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06 Sep 2019

A September to Remember!

We as South Africans sport a very rich cultural history that is rooted in the celebration of who we are, where we came from and more importantly, where we are going. Heritage month has arrived, and we are urged as a nation to reflect on our history that molded our presence, and which will pave the way for our future.

The South African Constitution supports and protects our country, our heritage and our culture. Our Constitution is regarded as one of the most progressive and fairest pieces of legislation in the world. Our legal system protects us and regulates the mechanisms that allow us to live in a free and fair environment. We are fortunate to be living in a country where our different cultures are celebrated and encouraged.

South Africa is in the middle of economic uncertainty and we are being judged by the world and exposed to opinions and accusations that influence our daily lives. Whispers are heard around every corner about people wanting to liberate their investments and run for the hills or hide money under mattresses. The current decreasing housing market is a big factor in the economy as property owners are focusing on the fact that their investments are not achieving ideal prices. If we look at this from a different angle, as perspective is one the most valuable traits a person can possess, we have arrived at a market more favourable for buyers. This is where first time buyers can get a foot in the door with a decreased prime interest rate and reduced sale prices. We are also experiencing a positive outcome from financial institutions when people are applying for bonds and other funding. The fact that our market is experiencing a dip creates opportunity for new investors and related service providers to inject our economy with fresh ideas. We have access to resources and we are players in a free market system, we need to stay true to our heritage and seek opportunities to rise above the hurdles.

It is important to note that South Africans are the most resilient people who have ever walked this earth and when a nation as powerful as ours is able to give way to differences and act together, there will be nothing that can stop us.

On Heritage Day the entire country will light the fires of hope and prosperity in celebration of OUR day and we should then take a moment and appreciate where we are, where we came from and where we are going. Let’s make this September one to remember.

CORNELIUS BOTHA
Attorney
September 2019

13 Aug 2019

Left Money in a South African Will But Living Overseas?

What happens if you want to access a South African bequest overseas?

BizNews gives you a step-by-step breakdown of how to go about it, depending on whether you are –

  • Non-resident,
  • Financially emigrated, or
  • A South African resident temporarily abroad.

Read also the section on taxation.

Bear in mind that of necessity an article like this can only give you an overview of some general principles, and that getting anything wrong could cost you dearly. Professional advice on your specific circumstances is a no-brainer here!

13 Aug 2019

Unlawful Occupiers: Eviction Is Possible, but Neither Quick nor Easy

This may be a good time to take Mark Twain’s advice to “Buy land, they’re not making it anymore”.

“It is only once the court concludes that there is no defence to the claim for eviction and that it would be just and equitable to grant an eviction order that it is obliged to grant that order” (Extract from judgment below)

When you find a property you like the looks of, just check upfront whether there is anyone currently in occupation. If there is, be sure to take legal advice on the occupiers’ legal position, because whilst it’s certainly possible to evict unlawful occupiers, you might be in for a long and difficult fight.

We discuss the strong constitutional and statutory rights enjoyed by unlawful occupants in the context of a recent High Court matter where a family, having refused to vacate a newly-sold apartment, proceeded to live in it rent-free for over two years.

“Buy land” said Mark Twain, “they’re not making it anymore.” With the first green shoots of a property market recovery supposedly now showing through perhaps this is indeed the time to take his advice.

Just be sure, if the property you have your eye on is occupied by anyone, to seek proper legal advice on the occupiers’ legal position before you put pen to paper.

We all know that unlawful property occupiers enjoy substantial constitutional and statutory rights, and a recent High Court case provides a good example of the fact that whilst it is certainly possible to evict unlawful occupiers, it could well be neither quick nor easy.

The family that lived rent free for two years

  • A buyer bought an apartment from the previous owner’s liquidators and took transfer on 31 March 2017.
  • The new owner advised the family occupying the apartment that it must vacate by 14 April or face eviction proceedings.
  • The family refused to budge, and the owner, after complying with the many formalities required of it by PIE (the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act), applied to the High Court for an eviction order.
  • The family defended the application, firstly on the basis that it was, it said, in lawful occupation in the form of a lease agreement. The Court rejected this defence, finding that the family was in unlawful occupation even on its own version of the facts, because the “lease” (which the owner denied was ever validly entered into) had lapsed at the end of May 2017. The family’s attempt to persuade the Court that the lease had been “tacitly” renewed was doomed to failure because of the owner’s unrelenting insistence that the family’s continued occupation was unlawful.
  • Secondly the Court considered the all-important question “Is it just and equitable to evict?

Per a 2017 Constitutional Court judgment which dealt extensively with the constitutional and statutory rights of unlawful occupiers, the High Court’s starting point was this: “that no one may be evicted from their home without an order of court made, after considering all the relevant circumstances”, having regard to the interests and circumstances of the occupier/s, and paying “due regard to broader considerations of fairness and other constitutional values, so as to produce a just and equitable result” (emphasis added).

This is where questions of indigence and the risk of homelessness arise, and this is the hurdle at which many a property owner has stumbled in the past.

In this case however, the owner triumphed, the Court finding on the facts that the family was financially able to pay rental but had paid nothing whilst enjoying free occupation for over two years. It had also had legal representation and could not be regarded as economically vulnerable or unable to obtain alternate accommodation.

Critically, perhaps, the Court commented that the father (in whose name the eviction application was brought and fought) “has known of the real risk of eviction for a period in excess of two years and as such, he ought reasonably and responsibly to have made contingent plans in the event that an eviction order is granted … The professed risk of homelessness is not borne out by the undisputed facts of the matter and [the father] cannot be characterised as indigent by any means”.

  • Finally, the Court, having decided to grant the eviction order, had to consider when to make the order effective from. It’s an important enquiry because as an owner you could find yourself successfully holding an eviction order, but with an expensive delay before being able to implement it. The Court must consider “what justice and equity demand in relation to the date of implementation of that order and it must consider what conditions must be attached to that order. In that second enquiry it must consider the impact of an eviction order on the occupiers and whether they may be rendered homeless thereby or need emergency assistance to relocate elsewhere.”

Fortunately for the property owner in this case the Court did not provide for too long a delay, giving the family eight weeks to vacate (slightly longer than requested because a minor child’s interests were involved).

The family also has to pick up the tab for all the legal costs.

Buyers – some final advice

First prize is always to have a solid agreement in place with any occupiers before you buy an occupied property.

So sign nothing – not an offer to purchase, nor a lease, nor any form of occupier contract – until you have your lawyer’s advice!

13 Aug 2019

How to Stop Vital Evidence Being Destroyed

“Surprise the enemy” (Sun Tzu in ‘Art of War’)

Your “strong” court case is worth nothing without the hard evidence to support it.

What if that vital evidence is in the hands of the enemy, and you have every reason to believe that it will be destroyed or spirited away before trial? Fear not, our law has a powerful weapon to help you in the form of an “Anton Piller” search and seizure order.

Let’s have a look at how the “surprise” element inherent in applying for these orders is both central to their successful execution, and an underlying reason for our courts’ caution in granting them. You have many requirements to meet and the recent Supreme Court of Appeal case of a software developer’s claims for damages and unlawful competition show how they work in practice.

You suspect that someone you are suing (or about to sue) will destroy or hide vital evidence in their possession. Perhaps by shredding documents or deleting electronic records supporting your case, or perhaps by spiriting away computer hard drives full of incriminating information. You fear that if they get away with it your case will be dead, or at least compromised.

Fortunately our law has a strong and quick remedy for you – the “Anton Piller” order, by means of which the High Court can authorise a search for, and a seizure into safekeeping of, the relevant evidence until trial.

Surprise raids and fishing expeditions

This is a drastic and draconian remedy. For obvious reasons this is a “surprise raid” on the other party – giving advance notice to the other party of your court application would defeat the whole object.

Which means that the other party suffers an unannounced and substantial invasion of its privacy, leading to all sorts of disruption and potential damage to its business.
Which is why our courts have laid down strict requirements that you must comply with before you will be granted an order. A recent Supreme Court of Appeal (SCA) decision illustrates –

  1. A developer and seller of computer software wanted to sue a company it had dealt with for damages on the basis of alleged breaches of contract and for unlawful competition. It obtained in the High Court an Anton Piller order giving access to the Deputy Sheriff, independent attorneys and forensic specialists to search and seize “documents specified in the order, computer equipment or any other storage devices”. This order was subsequently set aside and the developer, attempting to have the order re-instated, approached the SCA for leave to appeal.
  2. The Court in refusing leave to appeal analysed and applied the requirements for an order to preserve evidence under three main headings. You must establish (prima facie, in other words “on first appearance” but not definitively at this stage) the following –
    • That you have a cause of action against the other party, which you intend to pursue. The developer had, said the Court, established this.
    • That the other party has in its possession “specific documents or things which constitute vital evidence in substantiation of [your] cause of action…” This, said the Court, required the developer to “identify the documents it sought to preserve with the necessary degree of specificity”. A “blanket search for unspecified documents or evidence, which may or may not exist, is not permitted”. You have to be specific.
    • The major flaw in the developer’s case was, said the Court, its failure in its affidavits to identify or specify which vital information was in possession of [the other party] that needed to be preserved. It proposed a “keyword” search to be used in searching the whole of the other party’s data base that was “invasive and a trawling expedition through every aspect of [the other party]’s business” including sensitive and confidential information to which it could not be entitled.
    • That you have a “well-founded apprehension that this evidence may be hidden or destroyed or in some manner spirited away by the time the case comes to trial…” But in this case, said the Court, the developer had failed to show that the other party was untrustworthy or dishonest, plus it had “failed to set out any factual basis for an objective conclusion to be reached of the well-founded and reasonable apprehension that evidence would be concealed.”

3. This particular order, held the Court, “involves a departure from the basic premise upon which Anton Piller orders are granted, namely that they are to preserve evidence, not search for it”, whilst its execution was “nothing but a fishing expedition” (emphasis added). The software developer could not succeed in re-instating its Anton Piller order.

13 Aug 2019

Can Your Bank Take Your Money Without Permission?

“A bank is a place that will lend you money if you can prove that you don’t need it” (Bob Hope)

Is your bank entitled to clean out your current account’s credit balance – with neither notice to you nor your permission – to settle a separate debt you owe it?

Banks have always argued that they are allowed to do exactly that in terms of our common law principle of “set-off” – and that having that ability helps us all in the end by giving them more security when lending us money.

The National Credit Regulator however approached the High Court for a determination on whether or not the National Credit Act has changed all that. We discuss the issues at stake and the Court’s ruling.

A recent High Court decision has settled the knotty question of whether your bank can take money it holds for you in one account to cover your debt to it in another, without your permission and without notice to you.

Firstly, what is “set-off”?

To understand how important this new decision is, we need to go back to our common law (unwritten law) principle of set-off. In simple terms, common law set-off allows one debt to be cancelled out by another. So if for example I owe you R1,000 and you owe me R900, I am both your creditor and your debtor, and vice-versa. If we come to blows, I can then set the one debt off against the other with the net effect that I owe you R100.

Credit-lenders, and in particular banks, used to make extensive use of this to collect debt. If for instance you fell behind in your mortgage bond or credit card payments, your bank could, if it was so inclined, take the arrears out of your current account as soon as your salary was paid into it – without your consent and without notice to you.

Banks have always argued that this ability has made it easier for them to lend money to us when we ask for it, as it reduces their risk by giving them more security if things go wrong. Giving notice or asking for consent would, they argue, allow a recalcitrant debtor to quickly withdraw the funds and frustrate the debt collection. But the other side of the coin of course is that you could suddenly find yourself without money to live, let alone to service your other debt payments – a situation particularly hard on lower earners and those struggling with mountains of debt.

Enter the NCA (National Credit Act) in 2005…

How the NCA changed things

In broad terms, the NCA (when it applies – see next paragraph) restricts set-off in such a way as to give the consumer the right to choose whether or not to consent to set-off, which accounts it may be applied to, in respect of which amounts, when it is to be applied, and in respect of which debts.

But does the NCA apply to your particular debt? In most cases, yes. In a nutshell (there are some “ifs” and “buts” here so ask your lawyer for specific advice) the NCA applies to most personal loans, home loans, overdrafts, credit card debt, asset finance agreements, lease agreements and so on. It covers consumers who are individuals and some – not all – “juristic persons” (companies and the like – take advice for details).

Which brings us to the High Court…

Nevertheless at least one bank (which is unlikely to be alone in this practice) has continued until now to apply common law set-off without consent, in other words they would take money from a customer’s account to cover the customer’s debt on a separate credit agreement. The bank argued that the NCA’s set-off restrictions did not apply on its interpretation of the NCA, in its circumstances and to its credit agreements. Importantly, its agreements omitted any mention of set-off (where an agreement does mention set-off, there is no argument – the NCA restrictions definitely apply).

Having received complaints from consumers to this effect, the National Credit Regulator asked the High Court to interpret the NCA’s provisions and to rule on the legality of the bank’s practice.

The High Court’s decision

Common law set-off without your consent as above cannot happen if the NCA applies to your credit agreement.

In a nutshell – you have the choice! Banks and other credit-lenders must ask you before taking money from one account to cover your debts in another.

13 Aug 2019

Warning: Property Email Scams Surging

“Forewarned is Forearmed!” (Wise old saying)

Here’s another warning about cyber-scams in the property industry because the more they increase, and the cleverer they become, the more vital it becomes for you to be aware of them and to protect yourself from them. Remember that you become a prime target when you buy or sell property – the rich pickings on offer when property is involved make sure of that.

So we’ll have a look at how these cyber-scams work, at how you can protect yourself from them and at how, no matter how much security the transferring attorneys may have on their side, you still need to be constantly on guard.

Why yet another warning about cyber-scams in the property industry? It’s because the hard fact is that the criminals are winning this war. In fact we are now reportedly the “second most targeted country in the world with regard to cyber-attacks” (Law Society of South Africa).

Hence, no doubt, the Legal Practitioners Indemnity Insurance Fund report of “over 110 cybercrime related claims with a total value of R70 million” in the period July 2016 to August 2018.

The scammers are using more and more sophisticated techniques to lull their victims into complacency, and your best protection is your own vigilance – forewarned is definitely forearmed!

And remember that property transactions will always remain a firm favourite with online fraudsters for two simple reasons –

  • Property sales usually involve large amounts of money.
  • Electronic communication between attorneys and clients is a fertile ground for interception and deception.

A seller’s or a buyer’s nightmare – every cent stolen!

As a seller, you’ve sold your property for R5m, transfer to the buyer has been registered but the money doesn’t show up in your bank account (let’s call it “account A”). You phone your conveyancer only to be told “but we did pay you, we followed your instruction to pay into account B.” Of course account B was set up by a fraudster and your R5m is long gone.

Or as a buyer, you have paid the full purchase price into the transferring attorney’s “new bank account C” and are shocked to be told by the attorney that you have actually paid nothing at all to anyone – except to a scamster. Good-bye both money and property!

What happened?

How your money gets taken – 2 main scenarios

Cyber criminals are resourceful, creative and constantly updating their methods so this is by no means an exhaustive list of your risk areas. To date however the two main categories of scam remain –

  1. Your attorney’s payments to you: As a seller, when you give the transfer instruction to your attorney you will nominate a bank account – account A in this example – to receive the sale proceeds. Before transfer however (often at the very last minute) the conveyancing firm receives a genuine-looking email “from you” changing your banking details to “my new account, account B”. Your emails to and from your attorney have been intercepted, and your details cleverly spoofed. Your money is gone – forever. Of course if you chose the right attorney to attend to your transfer in the first place this shouldn’t happen to you – but, as we shall see below, the scammers are so sophisticated now that you can never ever let your guard down, no matter how trustworthy the firm.
  2. Your payments to the attorney: The main risk here is to the buyer paying the whole or a large portion of the purchase price to the transferring attorney. Of course transfer duty and other costs of transfer can also add up to a tidy sum, whilst as a seller you will be paying for things like bond cancellation costs, rates, agent’s commission and so on.

The scam here is that once again emails are intercepted, and this time you receive an authentic-looking but entirely fraudulent email asking you to pay into “account C”. The email appears to come from the conveyancing firm but of course it is again a clever (often very sophisticated) impersonation, this time of the firm’s branding, details and email address.

The false account details might be in the email itself or in a falsified attachment – nothing is safe. The email may be in the form of a “we’ve changed our banking details” notification, or the criminal may work on the basis that you just won’t notice the change. And of course account C isn’t the conveyancer’s trust account at all, and the minute you make a payment into it your money is – once again – gone forever.

Who can you recover your stolen money from?

By the time you realise you have been scammed, the criminals are long gone and your chances of catching up with them are remote to say the least.

So could the attorney possibly be liable? A recent High Court judgment deals with that very issue…

Court: Attorney negligent, must pay almost R1m

In this case a transferring attorney was ordered to pay her client damages of R967,510-53 for negligence.

In a nutshell, the attorney had attended to a property transfer for the sellers, and a scammer intercepted emails between the sellers and the attorney’s secretary. This was a classic “Scenario 1” operation, and seemingly a sophisticated one – the scammer persuaded the secretary to accept an emailed “my bank account details have changed” instruction and to pay the proceeds into the scammer’s account.

The sellers sued the attorney for damages, the attorney denied any negligence whatsoever, but the Court found that she had indeed failed to carry out her mandate with the “due care, skill and diligence expected of a reasonable attorney and a conveyancer in the circumstances.”

What is important for you is that the Court reached this conclusion on the particular facts of this matter. There were specific factors present here such that a “diligent, reasonable attorney” would, said the Court, have taken steps to verify the information in the fraudulent emails.

That suggests that there are many possible sets of facts which would have left the seller unable to prove any failure of duty by the attorney. Your risk is that if you try to hold the attorney liable you will have to prove that your loss resulted from his/her fault and not from yours – that’s never going to be easy and if you fail, you are left high and dry.

Protect yourself. Be vigilant!

So prevention really is much better than cure here. Litigation will be expensive and risky, and even if you succeed in your damages claim the attorney’s normal indemnity insurance excludes these types of claims so your victory could be a hollow one.

Fortunately there are several common sense steps you can take to minimise your risk –

  • If you have the choice of transferring attorney (which you normally would have if you are the seller), choose an attorney you trust to do the job properly, carefully and professionally.
  • Having said that, no matter how much security your attorneys have put in place on their side, if it is your system that is vulnerable that is what the criminals will exploit. So keep all your anti-virus, anti-malware and other security software updated, learn all about protecting yourself from malware/spyware/phishing attacks, and generally treat all electronic communications with caution – even those appearing to come from a trusted source like your attorney.
  • Read “Is That Sender For Real? Three Ways to Verify the Identity of An Email” on FRSecure’s blog. All the tips given there are important, but at the very least use the methods given to find out where the email really comes from. Then check back to see that it matches in every detail the email address you were given at the start of the transfer process.
  • Be suspicious if anything in an email just feels “not-quite-right” – perhaps only a cell phone number is given, or a free generic email address (like Gmail) is used, or the wording is somehow “off”. If the email makes you even the slightest bit uneasy, err on the side of caution and investigate further.
  • Most importantly, never accept notification of any supposed change in your attorney’s banking details without visiting or phoning your attorney to check all is in order (don’t of course use the contact details given in the suspicious email, they could also have been doctored!).
06 Aug 2019

COMMENTARY ON THE PROPERTY SECTOR TRANSFORMATION CHARTER CODE

Section 20(1) of the Property Practitioners Bill states that:

“The Property Sector Transformation Charter Code, as amended from time to time, applies to all property practitioners”

But how will the code be enforced on the industry? Well, this will be done in an indirect but very effective way. From the time that the Property Practitioners Bill becomes law, one of the requirements for the issue of a Fidelity Fund Certificate will be that the Property Practitioner is “in possession of a valid BEE certificate.” (Section 50(a)(x)). To get this BEE certificate you will have to comply with the Code.

This Property Sector Code was published in the Government Gazette on 9 June 2017. Its main purpose is to set out a path for transformation in the property sector. In the preamble it states that the Code:

  • Constitutes a framework and establishes the principles upon which Broad Based Black Economic Empowerment (B-BBEE) will be implemented in the property sector; and
  • Establishes targets and qualitative undertakings in respect of each element of B-BBEE; and
  • Outlines processes for implementing the commitments (to transformation) contained in the code and creates mechanisms to monitor and report on progress.

It is therefore of vital importance for all owners of estate agencies to know what is happening here so that they can start preparing themselves for compliance. It will also be of interest to all estate agents to know of these big changes that will be taking place in the industry.

The Code starts by setting out the challenges facing the property sector, starting with situation created by the Native Land Act of 1913, which denied black South Africans the right to the ownership of more than 93% of the productive land in South Africa. It sets out the sad situation that we are faced with in the property sector where property ownership is predominantly white and where black people are underrepresented as employees and business owners in all parts of the property sector.

The code also seeks to redress gender inequalities in the sector, especially in respect of black women.

Amongst the objectives of the code are:

  • To promote economic transformation, especially as regards ownership and control and management of businesses, and make the sector more representative;
  • To unlock obstacles to property ownership by black people;
  • To promote development and encourage investment, especially in under resourced areas;
  • To support micro and small enterprises;
  • To improve skills development;
  • To facilitate the accessibility of finance;

 

EXEMPTED MICRO ENTERPRISES

The Code will not apply equally to all businesses in the property sector. The Code recognizes that it will be more difficult for smaller businesses to comply and lower levels of compliance will be required by these smaller businesses. Businesses falling below certain thresholds are totally exempted from specific compliance with B-BBEE requirements.
Property enterprises whose businesses are “asset-based”, I assume this to mean enterprises which trade in property, are exempt if the net assets of the business are less then R80 million. Enterprises who are services based, like property management companies, will be exempt if the turnover is less than R10 million.

Estate agencies however, get a special mention and they are only treated as Exempted Micro Enterprises (and exempt from the B-BBEE requirements) if the annual turnover is less than R2.5 million.

QUALIFYING SMALL ENTERPRISES

Assuming your estate agency has an annual turnover of more than R2.5 million, the next category of enterprises that you might fall into is the category of “Qualifying Small Enterprises”. These are enterprises with assets of less than R400 million for asset-based enterprises and an annual turnover of less than R50 million for service-based enterprises.
But once again, estate agencies get a special mention, an estate agency business will fall into this category if it has an annual turnover of less than R35 million.

So, for an estate agency to fall into the category of Qualifying Small Enterprises, it must have an annual turnover of more than R2.5 million, but less than R35 million. I think that a lot of estate agencies will fall into this category.

GENERIC CATEGORY

Estate agencies with an annual turnover of more than R35 million will fall into the Generic (unlimited) category. Other service-based property businesses will only fall into this category if they have an annual turnover of more than R50 million.

START-UP ENTERPRISES

A new business will be treated as an Exempted Micro Enterprise for the first year. If it is going to tender for contracts above a specific value during this period, it will however need to submit a scorecard for a Qualifying Small Enterprise, or a Generic scorecard, depending on the value of the contract.

THE SCORECARD (section 10)

Your B-BBEE compliance is determined on the basis of a scorecard. There is a slight difference in the weighting on the scorecards for Qualifying Small Enterprises and Generic Enterprises (to make it easier for the smaller enterprises) but the emphasis on the various elements remains similar. The factors that are measured in the scorecards are:

CATEGORY QUALIFYING SMALL ENTERPRISE GENERIC
Ownership 27 points 30 points
Management control 9 points 9 points
Employment equity 11 points 13 points
Skills development 17 points 19 points
Enterprise and supplier development 35 points 39 points
Socio-economic development 2 points 2 points
Economic development 4 points 5 points
Total 105 points 117 points

 

The category of economic development is unique to the property sector. Under this heading the extent to which an entity contributes towards development in under resourced areas is measured.

The maximum score possible is 105 points for QSE’s and 117 points in the Generic category. If you exceed targets you can also qualify for bonus points.

Scores for each category are calculated based on set formulas and the outcome of the calculation will determine your level of compliance.

OVERSIGHT

The implementation of the code is to be overseen by the Property Sector Charter Council. Entities within the property sector will be encouraged to contribute towards funding the Charter Council and this will be recognised as part of Enterprise Development or Supplier Development. You can therefore buy some points by contributing to the costs of the Council.

Qualifying enterprises (including all estate agencies with a turnover of more than R2,5 million) will have to submit a B-BBEE report, a certificate and a scorecard, verified by an accredited BEE verification agency, to the Charter Council on an annual basis. They will then receive their BEE certificate.

KEY PRINCIPLES IN MEASURING B-BBEE COMPLIANCE

  • Substance takes precedence over legal form.
  • Misrepresentation will be dealt with in accordance with the B-BBEE Act.
  • The splitting of enterprises to enable them to qualify in lower category may constitute an offence.
  • All representations about compliance must be supported by suitable evidence.

 

APPLICATION OF THE CODES

How this code is to be applied and how the scores are to be calculated is very complicated and requires specialist knowledge of the B-BBEE Act. That is where the BEE verification agencies will come in.

An enterprise will be awarded points on their scorecard for compliance with different categories. The closer you are to your targets, the more points you will earn. You also have the possibility to earn bonus points if you exceed your targets. Once your scorecard is marked, it will determine at which level of B-BBEE compliance the enterprise is at.

Below you will find the targets that have been set in the various categories on the scorecard. Compliance to this level will give you a score in excess of 100%. You will then qualify as a level 1 Contributor. The levels go right down to Level 8, and if you score less than 30 points, you will be treated as a Non-Compliant Contributor.

OWNERSHIP

In this section, the targets for ownership of property sector companies that render services (like estate agencies) are stated as follows:

27% ownership by black people

10% ownership by black women

3% ownership by “broad-based ownership schemes and/or designated groups”

3% ownership by “new entrants”.

To score in this category, property owning companies are given a period of 10 years to achieve 50% black ownership, in annual increments.

MANAGEMENT CONTROL

The targets that are set in the code for Management Control of estate agencies are the following:

50% of voting rights must be held by black people at board level, of which one half must be held by black females;

50% of the executive directors as a percentage of all executive directors must be black and half of these directors must be black females;

60% of the executive management must be black, and half of these must be black females.

The code specifically defines the term “management” in the context of an estate agency. Somebody is part of management if he is earning more than R360 000 per year and is “possessing a level of authority”. This means that for someone to qualify as a manager for the purposes of your scorecard, the person will have to earn no less than R30 000 per month.

In generic enterprises, for someone to qualify as a senior manager, they must earn more than R450 000, for someone to qualify as a middle manager, they must earn between R225 000 and R450 000 per annum and a junior manager must earn between R225 000 and R150 000. These requirements obviously put in place to prevent window dressing. If you are going to call an employee a manager, they will need to have a salary that goes along with the title.

EMPLOYMENT EQUITY

The employment equity targets for estate agencies are as follows:

50% of all agents must be black and 35% must be black females.

35% of the total management team must be black and 18% must be black females. (Remember, these people need to earn decent salaries – as stated above – to qualify as managers.)

30% of the administrative team must be black.

It seems as if there’s quite a bit of overlap between the categories of Management Control and Employment Equity, and you may be able to earn points in both categories for the same thing.

SKILLS DEVELOPMENT

Under this heading, targets are set for enterprises to use a certain percentage of their income for skills development, including learning programs, apprenticeships and internships. An agency will need to spend 5% of its expenditure on skills development to qualify for the full quota of points in this section.

ENTERPRISE AND SUPPLIER DEVELOPMENT

Under this heading, targets are set for enterprises to use the services of other entities that are BEE compliant.

SOCIO-ECONOMIC DEVELOPMENT

Under this heading, you are awarded points if you reach targets for contributions to socio-economic development projects that benefit black groups and promote transformation and development.

ECONOMIC DEVELOPMENT

Under this heading, enterprises are encouraged to invest in economic development projects, especially those in under resourced areas.

WHAT LEVEL OF COMPLIANCE IS REQUIRED TO OBTAIN A “VALID BEE CERTIFICATE”?

My understanding of the law at this stage is that it will not matter what your level of compliance is, and that all you will have to do is go through the process to work out your scores and then submit that to the Charter Council. The Charter Council will then issue you with a BEE certificate. This certificate might reflect that you are completely non-compliant. The certificate will however be a valid BEE certificate and on the strength of the certificate you will qualify for your Fidelity Fund Certificate.

This process would therefore just help the Charter Council to assess the current situation within the property sector as regards transformation.

I’m confident however that this situation will not last forever. My prediction is that, in terms of the Regulations to the Property Practitioners Act, the Minister will regulate that a “valid BEE certificate” will have to reflect that you qualify at a certain level of compliance. At that stage things are going to get very interesting in our industry. I also predict that this is going to happen sooner rather than later.

Miltons Matsemela

Deon Welz

05 Aug 2019

Choose your conveyancer wisely!

The importance of the choice of a transferring attorney was emphasized in the recent High Court case of Agu v Krige and Others (20763/2017) [2019] ZAWCHC 46. The case involved the theft of R720 000 of trust money by a deceitful conveyancer.

In the court, Agu, who was the Purchaser of a property, was asking for an order in terms of which Krige, the Seller, would be forced to transfer the property to her. This was despite the fact that the conveyancer, who had received the purchase price, had stolen the money.

The sale agreement stipulated that payment of the purchase price by the Purchaser was to be made in full to the Seller’s conveyancer before transfer. The purchase price was then to be held in an interest-bearing trust account (with interest accruing to the Purchaser) until transfer was registered. The purchase price was then to be paid to the Seller.

The Purchaser had paid the full purchase price to the conveyancing attorneys (who had been nominated by the Seller). The Purchaser contended that they had therefore discharged their obligation to make payment. The Seller obviously denied this, and alleged that the Purchaser’s obligation to pay would only be discharged once he had received payment.

The Court therefore had to determine whether the conveyancer was the Seller’s agent in receiving the funds for the property. If the conveyancer was the Seller’s agent, then the Purchaser could be said to have paid the purchase price and would be entitled to the transfer of the property. If the conveyancer was not the Seller’s agent to receive the purchase price, then the Purchaser could not be said to have paid, and would not be entitled to transfer unless she paid again.

The Court found in favour of the Purchaser and held that the conveyancer had acted as an agent for the Seller when collecting the purchase price. Thus, the Purchaser had “complied with her obligation in terms of the deed of sale by making payment of the purchase price to the [conveyancer].” The Court therefore ordered the Seller to transfer the property to the Purchaser.

Our feeling is that this is another one of those cases that could have gone either way, and it is a judgment that might be overturned on appeal.

But what should we learn from this case? It emphasises the importance of making use of an honest and reputable conveyancer when purchasing or selling property. It is also a reminder to look at your own deed of sale, and, if you had wanted the case to turn out differently, you should make appropriate changes to ensure that this question is not open to interpretation.

If you need assistance in making changes to your deed of sale, do not hesitate to contact one of our attorneys.

Storm Barry and Deon Welz
July 2019

05 Jul 2019

Business Email Dos and Don’ts

“The email of the species is deadlier than the mail” (Stephen Fry)

Do your business emails enhance your brand or tarnish it? It’s a critical question, particularly for businesses with high email volumes (that’s most of us these days) and it’s entirely up to you what the answer is.

On the one hand it’s all too easy to jeopardise an entire business relationship by hitting the “Send” button on a badly considered, written or configured email. On the other, it’s easy to turn every email you send into a powerful projection of all the good things you want everyone to know about your business and about you personally.

Get started with “The dos and don’ts when sending a business email” on BusinessTech, a 13-point checklist of things to watch for, from “Subject Line” to “Conversation Closer”.

03 Jul 2019

Airbnb Owners and Buyers – Should You Be Worried About the New Regulations?

“While travel on our platform accounts for less than 1 in 8 visitors to South Africa, those guests boosted the economy by R8.7 billion and helped create 22,000 jobs last year alone” and “Regulation is a useful and necessary tool of good policy, but policy comes first. Sadly, the current wording of the draft Bill is very vague and unclear. It indicates the creation of specific regulatory approaches without any explanation of what they are trying to encourage or solve.” (Airbnb)

Recent media reports of government plans to regulate Airbnb and other “short-term home rentals” have sent shivers down the spines of many Airbnb owners (and those thinking of buying property for the purpose).

But should you be worried? It’s an important question because short-term letting can be highly profitable for property owners who own or buy the right property in the right place and at the right time.

So let’s have a look at what has actually happened so far. What stage has the proposed new legislation reached and what does it actually provide? And is it possible at this stage to make any sort of informed guess as to what the final outcome might be?

Firstly, there is no doubt that Airbnb can be highly profitable for you if you have – or buy – the right property in the right place at the right time.

Just be sure to comply with all municipal zoning and other by-laws and (if you are in a community housing scheme) any Body Corporate or Home Owners Association requirements. There is also a host of other legal, tax, financial and practical concerns to consider – proper legal advice (and a short-term letting contract tailored to meet your particular needs) will pay handsome dividends.

A new factor to take into account now is government’s proposed new regulation of short-term rental schemes like Airbnb and its accommodation booking platform. The news has sent shivers down the spines of both existing and prospective Airbnb owners.

But is there actually anything to worry about? It’s much too soon to be sure but there may be grounds for optimism. Let’s start with a look at what has actually happened to date.

Here are the facts so far

  • Government’s declared intention is to regulate short-term home rentals because, it says, of perceptions that it may be hurting the tourism sector. Like other digital disruptors – Uber springs to mind – Airbnb has literally thrown a cat among the pigeons, and we are no doubt now seeing the fallout.
  • The proposal is contained in the Tourism Amendment Bill, published on 15 April 2019 with a 60 day window for public comment which has now been extended to 15 July. The Bill includes a provision for “the determination of thresholds for short-term home sharing”.
  • The relevant new definition in the Bill is: “‘short-term home rental’ means the renting or leasing on a temporary basis, for reward, of a dwelling or a part thereof, to a visitor.”
  • Reaction from stakeholders has been varied to say the least, with media reports suggesting a heady mix of both strong support for, and bitter opposition to, the new proposals. Perhaps most pertinently Airbnb has met with the Minister of Tourism and reportedly supports “fair and proportional rules that are evidence-based, benefit local people, and distinguish between professional and non-professional activity taking into account local conditions.”

So where to from here?

Time alone will tell what the final Amendment Act will actually look like, but the majority opinion does seem to be that in the end result a fair and workable balance will be struck between the need to regulate the industry on the one hand, and the need to encourage entrepreneurship and grow tourism on the other.

Expect an outcry and court challenges if that doesn’t happen.

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