC’s in the name of the CC. The CC had however ceased to exist when it was converted to a (PTY) LTD.

The court refused to accept the argument that by having converted to a (PTY) LTD, the FFC (in the name of the entity as a CC) was the same as being issued to the (PTY) LTD. The case was dismissed. The court relied heavily on section 26 of the Estate Agency Affairs Act which states that if an agency is a company, every director of the company must also have a valid FFC. A director of a company and member of a CC are not at all the same thing and hence the court came to a very quick conclusion, that the agency had no legal standing to enforce any rights in terms of the restraint.

In making his finding the judge declared the contract of employment, and particularly the restraint of trade, to be unenforceable.

What we conclude from this is that any agency which is not in possession of a valid FFC at the time of instituting an action, whether it be to enforce a restraint or any other claim or right, which seeks to protect its business, may very well face the same dilemma, regardless of the reason for the FFC not having been issued.

In making his finding the judge declared the contract of employment to be invalid, null and void and therefore unenforceable. In our opinion this judgment goes too far, as the Estate Agency Affairs Act already sets out penalties for trading without an FFC, and the invalidity of all contracts entered into by the agency is not one of these. This decision might therefore be overturned on appeal. Until then however it is an important precedent that other courts might well follow.

For this reason, any agency which is not in possession of a valid FFC at the time of bringing an application to enforce a restraint may very well face the same dilemma, regardless of the reason for the invalidity / absence of the FFC.

Robert Krautkramer and Deon Welz
Miltons Matsemela
January 2019

03 Jan 2019

EXPROPRIATON BILL PUBLISHED FOR COMMENT!

Dear all

Government published a draft Expropriation Bill for public comment on Friday 21 December 2018. We have until 19 February 2019 to comment on it. Follow this link to add your comments https://dearsouthafrica.co.za/expropriation-bill/

For a full executive summary of the Bill, please visit our website at www.miltons.law.za

Very shortly, the Bill addresses expropriation with compensation, and without compensation.

Property may also only be expropriated if this is for a “public purpose” or in the “public interest”, and these terms are then defined. The Bill sets out what procedure an expropriating authority must follow before it can firstly decide whether to expropriate, and for how much, if anything. The Bill also caters for the manner in which compensation will be payable, if anything.

Very briefly:

  1. The bad news is that it does not limit the nature of land which may in principle be expropriated and all land is therefore potentially, (in theory) subject to expropriation, including residential land.
  2. The good news however (as far as residential land is concerned) is it does seem that Government will only be interested in land which is abandoned or owned “solely for speculative” purposes but it fails to define what exactly “speculative purposes” is intended to include! If this therefore becomes law in its present format, many mountains remain in Government’s path when (not even “if!”) this is challenged in the Constitutional Court.
  3. The other good news is that it also confirms that no decision to expropriate (save for urgent circumstances due to disaster management needs) may be enforced, without a court order, and anyone affected by an expropriation decision may challenge it in court. Hence the interests of both property owners and the holders of rights (such as bond holders and tenants, or even possibly a former spouse who stands to take transfer by virtue of a divorce settlement agreement), are catered for and protected.

We urge all recipients of this Newsflash to share it; to read the Bill, and to participate in the commentary procedure!

Kind Regards
Robert Krautkramer
021 521 1300 / 082 823 6781

03 Jan 2019

Executive Summary of the Expropriation Bill, with AND without compensation. What you need to know.

Despite the ANC’s desire to address expropriation without compensation (EWC) by amending the Constitution Act, (rather than just bringing out legislation to deal with the matter), Government has nevertheless (very quietly I may add) published a draft Expropriation Bill for public comment on Friday 21 December 2018. (Follow this link to add your comments – closing date for comments is midnight 19 February 2019 so read it and have your say! Click here: https://dearsouthafrica.co.za/expropriation-bill/

The Bill addresses expropriation with compensation, and without compensation (EWC)

The bad news is that it does not limit the nature of land which may, in principle, be expropriated, and thus it also, in principle, includes residential property for EWC – which to date, was not anticipated.

The good news however, is that, as far as residential land is concerned, it seems Government will only be interested in land which is owned “solely for speculative” purposes. It also brings much needed comfort, because it provides that no decision to expropriate (save for urgent circumstances due to disaster management needs) may be enforced, without a court order (if contested) and anyone who has an interest in an expropriation (for example a former spouse who stands to take transfer by virtue of a divorce settlement agreement) may approach the court to challenge any decision to expropriate, and / or the amount offered for compensation, if any.

And if this becomes law, (and should the Constitution Act be left alone), many mountains remain in Government’s path, because this proposed legislation, will still be subject to the ConCourt’s blessing, if (and as a certainty no doubt, when) certain parts of it, are challenged, because it has certainly left some questions that need answers.

Herewith a summary of the Bill:

    1. Purpose of the Act if this Bill becomes law:
      To provide for the expropriation of property (which includes land) for a public purpose or in the public interest, in accordance with the Constitution – which, by way of reminder, actually prohibits EWC (save, to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors) – and, which Constitution, guarantees administrative action that is lawful, reasonable and procedurally fair, as well as the right, to have any dispute resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum. It is against this backdrop that this proposed legislation is to be applied and interpreted.
    2. How are “public purpose” and “public interest”, defined?
      These terms are defined to mean that they include “any purposes connected with the administration of the provisions of any law by an organ of state” and to “include the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources in order to redress the results of past racial discriminatory laws or practices”, respectively.
    3. Who pays all the legal costs of giving effect to a decision to expropriate (i.e to transfer the property and maybe cancel existing bonds)?
      The relevant organ of state which expropriates.
    4. How does government intend to go about expropriating land?
      • Once property is earmarked for expropriation, the expropriating authority must ascertain the existence of registered and unregistered rights in such property and the impact of such rights on the intended use of the property, and may, only with either the consent of the owner (which includes a lawful occupier), or a court order, enter the property to conduct a full investigation, to determine the suitability of the intended expropriation, and value of the property. The local municipality must also be advised and consulted. The owner is then required to cooperate.
      • If an expropriating authority intends to expropriate property, it must amongst other things, publish a notice in the Government Gazette, two local newspapers circulating in the area where the property is situated, and serve a notice of intention to expropriate, on the owner (which includes anyone with a registered real right over the property) and any known holder of an unregistered right in the property. This notice and publication, must, amongst other things, include a description of the purpose for which the property is required and the intended date of expropriation, and extend an invitation to any person who may be affected by the intended expropriation to lodge objections and submissions within 30 days (not specifically defined, thus calendar days), and it must include a directive, amongst other things, to provide the details, names and addresses of any holders of unregistered rights (i. e. of which no official, public record exists – such as a lease agreement, and details of the right and the holder thereof) together with input on the amount claimed by the owner or holder of unregistered rights, as reasonable compensation; details of any improvements made to land which should affect the proposed compensation sought; details of any sale agreement, if the property has been sold but ownership not yet transferred, with details of the purchaser, and finally, if a builder’s lien exists over the property, details of the builder and the lien.
      • No offer of compensation is therefore made in this first letter. The owner or holder of rights must first say, how much he or she wants.
      • To be noted is that once the authority has published the notice and served it on owners and known holders of unregistered rights, it is not required to then also still make contact with holders of unregistered rights, of who it only becomes aware, once it receives a response from the owner to the above notice of expropriation. In other words, publication in the Gazette and newspapers, is deemed sufficient notice to all holders of rights, of which the authority is not aware, when the process commences. Given that there is always an official public record of mortgage bonds, banks will always be likely to receive notice. Landlords would thus be well advised to ensure that if the authorities come knocking, to conduct an investigation, and to inform them of the existence of a lease, and to also notify the tenant, of the notice to expropriate. The tenant should then also give input, depending on the purpose of the intended expropriation.
      • Within 20 days of receiving a response from an owner or rights holder, the expropriating authority must then inform the relevant owner or rights holder of whether the amount of compensation claimed, is accepted, and if the amount of compensation claimed is not accepted, indicate the amount of compensation offered, if anything, by, furnishing full details and supporting documents in respect thereof.
      • If no agreement on the amount of compensation payable has been reached between the expropriating authority and the owner or the rights holder within 40 days of the expropriating authority receiving a response from an owner or rights holder, the expropriating authority must decide (no time frame is given) whether or not to proceed with the expropriation. If the expropriating authority decides to proceed to expropriate; or to continue with negotiations on compensation; or not to proceed with the expropriation of the property, it must then inform the owner or rights holder of its decision, “within a reasonable time”.
      • This part of the Bill needs serious attention. As I understand it, it effectively means that the matter can go into limbo for months or even years, because “reasonable time” can mean anything! And no doubt that where property was earmarked for expropriation, the deeds office will have been notified of this and an interdict will have been registered against the property, and this could hold up any potential transfer of such land (if it had coincidentally been sold), indefinitely, and force the land owner to go to court.
      • If the expropriating authority decides to expropriate a property, it must cause a notice of expropriation (containing full particulars, including the compensation to be offered) to be served on the owner and all known holders of rights; the holder of a mortgage bond registered in the Deeds Office; the buyer of property if it had been sold, or the builder, if it was subject to a lien. The expropriating authority must also publish a notice in the Government Gazette and two local newspapers circulating in the area where the property is situated. It may also decide to only expropriate a portion of land, not an entire erf. Compensation is also payable to the holders of rights. (Tenants may therefore also be compensated if they are left without an abode.)
    5. How is compensation determined?
      • The amount of compensation to be paid to an expropriated owner or expropriated rights holder must be just and equitable reflecting an equitable balance between the public interest and the interests of the expropriated owner or expropriated holder, having regard to all relevant circumstances. This may include the current use of the property; the history of the acquisition and use of the property; the market value of the property; and the purpose of the expropriation.
    6. Now for the question you have all been waiting for: When may land be expropriated WITHOUT compensation?
      • The Bill states that it may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including but not limited to (i. e. ALL LAND IS SUBJECT TO THIS):
        • Where the land is occupied or used by a labour tenant, as defined in the Land Reform (Labour Tenants) Act, 1996 (Act No. 3 of 1996).
        • Where the land is held for purely speculative purposes. (This once again, includes any land.)
          • This clause is certain to receive the most attention.
          • “Speculative” is not defined but if its ordinary meaning is to be applied, it would mean land which was acquired with the intention of selling quickly again, at a profit. i. e. Properties intended to be renovated and sold, or, “flipped”.
          • But how exactly Government intends to figure out which properties a person owns, are for speculative purposes, as against investment (medium or long term) is a complete mystery (assuming Government intends to acknowledge a difference between the two.)
          • Unless they intend sending notices to all persons who own more than one property, to force them, to disclose their intention. Who knows, but leaving “speculative” undefined, is most undesirable and unfortunate.
          • Where the land is owned by a state-owned corporation or other state-owned entity;
          • Where the owner of the land has abandoned the land;
          • where the market value of the land is equivalent to, or less than, the value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land. (Commentary I have read on this part of the Bill suggests that Government is referring here, to farms which were redistributed, but where farming operations then failed, despite heavy state subsidising. Here Government may want to take it back and maybe give it to someone else who can hopefully make it operational and profitable.)
    7. Disputing compensation or ignoring expropriation notices
      • The Bill then proceeds to say that the owner or a holder of an unregistered right who receives a notice of expropriation must accept or contest any such notice, whether subject to or without compensation, and if contested, what information to provide and how to go about trying to reach a settlement.
      • But ultimately it also states that even if the owner or holder fails to respond to an expropriation notice, no decision to expropriate can be made final until either the owner or holder agrees to this, and also, to the amount of compensation to be paid, or until a Court makes an order enforcing it, where no agreement can otherwise be reached.
      • However, if the only dispute centers around the amount to be paid, an owner or holder can still be expropriated, and ownership can be transferred. The issue of compensation can then be determined separately.
    8. Payment where property is bonded, or has been sold, or is subject to another’s rights
      • If property that is expropriated is encumbered by a registered mortgage or subject to a deed of sale, or lien, the expropriating authority may not pay out any portion of the compensation money except on such terms as may have been agreed upon between the expropriated owner or expropriated holder and the bond holder, or buyer or builder concerned, as the case may be.
      • Failing such agreement reaching the authority within certain time frames, it may deposit the compensation money with the Master of the High Court, and any of the disputing parties may apply to court for an order directing the Master to pay out the compensation money in such manner and on such terms as the court may determine. Talk about passing the buck!
    9. What about rates clearance to enable transfer?
      • Once expropriation is a certainty the municipal manager must, within 30 days of receipt of a copy of the notice of expropriation, inform the expropriating authority in writing of any municipal charges owing. The expropriating authority must inform the expropriated owner or expropriated holder of any outstanding charges and if the said amount is not disputed within 20 days of the notification, the expropriating authority may utilise as much of the compensation money in question as is necessary for the payment, on behalf of the expropriated owner or expropriated holder, of any outstanding charges. (The Bill does not tell us what is to happen where no compensation is payable. One must assume that such charges will be paid by the authority or written off.)
      • If the municipal manager fails to inform the expropriating authority of the outstanding charges within the time it has, the expropriating authority may pay the compensation to the expropriated owner or expropriated holder without regard to the outstanding municipal property rates or other charges, and in such an event the Registrar of Deeds must register transfer of the expropriated property and the expropriated owner or expropriated holder, as the case may be, continues to be liable to the municipality for the outstanding rates and charges calculated up to the date of registration of the expropriated property in the name of the expropriating authority.
    10. Urgent temporary expropriations
      • In the event of for example a natural disaster, property may also be temporarily – up to 12 months – expropriated (such as hotels, to accommodate people who lose their properties in a flood) subject to compensation and payment of any repairs or maintenance required, which arises as a result of the expropriation – but only if suitable property held by the national, provincial or local government is not available. A court may extend the 12 months if necessary or allow for urgent temporary expropriation under other circumstances, if circumstances justify it.

In closing then:

It is of concern, that speculative ownership has been specifically targeted with no compensation. This may result therein, that multiple property owners will try to mortgage their properties to the hilt and simply take their money off shore – if they can find a bank of course, which will agree to lending them money, until we have certainty of what “speculative” is intended to all include!

But on the bright side, Government will have no right, in terms of this proposed legislation, to expropriate anyone without compensation, nor to enforce expropriation per se, without a Court order.

Kindest regards

Robert Krautkramer
Director
Miltons Matsemela
021 521 1300 / 082 823 6781

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