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29 Jul 2022

Website of the Month: Solar Power and the Insurance Risk

With our loadshedding woes unlikely to go anywhere soon, more and more property owners are looking to solar power as an alternative to relying on Eskom.

Just be careful that you don’t fall foul of your insurers in the process. “Rules homeowners should know before installing solar power” on MyBroadband lists four technical regulations to be particularly aware of.

For some practical advice on deciding whether or not to go the solar route in the first place, and if so how, read another MyBroadband article “What you should know before installing solar panels and batteries at your home” here. Keep an eye also on the developing story around proposed new Eskom tariffs and “feed-in” tariffs.

29 Jul 2022

The Trouble with Family Loans: A R540,000 Lesson

It may seem like overkill, and illogical to boot, to insist on a family loan being recorded in a formal contract. But in fact it’s the only logical course of action to take, as we shall find out in the context of a court fight between a daughter and her parents over a R540k “loan”.

It isn’t clear from the stated facts whether this particular family fall-out stemmed from a simple misunderstanding or from something worse, but the outcome shows just how easily things can go wrong if family loans aren’t properly agreed and recorded.

We’ll end off with a look at why that risk applies to even the most rock-solid of families, listing five possible scenarios in which the lack of a formal contract could well lead to tears.

“How sharper than a serpent’s tooth it is to have a thankless child!” (Shakespeare)

“Family helps family in times of need” – that’s been part of human culture since long before the dawn of history but be sure to observe all legal formalities. A recent High Court decision provides an excellent example of the risks of not doing so.

Parents lose R540,000

  • A daughter in the middle of a divorce borrowed R540,000 from her parents so that she could buy out her spouse’s 50% share in her house.
  • As far as her parents were concerned it was a repayable loan, but when they had to sue their daughter for repayment they were in for a rude shock.
  • Although their daughter had admitted asking to “borrow” the money, the Court held that the parents had failed to prove (the onus being on them to do so) “the existence of a loan agreement, its terms and consequent breach thereof on a balance of probabilities”. Nor had they proved “the material terms and conditions agreed upon including the amount of the loan and the date of repayment”. Another nail in their coffin – they had failed to prove animus contrahendi (lawyer speak for “a serious intention to contract”).
  • Their claim was dismissed with costs, so it’s goodbye to their R540k.

5 reasons why you need a contract, no matter how strong your family

One wonders how many families have rued their attitude of “We have a very close and strong family, and we trust each other with everything. No way do we need a contract. Forget it.”

But it’s not just a matter of trust. Consider these scenarios –

  1. Without a written contract, who is to say for certain that you are all on the same page as to whether it is a gift or a loan, and if so when and how it is repayable? You could in all innocence have two totally different visions of what you have agreed on. It’s only fair to everyone to put everything on record.
  2. Even the strongest families go through rough patches – it may be highly unlikely, but it happens, and our law reports are full of unforeseen and bitter family fights.
  3. What if (horrible thought, but we must all be realistic) one of you dies before the debt is repaid? Now you are dealing not with a parent, a grandparent, or a child, but with the executor of their estate, an executor who will need proof of the loan and its terms.
  4. If a divorce should intervene, a family loan is as much an asset (or liability) as any other, and solid proof of it will be essential.
  5. The same applies to an attack by a third party such as the taxman or a creditor.

Bottom line: Have a clear, written contract recording at the very least the amount of the loan and the agreed date and terms of repayment. For significant amounts of money, professional advice is essential.

A final thought – ask about the National Credit Act

It may seem strange in the context of a family, but your loan agreement will be unenforceable if you didn’t register as a “credit provider” in terms of the National Credit Act (NCA) in circumstances where you should have registered. In many cases it won’t be necessary, in that it doesn’t apply where family members are dependent on each other. Plus, only “arm’s length” transactions will as a general rule fall under the NCA. But there are grey areas here, so specific advice is again essential.

29 Jul 2022

12 Questions to Ask Before You Sign That Deed of Sale

Buying or selling property puts a lot of your money at stake, so it’s no time to take chances.

It’s too late to ask questions after you have signed the deed of sale, so let’s have a look at 12 questions you should be asking before you commit yourself to anything.

Some of these questions you only need to ask as a seller, others only as a buyer. But most of them apply to both of you, and not asking them means blinding yourself to possible risks and problems just when you should be treading most carefully.

“Knowledge is power” and it comes from asking the right questions at the right time!

“Knowledge is power” (old proverb)

Whether you are buying or selling property, remember that it is too late to ask questions after you sign the Deed of Sale (often called a “Sale Agreement” or “Offer to Purchase”).

“Knowledge is power” rings particularly true when it comes to any form of process with significant legal consequences, so here are some of the important questions you should ask upfront, before you commit to anything –

  1. What do all the terms and conditions (particularly the legal-speak bits) in the Deed of Sale mean in practice?
  2. Are my rights adequately protected and my risks minimised by the terms and conditions?
  3. What costs will I have to pay, and when?
  4. Is there anything in the Title Deed or local municipal laws and zoning restrictions that may impact me (as a buyer)?
  5. Do I (as buyer) have a copy of the plans, and have all extensions and alterations been authorised by the local authority?
  6. What defects have been disclosed in the Mandatory Disclosure Form, is a home inspection report worthwhile (and permitted by the deed of sale), what is the legal position around voetstoots clauses and patent and latent defects, and does the Consumer Protection Act apply to this sale?
  7. As a buyer, have I checked for practical issues like local fibre availability, crime levels, security, school feeder zones, fixtures and fittings to remain, work-from-home practicality, buy-to-let possibilities etc?
  8. Are there tenants (or other occupants) in the property, and if so what is their status and what does the deed of sale say about when they will vacate?
  9. When does the buyer take possession and occupation? (Careful here, possession and occupation are two different concepts in law)
  10. What arrangements have been made for date of transfer and payment of occupational interest, rates and taxes, levies, municipal service charges and the like?
  11. In a residential complex: As a buyer, what Rules and Regulations will I be bound to, is there a danger of a special levy being levied, and do the latest financial statements for the Body Corporate or Homeowners Association show a healthy financial situation?
  12. Have I as seller appointed my choice of conveyancer (transferring attorney)?

A final but vital thought here – whether you are buying or selling property, a lot of your money will be at stake here. Get professional advice before committing yourself to anything!

29 Jul 2022

Bodies Corporate: Forcing Access to Units, and Round Robin Resolutions

What happens when a body corporate, in trying to trace a leak while carrying out its duty to properly manage the sectional title scheme, is refused access by a “recalcitrant” owner?

We address that question with reference to a High Court decision which saw the unit owner in question concede access to the body corporate only at the very last minute, and then try to dodge liability for costs by attacking the validity of the body corporate’s “round robin” resolutions.

We end off with a strong warning from the Court to approach the Community Schemes Ombud with such disputes rather than the High Court wherever possible.

Owning your own property comes with a raft of benefits, including a general right to privacy and control over who can access your property and who can’t.

But of course there are exceptions. And apart from the obvious ones, a recent High Court judgment highlights one that is particular to sectional title schemes. It involved a unit owner whose “recalcitrant actions” prevented a body corporate from entering his unit to check for a water leak.

A recalcitrant unit owner blocks access to his unit for a leak test

  • A unit in a sectional title scheme had a damp problem and the neighbouring unit owner initially allowed the body corporate access to his unit to conduct a leak test. No leaks were found.
  • However three months later the damp problem was still unresolved, and this time the neighbour flat out refused access to his unit for a second leak detection test. Requests for access through the managing agents, loss adjusters, leak detection agents and the body corporate’s attorneys all fell on deaf ears.
  • The body corporate applied to the High Court for an urgent order compelling access within 48 hours.
  • Although the neighbour had initially taken the stance that there was no reason why a second inspection should be conducted, he had a last-minute change of mind (after taking legal advice) and accepted that the body corporate is entitled to conduct reasonable inspections from time to time in order to properly manage the common property. He made a settlement offer to this effect to the body corporate, which rejected the offer as it still wanted its costs.
  • Ultimately the Court rejected the neighbour’s attacks on the body corporate’s standing to bring the court application and held the neighbour liable to the body corporate for both the leak detection costs and the legal costs (only on the Ombud’s tariff – more on that below).

Were the body corporate’s round robin resolutions valid?

At issue was the validity of two body corporate resolutions. The full details of the various legal challenges mounted against the resolutions will be of great interest to industry professionals, but for most bodies corporate and unit owners perhaps the most important practical aspect is the attack on the first resolution because it was signed only by two of the five trustees on a round robin basis.

The Court was unimpressed by the neighbour’s argument that the resolution was defective because it was not signed by a majority of trustees and did not record date, place, and time.

“It is common practise” said the Court “what with the onslaught and the lagging effects of [Covid 19] that trustees, shareholders, governing bodies and directors meet virtually and sign documents via round robin.”

“It is … not uncommon for [trustees] to manage the affairs of the body corporate as they deem fit and in the best interests of the owners. Ad hoc and informal meetings are often held in order to deal with incidents without having to call or convene a formal meeting of the trustees.”

Each case will be different

The particular facts in this case clearly played a significant role in the Court’s ultimate decision, and there is no substitute for legal advice specific to each unique set of circumstances.

For example, one of this scheme’s Management Rules specifically caters for a trustee meeting by ‘any other method’ which, said the Court “in my view would encompass and encapsulate the extension of the method of signing resolutions. It would be absurd to consider or apply anything to the contrary.”

Important also was the Court’s finding that “throughout the entire process all the trustees were aware of and informed of what was transpiring”.

Finally, a warning from the Court to always approach the Ombud first

The Court once again confirmed the principle that in a matter such as this the parties should in the first instance approach the CSOS (Community Schemes Ombud Service) rather than the High Court.

Commenting that “I am of the view that this matter should never have been brought before this court as first instance” and “There are no exceptional circumstances pertaining to this matter, but rather issues that fall squarely within the ambit of the Ombud that can and would have been expeditiously dealt with at no cost as the employ of legal representatives is not permitted” the Court awarded legal costs to the body corporate only “on the tariff applicable in respect of proceedings under the ambit of the Ombud”.

Reading between the lines, the body corporate was possibly fortunate that the High Court agreed to hear its application at all. It may well have been saved only by the Court’s expressed displeasure with the neighbour’s “recalcitrant actions” and by his conduct in opposing the application in the first place.

29 Jul 2022

Trusts on Divorce: Are You Stuck with an Ex-Spouse as Trustee?

Divorce can be a costly and traumatic process, and if you and your ex-spouse are still co-trustees of your family trusts afterwards, you may well find the situation untenable.

A recent High Court fight over a “not the Titanic” divorce saw ex-spouses both applying for the removal of the other as trustee. In deciding the case, the Court addressed questions of a trustee’s duties, whether a trustee must be impartial, and the grounds on which it will remove a trustee.

We’ll close with a piece of advice on how to avoid the situation these ex-spouses found themselves in.

“Love is grand. Divorce is a hundred grand.” (Anon)

Trusts may be formed for a variety of reasons, and the purpose and structure of each trust will inform the choice of trustees. When it comes to families aiming to preserve and protect family assets for future generations, often both spouses are appointed not only as beneficiaries, but also as trustees.
That’s a great scenario whilst the marriage prospers, but what happens on divorce? A recent High Court decision addressed one such scenario –

‘Not the Titanic’ – this marriage took six years to sink

In 2014, whilst a marriage was (as the Court put it in a judgment rich in nautical imagery) “still in calm waters”, the spouses formed four trusts. Two were called business trusts, one a property trust, and the fourth a family trust. Naming choices aside, the critical issue is that both spouses had been appointed as trustees.

Regrettably in 2015 the couple “drifted” apart and their marriage “ran aground and settled on the rocky shores of the divorce courts door” with the institution of divorce proceedings. “Unlike the Titanic” observed the Court, the relationship took six years more to be finally laid to rest – the divorce was only granted in 2021.

The ex-spouses apply for each other’s removal as trustee

The ex-husband then applied to the High Court for removal of his ex-wife as trustee of all four trusts on the grounds that she had breached her duties as trustee. Most significantly, he said, she had failed to attend trustee meetings for some five years despite being invited to them.

  • Her main defence was that, in the context of the ongoing divorce proceedings, her ex-husband’s conduct made it impossible for her to attend to her duties as trustee. The Court was unconvinced by her various allegations in this regard, and two aspects in particular bear mention –
  • She complained that being in the minority her decisions were overruled – not an excuse for failing to attend meetings held the Court.
  • Her ex-husband failed to provide a vehicle to enable her to attend meetings – again no excuse, said the Court, there being a provision in the trust deed for virtual meetings.
  • Also counting against her was the fact that she was living in a trust-owned property “but fails to maintain such and pays no rent at all despite receiving the amount of R10 000,00 per month towards property expenses incurred.”
  • Finding that she had not been involved in the trust’s affairs and did nothing to safeguard them, the Court ordered her removal as trustee.

The Court then rejected as being without merit her counterclaim for her ex-husband’s removal as trustee on the grounds of a breach of his duty of trust towards her and a conflict of duty between his private interests and his duties as trustee.

Let’s have a look at the law behind those decisions –

What are a trustee’s duties?

Per the Trust Property Control Act: “A trustee shall in the performance of his/her duties and the exercise of his/her powers, act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another”.

Must a trustee be impartial?

The Court: “It is not required of a trustee to be total[ly] impartial or [to have] no connection with the beneficiaries, but rather that he or she is capable of bringing the necessary independent mind to bear [to] the business of the trust and of deciding what is in the interests of the trust.”

When will a court remove a trustee?

The court has a discretion which it must exercise “with circumspection”.

Per the Court: “The court has to be satisfied that the requested removal will be in the best interest of the trust and the beneficiaries … a mere conflict of interest between trustees and beneficiaries or amongst the trustees [is] insufficient for the removal of a trustee … the overriding question is always whether or not the conduct of the trustee imperils the trust property or its administration”.

There is no requirement to prove bad faith or misconduct, rather “the essential test is whether such disharmony, as in the present matter, imperils the trust estate or its proper administration … It is therefore clear that the court may remove a trustee from office in the event that such removal will be in the interest of the trust and its beneficiaries.” (Emphasis supplied)

In closing…

If you are faced with a divorce scenario, avoid a situation such as the ex-spouses in this matter faced by making sure that all questions around any trusts involved – such as who is to remain as trustee, who is to remain as beneficiary and so on – are resolved as part of the divorce process, and not left for future resolution.

Even better, take professional advice upfront when setting up trusts on how to avoid any future disputes that may arise should your marriage ever sail into stormy waters.

06 Jun 2022


It has come to our attention that an asbestos inspection company is sending emails to estate agents stating that it is now mandatory for sellers and landlords to “disclose the presence of any asbestos materials in a property, before entering into a new sale or lease agreement”. The article also states that the Property Practitioner Act requires sellers and landlords to disclose the existence of all defects. It therefore suggests that the mere existence of asbestos, is a defect, and that this must now be disclosed. The author relies on the recently published Asbestos Abatement Regulations to substantiate this view. (Read here to view our previous publications on this topic – Asbestos roofing article

We disagree with the views expressed in this article.

The regulations do not in any way oblige sellers or landlords to disclose the mere presence of asbestos. The regulations only require owners of properties which have asbestos, and which may expose workers to a risk of exposure, to have it inspected, or what to do, if they wish to treat or remove asbestos. Furthermore, it is established law that where a purchaser purchases voetstoets, the seller can only possibly be held liable for material, latent defects he actually knew of and fraudulently withheld at the time of sale, and which the purchaser could not determine himself upon a reasonable inspection.

There is not and never has been a duty to “disclose all defects”. And these PPA certainly does not change this as is alleged.

The mere fact that asbestos happens to form part of the roofing for example does not amount to a defect in any manner or form, which is what this article suggests. Assuming there is asbestos and assuming the property has been inspected, and that the asbestos has been found to be a threat, then this may need to be disclosed as a defect. At best, agents may want to possibly add some further questions to their condition reports, along the lines of:

Does the property have any asbestos that you are aware of which could also expose a worker to any risks associated with asbestos?

If so, has the property been inspected in terms of the Asbestos Abatement Regulations and can you provide a copy of the report?

If the seller cannot answer these questions to a purchaser’s satisfaction, then it is for a purchaser to decide whether to make an offer or to attach any further conditions in this regard, if so inclined.

We hope this will clarify any confusion which this article may cause.

03 Jun 2022

New Ruling on Divorce Assets: How Does it Affect You?

Whether you are about to tie the knot or about to divorce, you should know about an important new ruling from the High Court, declaring a section of the Divorce Act to be constitutionally invalid.

We start off with a recap of the 3 choices of “marital regime” available to you on marriage, then we discuss whether or not this new ruling will apply to your own marriage situation.

For those of you to whom it does apply, we analyse the practical effect of the Court’s judgment on your financial rights and prospects in divorce.

“…the inequality at hand is caused when, after the conclusion of the marriage, a distortion is caused by the fact that one spouse contributes directly or indirectly to the other’s maintenance or the increase of the other’s estate without any quid pro quo.” (Extract from judgment below)

You may have read of the recent High Court decision declaring a section of the Divorce Act invalid.

To understand the importance of this new ruling for many couples about to divorce (and for all couples about to marry), let’s start at the beginning –

A recap – your 3 choices of “marital regime” on marriage

  1. You can marry in community of property: All of your assets and liabilities are merged into one “joint estate” in which each of you has an undivided half share. On divorce or death the joint estate (including any profit or loss) is split equally between you, regardless of what each of you brought into the marriage or contributed to it thereafter. This by the way is the “default” regime – so you will automatically be married in community of property if you don’t specify otherwise in an ANC executed before you marry.
  2. You can marry out of community of property without the accrual system: Your own assets and liabilities, both what you bring in and what you acquire during the marriage, remain exclusively yours to do with as you wish. Note here that the “accrual system” (see option 3 below) will apply to you unless your ANC (ante-nuptial contract) specifically excludes it.
  3. You can marry out of community of property with the accrual system: As with the previous option, your own assets and liabilities remain solely yours. On divorce or death you share equally in the “accrual” (growth) of your assets (with a few exceptions) during the marriage.

Before we move on to the altogether less happy subject of divorce – if you are about to marry, take full advice on which of these options is best for you before you tie the knot!

Does this new ruling apply to your marriage?

This ruling does not apply to you if your marriage was terminated by death or divorce prior to the judgment (which was handed down on 11 May 2022).

It does apply to you if –

  1. Your marriage is still in existence, and

  2. You chose Option 2 above, in other words if you are married out of community of property without accrual, and

  3. Your marriage was concluded after 1 November 1984. Why that 1984 cut-off date? Well, what this High Court case was really all about was the fact that where a marriage was concluded before 1 November 1984 (that’s when the new “Matrimonial Property Act” took effect), courts had a discretion to make a “redistribution order” transferring assets between the divorcing spouses. But (until now) courts have had no such discretion for marriages concluded after the cut-off date.

The constitutional invalidity

That time bar – the 1 November 1984 cut-off – is set by a section of the Divorce Act. And that, held the Court, is unconstitutional because it discriminates between couples based solely on the date of their marriage.

It deprives couples married after the cut-off date of the opportunity to ask a court for a share of benefits acquired during the marriage, based on their respective contributions (direct and indirect) “to the other’s maintenance and estate growth during the subsistence of the marriage”. In practice (until now), a spouse could be left destitute after spending decades contributing to a marriage and to the other spouse’s wealth.

The Court’s declaration of constitutional invalidity, whilst it must still be confirmed by the Constitutional Court, changes all that.

The practical effect of the ruling

  • Courts now have a very wide discretion to order a “redistribution” of assets between you and your spouse, ordering a transfer of assets and money from one spouse to another, regardless of what your ANC provides.
  • That gives you the right to claim compensation for your contributions to the marriage, in other words to claim a fair share of wealth accrued during the marriage (assets brought into the marriage aren’t affected). You will have to prove your case, show what you contributed, and convince the court that a redistribution in your favour is warranted.
  • The practical effect of such a redistribution order “is that the party who contributed to the other’s gain is compensated for its contribution to the extent that a court finds just and equitable. To this end, the court is cloaked with a wide discretion taking into account an infinite variety of factors.” Factors likely to be considered are each spouse’s respective contributions of time, services, savings of expenses, their current financial positions, what was agreed in the ANC, and the like – each case will be different.
  • Note that this is not the same as accrual (Option 3 above). With accrual, the spouse with less asset growth (accrual) during the marriage has an automatic claim against the other for half the difference. But with a “redistribution order”, there is nothing automatic or 50/50 about it – instead the court exercises its discretion as to what (if anything) to award to who.

The aim here is not to put the spouses into equal financial positions, the aim is to redress an unfair financial imbalance.

03 Jun 2022

Landlords: Zoning Law Contravention Could Invalidate Your Lease

Here’s a warning to property owners to know and comply with your local municipal zoning laws. Contravene them at your peril.

For example, as a landlord you could be left with an invalid lease, and no claim against your tenant for arrear rental, municipal service charges, or anything else. That’s exactly the fate that befell a landlord recently when a High Court ruled in favour of a tenant whose business (“coffee shop, home industry and restaurant”) fell foul of the “Single Residential 2” zoning that applies to the leased premises.

We discuss the outcome in that case and end off with some practical suggestions for both property buyers and landlords.

“…it is a general rule that a contract impliedly prohibited by statute is void and unenforceable…” (extract from judgment below)

Here’s yet another warning from our courts of the importance of complying with your local municipal zoning laws, whether you buy property to live in, as a capital investment, or to let out.

One risk for a landlord is finding yourself with an invalid lease and no claim against your tenant. A recent High Court decision illustrates –

The unlawful coffee shop and the invalid lease

  • A landlord rented premises to a tenant for use as a coffee shop, home industry and restaurant. The tenant also resided on the premises, but no rental for the residential component was specified in the lease.
  • The business use was contrary to zoning provisions indicating that the property could only be used for dwelling purposes as it was zoned “Single Residential 2”.
  • The landlord, although aware of the zoning restrictions, told the tenant that she could operate her business.
  • When the landlord sued for arrear rental and payment of municipal charges the tenant’s defence was that the lease was invalid and unenforceable.
  • The High Court (hearing an appeal from the Magistrate’s Court) held the lease agreement to be illegal, void and unenforceable. The tenant, it said, could not be expected to establish from the municipality, before entering into the lease agreement, whether the premises could be used for her business. She had seen other restaurants in the same street and had no reason to question the landlord’s right to allow her to trade as she did.
  • As to the applicable law, the Court found that “although it is a general rule that a contract impliedly prohibited by statute is void and unenforceable, this rule is not inflexible or inexorable [inevitable].” The Court’s analysis of when this will apply (and when it won’t) will be of great interest to property professionals, but for most landlords the important thing is the fact that your lease will normally be invalid when it contravenes local legislation.
  • In that event, you will have no claim against your tenant because, as the Court here put it “this court shall not countenance unlawful conduct by allowing the [landlord] from benefiting from an illegal contract.”
  • Bottom line – the coffee shop tenant is not liable for rental, nor even for municipal charges relating to her occupation and use of the premises.

Zoning – what to do when buying or letting out property

The bottom line is that you need to understand all local zoning restrictions before buying property or letting it out to a tenant. If as a landlord you are aware of a possible issue in this regard, take professional advice on whether you may be able to word the lease in such a way as to protect you from losing all your claims against the tenant should worst come to worst.

31 May 2022

Website of the Month: Are Your Passwords in the Green?

We all know how vital it is to use strong passwords online, but for a sobering look at just how quickly the “average” cybercriminal can hack any that aren’t up to scratch, go to Hive Systems’ article “Are your passwords in the Green?” here.

Their “Time it takes a hacker to brute force your password in 2022” infographic provides a strong visualization of the weakness and strength of various lengths and types of passwords. Also read the warnings and infographic in the section halfway down the article “What about the elephant in the room; what if my password has been previously stolen, uses simple words, or I reuse it between sites?”

Essential knowledge in these days of soaring online crime!

29 Apr 2022

Beware The Badly Worded Bond Clause!

Whether buying or selling a property you are no doubt dealing with a high-value asset, and a reminder to have your sale agreement professionally drawn or checked, before you sign anything, comes from a recent High Court decision.

A seller with cold feet was unable to escape from an unfavourable sale agreement even after the buyer had failed to obtain a bond four years down the line.

The problem was the particular wording of the “bond clause”. That’s a clause that has tripped up many a seller and many a buyer in the past, and we analyse why things went badly for the seller (and well for the buyer) in this matter.

“The terms of the contract are the decisive criterion by which any potential expiry of a deadline has to be determined” (extract from the judgment below)

A recent High Court decision provides yet another reminder to have your property sale agreement drawn (or at least checked) by a professional. Before you sign anything!
As is the case in many such property sale disputes, it started with one of the parties – in this case the seller – looking for a way to escape the agreement after getting cold feet.

The seller tries to escape the sale

  • The sale agreement in this case contained a bond clause, a very common “suspensive” clause giving the buyer an agreed period of time within which to obtain a bond, failing which the agreement would come to an end automatically.
  • Bond clauses commonly specify a 30-day period from the date of the sale agreement, making it clear when exactly the period expires.
  • The problem in this case was that the bond clause was worded somewhat differently, no doubt because of an issue with unlawful occupants on the property.
  • This clause gave the buyer 30 days, not from the date of the sale, but from the date on which she was given “sole beneficial occupation”.
  • For a variety of reasons the transfer was delayed for four years, and the seller – now keen to get out of the sale because she had decided that the agreed price was too low – argued that the agreement had fallen away automatically. The bond clause period, she said, expired 30 days after the buyer took possession and occupation (the date of the sale) and the buyer’s failure to get her bond within that period put an end to the sale.
  • The buyer on the other hand argued that the 30 days never started running at all, because even four years later there were still unlawful occupants on the property (the sale agreement authorised her to evict the occupants at her own cost, and she hadn’t done so).
  • The Court held that the sale agreement distinguished between “possession” and “occupation” – which had both been given to the buyer immediately on signature of the sale agreement – and “sole beneficial occupation”. In the context of this agreement, held the Court, “sole beneficial occupation” meant that the buyer, “to the exclusion of all others, was to enjoy the benefit of occupation of the property pending transfer.”
  • Although the buyer had indeed been given “possession” and “occupation” four years ago, she had never been given “sole beneficial occupation”. The 30-day period had never started running and the seller is bound by the sale agreement.

For want of a well-drawn bond clause…

Badly drawn bond clauses have been the downfall of many a seller and many a buyer in the past. In this case the seller is not only stuck with an unsatisfactory sale price, she also loses four years’ worth of income because the buyer is not liable for occupational interest until sole beneficial occupation is given. Plus of course the seller must now pay all the legal costs.

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