Welcome to Miltons Matsemela - The Conveyancers
30 Sep 2022

Why You Should Sign a Power of Attorney Before You Emigrate or Travel

Leaving South Africa for foreign climes, whether permanently or for an extended period, probably means leaving behind unfinished business or financial affairs, and/or property or other assets needing to be dealt with.

And whilst it is certainly possible for you to sign documentation, contracts and the like whilst in another country, the inconvenience and costs likely to be associated with the necessary authentication procedures – to meet local requirements – are avoidable.

We discuss what a power of attorney (POA) is, the difference between a “special” power of attorney and a “general” one, what they involve, why and when you should consider signing one (or several), and how to structure each one to be valid and fit-for-purpose.

If you are emigrating, or perhaps just going overseas for an extended holiday or work contract, you may well leave behind some form of “unfinished business”. Perhaps you own a property, other assets or bank accounts needing attention, or have outstanding tax/business/financial affairs, or contracts to be signed, cars to be licenced, or something else unresolved that requires your future agreement or signature. Even if you can’t think of anything specific, consider executing (before you leave of course) an appropriate power of attorney in favour of someone you trust to act for you.

What is a power of attorney?

A Power of Attorney (“POA”) a document you sign authorising someone else to manage your affairs on your behalf as your agent. You can grant it for a specific purpose as a “Special Power of Attorney” or it can be a widely worded “General Power of Attorney”. In theory you can grant power of attorney orally, but in practice no one will (or should) act on that.

You must be at least 18 years old to execute a POA, and it remains valid only for so long as you have “legal capacity”.

You can terminate the POA at any time.

Why is a power of attorney important?

You can in a pinch execute and sign contracts, legal forms and the like whilst in a foreign country, but it can be a real mission. Depending on the circumstances, you may need to find (and pay) a notary public or embassy/consular official to authenticate documents, your signature, copies of papers etc. If it’s an embassy or consulate you need, you could find yourself travelling to another city, perhaps even another country. And if everything isn’t done exactly right the first time (a particular risk if you are dealing with someone not fully versed in South African law and procedure), you could find yourself repeating the process – perhaps even more than once in a sort of “Ground Hog Day” scenario. All avoidable if you leave behind in South Africa a valid and correctly structured POA.

How should you structure it?

The structure you will need depends on what affairs you need dealt with and why. It can be difficult to decide whether a POA is appropriate for a particular purpose, and if so how wide or how restricted you should make the powers you are granting to your agent. It can also be a challenge to find the correct wording to satisfy the requirements of whichever authority or other party is involved – for instance, specific forms are required by the Deeds Office, SARS, and banks. You might also need to leave behind more than one POA, each structured for a particular purpose. Similarly, you may be uncertain as to who to appoint as your agent, who is best qualified for each purpose, even perhaps who can you trust to act professionally and honestly.

There is no prescribed form and no list of required formalities for a valid POA but there are many possible permutations and legal risks involved, so the only way to ensure that it is valid and fit-for-purpose is to seek professional assistance specific to your circumstances.

30 Sep 2022

Building in Security Estates: The ‘Persuasive Sting’ of Penalty Levies

Building your own home in a residential complex of your choice is an attractive proposition on many levels. Just make sure up front that you will actually be ready to build within whatever deadlines the HOA (homeowners’ association) specifies.

Otherwise, as we shall see from a recent High Court dispute, you could end up paying levies at a penalty rate – if, that is, the developers don’t first demand re-transfer of the plot back to them, at your expense.

And the penalty levies will be substantial – 5 times the normal rate in the case in question, with other cases involving 8 or even 10 times normal levies. As the Court pointed out, penalty levies can’t be too moderate without losing their “persuasive sting”.

“… had the respondent imposed more moderate penalties, it would likely not have had the desired effect, or put differently, the same persuasive sting for individuals of substantial means.” (Extract from judgment below)

Buying “plot and plan” in a residential complex allows you the freedom to build your own dream house in a secure environment, quite apart from providing what is likely to be sound long-term investment. Just make sure that you will actually be ready to build within the time frame required by the HOA (homeowners’ association). If you don’t, you risk having to transfer the plot back to the developer (a costly exercise), or you could be lumbered with penalty levies many times higher than normal levies.

You can ask a court to reduce the penalty, but…

Our law gives us general protection from excessive “out of proportion” penalties by means of the Conventional Penalties Act, which in the section headed “Reduction of excessive penalty” provides that –

“If upon the hearing of a claim for a penalty, it appears to the court that such penalty is out of proportion to the prejudice suffered by the creditor by reason of the act or omission in respect of which the penalty was stipulated, the court may reduce the penalty to such extent as it may consider equitable in the circumstances: Provided that in determining the extent of such prejudice the court shall take into consideration not only the creditor’s proprietary interest, but every other rightful interest which may be affected by the act or omission in question.”

However, as a recent High Court decision illustrates, you will have your work cut out for you if you want the court to exercise that discretion in regard to penalty levies.

The ‘persuasive sting’ of 5x normal penalties

  • The HOA of a “luxury/ultra-luxury” residential estate required in its constitution that –
    – Each owner must start construction within one year of transfer,
    – Should construction not commence timeously the developer had the option to require re-transfer of the erf to it,
    – If the developer did not exercise this option, the HOA could “impose whatever penalties it deems appropriate in its sole discretion” on the owner.
  • When several erf owners failed to build within the one-year deadline, the HOA passed resolutions imposing penalty levies on them until they started construction.
  • These levies started off at 2x the normal levies, and over an eight-year period were increased in stages to 5x the normal.
  • The HOA sued the defaulting owners in the Regional Court to recover these levies, winning both in that Court and on appeal to the High Court.
  • It was, held the High Court, up to the owners challenging the amount of the penalty to prove –
    – What prejudice the HOA suffered,
    – That the penalty was disproportionate to that prejudice, and
    – The extent to which the penalty should be reduced.
  • In addition to the actual monetary prejudice (damages) suffered by the HOA, it was said the Court necessary to consider the HOA’s other “rightful interests” that might be affected by the failure to build, such as problems with security, nuisance, aesthetics, damage, and value loss caused by extended building activities. In this case, one of the additional reasons for the penalty provision was to discourage speculation in the erven by buyers intending to re-sell the plots for profit rather than build and live in the estate.
  • There was prejudice to the HOA even though the penalty provision was intended to create a deterrent rather than compensation for default – the prejudice was to the HOA’s “right to enforce concerted action for the common good, and to its interest in obtaining concerted action”.
  • Whether the penalty was “out of proportion” to the prejudice could be assessed in three ways:
  1. By looking at comparable situations where the desired result was achieved (the Court compared another similar matter in which a 10x normal penalty was reduced by the Court to 8x normal, much more than the 5x imposed here),
  2. By looking at the size of this penalty and the penalties in general in relation to the income and expenditure of the HOA, and
  3. “By exercising one’s sense of fairness and justice.”
  • The HOA had been fair and reasonable in phasing in the increases over an eight-year period.
  • Imposing more “moderate” penalties “would likely not have had the desired effect, or put differently, the same persuasive sting for individuals of substantial means.”

In the end result, the owners must pay the full penalty levies, interest, and costs on an attorney and client scale.

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