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07 Feb 2020

EXPROPRIATION WITHOUT COMPENSATION – OUR VIEWS ON CURRENT DEVELOPMENTS

We are receiving many queries from clients who are concerned about what they read regarding the proposed amendment to the Constitution allowing for expropriation without compensation. This article seeks to place certain issues in perspective, with reference to how the Constitution currently reads, and to the proposed amendments. Unlike a lot of the other reports we have seen, this is not fake news!

The basic Constitutional right at issue here is the right for owners of property to have their ownership protected, and this right is clearly set out in our Constitution. However, as with all rights, this right is not absolute, and under certain circumstances the government may take away (expropriate) our property. This is the current reality.

Guidelines for this expropriation are laid down in the Constitution: if the government wants to expropriate property it must do so by way of a law that does not target specific groups (i.e. it must be by a law of general application), and the expropriation must be for a public purpose, or in the public interest (the public interest includes land reform and the equal sharing of natural resources). Currently our Constitution states that expropriation must be subject to compensation.

In order to calculate the amount of compensation, all relevant circumstances need to be considered, including:

  • the current use of the property;
  • the history of the acquisition and use of the property;
  • the market value of the property;
  • the extent of direct state investment in the property; and
  • the purpose of the expropriation.

In the absence of an agreement between the state and the owner, the final decision of the amount of compensation is to be made by the courts. The Constitution states that the courts are bound to make this decision fairly, balancing the competing interests of the parties concerned.

Looking at the bullet points above, the market value of the property is only one of the factors to be considered in determining the amount of compensation. Accordingly, if these guidelines are properly applied, there is already a possibility that a court might decide that no compensation is to be paid to the property owner. Expropriation without compensation, in limited circumstances, is therefore already a very real possibility. If anyone disputes this, and argues that there must be some compensation, there is no doubt that, in terms of the current Constitution, the compensation could be as little as R1.

Moving on to the proposed amendments to the Constitution as published for comment by the government in December 2019, the first proposed amendment states that where land is to be expropriated for the purposes of land reform, the courts may determine that no compensation is payable. This does not advance the cause of those calling for expropriation without compensation because, as stated above, this outcome is already possible in terms of the current Constitution. Furthermore, the proposed amendment does not alter the position that a court will only be able to decide that no compensation is payable after taking into account all relevant circumstances, including the bullet points listed above, and after making a fair decision which balances the competing interests. This first proposed amendment therefore changes very little, if anything.

The second proposed amendment to the Constitution states that the government is obliged to pass a law to set out the specific circumstances where a court can determine that no compensation is payable. It also states that the existing provisions in the Constitution, which set out how and for what reasons property may be expropriated, and what factors must be considered when determining the amount of compensation (including the bullet points above), will continue to apply.

Because of this, any law that the government passes to allow expropriation without compensation outside these parameters will be able to be set aside by the Constitutional Court, because it will not be in accordance with the Constitution. This proposed change to the Constitution will therefore not allow the government to expropriate land without compensation in an unfair or irrational way, as so many South Africans fear.

In the latest developments on the subject, the leader of the ad hoc committee established to amend the Constitution has stated that it is the ANC’s intention to give the executive (the president and his ministers) the right to decide on which properties can be expropriated without compensation. This is intended to exclude the courts from the process. We do not believe this is possible.

The reason for this is because of the protection we all enjoy from section 33 of our Constitution which deals with “Just Administrative Action”, and section 34, which deals with “Access to Courts”.

Any decision taken by the executive (including those related to expropriation without compensation) would be classed as an administrative action. In terms of section 33 of our Constitution we all have the right to administrative action that is lawful, reasonable, and procedurally fair, and if this is not the case, this administrative action can be taken under review by a court and set aside. In addition, under section 34, we all have the right to have any dispute that can be resolved by the application of law to be decided before a court. These are fundamental rights which are entrenched in the Constitution.

As such, and unless far greater changes to the Constitution are made, it would therefore be impossible for the government to bypass the courts when deciding to expropriate land without compensation.

Finally, we must also point out that in December 2018 the government published a draft Expropriation Bill which was squarely in line with the current constitution. It provided for expropriation without compensation in limited circumstances, with checks and balances, and with the court having the final say. This draft Bill would also fit in with the Constitution as amended in terms of the first and second proposals mentioned above. If this is still the government’s intended course of action, we should not be unduly concerned.

We shall continue to monitor developments and keep you updated.

Deon Welz & Robert Krautkrämer
Miltons Matsemela Inc
February 2020

04 Feb 2020

Installment Sale Agreement and Quotation

Herewith a very brief summary of the typical features of instalment sale agreements:

We are seeing quite an increase in the number of requests for Instalment Sale Agreements, where buyers are unable to obtain mortgage bonds via the traditional route. It certainly provides a feasible option but these are not your typical sale agreements and we would suggest you consult with a property lawyer, or a company like SENTINEL HOMES, which is a company that specialises in assisting buyers and sellers with agreements of this nature.

1. They only apply where the purchase price is paid in more than 2 instalments, over more than 1 year and can only be used for properties which are used mainly for residential purposes. It does not apply to agricultural property.

2. If there is a bond over the property, the seller must provide confirmation of the outstanding balance owing, within 30 days of conclusion of the transaction. The buyer may demand to have proof of the balance owing from time to time but not more than 3 times a year.

3. The seller must register the sale agreement in the appropriate deeds office within 90 days from conclusion of the sale agreement. The title deed is endorsed. It will thus prevent any further sale or hypothecation. This will protect the buyer of course.

4. Once the buyer has paid half of the purchase price he may insist on taking transfer subject to a bond being registered in favour of the seller for the balance owing.

5. And lastly, of great significance, is the fact that should interest be levied on the instalments, as one would expect to be the case, and the buyer is a consumer under the National Credit Act, then all the requirements of the NCA will also apply.

Such deeds of sale can be lengthy and complex and no one should attempt to prepare such an agreement if they are not experienced in both areas of law.

Kindest regards

Robert Krautkramer

Sale_of_Land_on_Instalments_Sale_Agreement
Sale_of_Land_On_Instalments_Letter_and_Quotation(NCA)
03 Feb 2020

Instalment Sale Agreements

We are seeing quite an increase in the number of requests for Instalment Sale Agreements, where buyers are unable to obtain mortgage bonds via the traditional route. It certainly provides a feasible option but these are not your typical sale agreements and we would suggest you consult with a property lawyer, or a company like SENTINEL HOMES, which is a company that specialises in assisting buyers and sellers with agreements of this nature.

Herewith a very brief summary of the typical features of instalment sale agreements:

1. They only apply where the purchase price is paid in more than 2 instalments, over more than 1 year and can only be used for properties which are used mainly for residential purposes. It does not apply to agricultural property.

2. If there is a bond over the property, the seller must provide confirmation of the outstanding balance owing, within 30 days of conclusion of the transaction. The buyer may demand to have proof of the balance owing from time to time but not more than 3 times a year.

3. The seller must register the sale agreement in the appropriate deeds office within 90 days from conclusion of the sale agreement. The title deed is endorsed. It will thus prevent any further sale or hypothecation. This will protect the buyer of course.

4. Once the buyer has paid half of the purchase price he may insist on taking transfer subject to a bond being registered in favour of the seller for the balance owing.

5. And lastly, of great significance, is the fact that should interest be levied on the instalments, as one would expect to be the case, and the buyer is a consumer under the National Credit Act, then all the requirements of the NCA will also apply.

Such deeds of sale can be lengthy and complex and no one should attempt to prepare such an agreement if they are not experienced in both areas of law.

Kindest regards

Robert Krautkramer
Miltons Matsemela Inc

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