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30 Apr 2020

COVID-19 FAQ: The effect of Level 4 Regulations on Property Transactions (sales and leases)

On 29 April 2020 the Level 4 Regulations were published. This level commences on 1 May 2020. The end date is yet to be determined. We have no idea when we will move from this level, or in which direction such a move might be!

Leases are expiring; rentals are due; transfers were registered just before lockdown, but parties could not move, etc. – how does LEVEL 4 affect all of this? Here are the typical questions we have received, with our views:

1. May estate agents return to work?

No. Real estate is not included in the services that are able to operate. Courts, Deeds Offices, Master’s Offices; and business services required to allow these to function (including conveyancers and attorneys) may return to work, but only in order to allow these offices to function.

2. May my landlord insist on full payment of rental? (This includes commercial properties where the tenant is not allowed to trade and has no income; residential leases where tenants plead financial distress; as well as leases that were signed before the lockdown, and where the tenant is now unable to take occupation).

There is a lot of discussion online about Force Majeure/Vis Major (VM). This is a legal term that refers to a superior power or force which cannot be resisted or controlled, and which a person may rely on to excuse him or her from performing a contractual obligation due to “impossibility”. Examples of this are extreme weather events, wars, riots, or, in our case, legislation. The general consensus is that the current Government-imposed lockdown announced in South Africa on 23 March 2020 is a VM.

But this does not mean that everybody who has been affected by the lockdown will be able to use VM as an excuse to avoid paying rent!

It depends entirely on the particular circumstances of each and every matter. The scenarios below all assume that the leases do not have specific clauses in them that regulate the issue of VM. If they did, the lease agreements themselves will dictate the consequences. What follows is therefore a very brief discussion of the common law position.

Let’s first look at a residential lease where the tenant has continued to live in the leased premises but has lost his job as a result of the lockdown and now can’t pay the rent. This tenant will not  necessarily be able to rely on VM to avoid paying rent. The main reason for this is that the tenant has not been deprived of his occupation and use of the property.

For commercial tenants who cannot trade from the leased premises, and for residential tenants who have been prevented from taking occupation of the property as a result of the lockdown, the picture is different.

In these cases, VM is preventing the commercial tenant from making full use of the business premises and is preventing the residential tenant from making any use of the residence at all. In accordance with an old Roman Law Principle, these tenants may be entitled to a reduction (remission) of rent equal to the amount by which their use of the property has been reduced. The amount by which a commercial tenant’s rental would be reduced would vary with the circumstances. For the tenant who has not yet moved into their home, the reduction in rental would be 100%.

3. May my landlord cancel my lease if I don’t pay?

Once again, one has to first consult the lease to see whether it has a VM clause and whether it deals with cancellation and if not, then as mentioned, the breach may be excusable in certain circumstances. Each matter will have to be determined on its own facts.

Therefore, in conclusion to questions 2 and 3, and given the fact that our law has never been faced with a lockdown situation, it is almost impossible to predict how our courts are going to handle these types of matters. Our advice to landlords and tenants is that they communicate with one another to try and reach a resolution by agreement as soon as possible.

4. May my landlord evict me if my lease is cancelled, or if my lease ends during lockdown?

The Level 4 Regulations that have just been published expressly state that an eviction order may be granted during this time (since the courts may also return to work from 1 May 2020) but that such orders must be suspended during lockdown level 4. While a court could order an immediate eviction, this would only be done in exceptional circumstances. One must also bear in mind that the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE), which governs the law regarding evictions from residential properties, allows the court a very wide discretion in determining the timing of an eviction, depending on the circumstances. It is most likely that Magistrates and Judges will show mercy to tenants who face eviction because of lockdown, and give them plenty of time to move, provided the tenant was not being unreasonable and trying to abuse the current situation.

5. May tenants/buyers move into new properties yet? May agents take clients to view properties?

No. The Regulations published on 29 April 2020 still limit movement and do not allow either.

6. May attorneys see transfer and bond clients to sign documents?

Section 16 (2) (d) of the Regulations state that you may leave your residence “to obtain services that are allowed to operate as set out in Table 1.” This to us means we may see clients to sign transfer / bond documents or for any matters related to litigation, deceased estates or notarial services because we are needed to enable the Deeds Office, the Courts and the Master’s offices to function.

We hope that this has cleared up some of the confusion that has arisen during this lockdown period.

20 Apr 2020

WHEN IS THE DEEDS OFFICE RE-OPENING? IS IT REALISTIC TO EXPECT GOVERNMENT TO DECLARE THE DEEDS OFFICE TO BE AN ESSENTIAL SERVICE?

We have read with interest a recent appeal to Government from leaders in the property industry to allow the Deeds Office to operate with skeleton staff, analogous perhaps to an “essential service” in terms of the current regulations.

The article, which appeared in the industry’s newsletter and which was repeated in social media, creates an impression: (a) that property sales cannot take place in the absence of a functioning Deeds Office, and (b) that there is a direct link between the agent (and his sales transaction) and the Deeds Office. In doing so, it however fails to consider all the role-players involved in the wider property sector.

Given the financial impact lockdown is having, and probably will continue to have, on estate agents’ incomes for many months to come, this is an understandable appeal and is echoed by many other industries. The authors highlight the loss of income to agents due to property registrations not taking place and only mention other role players in property in passing. Perhaps the authors have not thought through the functions of the other role-players and the potential consequences such a decision will have. The post creates the impression that the Deeds Office functions in isolation (excuse the pun under prevailing conditions) rather than being the ultimate destination of property transactions, and also takes a rather simplified view of how the Deeds Office operates.

The Deeds Office cannot work on a skeleton staff. The Registrars need their staff to process their work according to rigorous levels and can only register Deeds once they are meticulously checked. This requires various levels of examination. If the Deeds Office is re-opened, we must also assume that all the cogs in the conveyancing process must be allowed to opperate. It is simply not possible for property transfers and mortgage bonds to be registered in the Deeds Office without their full supporting staff and the executing conveyancers and their clerks, and of course their paralegals and accounting staff in their law offices who process the payments to the clients.

The Deeds Office deals with the full spectrum of property transactions, namely second-hand sales, plot and plan sales, new developments, sectional scheme registrations, subdivisions, consolidations and removal of title deed conditions, mortgage bonds and bond cancellations, to mention just the most common transactions.

If this is entertained, then we must also allow the following professions and state offices to open their doors: the Receiver of Revenue’s transfer duty/VAT department, the Surveyor General’s office, land surveyors who are in private practice; town planners, planning departments of local municipalities (the rates clearance departments are functioning digitally); managing agents; home owner associations; valuators; compliance companies; handymen and construction workers; bond originators and the mortgage bond departments of the banks; removal companies; the civil courts and sheriffs’ offices (in the event that evictions are required); and of course, central in the process, the law firms specialising in Conveyancing. Their offices must open to draft documents and consult with clients to sign bond and transfer documents to be lodged in the Deeds Office. And last but not least, according to the EAAB’s 2018/2019 Audit Report, there are currently around 42 000 registered estate agents in South Africa, including interns, full status agents and principals, who will want to get up and running, meeting clients, viewing properties, etc. It is still possible to sell property while in isolation, and many estate agents are managing to work from home. The problem lies with the processes and number of people that are required, between date of sale and registration of transfer!

What we are trying to point out is that the Deeds Office cannot function in isolation. The entire property industry (or a large portion of it) will have to be declared “essential”. Our leaders have to balance the future of our economy against the objectives they are trying to achieve with the lockdown. We all know that the property and associated financial sector is one of the cornerstones of our economy, but viewed against Government’s intended objectives, we doubt if Government will heed such an appeal.

While from a purely financial survival point of view, we in the Conveyancing profession, and our frustrated clients, would welcome re-opening the property sector, the hard and cold truth is that such a re-opening will expose hundreds of thousands of people to the risk of COVID-19 infection on a daily basis, not just a several thousand state workers. One must bear in mind that the vast majority of us have families to return home to every evening, and they too will be exposed to the risk of infection. In simple terms, and as disappointing as it is to admit, it is therefore not likely or advisable to declare the Deeds Office as an essential service or open it on a reduced basis. It will simply undo all we have achieved through lockdown.

P.S – We have just learnt that Government has been in contact with the Legal Practice Council of SA, calling for submissions on declaring all legal services to be seen as essential services. We will keep you posted.

P.P.S – We have also been alerted to a document that is doing the rounds, which was allegedly issued by the Department of Human Settlements. It refers to statistics for February from all deeds offices in SA, save for Cape Town, and confirms that the Deeds Office will NOT open on 20 April 2020 (today). We have no idea what the purpose or origin of this document is or was, and whether it intends to refer to all the other Deeds Offices, save for Cape Town or whether Cape Town was omitted as an oversight.

But if all the other Deeds Offices will remain closed, it is even more unlikely that the Cape Town Deeds Office will open.

Lastly we are also hearing rumours that the Cape Town Deeds Office is going to reopen on 4 May 2020. We are trying to authenticate this, but having visited the Provincial Department of Human Settlement’s website, we can find no evidence that any decision has been taken as yet, as to when the Deeds Office will reopen.

We wish you well in these troubled times. Stay safe please.

Andrew Murray and Robert Krautkrämer
Miltons Matsemela Inc

16 Apr 2020

HOW TO GET DEEDS OF SALE SIGNED REMOTELY DURING LOCKDOWN WHEN THERE ARE NO PRINTERS AND SCANNERS

The COVID-19 lockdown has really focused our attention on how estate agents can continue to get Offers to Purchase / Deeds of Sale signed when buyers and sellers cannot attend meetings and do not have access to printers and scanners at home.

The problem arises because the Alienation of Land Act requires a deed of sale to be signed by both the buyer and the seller, and digital signatures are not sufficient to bring about a binding deed of sale. For a deed of sale to be binding, signatures need to be handwritten.

We have come up with two solutions to this problem. All the buyer or seller will need to implement these solutions is a smart phone, pen and paper:

SOLUTION 1:

Step 1.
Assuming most agents are able to prepare the Offer to Purchase (OTP) on their computers, they email it to the buyer with all the annexures. To avoid having to send counter offers backwards and forwards it would be best to have agreed to all the terms and conditions first.

Step 2:
The buyer writes out the following on a piece of paper, completes AND SIGNS IT:
I ……………………. hereby offer to buy ……………………. (property description) from ……………………. (seller) for the sum of R ……………………. on the terms and conditions as contained in the template offer to purchase as well as any annexures thereto, as are contained in the email from ……………………. (name of agent) to myself, dated ……………………. and sent to me at ……………………. (exact time), contents of which are repeated herein as if specifically set out.
Signed at ……………………. on …………………….

Step 3:
The buyer then takes a photo of this handwritten document, as well as the computer screen containing the email with the attachment/s, and WhatsApps these to the agent, who in turn WhatsApps these to the seller. (There will be two photos to forward.)

Step 4:
The agent emails the completed but unsigned OTP and attachments to the seller.

Step 5:
The seller then writes this out on a piece of paper AND SIGNS IT:
I ……………………. hereby accept the offer to purchase of ……………………. (property description) from ……………………. (buyer) for the sum of R ……………………. as contained in the WhatsApp image received from ……………………. (agent) on ……………………. at ……………………. (time) together with all documents referred to therein.
Signed at ……………………. on …………………….

Step 6:
The seller then takes a photo of this piece of paper and returns it to the agent- who forwards it to the buyer.

Step 7:
The agent then sends the unsigned OTP and attachments, as well the photos of the handwritten documents (which can be sent from WhatsApp to email on any smart phone) to the transferring attorney. These two handwritten documents are then in essence the sale agreement which incorporates all the terms of the unsigned Offer to Purchase by reference. Where the sellers are married in COP, they will still need two witnesses to sign unfortunately.

SOLUTION 2:

This solution relies on the fact that the Alienation of Land Act allows a buyer or a seller to authorise a representative to sign the deed of sale on their behalf. Such authorisation needs to be in writing, but it does not have to comply with the formal requirements of a Power of Attorney. This solution might be better suited when it is only one party who cannot print, sign, and scan the actual OTP. Once again, this will only work if the agent is able to prepare the full OTP digitally, or get it into a digital format to send on. We first deal with the situation where it is the buyer who cannot print and scan the document:

Step 1.
The full OTP is sent to the buyer, with all the annexures. To avoid having to send counter offers backwards and forwards it would be best to have agreed to all the terms and conditions first.

Step 2.
The buyer then authorises a representative to sign the OTP on their behalf. This is done by the buyer writing out a letter of authorisation on a piece of paper and signing it. The suggested wording for the authorisation is less than a page and is set out below. During lockdown it would be easiest for the buyer to authorise the estate agent to sign, but any 3rd party could be authorised to sign. Such a 3rd party would just need to be able to print, sign and scan the OTP, so that it can be sent on to the seller.

Step 3.
Once this is letter of authorisation is written out and signed, the Purchaser takes a photograph of this page and sends it to the agent’s phone. The agent, or the other 3rd party is then able to sign the OTP on the buyer’s behalf.

Step 4.
The OTP signed by the representative is then sent to the seller who can print, sign and scan in the ordinary course.

Step 5.
The fully signed OTP, with the written authority is then sent to the conveyancer to commence with the transfer.

Here is the wording for the authorisation of the buyer’s representative:

 

WRITTEN AUTHORITY TO SIGN OFFER TO PURCHASE

I the undersigned
_____________________________________________________________ (name)
_____________________________________________________________ (SA ID No. or Passport No. and Nationality)
hereby authorise
___________________________________________ (Insert name of representative)
______________________________________________________________SA ID No. or Passport No. and Nationality
to sign the offer to purchase on my behalf in terms of which I am purchasing property known as:
___________________________________________________________________(property description)
For a purchase price of R_______________________________ on the terms set out in the offer to purchase sent to me
at ______________________ on ______________________________.
(exact time and date on which offer to purchase/deed of sale was sent to the Purchaser/s)

Signed and Dated at _____________________ (Place) on ____________________________ (Date)

____________________________
PURCHASER

If there is more than 1 buyer, this document can be adapted, or each buyer will have to sign a separate authority. If it is the Seller who is the one who is unable to print, sign and scan they can follow the same procedure as was followed by the buyer.

This document giving the written authority, (and a similar document that could be written out and signed by the Seller) is available here:

Finally, we must point out that we do not recommend these “work around” methods when parties are able to sign in the usual way. These alternative methods add risk to the transaction and might create loopholes which can be relied on to get out of the contract at a later stage. We are however confident that if the procedures are followed correctly, they will give rise to a binding deed of sale.

Feel free to call us if there is anything that is not clear from our article. We would love to help you make a sale during the lockdown.

Keep safe and stay healthy.

Robert Krautkrämer and Deon Welz
Miltons Matsemela Inc
April 2020

14 Apr 2020

ANOTHER DROP IN INTEREST RATES!

We have some really good news!

The repo rate (rate at which the Reserve Bank lends money to the retail banks) has today (14 April 2020) been reduced by a further 1%. As such the repo rate will now be 4.25% and the prime lending rate, will be 7.75%.  This reduction is in addition to the 1% reduction we saw on 16 March!

How will this affect your pocket? On a home loan of R2 000 000, repayable at a prime interest rate of 8.75% over 20 years, your payment would have been R17 674.21. It will now be R16 418.97, signifying a reduction of R1 255,24 pm.

But that’s not the only good news we have.

Firstly, and unlike so many other firms, we are still operational which means we are opening files; taking deposits on new transactions; attending to enquiries and even arranging bridging finance! To ensure safe receipt of deposits, the overseeing conveyancer will make contact with the purchaser/s to ensure that funds are safely received, and invested.

Secondly, we have decided that should lockdown indeed come to an end on Thursday 30 April 2020, our doors will be open on Friday 1 May, Saturday 2 May and Sunday 3 May 2020, in order to see clients, whether at the office, or at their homes! (Naturally we will still follow our comprehensive Covid-19 safety protocol.)

Stay safe and hope to see you all soon!

01 Apr 2020

Your Neighbour Builds Without Plans – Can You Get a Demolition Order?

“The primary remedy therefore is an order for removal of the structure” (extract from the judgment below)

“Neighbour problems” are as old as civilization itself, and an all-too-common cause of conflict is construction work. When your neighbour’s new house/extension/outbuilding impinges on your sea view, or steals your light, or invades your privacy, or encroaches on your property, you are going to be upset. And you will want to know what you can do about stopping the offending work as soon as possible.

A recent High Court decision confirms how strong your position will be if you can show that your neighbour has proceeded without the necessary municipal approvals. We discuss the facts of the case (a 16 year long saga over an encroaching garage), and the law behind the Court’s decision to order demolition.

What can you do if your neighbour has started (or finished) building without the necessary municipal approvals?

In a nutshell, our courts will very probably assist you with a demolition order, as a recent High Court decision around a long-running property encroachment illustrates.

The 16 year saga of an encroaching garage

  • A couple, owners of a property next to a church Mission, expanded their house in 2004 by building a brick garage.
  • They thought they were building on their own land, having in 1998 built a wall along what they genuinely – but mistakenly – thought was the correct boundary between the two properties.
  • As we shall see below, their fatal mistake was building their garage without municipal plans or approval.
  • In fact the garage was inadvertently built on Mission land, but the Mission was having none of that –
    • First in 2012 it asked the couple – and another neighbour in the same position – to demolish.
    • When the couple refused (the other neighbour complied) the Mission in 2014 laid criminal charges against them for failing to comply with the relevant Act (the National Building Regulations and Building Standards Act). These charges, for purely technical reasons, failed to stick.
    • On pressed the Mission, this time turning to the local municipality for help in 2016. The municipality duly issued a formal Notice requiring demolition of the garage as it had been erected illegally without plans or permission. The couple simply refused to either receive the Notice or to remove the encroaching garage.
  • Which brings us to the High Court in 2017, with the Mission applying for a demolition order and the couple asking the Court to rather order the Mission to transfer the relevant piece of its land to them against payment of reasonable compensation.

What about alternatives to demolition?

A court deciding a demolition application has “discretion to reach an equitable and reasonable solution in terms of the common law by ordering payment or compensation rather than removal in cases where the cost of removal would be disproportionate to the benefit derived from the removal”.

In this respect said the Court (emphasis supplied) “the encroaching owner’s own conduct plays an important role” and “while one is acutely aware of the financial implications, inconvenience and disruption which the partial demolition will cause the [couple], the upholding of the doctrine of legality, a fundamental component of the rule of law, must inevitably trump such personal considerations.”

Commenting on the couple’s “obstructive behaviour” in this case, and finding that they “are indeed in legal and administrative breach of the law … to allow them to keep the structures where they are, would be to perpetuate the illegality”, the Court ordered the couple to demolish their illegal garage within 90 days.

So if you are the neighbour planning to build…

Whilst the case in question deals with encroachment on another’s land, our courts have applied exactly the same principles to a wide variety of “neighbour dispute” cases – sea view obstructions, failure to observe building lines and the like.

So don’t even think of starting to build without having all necessary municipal plan approvals and permissions in place!

And if you are the objecting neighbour…

The couple in this case put up an argument that the Mission couldn’t demand demolition as it had “acquiesced in their occupation of the relevant land because it did not object when they built the wall on the church ground in 1998, and did not complain when they built the ‘offending’ garage in 2004 or 2005.”

Factually the Mission’s long history of actively objecting to the unlawful construction put an end to that argument, but the longer you delay in objecting and taking action the greater your risk of facing a similar argument. Take immediate action against any neighbour building unlawfully.

01 Apr 2020

Beware the “Common Law Marriage” Myth

“In our law cohabitation does not have special legal consequences. Generally the proprietary consequences and rights flowing from a marriage are not available to unmarried couples, regardless of the length of their cohabitation” (extract from judgment below)

Anyone in an informal life partnership arrangement should beware the extremely prevalent – and extremely dangerous – myth of the “common law marriage”.

We discuss the risks of relying on this myth with reference to a recent High Court case in which a couple split after a 22 year relationship. The life partner holding the assets vigorously defended the other partner’s claim to a 50% share, and her struggle to prove the existence of a “universal partnership” shows how difficult it can be to exit such a relationship with even the smallest financial benefit. The claimant in this case was fortunate in eventually being awarded a 30% share (better than nothing, but not 50%!)

Fortunately our law offers you a quick and simple solution…

If you live as a couple, avoid the trap of believing the myth of the “common law marriage”. It’s a very persistent myth, possibly because some other countries do indeed give formal recognition to certain forms of life partnership.

But not in South Africa – there is no such thing in our law as a “common law marriage”. No matter how long you have lived together, if you break up or when one of you dies, neither of you automatically has any of the rights and protections afforded to a couple in a marriage or civil union.

Apart from the personal consequences the financial downsides can be huge, and our courts are all too often faced with sad and bitter disputes which end with one of the partners destitute and homeless after decades of cohabitation.

A recent High Court case highlights the financial dangers…

22 years on, a couple splits

  • For most of 22 years, with only a short early separation, a man and woman “in a romantic relationship” lived as a couple, in a household complete with the woman’s daughter from a previous relationship.
  • They had been jointly involved to one degree or another in a series of business ventures including vegetable farming (on a farm purchased in the man’s name), commercial blasting, a bakery and a packaging business, and what was at stake in the High Court was whether the woman could prove her claim to a 50% share of the resultant assets.
  • The facts were bitterly disputed, with the man adamant that the relationship had been nothing more than co-habitation as lovers. But eventually the Court concluded, on the basis of the facts that it found proved, that “the parties intended to pool their resources for the benefit of a joint estate” and that the woman had accordingly proved the existence of a “universal partnership”.
  • Not however to the 50/50 extent she claimed, and the end result is that at age of 47 and after 22 years she leaves the relationship with only 30% of the net assets. Hard though that may seem, she could easily have been left with nothing, as we shall see below when we look at what our law says about such relationships.

The difficulty of proving a “universal partnership”

The problem in such a case is that you have to prove a lot more than just cohabitation.

You also need to prove the existence of a “universal partnership” and that, as many cases in the past have illustrated, is not easily achieved, not least because the onus is on you to prove your case. You will need to prove all of the following –

  1. Each of the parties brought something into the partnership, or bound themselves to bring something into it, whether it be money or labour skills;
  2. The business had been carried on for the joint benefit of both parties;
  3. The object was to make a profit; and
  4. The partnership contract was legitimate.
    • If, as is common in this sort of situation, you rely on a “tacit” agreement (an unexpressed agreement inferred from your actions as a couple), you have to go further and prove that –
  5. The other person was fully aware of the circumstances connected to the transaction;
  6. The act relied upon was unequivocal; and
  7. The tacit contract does not extend beyond what the parties contemplated.

Again, not easily proved, as “A tacit contract will be interpreted strictly and not extensively, since a contract must be interpreted in favour of the person on whom it is sought to place an obligation.”

The good news – there’s a simple solution…

We have talked above only about the financial consequences of life partnerships which are unregulated by agreement. But formal marriage also provides a range of other legal benefits and protections (such as rights of inheritance and support and other personal aspects of your relationship) which are not automatically available to you.

Fortunately you can avoid all the risk and uncertainty of an unregulated relationship with a quick and simple solution – a formal cohabitation/life partnership agreement.

Just be sure to get it in place early on. Take professional advice (jointly – this is to protect you both!) as soon as you commit to a long-term relationship.

01 Apr 2020

SEPARATE WATER METERS REQUIRED FOR ALL SECTIONAL TITLE PROPERTIES IN CAPE TOWN

Recent amendments to the City of Cape Town’s Water By-law have introduced a few significant changes that are going to impact on our lives, especially for the owners of Sectional Title properties or properties where the main municipal water supply feeds more than one dwelling or unit.

If you were the owner, or the person in control of such a property, and if the branch supply pipes to the separate units did not have:

  1. an isolating valve (to control or cut off supply); and
  2. a water management device, prepayment meter, or private sub meter,

you now have an obligation to ensure that these items are installed. The deadline for such an installation is 4 October 2020.

If, however, there was already an isolating valve on the branch supply pipe, you were obliged to have installed a water management device, prepayment meter, or private sub meter by 4 October 2019. This obligation is therefore already overdue.

According to Tyron Vomberg of Inspecto, these requirements are not yet on the list of items to be checked by the plumber who issues a water certificate of compliance, but we believe they soon will be. When this happens, no water certificate will be issued if your property is non-compliant.

The installation of these items can be done by private plumbers who are registered with the City, but the work can take time. So, if you are non-compliant and intending to sell your sectional title property or a property forming part of a scheme, it would be advisable to get compliant before you do so, especially if your transfer will be registered after 4 October 2020.

Divan Stander and Deon Welz
Miltons Matsemela Inc
March 2020

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