2020 - Page 3 of 4 - Miltons Matsemela

05 May 2020

POSITIVE NEWS REGARDING BOND APPROVALS DURING LOCKDOWN

Since we posted our Newsflash recently, introducing the “Photo Sale Agreement” method, we had a number of estate agents enquiring whether the Banks will accept sale agreements in this manner. Having made enquiries, we were alerted to the fact that the Banks are now all (since last week Thursday) willing to accept UNSIGNED offers to purchase! It also appears that some banks have in the past insisted on witness signatures on all OTPs (regardless of whether sellers were married in COP or not). This is also being relaxed during lockdown.

Although this is certainly positive news to enable loan approvals, we wish to urge agents to still use our Photo Sale Agreement method, (when all else fails), and, where sellers are married in COP, to try and get witnesses to also sign, to ensure that you all have valid and binding sale agreements. No point in getting a bond if the formalities of the sale were not met because in reality, you still have a VOID sale agreement! Where the sellers are married in COP, the one would be for such sellers to do a Zoom or Whatsapp video call to the agent, sign the OTP on video so that the agent can see it is them signing, and then the agent can simply witness the signatures. Although two witnesses should sign for each signatory, if only one (or none) is available, so be it. When the sellers eventually appear in front of a conveyancer, they have to sign a Power of Attorney to authorise the transfer and then those signatures will also require two witnesses. When that happens, then the “defect” will be remedied. Until then, one will have to rely on good faith. It is the best one can do! The law was not designed to deal with this situation in mind, so we have to improvise where we can.

Warmest regards
Miltons Matsemela Inc

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

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 –

Each of the parties brought something into the partnership, or bound themselves to bring something into it, whether it be money or labour skills;
The business had been carried on for the joint benefit of both parties;
The object was to make a profit; and
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 –
The other person was fully aware of the circumstances connected to the transaction;
The act relied upon was unequivocal; and
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.

06 Mar 2020

Running a Business in a Residential Area – Check Your Zoning First!

“It is unquestionable that an owner of land is not permitted to perform activities which contravene the restrictive title conditions or the zoning restrictions” (extract from judgment below)

If you would like to run a business from home or to buy a residential property specifically to convert it into business premises – or indeed on the other side of the coin if you want to object to a new business opening up in your leafy suburb – you should be aware of a recent High Court decision in which a small 8 am – 4.30 pm office was ordered to stop operating in a residential area.

The Court addressed questions such as “Who can apply for an interdict?”, “Does a pending rezoning application make any difference?”, “Must the business be causing a nuisance?”, “What difference does it make that the suburb’s residential character is already changing?” and “What if other property owners are also breaking the law by operating under the radar and getting away with it?”

You decide to open a home business, or perhaps you are about to buy a house in order to run a business from it. You apply for rezoning but the council is taking forever to decide (although it has happily started charging you rates and taxes on the business tariff), your immediate neighbours are supportive, you won’t cause any nuisance, you know of many other businesses operating undisturbed “under the radar”, and anyway the suburb’s residential character has been eroding for years. Surely you are safe to just go ahead and open your business?

On the other side of the coin, perhaps you bought your dream house in a leafy suburb, secure in the knowledge that its residential character is protected by strong and effective zoning laws. Then businesses start moving in – what can you do about it?

A recent High Court decision addresses both questions directly…

A suburban office and the interdict application

A construction company opened an administrative office in a suburban area, manned from 8 am to 4.30 pm on weekdays by a staff of four (with the occasional visitor).
Three complainants in the suburb, objecting strongly to this move, applied to the High Court for an interdict against the running of any business on the property. They had, they said “acquired their properties with a keen expectation of residing in a residential suburb with amenities that are consistent with a residential suburb and with a residential character” – sentiments which will no doubt resonate with many other home-buyers.
Critically, one of the restrictive conditions in the offending property’s title deeds read “this erf shall be used for residential purposes only and no trade or business or industry whatsoever shall be conducted thereon”. That, said the Court, rendered the property’s usage illegal. Full stop.

All the defeated defences

The property owner and the business (let’s refer to them together as “the business” for simplicity) raised a series of defences to the interdict application, all of them rejected by the Court on essentially the same ground that “the use or continuation to use the property for any business or trade other than for residential purposes constitutes an illegal act” –

The suburb’s character had been changing over the years with businesses moving in, including a large shopping mall. Not relevant.
The business had applied to the local council for re-zoning and removal of the title deed restriction over a year before, no objections had been received and it had in fact been supported by at least one neighbour. Not relevant.
Although the rezoning application had yet to be granted or declined, council was already collecting rates and taxes payable by business and commercial properties. Not relevant.
The office caused no nuisance to anyone in the area. Not relevant.
Other property owners in the area were also in contravention of the law. Not relevant.

Who can object and who can’t?

The business also argued that only property owners living “in close proximity” to the office had any right to object. That, it said, excluded not only the complainant who was not an owner (she lived with her parents) but all three of the complainants because they all lived about a kilometer away from the office.

No problem, said the Court, “the essence of town planning schemes is conceived in the interest of the community to which it applies” and the complainants lived “in an area affected by an applicable zoning scheme”. All the complainants had “protectable interests” and therefore locus standi (in plain English, the ‘right to bring a legal action’) and were entitled to enforce their rights under the planning scheme.

The interdict and the request to suspend it

“Once it is accepted”, quoted the Court from an earlier judgment “that the nature of the right in question is a public right, then it must follow … that for continuing infringements of that right the only effective remedy is an interdict, all the more so where such infringements amount to an offence.” Final interdict granted with costs.

Finally, the Court rejected a request by the business to suspend the application of the interdict. The business had been continuing to act in an unlawful manner for at least fifteen months, it was “hell-bent to do so without the necessary relaxation of the restrictive conditions” and to suspend the interdict would be to support or give approval “to an ongoing illegality which is also a criminal offence … tantamount to the subversion of the doctrine of legality and undermining of the rule of law”. The business “must be brought into line immediately when such matters are brought to the attention of the court.” Interdict effective immediately.

Owners – must you always rezone?

Have your attorney check what title deed restrictions your property is subject to, what your current zoning is and what it allows and doesn’t allow. Your local town planning scheme may perhaps let you run a small scale “home enterprise” or “micro business” either without any municipal consent (there will be conditions attached) or with a municipal permit. Or you may need to formally apply for rezoning and removal of title deed restrictions. Every local authority will have its own rules on this and the important thing is to comply with them or risk unhappy neighbours applying to close you down.

04 Mar 2020

THE GREAT SPLUMA SPLASH!

Another rumour that is causing anxiety in our industry is that, as from October 2020, no property will be able to be transferred unless a certificate in terms of the Spatial Planning and Land Use Management Act (SPLUMA) has been obtained from the municipality. The main purpose of this Certificate will be to confirm that all improvements on the land are built in accordance with approved building plans and comply with the zoning scheme.

Thankfully, this is not true, at least not in the Western Cape.

The confusion appears to have arisen because we have SPLUMA, which is a law that applies to the whole country, and a by-law in Emalahleni, Mpumalanga, that applies only in Emalahleni, which has a similar name.

SPLUMA, which was passed in 2015, applies nationally, and requires provinces and municipalities to pass provincial and local laws to govern land use and land development in their provinces and municipalities within 5 years (which is where the 2020 deadline appears to come from).

It does however not specifically state that before a property can be transferred, a certificate to confirm approved building plans and zoning is required.

The similarly named SPLUMA by-law of Emalahleni, Mpumalanga however does contain such a section. In Emalahleni, Mpumalanga such a certificate is therefore required before a property can be transferred. This is apparently the practice in the Mpumalanga Deeds Office.

Given the fact that the by-law in Emalahleni, Mpumalanga so closely resembles the “main” SPLUMA by name, we think that this is where the confusion has arisen, and some commentators have interpreted the local by-law to apply to the whole of the country. We must however point out that the wording of the Emalahleni Municipal By-law is also repeated in the Polokwane by-law, so this might be a trend in the northern part of the country too.

The Western Cape Land Use Planning Act (the provincial legislation that governs how we do things in the Western Cape), and the City of Cape Town Municipal Planning By-Law (which tells us how we do things in the City of Cape Town) – both of which were passed specifically in order to comply with SPLUMA – however do not require such a certificate before transfer.

It thus appears that those of us lucky enough to be in the Western Cape can all calm down to a mild panic!

We will however continue to monitor the situation and if any further information comes to light, we will let you know.

Robert Krautkramer and Deon Welz
Miltons Matsemela Inc

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

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

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.

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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