Welcome to Miltons Matsemela - The Conveyancers
Visit Us
Call Us
+27 (0)21 521 1300
03 Dec 2018

Lending to a Friend or Selling Property on Credit – Must You Register as a Credit Provider?

“Neither a borrower nor a lender be; For loan oft loses both itself and friend” (Shakespeare)

It seems ridiculous if you are just making a once-off loan to a friend or relative that you might have to register as a credit provider in terms of the National Credit Act, but that’s the import of a new Supreme Court of Appeal decision.

We discuss what happens if you don’t register despite being required to (it’s not a pretty picture), the grey areas surrounding the question of when you have to register and when you don’t, and the particular risks faced by property sellers.

Registration is by all accounts a time-consuming process with lots of red tape, so forward planning is essential here.

It seems logical that the very strong consumer protections in the NCA (National Credit Act) are designed for commercial situations in which credit is advanced by “credit provider” businesses to “credit consumers”.

But does the NCA also apply to non-commercial, once-off loans? Like a loan to a friend or relative? And what about property sales?

Why should you be worried?

If you aren’t in the business of providing credit it seems counter-intuitive that you should have to worry about NCA registration when making a single loan or giving credit on a once-off basis. And in fact until now our various High Courts have been split over the question.

But that has all changed with a recent Supreme Court of Appeal (SCA) decision, and your danger is this – if you should have registered as a credit provider but didn’t, your agreement is unlawful and could be declared void. You might have to write off your whole loan.

A “family” fall out and a R2m “time to pay” share purchase deal

  • A couple brought into their business a businessman who was “like a son” to them. The idea was that eventually he would take over the business and over time he became a substantial shareholder. Alas however some 12 years down the line there was a falling-out and a mutual decision to part ways.
  • It was agreed that the businessman would sell his interest in the business to the couple for R2m, to be paid by way of a R500,000 deposit and monthly instalments of R30,000 p.m. Interest was payable on the deferred amount and a mortgage bond registered over the couple’s house as security.
  • The businessman (as seller) registered as a credit provider (in order to get the mortgage bond registered in his favour) but only after the credit agreement was signed.
  • When the business ran into trouble the couple couldn’t continue paying and the seller sued them for the outstanding balance of R1.13m. The couples’ defence was that the agreements were null and void due to non-compliance with the NCA.
  • The SCA held that the seller should have registered as a credit provider before the credit agreement was entered into. He didn’t, the agreement was thus unlawful, and he loses his R1.13m.

What is excluded from the registration requirement?

So are you at risk? Firstly, the NCA has many general exclusions and situations of limited application, such as to “incidental” credit agreements, interest-free loans, larger corporates and agreements (thresholds apply – take advice for details).

Secondly, the NCA only applies if you are “dealing at arm’s length”. What does that mean in practice?

  • To start with, there are specified exclusions for certain shareholder loans and for loans between family members who are “co-dependent” or “dependent” on each other. Think for example of parents supporting a student daughter or the daughter supporting her parents.
  • Then there’s the much wider provision excluding “any other arrangement … in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction”. That might suggest that loans to close friends are also excluded, but it’s not nearly as simple as that.The lender in this case couldn’t of course claim to be an actual family member of the couple. But he did argue that because of his “almost familial relationship” with them, he didn’t try to get the “utmost possible advantage” out of the deal and therefore the NCA didn’t apply. On the facts however the SCA disagreed, the relationship between the parties having become hostile and threatening prior to signature of the agreement. The point is that if there is an element of “independence” between you and the debtor, you are at risk.

Outside those specific exclusions, deciding whether or not a court will consider you to be “at arm’s length” is always going to involve grey areas.

Sale of property with deferred payments

There’s particular danger here for the increasing number of property sellers who, in order to attract cash-strapped buyers in these tough times, are agreeing to sell their properties on a deferred payment or instalment sale basis rather than the standard “pay in full against transfer” basis. Watch out also for a normal “pay in full” deal morphing into a “pay me the rest later” sale when the buyer can only get a bank loan for part of the total price.

If either of those scenarios apply, your sale may have to comply with both the NCA’s obligation to register as a credit provider and with the strict requirements of the Alienation of Land Act. Specific legal advice is essential before you agree to any form of “deferred payment” property sale.

The bottom line

Unless and until the NCA is amended to make it clearer, less confusing and more pragmatic, tread very carefully in lending money or giving credit – in relation to a property sale or otherwise – to anyone. Even family and friends.

Ask your lawyer for advice on your specific circumstances – do you fall into one of the exceptions or must you register as a credit provider? If you do need to register, prepare for lots of red tape and delay!

03 Dec 2018

Reporting Crime and the Defamation Danger: Lessons from the Workplace

We all have a duty to report crime to the police, and particularly when it happens in the workplace not doing so is likely to end badly for you.

But what if your report turns out to be wrong? Or just unprovable? Have you just laid yourself open to the risk of a substantial damages claim for defamation?

We answer these questions with reference to a recent case in which an employee was arrested on suspicion of fraudulently ordering R138k worth of iPads. Released without charge, he sued his employers for R1.6m and the Court listed the 3 things an accuser must prove to succeed in a defence that the crime report was reasonable.

Believing someone to be guilty of a crime you call the police and have the suspect arrested, only to have the charges dropped. Can you be sued for defamation?

A recent High Court case provides some answers.

A fraudulent iPad order, an arrest and a R1.6m claim

  • A government employee was, at the instigation of officials in his department, arrested and taken in for questioning by police on suspicion of fraudulently ordering R138,000 worth of 14 iPads on departmental letterheads.
  • The police released him after taking a statement and his employers did not pursue disciplinary charges against him. They also withdrew an accusation of unlawful conduct in the workplace, with however an indication that the matter might be revisited if further information came to light.
  • The employee accused his employers of defamation and sued them for R1.6m in damages for his tarnished dignity and reputation at work, trauma, post-traumatic stress, medical expenses and loss of earnings

Holding that the publication or allegation of a suspicion of a criminal offence is defamatory and the onus is upon the accuser “to prove justification”, the Court concluded, on the facts of this particular case, that there was indeed a “reasonable suspicion” that the employee had been involved in the fraudulent order. The employer had therefore been justified in its conduct.

The employee’s claim for damages accordingly failed and he is lumbered with a (no doubt substantial) legal bill.

The acid test – 3 things an accuser must prove

An accuser relying on reasonableness of the publication as a defence must prove, held the Court, that he or she –

  1. Had reason to believe in the truth of the statement,
  2. Took reasonable steps to verify its correctness, and
  3. Acted reasonably when reporting the matter to the police, or that publication of the statement was reasonable in all the circumstances of the case.

What that all boils down to is this – whether in the workplace or out of it, you aren’t automatically guilty of defamation just because no prosecution ensues.

What is vital is that you have enough evidence to prove all three legs of the reasonableness test if it comes to justifying your actions in court.

03 Dec 2018

Firearm Owners: What to Do if Your Licence Has Expired

Of course the police deserve all our support in their efforts to rid South Africa of the scourge of illegal firearms – there’s an estimated 2.3m of them out there!

What happens though if, as a legal gun owner, you have for some reason allowed your firearms licence to expire? You may well have come under pressure from the police to surrender your firearm for destruction, on pain of arrest and prosecution for a very serious offence.

That’s an alarming quandary to be placed in and almost half a million other expired licence holders join you in the same boat. So it’s important that you are aware of the terms of the High Court interdict recently granted against SAPS. Read on for the details…

“… this is a matter of national security and… something of the order of 450,000 gun owners with their expired licences form part of this equation… in a country riddled with crime…” (Extracts from judgment below)

Possession of an unlicensed firearm is, for good reason, a serious offence carrying heavy penalties, and law abiding citizens will support the police in their efforts to rid our country of illegally-held firearms. It’s a major problem, with media reports suggesting that only 3m out of a total of 5.3m guns are registered and legally owned. That’s 2.3m illegal firearms out there!

Caught up in this are the almost half a million South African gun owners who have always held their firearms legally in terms of valid licences but have, for whatever reason, not renewed them on time. Not only private citizens are involved but also security service providers, and it’s a big issue – the Court in this case estimated that up to 60 million rounds of ammunition are involved.

These gun owners are faced with a serious quandary in that, following a Constitutional Court finding that the Firearms Act’s provisions pass constitutional muster, the police have been pressuring them to surrender their firearms for destruction or face arrest and prosecution. The argument is that once a licence has expired it comes to an end and cannot therefore be renewed, rendering possession of the firearm/s unlawful.

Of course the best advice is to always apply for renewal of your licence in good time (at least 90 days before expiry). But now holders of expired licences at least have some interim respite following a High Court decision. The Court has, pending determination of a full application by GOSA (Gun Owners of South Africa) to resolve the situation, ordered that SAPS “…are prohibited from implementing any plans of action or from accepting any firearms for which the licence [has] expired at its police stations or at any place, for the sole reason that the licence for the firearm expired and… from demanding that such firearms be handed over to it for the sole reason that the licence of such a firearm has expired…”.

Note that this is only interim relief and that there is still much uncertainty over what the final outcome of this case will be, over the validity of old “green” licences, over talk of a possible upcoming amnesty, and over an initiative to amend the Firearms Control Act to allow grace periods in which to apply for renewals.

Until there is clarity on all these issues ask your lawyer urgently for specific advice if you have a problem.

03 Dec 2018

The Existential Dread of Gift Giving, and Science to the Rescue!

Are you, like most of us, “soaked in the existential dread that comes from trying to find gifts our loved ones might appreciate” at this time of year?

If so, don’t despair. Scientists around the world have been researching what it is that makes for the perfect gift, and how to find it.

We share three websites to help you improve your gift giving, choose the best relationship-building gift, and “make your gift count extra” with a simple win/win tip that will leave you as happy as the recipient of your thoughtfulness.

“Every holiday season, as we drive ourselves crazy at the mall or shopping online, soaked in the existential dread that comes from trying to find gifts our loved ones might appreciate, I think of the great writer and social critic James Baldwin, who wrote: ‘If the hope of giving/is to love the living,/the giver risks madness/in the act of giving’” (from the New York Times article below)

Are you struggling to find that perfect gift – Festive Season or otherwise – for someone special in your life (or business)?

Read these for some research-based help –

  • A list of 3 ways to improve your gift giving in “Gift-Giving Tips From Scientists” on the New York Times website.
  • Tips on choosing a relationship-building gift in the Daily Mirror’s “The science of gift giving: What people REALLY want for Christmas” here.
  • And last but not least a win-win idea to make your gift count extra in “To pick a great gift, it’s better to give AND receive” on ScienceDaily.
03 Dec 2018

Buying Property this Festive Season? Check the Title Deed First!

“Don’t wait to buy land, buy land and wait” (Will Rogers)

If cowboy Will Rogers’ practical advice “Don’t wait to buy land, buy land and wait” has you looking for a property to buy this Festive Season, don’t miss out on an invaluable source of relevant information – the title deed.

What you find in the title deed of your prospective purchase could make or break your decision to buy it, and it will certainly impact on how much you want to offer.

We’ll tell you what a title deed is, why it’s important to check it before you make an offer, and what you should look for once you have it.

If you plan to buy property this Festive Season – perhaps your new dream house, or a holiday home, or an office for your business, or purely as an investment – check the title deed of the property you have your eye on before you sign anything.

Why is that so important?

Firstly, what exactly is a title deed and why check it?

In a nutshell, a “Title Deed” (also called a “Deed of Transfer” – they’re the same thing) is proof of who owns a particular property. It’s issued by the local Deeds Office after a conveyancing attorney has registered transfer to a new owner.

The title deed is a mine of crucial information relating to the property, its history, and conditions attaching to it. So check it thoroughly, it’s well worth the effort –

  1. You may well pick up valuable pointers to the property’s value, such as what the seller paid for it and when, things that could affect what it’s actually worth to you, and so on.
  2. If you don’t do a proper check, you could be in for a very nasty surprise down the line. To take just one example, you really don’t want to find out after you buy that servitudes apply and you must now live with neighbours crossing your property whenever they feel like it, or that you can never build that double-story you have dreamed of, nor subdivide when you decide to retire.

The reality is that our courts regularly have to deal with disputes arising from title deed conditions of which the buyer was blissfully unaware – until it was too late. And it’s no use crying “but I had no idea I was buying a property with a zoning restriction/height restriction/right-of-way servitude”. Because the property register kept by the Deeds Office is open to the public, everyone, including you, is presumed to have notice of registered rights like those.

You can get a copy of the title deed direct from the Deeds Office or online, but it will be easier to ask the seller (estate agent if applicable) or your lawyer for one.

So what should you look for before buying?

Look for the following in particular –

  • Who the current registered owner is, when they bought the property and what they paid for it.
  • What the property’s history is.
  • The full description of the property, its erf or section number, exact size and references to boundaries.
  • Any rules or contracts applying to it. For example if you are buying into a residential complex managed by a Home Owners Association, there is likely to be an obligation to join the HOA.
  • “Restrictive conditions” relating to your rights to use, build, sell the property and so on. For example, no matter what the local zoning laws allow, you could find that you are specifically limited to residential usage only, or to a single story house built on no more than 50% of the erf, or you may not be able to subdivide a large piece of land.
  • Real rights registered over the property. Because they are “real”, they come with the property and will be enforceable against you if you buy. And they can seriously limit not only the property’s value but also your use and enjoyment of it. Imagine for example if all the neighbours have a “right of way” servitude to use a road or footpath through your property. Or that someone has a lifetime usufruct giving them the right to live in your new house until they die.
  • Any mortgage bond will also be endorsed on the title deed, as will the fact that it has been cancelled if the owner has paid it off in full – factors that may help you in deciding on where to pitch your offer.
  • Each title deed will be different. Scrutinise it for anything else that may be relevant to your decision whether or not to buy, or to the price you are willing to pay.

Check that everything in the title deed ties in with the offer you are being asked to sign. And that you are happy with all obligations and restrictions on your use of the property.

Most importantly, even the simplest title deed can be full of legalese and pitfalls for the unwary. So as always, ask your lawyer for help before you sign anything!

23 Nov 2018

NEWSFLASH: Repo Rate Changes!

South African Reserve Bank Governor Lesetja Kganyago, has announced that the repo rate (the rate at which banks borrow money from the Reserve Bank) will increase by 25 basis points to 6.75% per annum. This means all our bond/car installments will also go up by 0.25%. In Rand terms, and on a 20 year home loan, this effectively means an increase of R16.50 pm, for every R100 000.00 So on a R2 mill bond, it means around R330 a month more.

What does this mean on a larger scale?

As we all know, we have had several fuel price increases recently and this has had a knock on effect on the general cost of living, thereby pushing up inflation in October from 4.9% to 5.1% (Still well within the Reserve Bank’s target of 3 – 6%)

The good news (we hope!) is that the Automobile association has however predicted a significant drop in the fuel price this December, which would be a wonderful relief just before so many of us hit the roads in search of clear skies; surf and sand! Furthermore, for those who like to import and travel, the rand has appreciated by 3.8% against the US dollar and by 6.6% against the euro, since September. The SA Rand also firmed against the dollar immediately, following the announcement by 1.14% and by 0.06% to the Pound.

And if the fuel price does drop as the AA predicts, this should possibly see us remain at the present inflation (if not reduced) and the repo rate will hopefully hang in there a bit longer or maybe even come down again. So it is certainly not all doom and gloom.

21 Nov 2018

MILTONS MATSEMELA INC DOES IT AGAIN!

We are very pleased to share with you the fact that Miltons Matsemela received recognition on 20 November 2018 as having been placed 2nd in overall position, in terms of performance, on ABSA’s home loan attorney registration panel, for the entire Western Cape!

In addition to this we have also been invited by ABSA bank to serve on a Pilot Project, whereby we will be one of a few select panel attorneys, who will also be allowed the privilege, to attend to the bond registration, along with the transfer.

The benefit of this is of course convenience for the buyer, who now only needs to visit one firm of attorneys – instead of 2. This should in turn also result in a faster registration turnaround time. This project will initially run for 3 months, with immediate effect.

This just once again confirms, that we are The Conveyancers.

20 Nov 2018

REGISTRATION OF SOLAR INSTALLATIONS IN THE CITY OF CAPE TOWN

Changes to the City of Cape Town Electricity Supply By-Laws of 2010 now make it compulsory to register certain solar installations with the City. This affects all properties that fall within the City of Cape Town municipal boundary.

Over the past few years, the City of Cape Town has seen a rapid uptake of rooftop solar photo voltaic (PV) installations and encourages all home and business owners with these installations to register both grid-tied and off-grid small-scale embedded generation (SSEG) systems by 28 February 2019.

  • People with properties that have SSEG systems are now required to register and obtain authorisation in accordance with the City’s Electricity Supply By-law. (This does not however apply to solar water heaters and emergency equipment such as standby generators, unless they are synchronised or connected to the City’s electrical distribution network.)

Connecting an SSEG system to the grid can pose a safety risk and, for this reason, the City must ensure that all generating equipment is approved and installed correctly.

  • Unauthorised systems that are grid-tied will be considered to be a form of tampering. Off-grid systems must also be registered so that they are not mistaken for grid-tied systems.

What is an SSEG?

SSEG systems (or small-scale embedded generation systems) are any devices, or machinery, that are designed to generate and supply electricity to an electrical installation, such as home or business. The most popular of these systems are Solar Photovoltaic systems.

Solar Photovoltaic (PV) technology uses the light energy from the sun to generate electricity that can be used in your home. They can be divided into four main categories:

Grid-tied feed in PV systems: They have PV panels that are connected directly to an inverter. The electricity it generates is used locally on the property or fed back into the electricity grid, when excess electricity is generated.

Grid-tied hybrid PV systems: They are able to disconnect the incoming supply and connect the load to the PV system or stored energy in batteries. These systems can operate in load-shedding scenarios.

Grid-tied PV systems with reverse power blocking: They provide electricity to the property when there is a demand for it, but blocks any excess electricity generated from feeding back onto the grid.

Standalone or off grid PV systems: They usually have batteries and a charge controller. The system feeds electrical circuits on the property that are wired completely electrically separate of the electricity service provider’s grid.

For more information and to register please visit http://www.capetown.gov.za/City-Connect. There is no registration fee.

Kind Regards

Robert Krautkrämer
Miltons Matsemela

07 Nov 2018

Fidelity Funding

Several changes have come about in the legal profession as a result of the full implementation of the Legal Practice Act, the new law that will govern the attorneys’ profession. One of these changes is that the Attorneys Fidelity Fund, which insures the public against the theft of trust money by attorneys, will now change its name to the Legal Practitioners Fidelity Fund. There is also a change in the way in which the Attorneys Fidelity Fund will receive its income, and it is now likely to get even more money.

Attorneys traditionally run 2 trust accounts into which a client’s money is paid. The first account acts as a current/transmission account and the funds that pass through this account are small or are not retained for any length of time. All the interest that accrues on this first trust account is paid to the Law Society and this money is paid into the Attorneys Fidelity Fund. This is the primary source of funding for the Fidelity Fund.

The second trust account that attorneys run is an investment account and if attorneys will be holding a client’s money for any length of time, or if the amount is substantial, the client’s money will be transferred into this second account. All the interest generated while the money is in this second account accrues to the client (less a small fee to cover the management of the account and bank charges).

From 1 March 2019, the new Legal Practice Act will now will now entitle the Fidelity Fund to take 5% of the interest that accrues on the second trust investment account, in addition to all the interest on the first current/transmission account. The additional 5% of the interest will be deducted by the banks and paid over directly to the Fidelity Fund on a monthly basis. This will no doubt boost the income of the fund but this will be at our clients’ expense.

Let’s hope the Attorneys Fidelity Fund continues to be managed wisely so that there is always money available to cover the losses suffered by the public when crooked attorneys steal their client’s money out of their trust accounts!

Miltons Matsemela Inc
Deon Welz & Storm Barry
October 2018

18 Oct 2018

Fidelity Funding

Several changes have come about in the legal profession as a result of the full implementation of the Legal Practice Act, the new law that will govern the attorneys’ profession. One of these changes is that the Attorneys Fidelity Fund, which insures the public against the theft of trust money by attorneys, will now change its name to the Legal Practitioners Fidelity Fund. There is also a change in the way in which the Attorneys Fidelity Fund will receive its income, and it is now likely to get even more money.

Attorneys traditionally run 2 trust accounts into which a client’s money is paid. The first account acts as a current/transmission account and the funds that pass through this account are small or are not retained for any length of time. All the interest that accrues on this first trust account is paid to the Law Society and this money is paid into the Attorneys Fidelity Fund. This is the primary source of funding for the Fidelity Fund.

The second trust account that attorneys run is an investment account and if attorneys will be holding a client’s money for any length of time, or if the amount is substantial, the client’s money will be transferred into this second account. All the interest generated while the money is in this second account accrues to the client (less a small fee to cover the management of the account and bank charges).

From 1 March 2019, the new Legal Practice Act will now will now entitle the Fidelity Fund to take 5% of the interest that accrues on the second trust investment account, in addition to all the interest on the first current/transmission account. The additional 5% of the interest will be deducted by the banks and paid over directly to the Fidelity Fund on a monthly basis. This will no doubt boost the income of the fund but this will be at our clients’ expense.

Let’s hope the Attorneys Fidelity Fund continues to be managed wisely so that there is always money available to cover the losses suffered by the public when crooked attorneys steal their client’s money out of their trust accounts!

Miltons Matsemela Inc

Deon Welz & Storm Barry
October 2018

© 2016 Miltons Matsemela. All rights reserved.

Site by Mc Lennan Digital Web Studio.

Scroll Up