MC2Agent and Property Tips

Capital Gains Tax (CGT) in South Africa is a tax you may need to pay when you dispose of an asset - such as property, shares, or even a valuable item - for more than you originally paid for it. This tax has been in effect since 1 October 2001 and is governed by the Eighth Schedule of the Income Tax Act (No. 58 of 1962). A "disposal" doesn't only mean selling an asset; it also includes donation, alienation, or death (deemed disposal).

To calculate CGT: (Capital Gain – Exclusions) × Inclusion Rate × Marginal Tax Rate.

Firstly, calculate the capital gain, which is the difference between the sale price and the original purchase price (known as the base cost). Then you deduct any exclusions - individuals get an ‘annual’ exclusion of R40,000. The inclusion rate determines how much of the remaining gain is taxable: 40% for individuals and 80% for companies and trusts. Finally, the taxable amount is added to your annual income.

For example, if an individual sells a piece of land for R300,000 of which the base cost was R100,000, the capital gain is R200,000. After applying the R40,000 annual exclusion, R160,000 remains. At an inclusion rate of 40%, only R64,000 is subject to tax. If the person earned R300 000 in the tax year, the gain of R64 000 is added to the R300 000 and income tax is payable for that tax year on R364 000.00 at the marginal rate applicable to the tax bracket the person falls into, which in this example will be R42 678 + 26% of taxable income above R237 100. Effectively the person will be liable for R16 640.00 capital gains tax for the year on top of the normal income tax (R64 000 x 26%).

Next week we will discuss what can be included in the base cost.

Please note that this article is only a general information on capital gains tax. SARS prohibits a person to give specialized tax advice if such person is not a qualified and registered tax practitioner.  For expert and personalised advice, it is strongly advised that you consult with a qualified tax professional.

SALE OF IMMOVABLE PROPERTY

Section 2(1) of Alienation of Land Act

Did you know that according to section 2(1) of the Alienation of Land Act, the sale of immovable property is only valid if a written deed of sale is signed in wet ink by both parties. In other words, unlike movable property, immovable property cannot be sold through an oral agreement or by way of electronic signatures. 

When must an antenuptial contract be signed?

If you want to marry out of community of property (with or without accrual), you must sign an antenuptial contract before the wedding. If the antenuptial contract is signed after the marriage, you will be married in community of property. While it is possible to change this through a court order later, it is a lengthy and expensive process. Additionally, it's crucial to ensure that the contract is registered at the Deeds Office within three months of signing, otherwise you will also be married in community of property. 

Visit our website: www.mcvdberg.co.za for more information.

DID YOU KNOW?

WILLS AND ESTATES

Original will 

A deceased’s originally signed will must be submitted to the Master of the High Court, so the originally signed will must always be kept in a safe place. If no original is available, an application must be made to the Master for acceptance of a copy, and if the Master refuses, a court application will have to brought for acceptance of a copy of a will. The estate will be administered in terms of the Intestate Succession Act 81 of 1987 if a copy of the will is not accepted. 

Visit our website: www.mcvdberg.co.za for more information.

In the matter of Moatshi v City of Tshwane Metropolitan Municipality, the Court had to decide whether section 118(1) of the Local Government Municipal Services Act allows for interest to be charged on an outstanding balance when clearance figures are issued. 

In this matter, Mr Moatshi purchased a property from an insolvent estate. The attorneys applied for clearance figures and figures of R215 000 and R258 000 were issued. Upon investigation it was clear that the Council was charging single as well as compound interest on the outstanding amounts. 

The purchaser took to court to have an order declaring that interest may not be charged on the outstanding amounts. The purchaser argued that the Council is only allowed, in terms of the abovementioned Act, to charge service fees, surcharges on fees, property rates and municipal taxes, levies and duties and that this excludes interest. 

The court found that while there is no provision for interest in Section 118 of the Act, Section 96 provides that the Municipality must adopt a debt collection policy, which policy must provide for interest on arrear amounts.  It was concluded that a Municipality may not charge interest in general on arrear amounts, and that interest can only be charged if sections 75A (2) – (4) have been complied with. 

The above requirements include: 

(1)  The consumption occurred by the user who has a contractual relationship with the Council 

(2)  A statement was sent to the user demanding payment by a set due date 

(3)  The account remains unsettled by the due date stipulated 

In the above scenario the purchaser was not the consumer and no contractual relationship existed between the parties. The purchaser did not receive a statement and failed to settle same by a specified due date , therefore the Court found that the Council was not allowed to charge interest on the arrear amounts in this instance. 

DID YOU KNOW?

DEFECTS

Latent Defects

Latent defects are hidden defects at the property which cannot be seen with the naked eye or cannot be established by the Purchaser by conducting a reasonable inspection of the property. The Seller has the legal obligation to disclose any hidden (latent) defects to the Purchaser that the seller is aware of. Latent defects that the seller are not aware of falls within the ambit of the voetstoots clause, and the seller will not be liable for these.

Read our MCSellersGuide on www.mcvdberg.co.za for more information

DID YOU KNOW?

BONDS

Suretyship 

Did you know that if a company is securing a purchase with a mortgage bond and the financial institution requires suretyship, the spouse of the surety—if married in community of property—must also give consent to the suretyship, even if they have no interest in the company. 

Read our MCBondGuide on www.mcvdberg.co.za for more information

An offer to purchase stands as a pivotal contract that solidifies the transaction between a seller and a purchaser. Given its significance, it is commonly assumed that the presence of two competent witnesses during the signing of the offer to purchase is essential.

Section 2 of the Alienation of Land Act states that an alienation of land shall only be of force if the parties, meaning the seller and purchaser, or their respective agents have signed the offer to purchase. There is thus no statutory requirement for witnesses to sign the offer to purchase. However, the role of these witnesses goes beyond a mere formality; they serve as vital markers in confirming the identities of the signing parties and validating their intention to be bound by the terms of the offer to purchase. The act of witnessing not only provides assurance regarding the authenticity of the signatures but also acts as a safeguard against potential disputes where a party might later deny their involvement in the agreement.

While the customary practice may suggest that one or two witnesses should sign the offer to purchase, it is crucial to note that the law does not explicitly mandate this requirement. Failure to have witnesses sign the document does not automatically invalidate the offer to purchase. Nonetheless, it is prudent to bear in mind the practicality of having witnesses available for future reference, should the need arise to verify the authenticity of the transaction.

Property practitioners are hence encouraged to have at least one witness sign the offer to purchase in the presence of the parties. Even though it is not a statutory requirement, it can prove to be useful in resolving possible future disputes regarding the enforceability of an offer to purchase.

DEFECTS

Patent defects are those defects present at the property that can be easily seen or ascertained during a reasonable inspection by the purchaser. The purchaser must do a thorough inspection before making an offer. A seller is not liable for any patent defects. If a purchaser requires patent defects to be repaired, it should be specified in the sale agreement.  Examples of patent defects are cracked tiles or windows, visible damp, marks and nails on walls etc.

TERMS OF AN OFFER TO PURCHASE 

“Voetstoots” 

“Voetstoots” is a legal term which means an asset is sold “as is, without warranty” or “in the conditions as it stands”. When immovable property is sold voetstoots the seller is not liable for any latent defects (defects that are hidden) that he/she was not aware of. This does not negate the duty of a seller to disclose all latent defects that he/she is aware of. The seller will also not be liable for patent defects (visible defects).

Visit our website: www.mcvdberg.co.za for more information.

Joint Will

Did you know that in order to amend a joint will, both testators must consent to the amendment. Therefore, after the death of the first dying spouse, the surviving spouse cannot amend the joint will or sign a new will. 

Visit our website: www.mcvdberg.co.za for more information.

WILLS AND ESTATES

SARS

Property owners in the City of Tshwane are urged to check whether the municipal valuation of their properties is accurate and fair, and if not, residents must object before 2 May 2025. This objection must be considered before a final decision is made.
 
The City has done a revaluation of all properties for the purpose of levying property rates. The new rates will apply from 1 July 2025. 
 
The municipal valuation roll, which contains the particulars of each rateable property, is available for inspection on the city’s website and at municipal offices, or available on this link: https://propertyvaluations.tshwane.gov.za/

Residents can obtain objection forms from: 
https://propertyvaluations.tshwane.gov.za/Downloads for submission to the following email: prov@tshwane.gov.za

Alternatively, hard copy forms can be obtained at municipal offices, although for verification and record purposes property owners are advised to use email as far as possible.  
 

Herewith some practical guidelines when lodging an objection:
 

• If you recently purchased your property for a significantly lower price than the municipal valuation, a copy of the purchase agreement should be submitted as a supporting document to your objection 
• ?If the average sale price of properties in your area is significantly lower than your own valuation, a copy or extract of an estate agent reports should be submitted. 
• If a private valuation of your property has been done and shows a disparity with the municipal valuation, a copy of the valuation report should  be submitted.

Section 18(3) of the Administration of Estates Act, 66 of 1965 stipulates that when the value of the assets in an estate of a deceased is less than R250 000 a representative is appointed by the Master of the High Court and not an executor, and the process of winding up the estate is much simpler.

There is no requirement to place an advertisement in a newspaper concerning the estate and there is also no requirement to draw up a liquidation and distribution account for lodgement at the Master.

When a property is sold out of a deceased estate with a value of less than R250 000, the representative signs on behalf of the estate.

If the property of the deceased estate is sold for more than R250 000, and only a section 18(3) Letter of Authority has been issued, there are two options on how to proceed:
 

1. The property must first be transferred to the heirs and the heirs can sell to the purchaser (this will have the effect that the estate must pay the costs for the inheritance transfer).
 
2. A Letter of Executorship must be applied for, and an executor must be appointed, which will entail that the long process of winding up the estate must be followed. Only after the new Letter of Executorship is issued, an Offer to Purchase can be signed by the executor and the purchaser.

A customary marriage must be registered at the Department of Home Affairs within 3 months after conclusion of the marriage (section 4(1) of the Recognition of Customary Marriage Act). However, failure to register the marriage does not affect its validity in terms of section 4(9) of the Recognition of Customary Marriage Act. Although failure to register the marriage does not render the marriage null and void, what are the implications on the dissolution of such an unregistered customary marriage?

The court confirmed in Netshituka v Netshituka and Others 2011 (5) SA 453 (SCA) that should a spouse to a customary marriage enter into a civil marriage or civil union with another person, the subsequent marriage (civil marriage or civil union) is null and void. A mere separation does not terminate a customary marriage. Only a court of law by a decree of divorce may terminate a customary marriage in terms of section 8(1) of the Recognition of Customary Marriage Act read together with the Divorce Act on the ground of irretrievable breakdown of the marriage. It is however important to establish with prima facie proof that the customary marriage exists before the said marriage is dissolved through the court. Prima facie proof in most cases is the marriage certificate that is handed to the court on the day of the divorce hearing. It is however not necessary to register the customary marriage first for purposes of obtaining prima facie proof before the marriage gets dissolved.

A property report is regarded as a record of the latent defects (defects that cannot be seen with the naked eye) disclosed by the seller to the purchaser, and is currently a legal requirement (when an agent signs a mandate with a seller), in terms of the Property Practitioner’s Act (PPA). It is strongly advised that the seller completes this report thoroughly and hands it to the potential purchaser prior to signing an agreement. If the seller does not complete this property report it will be deemed that he/she did not disclose any latent defects to the purchaser, and such as seller can be held liable for latent defects that was not declared, but that he/she was aware of.

It is however important to note that this report does not constitute a warranty of any kind or nature made by the seller to the purchaser relating to the existence, nature or extent of any defect. For example, should the seller declare on the property report that any additions and/or improvements have been duly affixed on approved building plans and it comes to the purchaser’s knowledge that the building plans are not updated, the seller cannot be held liable if he was not aware that they were not updated. The purchaser however has a legal obligation to conduct a thorough inspection of the property to establish if it contains any patent defects (defects than can be seen with the naked eye) even if the seller has provided the purchaser with a property report as a seller is not liable for patent defects not specifically addressed in the offer to purchase.

Although the property is sold “voetstoots”, the seller has a legal and contractual obligation to disclose the latent/hidden defects to the purchaser that he/she is aware of. The voetstoots clause will only protect the seller from the latent defects he/she either discloses or are unaware of. Should a purchaser encounter a defect after registration and it is alleged that the seller was aware of the said defect, the purchaser must prove the following:

- The property had the defect at time of conclusion of the sale agreement;
- The seller deliberately concealed the defect as he/she knew that if it was not concealed and the purchaser was aware of the defect, the purchaser would not have continued with the transaction or the purchaser would have negotiated a more favourable purchase price;
- The seller knew about the defect and did not disclose same to the purchaser and
- The seller made a fraudulent or material misrepresentation.

When a seller chooses an estate agent to sell his/her property, a mandate must be given by the seller to the estate agent. The code of conduct of the Property Practitioners Act (hereinafter the “PPA”), specifically Regulation 34.3, states that an estate agent shall not offer to sell or let a property without a mandate given by the seller or lessor.

The mandate can be in the form of a sole, exclusive, dual or multiple agent (open) mandate. Any changes that either party wants to bring to the mandate must be done in writing and attached to the original mandate.

It should be noted that it is possible for a seller to provide a verbal open mandate to an agent in certain circumstances, but this is a risky route to follow. A verbal mandate can open the floodgates for disputes and litigation, as the exact terms and conditions of the mandate are not in writing.

Section 67 of the PPA stipulates that an agent should not accept a mandate unless the seller or lessor of the property has provided him/her with a fully completed and signed mandatory disclosure form (an immovable property condition report (IPCR)).

The agent is also required to sign the IPCR and provide a complete copy to the purchaser, who is also then required to sign the IPCR. This form requires the seller or lessor to clearly disclose the defects in the property, especially defects that are not easily identifiable. The IPCR should be attached to the agreement of sale and forms an integral part of the agreement of sale.

If no mandatory disclosure form was completed and signed by the seller, it will be interpreted as if no defects were disclosed to the purchaser and the agent and/or seller may be held liable in certain circumstances for damages. If an agent has not provided the purchaser with a copy of the signed IPCR, the Property Practitioners Regulatory Authority may take action against such agent or impose an appropriate sanction against such agent.

It is therefore crucial that an agent provides the purchaser with a completed and signed IPCR in the prescribed form. Section 67(5) of the PPA confirms that purchasers have the right to thoroughly inspect a property before countersigning the IPCR and finalizing the transaction.

Sellers and agents should ensure that an IPCR is completed, signed and provided to the purchaser before the offer is made. Purchasers should ensure that a thorough inspection is completed to ensure that all defects he/she wants repaired are written into the sale agreement to be enforceable.

When a property is purchased in South Africa, either Value-Added Tax (VAT) or Transfer Duty will be levied. It is therefore important to distinguish between the two.
VAT is a type of tax that is charged on the supply of goods and services by a VAT vendor and is paid directly to the South African Revenue Service (SARS) by the Seller. VAT vendors are registered in terms of the Value-Added Tax Act 89 of 1991. Any business or individual may register for VAT, but it becomes compulsory to register as a VAT vendor where the business has a revenue of more than R1 000 000 for a period of 12 succeeding months.

Transfer Duty, like VAT, is also a type of tax. Transfer Duty is charged on the fair market value of the property acquired. The tax position of the Seller will determine whether VAT or Transfer Duty is payable in the transfer of a property:
 

1. If the Seller is a registered VAT vendor and the property forms part of their VAT-able goods and it is sold in the ordinary course of their business, VAT will be payable. This will apply, for example, to a developer who is registered for VAT, as these transactions form part of his normal business.
 
2. If the Seller is not a registered VAT vendor, Transfer Duty will be payable.
 
3. If the Seller is a registered VAT vendor, but the property that forms part of the transaction is their private residence, Transfer Duty will be payable, as it is not part of the VAT-able goods of the seller’s business.
 
4. If the Seller claimed input VAT during or after the purchase of a property, VAT will be payable at the sale of the property.
 
5. According to section 16(3) of the Value-Added Tax Act, if the Seller is a non-VAT vendor, and the Purchaser is a VAT vendor, the Purchaser will be able to claim back notional VAT of 15% of the purchase price from SARS after registration.
 

The purchaser is obligated to pay transfer duty, and the seller is obligated to make payment of the VAT with his next assessment.

Where either party to an agreement of sale is a trust, the following should be kept in mind:
 

- Trustees of a trust can only act in their capacity as trustees once the Letter of Authority is issued by the Master of the High Court. No sale agreement can be signed for “a Trust to be formed”.

- A trust deed usually stipulates the minimum number of trustees that must be in office. It is therefore important to verify that the number of trustees on the Letter of Authority is equal to or more than the minimum number of trustees as stipulated in the Trust Deed. If the number of trustees are below the minimum, a new Letter of Authority will have to be obtained from the Master of the High Court. Any agreements signed whilst the number of trustees is not sufficient will be null and void.

- A resolution by all trustees must be signed, authorising the sale or purchase before a sale agreement is signed. If no resolution was taken by the trustees before the signature of the sale agreement, such agreement is void. A sale agreement can’t be ratified by the trustees.

- One trustee can be authorised by a resolution to sign all necessary transfer documents

It is therefore imperative to determine the number of trustees required, and to obtain a resolution from the trustee’s that authorises the transaction before an offer to purchase is signed by any trustees on behalf of a trust.

This is part 3 in the 3 part series of most frequent questions pertaining to building plans.
 

- Zoning regulations: What is it?

Cities are divided into zones; each zone is intended for certain types of properties.

The various zone types are industrial, commercial, residential, agricultural and open space.

Each zone type is further divided into classifications that determine the types of developments allowed. Each zone is governed by specific regulations as set out by the local authority. The zoning certificate of the property will stipulate what uses are allowed on the property.
 

- What happens if there are illegal structures on the property?

Homeowners who build without obtaining the necessary local authority consent may be subject to paying a fine, imprisonment, having the illegal structure demolished, and/or having their municipal rates increased.

- Second dwelling: Can I build a second dwelling (Granny flat) on my property?

If you want to build a second dwelling on your property, a consent use application in terms of Spatial Planning and Land Use Management Act 16 of 2013 will have to be brought, which is a costly and timeous process. You must find out from your local government or municipality to determine their regulations and guidelines for second dwellings. Factors such as erf size, zoning restrictions, setback requirements, and building codes may influence the eligibility of your property for a second dwelling.

- Is there an obligation on a seller to provide approved building plans in a property transaction?

In the next 2 MC2Agents the most frequent questions pertaining to building plans will be discussed, this is part 2 in the 3 part series.

- What happens if any structure is built over the building line?
 

An erf typically has four building lines, usually a two meter space from your boundary wall, which means that you are not allowed to build anything within two meters of your boundaries. The building lines of your property are indicated on the building plans of the property.

If a structure, for example a lapa roof or carport, is built over the building line, a building line relaxation must be applied for, to which your neighbour will have to consent. A town planner or architect is usually appointed to attend to this application.
 

In the next 3 MC2Agents the most frequent questions pertaining to building plans will be discussed, this is part 1 in the 3 part series.

- What happens if any structures are built over a servitude?

 
A servitude is a right by which property owned by one person, is subject to a specified use or enjoyment of another, which can either benefit or burden the owner of the property.
 
Your property may have services laid under it by the municipality, such as storm water, sewerage, electricity etc.
 
Although the general rule is that no structures may be built on a servitude, the municipality will sometimes allow you to encroach on such servitudes.
 
An encroachment application must be lodged at the municipality which must be approved by the legal department. The approval is totally at their discretion. If rejected the structures on the servitude will have to be removed.
 

- Who pays for any rectifications during the plan approval process?

 
The current owner of the property will be liable for the payment of any rectifications during the plan approval process, unless otherwise agreed to between the seller and purchaser.
 

- Is it necessary for a wendy house to be on the building plans?
 

In short, yes, the wendy house must be on the building plans. Whether it is temporary or permanent, a wendy house is a fixed construction and needs to be included in the building plans.
 

- Does a carport need to be on building plans?

 
A carport is defined as a structure with walls on no more than two sides that is intended to provide cover for a vehicle, caravan, or boat under the National Building Standards Act (Act 103 of 1977).
 
Thus, it is a structure and must be on the building plans.
No matter what type of carport you erect on your property, plans are required.

Offers to purchase usually contain either of the following clauses:

Example 1

“This offer is irrevocable until 25 June 2023  and is binding upon acceptance, irrespective of notification of acceptance to the purchaser.”

OR

Example 2

“The Purchaser’s offer shall constitute an irrevocable offer, which may not be withdrawn prior to presentation to the Seller, and which offer shall remain available for acceptance until 25 June 2023, whereafter it shall lapse and be of no further force and effect.“

There is a big difference on the effect this wording has on the date on which the offer lapses.

Example 1: Should the estate agent present an irrevocable offer to the seller, it is open for acceptance by the seller and cannot be withdrawn by the purchaser within the specified irrevocable time period as provided for in the offer. The purchaser can only revoke the offer should the seller not have accepted it on or before the 25th of June 2023. The irrevocable character of the offer simply falls away after the stated date and it becomes revocable at the instance of the purchaser.

Should the seller accept the offer to purchase made by the purchaser at any given time before 25 June 2023, a binding contract comes into being. Should the purchaser fail or neglect to revoke the offer after the date on which it was stated to be irrevocable, the offer does not lapse and is open to the seller for acceptance until the purchaser revokes the offer. Until it is revoked, it remains open and is capable of acceptance by the seller.

Example 2: Should the offer to purchase read that the offer lapses after the irrevocable time period, the seller must accept it before midnight (or such other time as contractually specified) on the 25th June 2023. The offer lapses and will be of no force and effect on the morning of 26 June 2023.

Our standard offer to purchase contains the irrevocable offer-clause. The advantage is that it provides flexibility where the seller may not be able to sign the offer on a specific date and the purchaser is willing to not revoke the offer before a specified date, after the specified date, the purchaser can revoke the offer if the seller has not yet accepted the offer, but the sale agreement does not lapse after the specified date.

Transactions relating to agricultural land is governed by the Subdivision of Agricultural Land Act 70 of 1970. The Act prohibits transfer of agricultural land to more than 1 (one) individual as the subdivision of agricultural land is sometimes not economically feasible.

It is a common practice that farm owners bequeath a farm to their children. This then creates the question as to what is the best outcome where agricultural land is to be inherited by more than one person?

The possible solutions are as follows:

A redistribution agreement can be entered into by the heirs in terms of which a trust is registered:
 

- The heirs can establish a trust wherein they shall be the beneficiaries and the agricultural land to be transferred to the trust.   
 

A redistribution agreement can be entered into by the heirs in terms of which the property is transferred only into the name of 1 of the heirs:
 

- An agreement between the heirs that the farm should be transferred to a nominated heir and the other assets would then be redistributed to the other heirs or the heir that receives the property makes a monetary contribution to the other heirs.
 

Consent from the Minister

- An application to the Minister of Agriculture for a consent to subdivide the agricultural land stating the reasons for granting of the consent to subdivision must be submitted. If it is not economically detrimental the Minister may issue consent that the farm may be transferred to more than one person.

- This is however a cumbersome process and can take up to 12 months or longer for the consent to be issued.
 

Sale of the farm
 

- The last option is to sell the farm and the proceeds are then divided equally between the heirs. For a sale all the heirs must consent thereto.
 

The matrimonial property system applicable to a foreign marriage is not determined by the laws of the country where the marriage was concluded, but by the laws of the country where the husband was domiciled (sees himself to be permanently resident)  at time of conclusion of the marriage. We however deal with all persons married in terms of a foreign country’s law similar to people married in community of property.

1. Seller

Signature of the sale agreement

- The sale agreement is not a document that is lodged in the Deeds Office, therefore if the property is registered only in one spouse’s name, only such spouse must sign the agreement and the assistance of the other spouse is not needed.
- If the property is registered in both spouses’ names, both must sign the sale agreement.
 
Signature of the transfer documents

- Where the property is only registered in the name of one spouse, the other spouse needs to assist, by signing the Power of Attorney to pass transfer, which document is one of the documents that is lodged at the Deeds Office.
- Should the property be registered in both spouses’ names, both spouses need to assist each other on the Power of Attorney to pass transfer.
 
2. Purchaser

Cash purchase

- In the event that a property is purchased cash, no assistance is required from the purchaser’s spouse on any of the documents (sale agreement and transfer documents), as none of the documents that the purchaser signs are lodged at the Deeds Office.

Purchase through bond finance

- In the event that the property is purchased through bond finance, the purchaser’s spouse will have to assist on the bond documents that are lodged at the deeds office being the Power of Attorney and draft bond deed, as well as on all the documents that the bank require co-signature on.  

In next week’s MC2Agent we will discuss the rules and requirements of the banks with regards to parties married in terms of foreign law.

A marriage's formal validity is governed by the law of the place where the marriage is concluded. This, however, does not imply that the legal consequences of such a marriage is governed by the legislation of the country in which the marriage was concluded.

In terms of South African law, more specifically the Matrimonial Property Act 88 of 1984, a marriage is considered to be in community of property if the husband is resident (domiciled) in South Africa at the time of the marriage's conclusion and no valid antenuptial agreement has been entered into. In cases where a marriage is concluded outside of the parties' respective domiciles, the law of the husband's domicile will apply (see Frankel's Estate and Another v The Master and Another (1950) ALL SA 347).

According to Holland v Holland 1973 (1) SA 897 T, a person's domicile is the specific jurisdiction area or country in which they currently reside or plan to remain permanently. Domicile is a subjective test based on the parties' intentions. However, in accordance with South African common law, specifically the Frankel case mentioned above, the judge stated the following regarding domicile:

“The conclusion at which I arrive is that the matrimonial regime is governed by the law of the husband’s domicile at the time of the marriage, and that it is not governed by the law of another domicile which he then intends to acquire immediately or within a reasonable time after his marriage.”

Nothing prevents spouses to a civil marriage—where the husband resides in another country — from concluding an antenuptial contract that governs the outcomes of their union and facilitates its registration in South Africa (see Johnson and Others v Registrar of Deeds 1931 CPD 228 and RCR 64 of 1961). This does not, however, lead to the marriage being one where there is no community of property. The parties still need to be defined as:

            “Married which marriage is governed by the laws of (name the country)”

Section 18(3) of the Administration of Estates Act, 66 of 1965 stipulates that when the value of the assets in an estate of a deceased is less than R250 000 a representative is appointed by the Master of the High Court and no executor, and the process of winding up the estate is much simpler.

There is no requirement to place an advertisement in a newspaper concerning the estate and there is also no requirement to draw up a liquidation and distribution account for lodgement at the Master.

When a property is sold out of a deceased estate with a value of less than R250 000, the representative signs on behalf of the estate.

If the property of the deceased estate is sold for more than R250 000, and only a section 18(3) Letter of Authority has been issued, there are two options on how to proceed:

1. The property must first be transferred to the heirs and the heirs can sell to the purchaser (this will have the effect that the estate must pay the costs for the inheritance transfer).

2. A new Letter of Executorship must be applied for, and an executor must be appointed, which will entail that the long process of winding up the estate must be followed. Only after the new Letter of Executorship is issued, an Offer to Purchase can be signed by the executor and the purchaser.
 

Sellers must bear in mind that although the purchaser is responsible for payment of the transferring attorney’s fee, there are certain costs and miscellaneous charges for which they (the sellers) are responsible, and which is payable before registration of a property can take place.

Some of these charges are standard, but some are unforeseeable and depends on the specific transfer.

1. The most common charges for which a seller is responsible are:
 

• Bond cancellation costs
• Compliances certificates
• Rates and taxes in advance (clearance figures), as well as a fee to the city council consultant appointed to obtain such figures or to attend to any necessary journals at the city council
• Levies of a HOA or Body Corporate in advance, as well as the admin fee of the Body Corporate or HOA to issue such figures
   

2. Other fees are not applicable to every transaction. Sellers also need to be aware of these fees as they are liable for payment thereof if the specific transaction requires the action(s) set out below:
 

• 4(1)(b) Application for rectification of a title deed
• Regulation 68(1): Application for a copy of the Title deed if the original is lost
• Section 24(6) application: Extension of a Unit (where a sectional title unit was extended)
• Registration of a General Power of Attorney
• Section 68(1) Application for Removal of Title Deed Condition
   

All of the above costs are explained in more detail in our seller’s guide, which can be accessed by clicking here, and it is important that agents also make the sellers aware of possible miscellaneous costs.

• The relevant FICA documents of either the seller or the purchaser is missing, inaccurate or incomplete.
• The purchaser fails to pay the relevant costs relating to the transfer and bond.
• The seller fails to pay outstanding levies.
• The local municipality delays in issuing the clearance certificate.
• The Electrical Certificate of Compliance, Gas Certificate of Compliance or Electrical Fence Certificate and accreditation certificates are outstanding from the seller or contractors.
• The original title deed is lost, and the deeds office copy is also lost and a lost copy application has to be done.
• The Master’s Office delays the matter by delaying the endorsement of the POA, by delaying the issuing of Letters of Authority/Executorship, or simply informing the file has been lost and nothing can be done.
• The approved building plans and sectional title plans are required but there are no approved plans.
• The property is attached and an interdict is registered against the property for debt of the seller which must first be uplifted.
• The outstanding bond amount is more than the selling price and the bank has to approve an Acknowledgment of Debt to enable the seller to pay the bank in instalments after registration.
• A Spluma certificate must be obtained when an extension of a unit is registered.
   

All accountable institutions (which includes conveyancers and property practitioners) must screen their clients against the Targeted Financial Sanctions list (TFS list) in terms of Section 26A of the Fic Act.

How is this done?

1. The property practitioner checks the name of the person by going onto FIC’s Website (fic.gov.za):
 

- Click on Search the TFS list.
- Click on Search in the Quick links.
- Click on click here to search the Targeted Financial Sanctions list.
- Enter the person’s name.
- If it is an entity, you will also have to scrutinize all authorised representatives and beneficial owners of the entity. This will for example be a trust well as all its trustees and beneficiaries.

2. It is very important to note FIC requires that proof of screening be kept on file. You will have to screen print and file the screen print with your other FICA documents for the particular client.

3. If your client is on the TFS list, you may not proceed with the transaction under any circumstances. If you have funds of the client in your possession, you may not refund the amount to the client.

4. A report in terms of Section 28A of the FIC Act must immediately be made. This is done by logging into your GoAML profile and clicking on new reports / web reports and then completing all information.

Dear Clients,
 
Great news, our new MCademy online Training Platform has been finalised and it’s now available!
 
We have also changed our member login system for our business associates. 
 
If you now go into our member login system, you will find the following 3 (three) buttons: -

1. Under the MCademy Training button, you will find the following online courses: -

- Fundamental Legal Training (FLT)
- MContract Training (MCT) 
- Advanced Legal Training (ALT) (coming soon)

The Trust Property Control Act 57 of 1998 does not make provision for the deregistration of a trust at the master’s office. However, the deregistration of a trust is an internal administrative procedure to manage the trust files in the master’s office. A trust must be registered with the Master in whose area of jurisdiction the greatest portion of the trust assets are situated. As all trusts are registered by the Master, confirmation of termination of a trust also needs to be brought to the Master’s attention. A trust can be terminated in one of the following ways:
 
1. Operation of law;
2. As a result of destruction of trust property;
3. Renunciation of the trust by the beneficiaries; or
4. Fulfilment of the trust’s objectives.
 
The master will have to deregister the trust if the trust is terminated. In this event, the Master will require the following documents from the trustees whereafter he will close the file:
 
1. Reasons for terminating the trust
2. Original signed resolution (for termination of the trust) containing the following information:

a. Stating whether it was a dormant or active trust;
b. Confirmation whether a bank account in the name of trust was opened and confirmation that same has been closed (if applicable).

3. Original letter of authority
4. Bank statement:

a. Reflecting a zero balance; or
b. Final statement prior to closing the account; or
c. Letter from bank confirming closure of account.

The budget speech for 2023/2024 brought the following changes to transfer duty rates payable. As from 1 March 2023 (sale agreements entered into on or after 1 March 2023), the purchaser will be liable for transfer duty according to the following new scale:

Our MCostcalculator will be updated accordingly on the 1st of March 2023.  Our fee sheet will be updated electronically but will only be available in print once all fee adjustments for 2023 has been announced by the relevant role players.

Should you require a quote prior to that date, please contact our office to assist you.

Visit our website at www@mcvdberg.co.za the 1st of March 2023 to view the new transfer duty rates.

In Wilrus Trading CC v The City of Tshwane Metropolitan Municipality and Another (36299/22), the tenant of the property requested the court to confirm that the tenant, as well as the landowner, has the right to be notified if the municipality is planning on terminating the electricity.
 
Wilrus Trading leased a property from Dey Street Properties (Pty) Ltd. Dey Street was made aware of the fact that the electricity will be changed to a pre-paid meter system and that they must make payment to have a positive balance and not to risk the chance of the electricity to be cut off. After several notifications, Dey Street did not make any payment, nor did they inform Wilrus Trading about the notifications, and it resulted in the electricity being cut by the municipality.
 
Wilrus Trading argued that they had to be informed of the cut-off by way of a pre-termination notice which would have given them time to make submissions to the Municipality. The Municipality in return argued that they do not have a contractual relationship with Wilrus Trading but rather with Dey Street and they did inform them about the electricity cut-off. The real course of action for Wilrus Trading will be against Dey Street.
 
The court held that it could not be expected from the Municipality to enquire whether there are tenants on the property each time they give notice to the landowner. However, it is different from other cases where the Municipality want to cut the electricity in a block of flats where they know there are multiple residents.
 
The court dismissed the application of Wilrus Trading as they had no legal standing in the matter.

Can a partially signed bond document which refers to the sale agreement be used to create a sale agreement which has not been signed yet?
 
In the case of Elmo-York N.O v Van Dyk and Another (67219/2019), the seller passed away before he could sign the sale agreement. There was however a partially signed bond document which referred to the sale agreement. Was there a valid sale?
 
The purchase price was payable by way of instalments and the purchaser also had to pay occupational rental of R10 00 while he occupies the property. This appeared from a draft mortgage bond agreement relating to the property. The purchaser had in the meantime given instruction to his attorney to start drafting all the necessary legal documents that will be necessary for the parties to sign to give effect to their intention.
 
The purchaser argued that there was a valid agreement of sale secured in the draft mortgage bond. The executor of the estate disagreed and offered to sell the property to the purchaser for a higher price, otherwise the property will be sold on an auction. The purchaser did not accept the offer.
 
The question arose as to whether the mortgage bond constituted a deed of alienation. In the case of Legator McKenna v O’Shea a related question was addressed, and the court found that the execution of conveyancing documents does not meet the requirements of the Alienation of Land Act that are necessary to prove that a valid sale agreement was entered into. There are multiple clauses that are essential to a deed of sale that are absent from the covering mortgage bond.
 
The court concluded that the covering mortgage bond did not result in a valid deed of alienation. The court granted an eviction order against the purchaser.

Transactions relating to agricultural land is governed by the Subdivision of Agricultural Land Act 70 of 1970. The Act prohibits transfer of agricultural land to more than 1 (one) individual as the subdivision of agricultural land is sometimes not economically feasible.
 
It is a common practice that farm owners bequeath a farm to their children. This then creates the question as to what is the best outcome where agricultural land is to be inherited by more than one person?
 
The possible solutions are as follows:
 
A redistribution agreement can be entered into by the heirs in terms of which a trust is registered:
 

- The heirs can establish a trust wherein they shall be the beneficiaries and the agricultural land to be transferred to the trust.   

 
A redistribution agreement can be entered into by the heirs in terms of which the property is transferred only into the name of 1 of the heirs:
 

- An agreement between the heirs that the farm should be transferred to a nominated heir and the other assets would then be redistributed to the other heirs or the heir that receives the property makes a monetary contribution to the other heirs.

 
Consent from the Minister
 

- An application to the Minister of Agriculture for a consent to subdivide the agricultural land stating the reasons for granting of the consent to subdivision.
If it is not economically detrimental the Minister may issue consent that the farm may be transferred to more than one person.

- This is however a cumbersome process and can take up to 12 months or longer for the consent to be issued.

 
Sale of the farm
 

- The last option is to sell the farm and the proceeds are then divided equally between the heirs. For a sale all the heirs must consent thereto.

The matter of cyber fraud and specifically the duty of care of role players in the process, was placed under the spotlight in a recent court case.
 
Previous court cases held that the debtor, in other words the party that is making the payment, carries the responsibility to ensure that the payment is made to the correct bank account.

On 16 January 2023, The High Court in Johannesburg in the case of Hawarden v Edward Nathan Sonnenbergs Inc altered this legal position.
 
The purchaser’s email account was compromised, and her emails intercepted and she received fraudulent banking details per e-mail from a fraudster, and subsequently paid the purchase price to the fraudulent account. The Court held Ethan Nathan Sonnenbergs Inc. accountable for not warning the Purchaser about cyber fraud and ensuring that payment was made to the correct account.
 
The relevance for attorneys
 
As was illustrated in this case, an attorney has a duty of care to keep all clients informed of the dangers of cyber fraud and to ensure a safe environment for communication and making of payments.
 
This is why we, as MC van der Berg, have strict processes and procedures in place to protect our agents and our clients. Our communication to clients warns about the prevalence of cyber fraud, and we do not send any banking details by way of e-mail.
 
Our firm is registered as a public beneficiary at 4 major banks for clients to safely make deposits into our account. We further do not allow any change of banking details by clients, unless they personally come into our offices to effect the change, or if they are not close to our offices we will telephonically confirm the new banking details before making payment.
 
The relevance for estate agents.
 

1. Make sure that, when you recommend a conveyancing firm, they have measures in place to protect clients against cyber fraud when making payments.

2. Estate agents who receive deposits from clients for either sales or rental properties, or who receive rent also have a duty of care (sec 69 of the Property Practitioner’s Act), and may be held liable if found to be negligent.

 
Estate Agents must therefore ensure that clients are warned and they have the required software security systems in place to prevent cyber fraud, and to ensure that they have systems in place to ensure safe and secure payments.
 
Read the case here.

The CSOS (Community Schemes Ombud Service) has decided to go digital. There will be a new system implemented called CSOS Connect System.
The new digital system will be self-service, and it will make it easier for customers to interact and engage with CSOS. The name is derived from the idea that the digital platform must give the customer the feeling that they have a real time connection experience while on the platform.
 
The CSOS Connect will be able to help with the following:
 

• Register a scheme
• Upload documents
• Make amendments to the scheme details
• Deactivate and delink the scheme
• Obtain a registration certificate upon the successful registration of the scheme

 
Some of the functionalities that is available for users on the digital platform include:
 

• Customer relations management
• Revenue
• Scheme governance and
• Enforcement and dispute resolution

Donations tax is tax payable to SARS when property is donated to another person in absence of a sale or any other operation of law. Currently this tax is levied at 20% on the value of the property donated which is less than R30 million and 25% on the value more than R30 million. Donations tax is paid to SARS by the donor, and if the value of the property is more than R 1 000 000.00 transfer duty will also be payable by the donee (receiver of the donation).
 
There are a few exemptions where Donations Tax cannot be levied in terms of Section 56(1) of the Income Tax Act in the following instances:
 

1. Property donated to a spouse of the donor.
2. Personal property donated by a donor where the donation only takes effect after the donor passes away.
3. A donation to a person for bona fide maintenance
4. The property is donated to a Public Benefit Organization such as institutions of advancement of art, sciences, education, charity organizations etc.
5. A donation made by a person who is a non – resident in the Republic or a foreign company. 
6. Donation made to an approved government institution.

A transferring attorney has an obligation to make payment of the seller’s proceeds after registration of the property occurs. In some instances, where a seller is situated abroad, the transferring attorney often receives a request to make payment into a foreign bank account. Clients must take note of the special procedure and additional costs involved should proceeds be paid into a foreign bank account.
 
There is an additional charge that differs from bank to bank, that will be deducted from the seller’s proceeds before payment is made into the specified foreign bank account. The transferring attorney gives instruction to the relevant bank from which payment is to be made that the funds must be paid into a foreign bank account. The transferring attorney is furthermore then required to submit certain documents as requested by the South African Reserve Bank to process the funds, namely:
 

1. Copy of the sale agreement
2. Proof of introduction of foreign funds to purchase the property if applicable
3. Copy of the title deed(s)
4. Attorney’s reconciliation statement
5. A letter confirming that the property was sold at a fair and market related price
6. Copy of beneficiary passport

Currently all accountable institutions have to report cash received in the amount of R25 000 or more to the Financial Intelligence Centre (FIC). This includes all cash amounts paid by a client which, if added up, resulted in an amount of more than R25 000.
 
A few amendments were published by the Minister of Finance on 14 October 2022, namely:
 

1. The threshold for cash reporting is increased form R24 999 to R49 999, with effect from 14 November 2022.
2. The period within which to report is extended to 3 business days, no longer 2 business days.
3. The requirement to report if the sum of individual payments make up more than R25000, is no longer required.

Substitution of a bondholder refers to a change, removal or substitutions of a debtor in respect of a home loan.
 
The common circumstances for substitution of a bondholder are as follows:
 

1. Divorce – One of the parties can be substituted by the other party if one party is awarded sole ownership of the property in terms of the divorce order.
 

2. Death of a bondholder - The remaining party can take over the bond if they become the sole owner of the property. 
 

A building loan is a loan provided by a bank for purposes of constructing a new building on an empty stand or renovating an existing building. The bank usually requires the following: Municipal Approved Building plans, written agreement with a NHBRC registered contractor, NHBRC enrolment certificate, NHBRC registration of the builder, contractor’s waiver of lien, and a deposit.
 
The bond amount is on retention, and the bank will only make payments for completed building works in the form of progress payments at various stages of building project. Furthermore, it is common practice among banks that the contractor has a risk insurance policy for the duration of the contract to minimise the risk of unforeseen damages. Upon completion of the entire project and presentation of an occupation certificate, a valuator inspects the property, whereafter the final payment from the loan is made.

Section 35A of the Income Tax Act 58 of 1962 places an obligation on a purchaser who pays a consideration of more than R2 million to a non-resident seller (or to any other person on behalf of the seller) for immovable property in South Africa, to withhold the following amounts:
 

a. 7.5% of the purchase price in the case where the seller is a natural person;
b. 10% of the purchase price in the case where the seller is a company; and
c. 15% of the purchase price in the case where the seller is a trust.

 
The amount withheld by the purchaser is an advance in respect of that non-resident seller’s liability for normal tax for the year of assessment. If a purchaser fails to pay the required amount to SARS within the period allowed for payment, that purchaser is liable for interest at a prescribed rate on any amount outstanding and must pay a penalty. In practice the conveyancer will usually withhold this amount and pay it to SARS. If the purchaser is a South African resident, they must pay it within 14 days from the date on which the amount was so withheld (date of registration of the transaction), and if the buyer is a non-resident, within 28 days.
 
Legislation places an obligation on the estate agent (if applicable) and the conveyancer who assists or administers the transaction to notify the purchaser in writing (before payment is made) that this section in question may be applicable. If they do not do so, and they knew or should reasonably have known that the seller is a non-resident, they can be held jointly and severally liable for payment of the tax, up to the amount of their respective fees from the transaction.
 
The seller may apply to SARS for a directive to waive or reduce the withholding tax payable, and if SARS is satisfied that the seller has sufficient other assets or security in SA, it may issue such a directive.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.

Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 7 and the last article in the series which discusses the disclosure by a person other than the seller.
 
Disclosure by a person other than the seller
 
The Property Condition Report must be signed by the Seller or a signatory that has personal knowledge with regards to the property such as a tenant that resided in the property. The report stipulates the number of years that the seller/signatory resided in the property.
 
THIS REPORT CAN THEREFORE BE:
 
- A full disclosure made by the seller personally
- A partial disclosure by

• A nominee (tenant) appointed by the seller

- No Disclosure as the signatory is only acting in a fiduciary capacity e.g., proxy, executor, curator etc. and has no knowledge of the property.
 
If the signatory thereof did not reside in the property and can therefore not disclose certain defects the purchaser  should  take extra  care  with the  inspection of the property.

Please refer to our Seller’s Guide for a detailed discussion on the disclosure by a person other than the seller.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.
 
Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 6 in the series which discusses the estate agent’s responsibilities.
 
The estate agent’s responsibilities
 
The agent/agency does not have any duty and does not purport to inspect the property or any regulatory measures for and on behalf of the purchaser or the seller.
 
The agent is not a supplier of property, but a supplier of an advisory service aimed at facilitating the conclusion of an agreement of sale between the seller and purchaser. The agent relies on the seller to disclose the defects as set out in the Property Condition Report. The agent/agency shall not be liable in any way, for any latent or patent defects to the property, including any regulatory measures e.g., building plans, zoning or compliance certificates or any other restrictions and shall not be liable for any damage the purchaser may suffer as a result of any defects.
 
If the agent assists the purchaser or seller to obtain any documentation regarding regulatory measures, building plans, sectional plans, specialist reports, compliance certificates, HOA/Body Corporate rules, title deeds etc. he/she merely acts as an intermediary and does not purport to have verified the correctness of the documentation or that the property is fit for the intended purpose.

Please refer to our Purchaser’s Guide for a detailed discussion on the estate agent’s
responsibilities.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.
 
Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 5 in the series which discusses the purchaser’s rights.
 
Purchaser’s right to advice or inspections
 
The purchaser is entitled, at his/her own cost, to appoint an expert and/or person with technical skills and knowledge to detect defects which includes regulatory measures and non-compliant aspects concerning the property, before making an offer.
 
The seller will only be required to attend to the defects set out in any specialist report, if the purchaser specifically required it in the offer and the seller agreed to attend to it.
 
Any report from an expert does not absolve the purchaser from his/her obligation to inspect the property to establish whether there are any defects.
 
The report also does not discharge the seller’s obligation to disclose those defects
required to be disclosed that he/she is aware of.

Please refer to our Purchaser’s Guide for a detailed discussion on the purchaser’s rights.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.
 
Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 4 in the series which discusses the purchaser’s obligations before entering into an agreement.
 
Purchaser
 
The purchaser has a legal obligation to satisfy him-/herself, about the condition of the property before making an offer. The purchaser must study the property condition report and also conduct a proper inspection of the property. This inspection should cover physical as well as regulatory measures.
 
If the purchaser is not satisfied with the condition of the property or the regulatory measures, but still wants to proceed with the transaction, he /she must address these issues in the offer. The seller can elect to accept or reject any of these terms. The purchaser can:
 

• make a lower offer,
• require the seller, in the offer, to repair certain defects
• request a contractual warranty in the offer.

 
Once the offer is accepted by the seller the contract is concluded and the purchaser cannot:
 

• cancel the agreement,
• claim a reduction in purchase price,
• institute claim against  the  seller  or agent,
• insist that registration is withheld,
• require that a retention be kept.

For defects
 

• disclosed in the IPCR
• detected after the offer is made
• the seller did not agree to repair
• the seller was not aware of

Please refer to our Purchaser’s Guide for a detailed discussion on the disclosure of defects by the seller.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.

Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 3 in the series which discusses the seller’s obligations before entering into an agreement.
 
The parties’ obligations regarding defects before they enter into an agreement
 
Seller
 
The seller must disclose the following defects to the purchaser before the offer is made:

• All latent defects; and
• Patent defects of a significant nature.
 
The seller must disclose the following defects he/she is aware of:
 
Latent defects: The seller must disclose all latent defects to the purchaser. If the pro- forma Report supplied by the agent does not make provision for a specific defect that must be disclosed, it must be entered in the open space provided.
 
Patent defects: Although the purchaser must conduct a proper but reasonable inspection of the property before an offer is made, the PPA requires the seller to assist the purchaser and he/she must disclose patent defects of a significant nature he/she is aware of. Minor issues such as cosmetic and aesthetic matters or defects that can easily be repaired/replaced are not defects that needs to be disclosed.
 
The seller is protected against claims for those defects that:
 
• Are disclosed  in  the  report, unless he/she contractually  agreed  to attend thereto;
• He/she was not aware of;
• Are not required to be disclosed
 
The seller is not protected against claims for defects that:
 
• Are required to be to be disclosed but were not;
• Are covered by written contractual warranties.
• Are contractually undertaken to be repaired.
• Are concealed in order to deceive the purchaser.
 
If the seller does not complete and sign the report, it is deemed that no defects were disclosed, and the seller can be held liable in certain cases. It is in the best interest of the seller to make a full disclosure about the defects.

Please refer to our Seller’s Guide and Purchaser’s Guide for a detailed discussion on the disclosure of defects by the seller.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.

Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 2 in the series which discusses the application of the Property Condition Report.
 
1. The process

Step 1. The seller (or nominee/fiduciary) discloses the required defects by supplying a completed and signed copy of this report to the agent when he/she is mandated to market the property.
Step 2. The prospective purchaser views and conducts a proper inspection (self or through a home inspector) of the property.
Step 3. The agent delivers a copy of the completed and signed report to the prospective purchaser, who must acknowledge receipt thereof, before an offer is made. 
Step 4. The prospective purchaser studies the report to familiarise him-/herself with the legal principles and to establish the extent of the defects disclosed by the seller.
Step 5. If the purchaser makes an offer, all the defects must be considered and dealt with in the offer.
Step 6. This report is incorporated into the agreement and the seller confirms he/she is not aware of any additional or new defects after signature of this report.
 

Please refer to our Seller’s Guide and Purchaser's Guide for a detailed discussion on the Property Condition Report.

The Property Practitioners Act, 22 of 2019 (PPA) & the Regulations that were Gazetted on 14 January 2022 came into operation on 1 February 2022 and brings a number of changes to the property industry.
 
Over the course of the next 7 weeks we will discuss how defects and the disclosure of defects must be addressed in terms of the PPA. This article is Part 1 in the series and discusses the disclosure of defects and the legal status of the IPCR.
 
Defects under the PPA part 1
 
Disclosure of defects
 
The (PPA) requires the seller to disclose certain defects in a prescribed format, the Immovable Property Condition Report (IPCR) (herein called the Report), if an estate agent is appointed to market a property. The estate agent must obtain this completed and signed report from the seller before he/she is legally permitted to accept a mandate to market the property.
 
Legal status of this report
 

- This report is regarded as a complete written record of the defects the seller is required by law to disclose to the purchaser before an offer is made.
- The report does not constitute a warranty made by the seller, or nominee/fiduciary or the estate agent to the purchaser relating to the existence, nature or extent of any defect.
- The report is not an undertaking by the seller to repair or replace any of the defects disclosed, unless the seller commits him/herself thereto contractually in the agreement. 
- The signatory discloses the information therein in the full knowledge that prospective purchasers may rely on such information when deciding whether, and on what terms, to purchase the property.

 
Please refer to our Purchaser’s Guide for a detailed discussion on the disclosure and legal status of the report.

It often happens that fixtures and fittings become a contentious issue between a seller and purchaser when immoveable property is transferred from one person to another. A deeper dive into this issue will allow us to uncover what problems may arise and more importantly – how to avoid these problems.
 
The agreement of sale will undoubtedly be the point of departure when ascertaining which fixtures and fittings attached in either a permanent or semi-permanent nature will form part of the sale of the immoveable property.
 
Our agreement of sale has a specific clause: Fixtures and fittings – which sets out the fixtures and fittings that can be included in the agreement of sale. It is a thorough but nonetheless standard clause.
 
So what happens when something is not listed in this clause becomes the object (literally) of contention between the parties to the agreement? What happens when the agreement mentions nothing about a Wendy house or a beautifully hand-crafted pergola situated on the property? Upon successful registration of the transfer, does it stay as the now lawful property of the new owner or does it go with the Seller?
As a general rule, any building erected on a land along with all items that are permanently attached to the building are regarded as a permanent fixtures and fittings that are deemed to be included in an agreement of sale.
 
There are three aspects that must be taken into account to determine whether a fixture or fitting is of a permanent nature:
 
1. Is an item attached to a structure or a structure attached to the land and does it serve the structure or land;
2. Whether the removal of such item or structure will damage the structure or land thereon;
3. Was the intention of the owner to attach the item or structure permanently.
 
Structures such as Wendy houses and pergolas are mostly pre-fabricated wooden structures that are erected on a property and are universally understood as a temporary structure, however in terms of the National Building Regulations and Building Standards Act 103 of 1977, structures of that nature are defined as a building and requires building plans. Therefore, it can be regarded as a permanent fixture to a property that is included in an agreement of sale.
 
In conclusion, is best to not leave such issues open for interpretation. In our agreement of sale, we have included a specific clause, namely clause 5.2, where the seller can state what fixtures and fittings are specifically excluded from the sale. Therefore, take the time to include and/or exclude all possible fixtures and fittings.

Spoliation applications are becoming a common occurrence. The application is brought by a party who feels that he has been unlawfully deprived of his peaceful possession or occupation of property. There is a principle in law that nobody, even if he is “in the right” has the right to take the law into his own hands and disturb another’s possession or use of property.

This was the issue in the case of Mutale and Another v Forte and Others (2021/46077) [2021] ZAGPJHC 573, where Mr and Mrs Mutale occupied a property with the consent of the seller in terms of the sale agreement. Upon return to South Africa, the Mutales discovered that they could not access the property due to the locks being changed. The seller claimed that he cancelled the sale agreement due to non-compliance.

The Mutales approached the court with a Mandament van Spolie application.

The court found that Mutales had not abandoned the property and satisfied the requirements for a spoliation application. The court therefore made a spoliation order in favour of the Mutales, on the grounds that their undisturbed occupation of the property had unlawfully and wrongfully been deprived by Mr. Forte in denying them access to the property. A seller can therefore not take the law into his own hands, and any disputes in terms of the sale agreement must be resolved by following the correct legal route.

The need may arise to purchase a property in the name of a trust, whilst the trust has not yet been registered.  No person is permitted to sign a purchase agreement on behalf of a trust to be registered – such contract will be invalid from the onset.  Only after the trust is registered at the Master of the High Court and the letter of authority is issued, a contract may be entered into on behalf of a trust. The date of the agreement must be a date later than the date as set out in the letter of authority. Any acts by a person prior to the issuing of the letters of authority will be null and void and unenforceable.

There are various ways in which a purchaser can obtain funds to pay for the purchase of a property, one of which is funds from an inheritance. This principle was discussed in the court case of Patrinos (N.O) v Theresa (2021). In this case there was a suspensive condition in the sale agreement that the sale of the property will be subject to funds that had to be obtained from an inheritance. The purchaser wanted to cancel the sale agreement and when the seller refused, she alleged the suspensive condition was not fulfilled. The court had to interpret the words: “obtaining funds from an Estate” and held that the word “obtain” did not mean the funds had to be paid, but merely that the Master had given permission / or approved the Liquidation and Distribution account. The agreement was found to be valid and binding.

It is clear from this case that the courts lean towards binding parties to agreements they have signed and do no declare agreements void very easily.

The rising costs of electricity, coupled with the unpredictability of load shedding, has urged many South African home-owners to make use of gas installations as a viable alternative to electrical installations. However, home-owners and potential sellers of property must take heed of the compliance rules and regulations which regulates the safe use of such installations.

In accordance with the “Pressure Equipment Regulations” promulgated under the Occupation Health and Safety Act, all installations must be inspected and officially determined safe and leak free. Liquid gas installations must be accompanied by a Gas Certificate of Conformity issued by an authorised person registered with the Liquefied Petroleum Gas Safety Association of Southern Africa.  In accordance with the Pressure Equipment Regulation 17(3), a certificate is required after any installation, alteration, modification or change of ownership of property.

Gas installations which require a gas certificate, or a copy thereof, to be delivered to a purchaser include gas fires or braais, gas stoves, ovens and hot water systems. However, portable or temporary gas appliances are ordinarily not included in the sale of the property and will in all likelihood be removed from the premises by the seller. Furthermore, inspections are often limited to the installation itself and does not cover the actual working conditions of the appliances-e.g. the heater, braai, hop or geyser.

Also take note that the gas bottles at the premises are often not the property of the seller, but on rental from a gas supply company. It is wise to inform the purchaser that he will not find gas bottles at the premises if this is the case.

You are welcome to contact us for advice on gas installations.

Fixed term lease agreements often stipulate that upon completion of the agreed upon period of lease, the lease will continue on a month-to-month basis, unless agreed otherwise. Problems often occur in the course of terminating such periodic leases, as there are very strict requirements that the cancelling party must comply with.

A periodic lease is cancelled by way of written notice of termination, given by either of the parties, to the other. Such notice of termination must be reasonable, in that it affords the other party sufficient time to get his affairs in order, and to vacate the leased premises. It is generally accepted that one months’ notice is reasonable, in the context of a month-to-month periodic lease agreement.

In order for the notice of termination to be deemed acceptable, such notice must make it clear that the lease is being terminated, and it must stipulate a clear date when the lease is terminated, taking into consideration that such date must be reasonable.

In Acire Property Holdings (Pty) Ltd v Banzi Trade 31 (Pty) Ltd t/a Brick-It (2021), the Court held that a notice which informed the lessee that the lease has been terminated with immediate effect, but that the lessee had been afforded one month to vacate the premises, does not constitute a reasonable notice of termination, as the lease could not be terminated with immediate effect and as such, does not have the result of terminating the lease.

The Deeds Office has published their increase of fees for the registration of transactions that take place on or after 1 April 2022.  The average increase is between R100-R500 depending on the purchase price/bond amount.

Some quotations and pro forma accounts that have been sent to clients will still refer to the old deeds office fee and may therefore change if the transaction registers after 1 April 2022.

All new quotations and pro forma accounts sent out from 1 April will refer to the increased deeds office fee. 

In abeyance of a possible increase in the professional fees of conveyancers, we suspended the printing of the fee sheets.  We will keep you posted in this regard.

Please refer to our MCostCalculator which has been updated.

A question which often arises is at what moment it can be said that the purchaser’s bond is approved. Many sale agreements determine that the bond is deemed to be approved and the suspensive condition therefore fulfilled once the bank issues a bond quotation to the purchaser. This is not correct. In terms of section 92 of the National Credit Act (read together with regulations 28 and 29) the bank must firstly provide the purchaser with a quotation and pre-agreement. This quotation is valid for 5 working days. The effect hereof is that the purchaser must accept the quotation (within this period) before it can be said that the bond is approved and the suspensive condition therefore fulfilled. A purchaser can also reject such quotation due to affordability, and the suspensive condition of bond approval will then not be met.

Occupation refers to the date that the purchaser is placed in a position to take control of the property purchased, which will be the date the keys to the property are handed to the purchaser. It does not refer to the date of actually moving into the property. Thus if the contract stipulates that occupation is on 1 July and the purchaser moves in on 3 July, occupational rent will be charged from 1 July.

The purchaser becomes an occupant on date of occupation and not a tenant as defined under the Rental Housing Act, and as such the protection of the Rental Housing Act is not applicable to the occupant. The agent must guide the parties in coming to an agreement which protects both sides and doesn’t expose the seller to unnecessary risk.

It is important to always agree on the specifics of the occupation date and the occupational rent when signing the agreement and not to leave it to be decided at a later date, even if the agreement states that occupation will only be on registration. If the circumstances change later, occupation can be arranged by way of an addendum drafted by the conveyancer, and the amount for occupational rent does not have to be negotiated at that stage, avoiding potential difficulties.

When it comes to the payment / financing of the purchase price, it is very important to take note of the fact that the payment of a deposit / delivery of guarantees do not constitute suspensive conditions.

Should the sale agreement for example state that the purchaser must pay a deposit in the amount of R100 000.00 on / before 1 December 2021, and he neglects to do so, the agreement will not lapse automatically.  In such a case, one must act in terms of the breach clause in the sale agreement, and the purchaser must first be placed on terms by giving him/her written notice of breach of the agreement due to non- payment of the deposit.

If the payment has still not been made by the time the notice period lapses, the seller will have the right to exercise his remedies in terms of the breach clause, which will include the cancellation or enforcement of the sale agreement, as well as a possible claim for damages. The agent will also have a claim for their commission against the party in breach. Any claims for specific performance, damages or commission will have to be attended to by a litigation attorney.

No seller or agent wants to be in the situation where there is a dispute about who is entitled to commission.

Agents can take practical steps to avoid such disputes:

1) Educate the seller. Homeowners are not in the business of selling property and are not knowledgeable about agent’s mandates. The seller should ask agents for a list of the potential purchasers who come to view the property. Should the same client want to revisit the property with another agent, the seller should not consent.

2) Enlighten the client that a sole and exclusive mandate means that no other agent may market the property.

3) Educate the purchaser that he or she should not view the same property with more than one agent.

4) Agents should confirm whether the potential purchaser has visited the property with another agent before taking clients to view a property.

5) Keep a record of the date and time on which clients viewed the property.

6) Keep in contact with potential purchasers. Often purchasers aver that they viewed the property through another agent because the agent never followed up after the initial viewing. Keep record of such follow up conversations.

There may be situations where a commission dispute is inevitable. The agents can then choose to negotiate a commission split or proceed to litigate for payment of the commission.

We are still in the process of amending our contracts, mandates and guides to align with the requirements of the PPA and it will be rolled out as it is finalised.

The documents will be uploaded onto the member page-system, alternatively will be provided to management of clients not making use of the system, as we do not have the capacity to provide these documents individually to all agents.

We request that agents making use of our member pages, test their usernames and passwords which was previously provided.

If you can not access your member page, kindly send an email to: josephine@mcvdberg.co.za.

As there are important changes to the guides, specifically, we request that you do not distribute it until it has been updated.  If you are in possession of hard copies of the guides, please destroy it. New hard copies of the SellersGuide will be provided to you in due course.

We thank you for your patience while we finalise the documentation.  As you know, we strive to provide you with professional, correct, and compliant documentation, which unfortunately is a timeous process.

Fidelity Fund Certificate – The responsibility of the Conveyancer

Holding a valid Fidelity Fund Certificate has always been a prerequisite for earning commission on an immovable property transaction under the previous Act (Estate Agency’s Affairs Act).

In principle, this remains the same under the PPA effective 1 February 2022.

The PPA places a responsibility on the conveyancer to police the validity of FFC’s and may only pay commission to the agency if they are in possession of a copy of the FFC of:

The Estate Agency

The Agent and

The Mentor (if applicable)

The conveyancer must ensure that the relevant FFC’s are valid on date of signature of the agreement, as well as date of payment of commission.

The same principle will apply when commission is advanced by a bridging company.

As of 1 February 2022, we require the relevant FFC’s prior to payment of commission.  You are welcome to forward your FFC to the conveyancing typist or to info@mcvdberg.co.za, to enable us to have it at hand on registration. We will keep a database of valid FFC’s for our agents to lighten the administrative burden but ask your patience while we populate the database

We are aware that many agents have not received their current FFC’s despite being compliant. We are looking at the PPRA for an interim solution while they address the problem. If you are one of these agents/agencies, please bring this to the attention of the conveyancing typist attending to your transaction as soon as possible.

The following wording must appear on all letterheads or marketing material pertaining to a property practitioner, as from 1 February 2022: Registered with the PPRA.

We suggest updating email signatures, website, Facebook and other social media sites immediately.

We also remind you that the Privyseal verification system instituted by the EAAB a few years ago is not being used any longer.  If you have not done so already, this link can be removed from your website and email signature.

Fidelity Fund Certificates – Who must hold an FFC within the estate agency space?

The PPA determines that the

1. Business operation (Company, Trust, Close Corporation, Sole Proprietorship); and

2. Leadership of the entity (Directors, Trustees, Members); and

3. Agents; and

4. Candidate Property Practitioner; and

5. Support staff (may also be required to),

must hold an FFC.

Furthermore, if a Property Practitioner operates in more than one industry, they must hold an FFC for each industry.  For instance: A property practitioner who sells property, but also does Sectional Title Management must hold separate FFC’s for both industries.

A few other industries also fall within the scope of the PPA, and we will give you more information on this at a later stage.

Invitations for the information sessions scheduled for tomorrow were sent out this morning.  The session will deal with topics of importance for agents and principals. Timeslots are 10:00 – 12:00 and 16:00 – 18:00 (repeat)

Fidelity Fund Certificates – Who must hold an FFC within the estate agency space?

The PPA determines that the

1. Business operation (Company, Trust, Close Corporation, Sole Proprietorship); and

2. Leadership of the entity (Directors, Trustees, Members); and

3. Agents; and

4. Candidate Property Practitioner; and

5. Support staff (may also be required to),

must hold an FFC.

Furthermore, if a Property Practitioner operates in more than one industry, they must hold an FFC for each industry.  For instance: A property practitioner who sells property, but also does Sectional Title Management must hold separate FFC’s for both industries.

A few other industries also fall within the scope of the PPA, and we will give you more information on this at a later stage.

Invitations for the information sessions scheduled for tomorrow were sent out this morning.  The session will deal with topics of importance for agents and principals. Timeslots are 10:00 – 12:00 and 16:00 – 18:00 (repeat)

Fidelity Fund Certificates – PPRA’s responsibilities relating to timelines.

The good news is that the Property Practitioner’s Regulatory Authority - PPRA (the old EAAB) will now be held to certain timelines in issuing FFC’s.

This is how it will work:
 

 - Application submitted by Property Practitioner.

 - PPRA must issue certificate within 30 working days.

 - If the PPRA has queries regarding the application (e.g request for additional information), the 30 working days start anew after the further information is submitted to the authority.

 - If the PPRA does not comply with the above despite the Practitioner being compliant, the certificate is DEEMED to have been approved and the authority must issue the certificate within 10 days from receiving written request.

Online session for all agents:

27 January 2022 from 10:00 – 12:00 and repeated at 16:00 – 18:00.

Link will be sent later today.

Fidelity Fund Certificates – Your responsibility.

A fidelity fund certificate will now be valid for a period of three years as opposed to the current yearly renewal. 

There is an option to pay the renewal fee annually (R780) or once every three years (R2 340). 

Application for renewal is due by no later than 31 October of the year the current FFC expires. The new FFC will then be valid from 1 January in year 1 until 31 December of year 3.

The application will be done by submitting a standard form (which, in an ideal world, will be available on an improved version of the current EAAB Portal).

We are unsure how this will be applied in practice.

Joseph Sakoneka will elaborate on FFC’s during the online information sessions this week.

Information session for Principals and Management:   

25 January 2022 from 10:00 – 12:00 (Zoom link will be sent later today)

Information session for supporting Agents:

27 January 2022 from 10:00 – 12:00 and repeated at 16:00 – 18:00

(Zoom link will be sent on 26 January 2022)

Some good news for Principals!

The PPA makes provision that:
 
1. A business property practitioner that does not receive funds in a trust account may on application to the Authority, be exempted from having such account.

2. A business property practitioner that has an annual turnover of less than R 2.5 million only requires an independent review by a registered accountant and not an audit by an auditor.

Joseph Sakoneka will tell you more about who will qualify for this exemption and the administration involved at the Principal PPA session on 25 January 2022.
 

Information session for Principals and Management:

25 January 2022 from 10:00 – 12:00 (Zoom link will be sent on 24 January 2022)
 

Information session for supporting Agents:

 
27 January 2022 from 10:00 – 12:00 and repeated at 16:00 – 18:00
(Zoom link will be sent on 26 January 2022)

The Property Practitioners Act, 19 of 2019 (PPA) will come into effect on 1 February 2022.

1. The Estate Agency Affairs Act, 112 of 1974 is replaced by the Property Practioner’s Act (PPA).

2. The Estate Agency Affairs Board (together with administrative support) will be replaced by the Property Practitioners Regulatory Authority (PPRA)

3. “Property Practitioner” is an umbrella term for various industries involved in the property industry (e.g. estate agents and managing agents) who now fall under the PPA.

4. An Intern Estate Agent will now be called a Candidate Property Practitioner.

In order to inform our clients and prepare them for the coming into operation of the new Property Practitioners Act, we will be doing the following:

1.  Daily PPA - MC2Agent will be sent, with relevant information relating to the PPA and regulations. Keep these in a data base for quick reference.

2.  MC Agreements, Addendums, Property Reports, Mandates and Guides are being amended to comply the PPA. This will be supplied to our agents on or before 1 February when the PPA comes into effect.

3.  Online information sessions will be presented on the following dates (please note that these dates have changed since our initial email):

Do not fear the new changes and challenges, we will keep you informed and make sure that you are compliant and ready.

One of the main requirements for an agreement of sale is that there is certainty regarding the parties who entered into the agreement. In the case of Makepeace vs San Lameer Villa 3212 cc and Others, Mr. Makepeace bought a property on auction from a close corporation, San Lameer Villa 3212 (hereafter called the seller). However, the bond approval was negotiated by his wife, Mrs. Makepeace and bond approval in principle was also then obtained by her.

This led to the question being asked whether Mr. Makepeace was indeed the purchaser or whether it was Mrs. Makepeace who obtained the bond approval in principle. Mrs. Makepeace instructed that she wanted to be substituted as the purchaser. This caused a substantial delay in the transferring process and San Lameer Villa 3212 decided not to grant permission for the substitution because it would only further delay the proceedings. The purchaser then made an application to court to keep the seller bound to their agreement.

The court dismissed the application on the grounds that the purchaser should initially have stated their clear intention to purchase the property in the name of Mrs. Makepeace. Even though Mrs. Makepeace was able to obtain a guarantee from the bank, this was not sufficient to substitute her as the purchaser of the property in the agreement of sale.

In conclusion, correctly identifying the seller and purchaser to an agreement of sale remains vital for the validity thereof.

Swimming pool-related drownings underscore the importance of enforcing Municipal building by-laws and regulations pertaining to swimming pool safety.

The National Building Regulations require strict access control to swimming pools which are accessible to the public and the failure to comply with said regulations, can lead to a negligence claim against the owner of the swimming pool if an incident occurs.

In terms of the National Building Regulations, an owner will be considered to have satisfied the requirements of strict access control if access to the pool is in compliance with the South African National Standards. These standards are as follows:

1. A wall or fence must surround the pool or swimming bath. This ensures that a person cannot gain access to the pool from a street or public access;

2. A wall or fence shall be provided in an interconnected complex with a swimming pool or swimming bath;

3. Said wall or fence shall not be less than 1.2 meters high measured from the ground level and may not have any openings wider than a 100mm ball.

4. SANS 1390 must be complied with as it regards the construction of any steel fence or gate.

It is important to establish what the relevant municipal by-law in your area may require in addition to the National Building regulations and what is required to facilitate building plan approval of the swimming pool.

In the process of selling a property, disputes often arise between the parties as to what has to remain in the house. The fact that there is no legislation in this regard makes it difficult to determine whether something is a fixture.

Although there is no legislation on the topic, our Courts have developed a test to determine whether something is a fixture, first laid down in the case of McDonald Ltd v Radin NO and the Potchefstroom Dairies and Industries. In this case, the Court stipulated that there is no general rule to determine whether something is a fixture, and that every case will depend on its own circumstances. The points that should be considered are as follows:
 

- The nature and structure of the item
- The way in which it is fixed
- The intention of the person attaching it

The object must, by nature, be capable of becoming part of the property itself and have the character of belonging to immovable property. There must be an effective attachment, either by sheer weight or physical connection, and there must be an intention that it be a permanent feature of the property.

By definition, a fixture is something that is affixed to the walls, floor or ceiling of a property. It is movable ‘personal’ property that, by means of bolts, nails, screws, cement, glue, or other method of attachment has been converted to ‘real’ or immovable property.

To avoid disputes it is advisable to include a list of all items that the sellers will remove in the agreement of sale.

In terms of Section 4.1.1 of the Estate Agents Code of Conduct, an estate agent has a duty to disclose any facts regarding a property which she may have personal knowledge of and which may be material to a purchaser. This being said, an estate agent is under no obligation to carry out an inspection of the property. The duty to inspect the property for patent defects rests with the purchaser, as the duty to disclose latent defects (he/she is aware of) falls on the seller.

However, the estate agent should ensure that both the seller and the purchaser know what their respective rights and duties are. Ideally, the sale agreement should contain a clause wherein the seller acknowledges his duty to disclose any latent defects that he is aware of. It should also contain a confirmation by the purchaser that he inspected the property and accepts the property in its condition as at the conclusion of the sale agreement.

The Property Practitioners Act will bring a new requirement, as Section 67 states that a property practitioner is not permitted to accept a mandate unless the seller or lessor of the property has provided a completed and signed mandatory disclosure of the conditions of the property. If such mandatory disclosure is not completed, signed and attached to an agreement for the sale or lease of a property, the agreement is interpreted as if no defects or deficiencies to the property were disclosed to the purchaser. This means that the seller or landlord will be completely exposed for defect claims and will legislatively have no defence against such claims.

It will be to an agent’s advantage to get into the habit of completing the mandatory disclosure on listing the property and providing it to a prospective purchaser before signature of an offer.

We are often asked what happens if a company fails to comply with statutory requirements and is consequently deregistered but there are properties registered in its name.

From the onset, it is the conveyancer’s responsibility to determine whether the company has indeed been deregistered. This will reflect on a CIPC search. If deregistration has indeed taken place, the representative of the Company must apply for re-instatement through an application or an order of court. This must be done before any party may proceed with further transactions in respect of assets registered in the Company’s name.

The assets of a deregistered Company automatically pass to the State. Our courts have in the past constantly confirmed that deregistration puts an end to the existence of the company, in the same way that a natural person ceases to exist at death.

Creditors of the Company or other interested parties are however not wholly without remedy and they can apply to the CIPC for the restoration of the registration of the Company. The requirements for re-instatement are as follows:

1. Letters from the National Treasury indicating that they have no objection to the re-instatement;

2. An affidavit indicating the reason for the non-filing of annual returns, if deregistration was as a result of non-compliance in relation to annual returns;

3. Sufficient documentary proof that the Company was in business or that it had any outstanding assets and liabilities at the time of deregistration and upon the successful processing of the re-instatement application all outstanding annual returns must be filed in order to complete the process.

It is advisable that sellers attend to re-instatement timeously as the re-instatement process will delay registration of transfer. We will gladly assist in this regard.

A building plan usually reflects all the details of the proposed building, including but not limited to the height, width, floor area, position of doors and windows etc. Current legislation requires that no erection, addition or extension of an existing building may be done without the approval of the local authority. Thus, all plans for new buildings, as well as the plans for the construction or addition to existing buildings, must be drawn up by an architect or draftsman appointed by the registered owner of the property and submitted to the local authority for approval before it can be built. In practice this does not happen and transactions are delayed or disputes arise due to building plans not reflecting all structures on the property. Currently, the seller is not obliged to provide updated approved plans unless it is contractually agreed by the parties or required by the bank granting the loan.

A sectional title plan shows the layout or outline of buildings of an existing or proposed sectional title scheme. Sectional title plans are drawn up by a surveyor. The plan is registered at the offices of the Surveyor-General. All sectional title developments, including a duet, must have both approved building plans and sectional title plans.

If owners wish to make any change in the structure of a building in a sectional title scheme, they must be aware of the fact that both the building plan and the sectional plan must be amended, approved and duly registered. Therefore, it is important to consult an architect, surveyor and conveyancer before starting the alteration of the building.

“Agricultural land”, as defined in Act 70 of 70 includes land which forms part of any area subdivided in terms of the Agricultural Holdings (Transvaal) Registration Act, 1919 (hereafter “The Act”). In terms of the Act, an “Agricultural Holding” is land of which the use is determined and which is not smaller than 1 morgen (8565 square meters). In most cases, the title deed contains conditions that the holding may not be subdivided or transferred to two or more persons without the consent of the Board (which is now represented by the Municipal Council).

Section 5(2) of the Agricultural Holdings Act however imposes further restrictions on agricultural holding owners and states that an agricultural holding may not be transferred to more than one person, if such owner's portion will be smaller than 1 morgen (8565 square meters) on division thereof.

By way of an example, if an Agricultural Holding is 4,0680-ha and the holding is transferred to 3 transferees, the transfer would be permissible in that 4,0680-ha divided by 3 is 1,3560-ha and each co-portion would not be smaller than 8565 square meters. The transfer may thus proceed without any additional consent having to be obtained.

If the Agricultural holding is however transferred to 4 purchasers (as per our example above) or subdivided consent from the Premier, represented by the Municipal Council in which the land is situated has to be obtained. Obtaining the consent will cause a delay in the transfer of between 3 and 4 months.

It is therefore important for agricultural landowners, when attempting to subdivide or transfer an agricultural holding to consult a conveyancing attorney.

Many agricultural land owners may already know of the bureaucratic strife one may experience in an attempt to develop or subdivide agricultural land. Most of the limitations arise from the Subdivision of Agricultural Land Act of 1970 often referred to as “Act 70 of 70.” However, owners of agricultural holdings must also take heed of Section 5(2) of the Agricultural Holdings Registration Act and the limitations it may impose on the transfer of land (this will be discussed in the next edition).

Act 70 of 70 specifically Section 3 of the Act, provides that agricultural land shall not be subdivided; no undivided share in agricultural land not already held by any person, shall vest in any person and no part of any undivided share in agricultural land shall vest in any person, unless the Minister has consented in writing to the subdivision or vesting concerned. As seen in Maxrae Estates (Pty) Ltd v National Minister of Agriculture, Forestry and Fisheries and Another (13769/19) [2020], the Minister has wide discretionary powers provided by Section 4(2) of the Act to grant or refuse an application for subdivision.

The consequences of the above mentioned is that the agent should liaise with the conveyancer before an agreement is signed where more than 1 person wants to purchase agricultural land and:

1. The conveyancer must establish whether the specific farm portion is covered by a “blanket” Act 70 of 70 consent which covers the whole farm, in which case there will be no delay in registering the transfer into the names of more than one person; or

2. The parties must apply to the Minister of Agriculture for consent, which can delay the transfer by four to six months; or

3. The purchasers can consider purchasing in the name of an entity such as a company, close corporation or trust.

Retirees must consider the type of rights which are attained when buying into a retirement scheme and retirement villages are ordinarily based on one of four ownership principles.

The first option is sectional title ownership and, in this case, registration of the property is concluded through the Deeds Office by a conveyancer and will give a purchaser outright ownership of the unit in the retirement village.

The second option is share block ownership. In this case, a company owns a building/s and assigns a number of shares to the purchaser. The owner of said share would have a right of occupation to a portion of the building. Ownership would therefore consist of ownership of a share and not a section of a building. The purchaser receives no title deed to the unit, but will receive share certificates reflecting their shares in the company that owns the retirement village.  Shares in a share block scheme cannot however be used to leverage further investments, unless the investor owns an immovable property.

The third option is life rights. With life rights transactions, buyers have the right to live in the property in terms of the Housing Development Schemes for Retired Persons Act 65 1988, for the rest of his or her life. The purchaser does not acquire ownership of the underlying property. Ownership does not vest in the life right holder and what happens upon death, is regulated in the contract of sale between the developer of the scheme and the purchaser.

The fourth option is full title ownership, in which case ownership in the property is registered in the purchaser’s name. Retirement schemes are however often managed by homeowners’ associations for the maintenance of public areas and the provision of security and other services. Owners must adhere to the rules of the Home Owners’ Association.

It is therefore important that retirees are aware of and obtain legal advice about the pros and cons of each of the above options before making a final decision.

Transferring property from one person to another almost always triggers tax implications for the parties involved. Examples of this may include Transfer Duty, Capital Gains Tax, Donations Tax, Income Tax and VAT.

As the Transferring Attorneys, we can assist clients with basic advice on the tax implications of a specific transaction. We, as most conveyancers, are however not registered as tax practitioners in terms of Section 240(1)(b)(ii) of the Tax Administration Act of 2011 and can therefore not give tax advice to clients on the complexities of tax legislation.

Estate agents should also desist from giving tax advice.

Clients with tax queries must be referred to registered tax practitioners for specialised advice.

We can assist with referrals in this regard.

The Property Practitioners Act 2019 (PPA) is new legislation which will replace the Estate Agency Affairs Act 1976. One of the main objects of the PPA is transformation in the property sector and to provide for consumer protection. The Act has been signed into law, but not operational yet.

The Property Practitioners Act 2019 now requires that the seller of a property must include a disclosure (property report) as part of the sale agreement to inform the prospective purchaser about the condition of the property. All defects need to be declared and the Act does not differentiate between latent and patent defects. As discussed in the previous MC2Agent (Enforceability of a property report) purchasers would usually have to follow an expensive legal process after discovering latent defects (in the event that the property was sold voetstoots). This is where the Act intervened. Purchasers can now register complaints regarding defects with the Property Practitioners Ombud in terms of section 28 of the Act.

Property practitioners have the following obligations in terms of the Property Practitioners Act:

1. Obtain a fully completed and signed mandatory disclosure in the prescribed form before accepting a mandate;

2. Provide a copy of the completed disclosure form to all prospective purchasers; and

3. Attach the completed disclosure form to the sale agreement – it will form an integral part of the agreement.

If the property report is not completed it will be deemed that no defects were disclosed. This means that the seller/landlord will be exposed to claims for defects and will have no defence against such claims, unless he was not aware of the defects. Property practitioners who fail to follow the rules can be held liable for damages on the part of the seller, purchaser, landlord or tenant. It is of paramount importance that estate agents ensure that the property report is completed and signed before the mandate bring it to every prospective purchaser’s attention. It is evident that the Property Practitioners Act places an obligation on the transferring attorney to ensure that a property report is present with every transaction.

A property report is regarded as a record of the latent defects (defects that cannot be seen with the naked eye) disclosed by the seller to the purchaser, but is currently not a requirement for a valid agreement of sale. It is strongly advised that the seller completes this report thoroughly and hands it to the potential purchaser prior to signing an agreement. If the seller does not complete this property report it will be deemed that he/she did not disclose any latent defects to the purchaser.

It is however important to note that this report does not constitute a warranty of any kind or nature made by the seller to the purchaser relating to the existence, nature or extent of any defect. For example, should the seller declare on the property report that any additions and/or improvements have been duly affixed on approved building plans and it comes to the purchaser’s knowledge that the building plans are not updated, the seller cannot be held liable if he was not aware that they were not updated. The purchaser however has a legal obligation to conduct a thorough inspection of the property to establish if it contains any patent defects (defects than can be seen with the naked eye) even if the seller has provided the purchaser with a property report as a seller is not liable for patent defects not specifically addressed in the offer to purchase.

Although the property is sold “voetstoots”, the seller has a legal and contractual obligation to disclose the latent/hidden defects to the purchaser that he/she is aware of. The voetstoots clause will only protect the seller from liability for the latent defects he/she either discloses or is unaware of. Should a purchaser encounter a defect after registration and it is alleged that the seller was aware of the said defect, the purchaser must prove the following:

- The property had the defect at time of conclusion of the sale agreement;

- The seller deliberately concealed the defect as he/she knew that if it was not concealed and the purchaser was aware of the defect, the purchaser would not          have continued with the transaction or the purchaser would have negotiated a more favourable purchase price;

- The seller knew about the defect and did not disclose same to the purchaser and

- The seller made a fraudulent or material misrepresentation.

The property report and the effect thereof in terms of the Property Practitioners Act will be discussed in next week’s MC2Agent.

The topic of nuisance, especially noise, originating from a property owner’s neighbour, is quite a contentious topic. However, it is widely accepted and outlined by our courts that property owners are expected to bear reasonable levels of nuisance from their neighbours.

In Van der Merwe and Others v Drenched Boxing (Pty) Ltd and Others the Applicants (Van der Merwe and Others) resided in a building that is situated in the Cape Town City Centre. In the building right next to theirs, Drenched Boxing (the Respondent) opened their doors for business during August 2020. The gym’s premises are zoned for commercial use. As can be expected from a gym, they had classes during the week, during which loud techno and dance music was part of the class, and the instructor’s voice was amplified by a microphone. The Applicants claimed that they were being woken up by the noise originating from the gym, 6 days of the week.

After contacting the manager of the gym, the City of Cape Town (“the City”) and the Ratepayers’ Association, who contacted the City’s officials and the ward councillor,  a written warning was issued to the Respondents by the City. When the Respondents still proceeded with the classes, the Applicants approached the court for relief.

The Court granted an interim interdict against the Respondent. The Respondent then approached acoustic engineers and Audio-Visual specialists to minimize the noise that was being produced by the gym. However, the Applicants still sought to make the interim order, a final order, claiming that the Respondent was still creating noise that was disturbing them.

On the return day, the court held that the interim order can only be made final if the applicants establish the requirements for a final interdict, which are that the owners must establish: (a) a clear right; (b) an injury actually committed or reasonably apprehended; and (c) the absence of similar protection by any other ordinary remedy.

The court found that everyone is in general permitted to use their property for any purpose they choose, provided that the use of the property should not intrude unreasonably on the use and enjoyment by the neighbours of their properties. The Court highlighted that a person setting up home in the inner city cannot expect the tranquillity of life in the leafy suburbs, but, such a person is still entitled to expect that his or her neighbour, whatever its character, will use its property in such a manner so as not to unreasonably intrude on the ordinary amenities of the inner city resident.

The court then looked at the final requirement that there must be no other remedy or protection available to the applicants, and found the Applicants failed to comply with the mechanisms that are contained in the Noise Control Regulations, and therefore the interdict could not be made final.  

In a recent court case decided in the High Court of South Africa, Limpopo Division, the importance of keen consideration for zoning laws and bylaws within a specific region, was once more highlighted. The aforementioned case, “Investec Property (Pty) Limited v China City Limpopo (Pty) Limited and Others”, established an important precedent regarding the prioritisation of the use of a property for commercial/ retail purposes, versus the industrial use thereof as determined by a town planning condition.

In the abovementioned case, a lease agreement was concluded between the Applicant and the Second Respondent. In terms of a clause of the main lease agreement, the Second Respondent was entitled to use the property for the purpose of conducting its business- with the condition that such use did not contravene any town planning conditions or any laws or bylaws applicable to the property.

The Polokwane/ Perskebult Town Planning Scheme, 2016 (hereafter "the Scheme") however did find application on the matter as the Scheme allowed for only the following primary land uses: “Warehouse, Builder's Yard, Mortuary, Industry, Public Garage, Service Industry, Panel Beating and Scrap Yard”. Any secondary land use rights had to be acquired through written consent from the Municipality.
  

The Spatial Planning and Land Use Management Act 26 of 2013 (hereafter referred to as "SPLUMA") is also to be considered and states that:"(1) An adopted and approved land use scheme-

(a)  has the force of law, and all land owners and users of land, including a municipality, a state-owned enterprise and organs of state within the municipal area are bound by the provisions of such a land use scheme;
(2)   Land may be used only for the purposes permitted-
(a)  by a land use scheme;
(b)  by a town planning scheme, until such scheme is replaced by a land use scheme; or
(c)  in terms of subsection (3)".

The property industry (conveyancing) amongst many other industries is confronted daily with the risk of becoming a victim to cyber fraud.  The most common type of cyber fraud involves the use of false banking details and identity information by the fraudster pretending to be the client. In this instance, the fraudster uses a spoofed email address instructing the transferring attorney that their banking details have changed. The new banking details are provided by attaching a new bank statement as proof. In the aforementioned instance, the proceeds (for example) are then paid into the false bank account. In a recent court case of Fourie v Van der Spuy and De Jongh Inc. and others 2020 (1) SA 560 GP the High Court addressed the question of who is responsible for any losses incurred as a result of cyber fraud (more specifically electronic funds transfer (EFT)). The court found that the onus is on the person or entity making the payment to confirm and verify the banking details, especially in the event that banking details have changed. The court ordered that the attorneys in this case be liable for the loss suffered by the client.

MC van der Berg implemented protocols to ensure that we protect our seller, purchaser as well as the estate agent.  We have been listed as a public beneficiary at ABSA, Standard Bank, FNB as well as Nedbank to reduce the risk of cyber fraud. This ensures that the person who intends to make payment does not need to create a beneficiary by inserting the bank account number (which may have been intercepted and fraudulently amended by a fraudster), but rather have the option to choose us as a pre-approved beneficiary. Furthermore, we insist that sellers and purchasers complete their banking details themselves where it is required. In the event that a client advises on the amendment of banking details, we contact the client to confirm the new banking details telephonically.

It is however of paramount importance that estate agents take note that they should also be alert to any suspicious emails as the agent can also be a victim to cyber fraud. It is evident that every party to a sale agreement has an obligation to take all necessary precautions to ensure that no one falls victim to cyber fraud.

In the case of Kingshaven Homeowners’ Association v Botha and Others a homeowner was prohibited to park his vehicle anywhere other than in his own driveway or in his own garage.

The owner lived in a residential estate governed by a Homeowners Association, one of whose rules forbade the parking of owners’ vehicles either in visitors’ bays or in the street.

The owner was able to park only one of the three vehicle’s that he owned in his own garage- he had a double garage, but could not use the one side because he used the space to store household equipment. He persistently parked his second vehicle outside his garage (it was large in size and meant that it impinged into the street), and his third vehicle in a visitor’s bay.

Other owners complained and the Homeowners Association asked the High Court for an interdict against the owner in question. Such an interdict was granted by the Court.

The Court highlighted the importance of always familiarizing yourself with the exact wording of the rules and regulations as set out by a Homeowners Association or Body Corporate and to bear in mind that it remains within their right to enforce compliance with these rules. 

South African law does not recognise the so called “common law marriage”. The period that a couple lives together does not translate into marriage by default.  As such, the laws that protect married individuals will not apply to couples who only live together.  In the case of a break-up, the law provides that all assets will simply be divided according to who owns each asset and no maintenance claim exists. Furthermore, if one of the parties passes away, the other party to the relationship does not inherit anything from the deceased in terms of the intestate succession, if such party passed away without a will.

If one partner bought immovable property during the subsistence of the relationship and it is registered only in his name, the partner who does not have official ownership will not be entitled to any part of the profit or the value of the property upon breaking-up.

It is always advisable for couples who live together to formally regulate their relationship with a co-habitation agreement. This agreement will secure each partner’s assets and provide ease of mind when the relationship comes to an end.

The Extension of Security of Tenure Act 62 of 1997 or ‘ESTA’ promotes the protection of the rights of persons residing on property that is not owned by them. The Extension of Security of Tenure Act is only applicable to land that is not part of a township, ie agricultural land. The properties targeted by this piece of legislation are rural and peri-urban land.  ESTA deals with the eviction of occupiers of the above-mentioned land. Some persons may not be evicted from the said properties at all. They are defined as ‘long term occupiers’. These occupiers include the following:

1.  People resident on the property for more than 10 years

2.  People over the age of 60

3.  People who cannot provide labour to the land owner as a result of ill health

These long term occupiers may only be evicted if they:

(f) committed such a fundamental breach of the relationship between the parties that restoration is impossible.

Eviction may only be granted by court order or mutual agreement after two months’ notice was given to the occupier following the termination or prescription of the legal rights of the occupier to reside on the property.

The 2018 amendment of the act provides for the following further protection of occupiers:

1.  Further regulates the rights of occupiers

2.  Provides for legal representation for occupiers

3.  Further regulates the eviction of occupiers by enforcing alternative resolution mechanisms provided for in the act.

For evictions of persons residing on residential property illegally, that is part of a township, the PIE act and its requirements for eviction is applicable.

In the case of the President of the RSA and Another v Womens Legal Centre Trust and Others; Minister of Justice and Constitutional Development v Faro and Others; and Minister of Justice and Constitutional Development v Esau and Others an important judgement was handed down by the Supreme Court of Appeal. It was argued and held that the Constitution places an obligation on the State to prepare and bring into operation legislation to recognize Muslim marriages as valid marriages. It was acknowledged that our law’s treatment of the religious marriages concluded in terms of Shariah law has many negative consequences for spouses and children in those marriages. The absence of legal recognition of Muslim marriages are problematic. For instance, those who do not have a civil marriage (in addition to the religious marriage) continue to be regarded as unmarried. The views held in the pre-constitutional era by the South African courts reflect a refusal to recognize Muslim marriages. The Court declared it to be unconstitutional.

The Court ordered Parliament to draft new legislation before the end of 2022 and institute interim provisions to assist spouses in such marriages with immediate effect. It is important to take note of these, especially where such spouses are parties to contracts or seeking a divorce. Upon divorce they have no access to provisions that exists in our divorce legislation, as these provisions only apply in respect of persons seeking a divorce in a civil law marriage. Section 7(3) of the Divorce Act is declared unconstitutional as it fails to provide for the redistribution of assets, on the dissolution of a Muslim marriage. Section 9(1) is also unconstitutional as it fails to make provision for the forfeiture of the patrimonial benefits of a Muslim marriage at the time of its dissolution in the same way as it does in respect of other marriages. As from 18 December 2020 all provisions of the Divorce Act shall be applicable to Muslim marriages and all Muslim marriages shall be treated as if they are out of community of property, except where there are agreements to the contrary.

During the course of property transactions, whether it be the sale or rental of immovable property, it may become necessary for attorneys and estate agents alike to keep money on behalf of a party in a trust account.

Although the funds are under the attorney/agent’s control, it belongs to the client and must be returned to them or paid to a third party on their instruction during the course or at the conclusion of the transaction.

To safeguard the client against theft by the agent or attorney, the Estate Agencies Affairs Act and the Legal Practice Act respectively established Fidelity Funds.

All agents and agencies must be issued with a Fidelity Fund Certificate by the Estate Agencies Affairs Board (EAAB), which must be renewed each year for the following calendar year. 

An agent/agency operating without this certificate is operating illegally and will not be entitled to commission and furthermore, the client will not have recourse to claim from the fund. 

Any party to a property transaction is entitled and encouraged to request proof of a valid FFC from the agent/agency.

It is the responsibility of the agent/agency to ensure that they qualify for and obtain the FFC timeously to ensure a valid FFC at all times, but what happens if they do their part, but the EAAB neglects their responsibility in issuing this certificate?

This issue has ended up in our courts numerous times, but in the latest matter of Signature Real Estate (Pty) Ltd v Charles Edwards Properties, the Supreme Court of Appeal found that the administrative shortcomings of a governing body should not stop an agent from engaging in their occupation if they have complied with the requirements to hold an FFC.

The way forward

There seems to be a light at the end of the tunnel. The Property Practitioners Act, in Section 49 makes provision for mandatory time periods for issuing of certificates.  When the Act comes into operation, the following time periods will have to be adhered to by the Board Authority (Currently the EAAB):

1. Within 30 days of receipt of the application, consider and issue a certificate/query the application (may be extended with proper, written reasons – 20 days).

2. Should the Authority return queries to the applicant, the matter must be finalised within 30 days from receiving a response.

3. Should the Authority not meet the deadline as set, the certificate will be deemed to be issued and MUST be supplied to the agent within a further 10 days.

As applications for FFC’s already open in the first half of the previous year, no agent or agency should (in theory) be without a valid FFC if they apply in time and respond to possible queries from the EAAB in time.  We will have to, however, wait for the Act to come into operation to see whether this is practically executable.

In the case of Glencore (Pty) Ltd and Others v Steve Tshwete Local Municipality and Others certain mining companies in Mpumalanga wanted to transfer properties into their names for mining purposes. However, the prerequisite of a SPLUMA certificate was adopted in the municipal by-laws as well as in the deeds office, which entailed that the transferor first has to obtain such a certificate before they can obtain a clearance certificate.

The Registrar of Deeds, Mpumalanga, requires a certificate in terms of their Spluma bylaws in order to approve a transfer and the failure to provide such certificate lead to the rejection of the said transfer.

The mining companies sought relief from the court by arguing that the municipality does not have the necessary legislative competence to issue this prerequisite and that it can only be imposed by national legislation. In response the court found that national competence with regard to deeds registration is not a municipal function and municipalities are not allowed to stipulate requirements for property registrations. The court further found that these regulations are unconstitutional, insofar that they are inconsistent with section 25 and 156 of the Constitution. It was also found to be in conflict with section 118 of the Municipal Systems Act. Thus, the court ruled that municipalities’ do not have the necessary powers to implement such rules. This judgment still has to be confirmed by the Constitutional Court, and until such time, certificates in terms of SPLUMA is still a requirement for property transfers in Mpumalanga.

Due to the ever-developing use of technology there is an increase of different apps which provide for and enable the use of the electronic signatures in contracts. Electronic documents and agreements are legal, however the most important exception is that a Deed of Alienation for the sale of immovable property still has to be in writing and signed physically in wet ink. These agreements cannot benefit from electronic signatures. In a recent case, Borcherds and Another v Duxbury and Others, the focus of the judgement was on the increased use of electronic agreements and signatures. The court found that the word ‘signed’ is not defined in the Alienation of Land Act and the approach that the court followed was that signatures are pragmatic and not formalistic, they focused on whether the method of signature fulfils the function of a signature, rather than insisting on the form. In the case Borcherds chose to sign the sale agreement electronically and then argued that his signature was invalid, the offer to purchase was emailed to the seller and he signed the documents by using DocuSign. DocuSign allows users to sign documents by attaching a saved signature.

The court held that it was clear that when the seller affixed his signature and initials to the sale agreement utilising the DocuSign application, the seller signed the sale agreement as envisaged in section 2(1) of the Alienation of Land Act with the intention of being bound to the sale agreement as seller. The sale agreement was declared valid and the court ordered that the parties give effect to the sale agreement.  Unfortunately, the approach followed by the court was incorrect, as the provisions of ECTA confirm that the intention of the parties regarding the signature is irrelevant. ECTA confirms in section 4(4) that certain agreements may not be concluded electronically and agreements for the sale of immovable property falls within these exceptions. Therefor a sale agreement for immovable property as provided for in the Alienation of Land Act is excluded from the scope of ECTA and the electronic signature provisions cannot be applied to sale agreements of immovable property. An appeal on this decision is expected.

The publication of recent articles relating to the Protection of Personal Information Act, 2013 (“POPIA”) has caused confusion as to the effective date of POPIA and the obligations relating to you, the estate agent.

We would like to clarify as follows:

1.     Certain actions, which are not applicable to Estate Agencies in general, requires prior authorization from the Information Regulator.  The effective date for this has been postponed to 1 February 2022.

2.     The Regulator has been experiencing technical issues with registration of Information Officers (IO) and Deputy Information Officers (DIO) and because of this, the deadline for these registrations has been postponed indefinitely.

What this means to you, the Estate Agency/Agent is that:

(A)  You still need to register your Information Officer/s as soon as possible.

(B)  You still need to implement documentation and processes as previously communicated in our trainings and documents provided to you.

Enforcement powers contained in POPIA will still be coming into effect on 1 JULY 2021.

Sellers must bear in mind that although the purchaser is responsible for payment of the transferring attorney’s fee, there are certain costs and miscellaneous charges for which they (the sellers) are responsible, and which is payable before registration of a property can take place.

Some of these charges are standard, but some are unforeseeable and depends on the specific transfer. The seller must take note of these charges as neither the estate agent nor the transferring attorney can foresee these charges on date of conclusion of the transaction.

The seller may be liable for the following:

1.      The most common charges for which a seller is responsible are the following:

• Bond cancellation costs
• Compliances certificates
• Rates and taxes in advance (clearance figures), as well as a fee to the city council consultant appointed to obtain such figures or to attend to any necessary journals at the city council
• Levies of a HOA or Body Corporate in advance, as well as the admin fee of the Body Corporate or HOA to issue such figures

2.      Other fees not applicable to every transaction. Sellers also need to be aware of these fees as they are liable for payment thereof if the specific transaction requires the action(s) set out below:

• 4(1)(b) Application for rectification of a title deed
• Regulation 68(1): Application for a copy of the Title deed if original is lost
• Section 24(6) application: Extension of a Unit (where a sectional title unit was extended)
• Registration of a General Power of Attorney
• Section 68(1) Application: Removal of Title Deed Condition

All of the above costs are explained in more detail in our seller’s guide, which can be accessed at Click here.

When entering into an agreement of sale and transacting with trusts, it is of utmost importance to consider the 2020 landmark decision of Henque 1273 CC v Du Plessis and Others. The judgment deals with disputes that arose when a trust cancelled an agreement of sale and agreed to sell the property to a different purchaser on the basis of a majority vote from two out of three trustees. The first purchaser argued that the trust was not properly before the court, as the resolution was inadequate. The court held in the first purchaser’s favour.

This judgment highlighted two important principles to keep in mind when transacting with trusts. Firstly, a trust does not have legal personality. The trust’s estate, which is an accumulation of assets and liabilities, is a separate entity and vests in the trustees who administer such trust estate, as specified in the trust deed.

Secondly, in the absence of authorisation in the trust deed, trustees must act jointly. Our courts have held that it was imperative for a minority trustee to be kept informed of the meeting, the agenda and proposed resolution; so that he could have exercised the various options open to him in making known his views.

Our law requires that when a trader sells any part of his business other than in the normal course, such trader must publish a notice of his intention to do so in order to protect creditors of the business. Serious consequences can result from the failure to do so. In the case of Hyde Construction CC v K2013046547 the court confirmed this.

Blue Cloud, the respondent in the matter, purchased Erf 2941 and developed the property into a shopping centre which is situated in Plettenberg Bay. Blue Cloud contracted Hyde Construction, the applicant, to undertake alterations to the shopping centre. A dispute arose between the parties and litigation ensued on the building contract whereafter Blue Cloud then sold the property which formed the basis of the dispute. According to Hyde Construction, Blue Cloud sold the property without any proper notice thereof. 

Section 34 of the Insolvency Act deals with the voidable sale of business. It states that if a trader transfers in terms of a contract any business belonging to him, or the goodwill of such a business or any goods or property forming part thereof and such trader has not published a notice of such intended transfer in the Gazette, and in two issues of an Afrikaans and two issues of an English newspaper circulating in the district in which that business is carried on, within a period not less than 30 days and not more than 60 days before the date of such transfer, the said transfer shall be void as against his creditors for a period of six months after such transfer. The purpose of this clause is to protect creditors by preventing traders who are in financial difficulty from disposing of their business assets to third parties who are not liable for the debts of the business, without due advertisement to all the creditors of the business. The Application succeeded and the transfer of the Sectional Title Scheme from Blue Cloud to the K Company was declared void in terms of section 34 of the Insolvency Act.  

In the event where, during the transfer of a unit that forms part of a sectional title scheme, the exclusive use area allocated to the unit that is being transferred, is not formally ceded to the purchaser by way of a notarial cession, section 24(7)(b) of the Sectional Titles Act provides that such “exclusive use area” vests in the body corporate. However, this does not mean that the purchaser is without recourse. In Le Roux v Dunrobin Body Corporate and Others, the purchaser found himself in just this position. The Western Cape division of the High Court held that it could not be the intent of the legislature to enrich the body corporate at the expense of the purchaser in such a peculiar predicament. Furthermore, the Court held that the provisions of Section 33(1) of the Deeds Registries Act is applicable in this instance, and they are clear in that they provide that any person who acquired in any manner, other than by expropriation, the right to ownership of immovable property may proceed to obtain the appropriate relief under this section. As such, the Court found that section 33(1) of the Deeds Registries Act may be used to cede such exclusive use area from the body corporate to the purchaser, without the need for the Body Corporate to pass a unanimous resolution to this effect.

The Alienation of Land Act 68 of 1981 (ALA) regulates instalment sale agreements, which agreements are defined as: the sale of a property where the purchase price is paid by the purchaser in two or more instalments over a period longer than one year.

The Act requires the seller to record the agreement with the Registrar of Deeds and the title deed is endorsed to reflect that the instalment sale agreement has been concluded between the seller and the purchaser. The registration provides protection to the purchaser, as it prevents the seller from alienating the property to a third party without the consent of the purchaser.

In the Constitutional court judgement of Amardien and Others v Registrar of Deeds and Others it was found that:

·         There is an obligation on the seller to record the agreement at the Deeds Office within the stipulated time as specified in the ALA;

·         The instalments only become due and payable when the agreement has been registered at the Deeds Office, and the Seller is not entitled to any payments until the recordal has been registered.

·         If the agreement has been registered late by the seller, the seller cannot claim payments retrospectively.

·         It will not be a valid cancellation if the seller exercises the remedy of cancelation when the purchaser has fallen into arrears under an agreement which was not recorded with the Registrar of Deeds.

It is therefore pertinent that an instalment sale agreement be recorded at the Deeds Office as soon as possible after signature of the agreement.

It often happens that the purchaser takes occupation of the property prior to lodgement and registration in the deeds office and then discover certain defects in the property. This then gives rise to a dispute between the seller and purchaser, and the purchaser then often gives an instruction that registration of the transaction must be held back.

The agreement is key in such a dispute. Unless the agreement provides for certain repairs to be done prior to registration, which has not been done, or determines the condition of the property, the purchaser cannot withhold or delay the transfer of the property. The withdrawal of the bond does not have the effect of lapsing of the agreement as the bond condition had already been met if the purchaser obtained a bond within the stipulated time. A suspensive condition once fulfilled, cannot retrospectively not be fulfilled. 

The options available to the buyer if the seller does not want to negotiate is the following:
 

• Proceed with the transfer and sue the seller for damages for the defects or a reduction in the purchase price, if it can be proved that there are latent defects that the seller fraudulently and purposefully withheld.
• Claim that there was a material misrepresentation by the seller which led to the purchase of the property, and if successful the sale can be cancelled, and damages can be claimed.

If the purchasers however instruct the bank to withdraw the bond with the intention that it would persuade the seller to meet the demands, the risk is taken that the action will indicate the intention of the purchaser to repudiate the agreement, which will amount to breach of contract. The seller can then enforce the remedies for breach of contract.

Risk however only passes to the purchaser on date of registration. Damages to the property that occurs after occupation by the purchaser, but before registration, will be the liability of the seller to repair, provided that the purchaser did not cause such damages. The risk clause can be amended by way of an addendum to stipulate that risk will pass to the purchaser on date of occupation.

Examples of these are:

• The relevant FICA documents of either the seller or the purchaser is missing, inaccurate or incomplete.

• The purchaser fails to pay the relevant costs relating to the transfer and bond.

• The seller fails to pay outstanding levies.

• The local municipality delays in issuing the clearance certificate.

• The Electrical Certificate of Compliance, Gas Certificate of Compliance or Electrical Fence Certificate is outstanding from the seller.

• The original title deed is lost and the deeds office copy is also lost and a lost copy application has to be done.

• The Master’s Office delays the matter by delaying the endorsement of the POA, by delaying the  issuing of Letters of Authority/Executorship, or simply informing the file has been lost and nothing can be done.

• The approved building plans and sectional title plans are required but there are no approved plans.

• The property is attached and an interdict is registered against the property for debt of the seller.

• The outstanding bond amount is more than the selling price and the bank has to approve an Acknowledgment of Debt to enable the seller to pay the bank in instalments after registration.

Increase of conveyancing fees:

The Legal Practice council has advised that in terms of their guidelines, the transfer and bond fees have increased (by approximately 5%) with effect from 1 May 2021. Please refer to our website (MCostCalculator) which will be updated on the effective date.  We will also provide you with an updated fee sheets as soon as they are ready.

The increased fees will be applicable on all new instructions received from 1 May 2021 onwards.

Commencement of the POPI Act:

The purpose of the POPI Act (Protection of Personal Information) is to give effect to Section 14 of the Constitution which provides the right to privacy. The POPI Act commenced on 1 July 2020. Organizations, such as Estate Agencies, must be POPIA compliant by 1 July 2021.

Our firm will provide training and all relevant documents to all our Estate Agencies to guide you to become POPI compliant. The date and time of the training will be confirmed in due course. 

What happens if the parties enter into a sale agreement and subsequent to the conclusion of the agreement, one of the parties passes away? In the event where death of a party occurs and the agreement was concluded prior to the death of either party, in which transfer has not yet taken place, the sale agreement will remain valid and enforceable.

The death of a party would however cause inevitable delays. In this instance it turns into a deceased estate transaction and a letter of Executorship will first have to be obtained to proceed with the transaction. In some instances it would not be possible to proceed with the transfer, for example when a purchaser bought a property with mortgage finance from a bank as the bank would most likely withdraw the bond as there would no longer be an income to repay it. In a cash transaction, the estate would be obliged to proceed with the transfer and pay the purchase price or alternatively, come to an agreement with the seller for the consensual cancellation of the sale.

In the event of the death of a seller, the special power of attorney signed by the seller in favour of the conveyancers to effect transfer falls away and the conveyancers now require the signature of the executor to proceed with the transfer. This even applies where documents have already been lodged at the deeds office and these documents would have to be withdrawn in these circumstances. The power of attorney must also be endorsed by the Master of the High court which can cause further delays.

When a property is transferred, the original title deed needs to be lodged at the deeds office. Often the owner or, if bonded, the bank misplaced the current holding title deed. A certified copy of the title deed must then be issued by the deeds office.

This process entails that:

1.      An affidavit must be signed by the owner of the property confirming that the title deed of the property has been lost.

2.      A notification of intention to apply for a certified copy of the title deed must be published in an ordinary issue of a local newspaper.

3.      Before the certified copy of the title deed is issued, it must first lie open for inspection for two weeks (after the publication of the notice mentioned above) for any interested person free of charge.

4.      During this period any interested person may object to the issuing of the certified copy of the title deed.

5.      The objection must be done within the two (2) weeks of inspection. 

6.      Only after 2 weeks of publication has lapsed, the application for the certified copy of the title deed can be lodged at the deeds office.

The application for the certified copy of the title deed can be done simultaneously with the transfer of the property.

All deeds offices have their own regulations on which documents must be lodged together with the application for the certified copy of the title deed.

To ensure that the transaction is not delayed we immediately attempt to establish whether the original title deed is missing or not.

The cost for a certified copy of the title deed is approximately R 2500.00 which will be borne by either the seller or the bank. 

Should your neighbour build an encroaching structure without prior approval from the municipality, you can turn to the court for a removal order should other remedies fail, as was demonstrated in the recent High Court judgement of Bet-el Faith Mission v Motthamme and Others (hereafter the ‘Bet-el’ case).

 In this case, Mr and Mrs Motthame, who owned the property next to the Bet-el Faith Mission church, built a brick garage on what they thought was their property. However, aerial photographs later showed that the garage encroached on the Mission’s land.

The Mission sought the help of the local municipal council, as the couple had not obtained the necessary approval before constructing the garage. The municipality issued a formal notice to the couple, instructing them to demolish the garage. When Mr and Mrs Motthame refused to carry out the municipality’s demolition order, the Mission turned to the court for relief. Mr and Mrs Motthame argued in the pleadings that instead of issuing a demolition order, the Court should order the Mission to transfer the land on which the garage had been built to them at a reasonable price. However, the Court maintained that upholding the doctrine of legality must take precedence over personal considerations such as inconvenience, disruption, and financial implications, and ordered the demolition of the garage.

If you are in a similar situation, it is important to take prompt action against your encroaching neighbour to avoid a lengthy and expensive legal battle.

In the abovementioned court case, the question before the court was what would be a sufficient reason to apply for the removal of a co-trustee. The request usually arise when the relationship between trustees and beneficiaries sour. The court confirmed that the requirement would be that the relationship between the trustees should be of such a state that it jeopardises or endangers the proper administration of the trust and not mere animosity among trustees. Furthermore, the court confirmed that it should be in the interest of the trust and the beneficiaries to remove the trustee. An example of sufficient circumstances would be when mutual respect and trust is lost between the trustees which results into the trust administration and management of assets being neglected. A mere relationship that turned sour is therefore not a sufficient reason for the removal of a trustee.

Estate Agents must take note of the wording of the sale agreement’s occupational rent clause.  Often the situation arises that the seller is under the impression that the purchaser will be billed separately for water- and electricity consumption from date of occupation.  If the occupation clause does not specifically state that the purchaser is liable to pay the water and electricity consumption, the occupational rent amount is then so to speak “all inclusive”.  Amend the clause accordingly or keep the consumption in mind during the negotiating process with regards to the amount occupational rent payable. It is further advisable to request an amount for utilities in advance based on the average consumption of previous months. 

Selling a property which is currently being leased does not automatically cancel such a lease agreement. The common law rule of “huur gaat voor koop” is applicable which stipulates that a lease agreement takes precedence over a sale agreement.  This means that even though ownership may pass to the purchaser, the tenant may occupy the property until expiry of the lease agreement.

Our advice is that the purchaser be informed of the lease agreement and a copy thereof be provided to him. It is a misconception that the purchaser can renegotiate the lease, all rights and obligations in terms of the existing lease are ceded to the purchaser. It is also advisable to insert a clause in the deed of sale referring to the lease agreement, but even if there is no reference thereto the “huur gaat voor koop” rule will still be applicable. It is further pertinent to agree on whether the purchaser will take over the rental mandate of the rental agency or not, as the “huur gaat voor koop” principle” does not cover the rental agency’s mandate.

The current legal position is that there are no legislation prohibiting transfer and the deeds office does not require approved building plans for a property before it registers a property in the name of the purchaser. The lack of updated approved building plans is a latent defect, covered by the voetstoots clause, if the Seller was not aware of such fact.

Building plans can however be a requirement due to the contractual agreement between the seller and purchaser or a requirement of the bank which approved the purchasers’ loan.

Often the seller will indicate that they do not have updated plans for the property when completing the immovable property condition report. If this is indeed the case the agent must ensure that the purchaser is provided with a copy of the report.

On becoming aware that there are no plans the purchaser has to either agree to buy the property without updated plans, or the plans have to be addressed in the deed of sale. The options are:

1)      The seller must provide updated, approved building plans before registration. This will definitely delay the transfer with 6 months or more, or

2)      The seller will provide updated, approved building plans in due course and the transfer of the property into the name of the purchaser may proceed. A retention amount can be agreed on to set the purchasers mind at ease. The risk involved with this option is that there may be structures built over servitudes in which case the plans will not be approved until the structure encroaching the servitude is removed.

Be aware that your agency’s pro forma contract may contain a clause that is not in line with the expectation of the seller or purchaser, for example the clause may read that the seller warrants that the plans are in order whilst they are not.

You may want to consider appointing iCompli2sell, a compliance specialist company, to ensure that your client’s valued asset is legally compliant.

They can assist purchasers and sellers to ensure that legal measures like zoning, servitudes, building lines, building plans, site development plans, sectional plans etc. are in order. Our professional team consists of town planners, architects, draughtspersons, engineers, conveyancers, and land surveyors who will investigate and assess each case, based on its merits.

Contact them on 086 006 1062 or send an email to helpme@icompli.biz or visit their website at www.icompli.biz. 

The regulations promulgated in 2009 under the Occupational Health and Safety Act 85 of 1993 states clearly that all gas installations must have a Certificate of Conformity which must be issued by an authorized person registered with the Liquefied Petroleum Gas Safety Association of South Africa (LPGAS). The certificate must state that the installation has been properly inspected and found to be safe and leak free. Home- owners must understand that such an inspection is not just essential for their insurance policy to remain valid, but that it is conducted to ensure that the installation is safe and their family is not at risk. Regulation 17(3) makes it compulsory for a gas compliance certificate to be obtained, generally by the seller, in the event that a property is transferred from a seller to a purchaser.

The following are examples of gas installations that require a certificate:

·        Gas fires/built in gas-braais

·        Gas stoves and ovens

·        Hot water systems

Many agreements to purchase immovable property contain provisions whereby the purchaser forfeits his deposit upon cancellation of the agreement. This occurs when the purchaser is in breach of provisions in the agreement and ultimately fails to remedy such breach.

In terms of the Conventional Penalties Act, a court may reduce the penalty, should it find that the penalty is not in proportion to prejudice suffered by a creditor due to breach and cancellation of the agreement. The penalty amount should represent the damages actually suffered by the seller.

A purchaser may approach the court to claim reduction of the penalty amount even though the agreement provides that a purchaser will forfeit his deposit should the agreement be cancelled due to his/her breach.

It is important that these provisions are not confused with ‘rouwkoop’. ‘Rouwkoop’ is a clause that entitles the purchaser to legally withdraw from the contract by paying a sum of money. Should this happen, the purchaser will be acting in accordance with the terms of the agreement and his withdrawal will not constitute a breach of contract. This is clearly very distinguishable from a penalty clause which comes into operation only where there is a breach of contract. A penalty clause and rouwkoop clause can also not be combined (for example: any deposit paid will be forfeited as rouwkoop), as they are 2 distinct concepts. Rouwkoop is a predetermined amount specified in the agreement which a party can pay to withdraw from such agreement, while a penalty can still be disputed in a court and must be proportionate to the damages suffered.

When purchasing a vacant stand an estate, it is very important to establish what the building deadlines are, and what penalties will be applicable if such deadlines are not adhered to. It should also be noted further that a building deadline period does not start over from date of change of ownership, as is quite often the understanding by purchasers, unless it is clearly specified as such in the HOA rules.

A recent Court decision illustrates the risk and the financial cost of not complying. The court confirmed in Walker and Another v Cilantro Residential Estate Homeowners Association that property purchasers should take the building deadlines very seriously as the failure to comply with these deadlines could expose you to heavy fines, penalties and even the risk of losing the property.

In this case, a Homeowners Association (HOA) imposed “double levy” penalties totalling to an amount of R 105 000 on the owners of a stand who failed to complete the building works within the time specified, which conditions was contained in the title deed of the property, as well as in the rules of the HOA. The owners challenged the validity of the penalties on technical grounds, but they failed and the court held that they must pay the total penalty levies, late payment penalties, as well as the attorney-client legal costs for both the magistrates court and the unsuccessful appeal to the High Court.

This case confirmed that the HOA has the power to raise “recurring penalties” because of the wording of their articles of association which specifically gives the HOA the power to impose a system of fines or penalties.

However, the penalties must be proportionate to the prejudice suffered by the HOA. In this case, the title deed also gave the HOA the right to claim back the plot for breach of the building clause, which can also be enforced by the HOA if the deadline is not met.

It is therefore pertinent to establish if there are any building penalties applicable in an estate, in order for you to be able to advise any potential purchaser thereof.

If parties are married according to the laws of a foreign country, and a party is purchasing property through bond finance, the other spouse needs to assist with signature of all documents that are to be lodged in the Deeds Office, as per the Deeds Registries Act. The banks however have their own rules, regulations and requirements when the parties are married in terms of foreign law, namely:

SA HOME LOANS:

A spouse must only assist and co-sign the documents and does not need to be added as a co-applicant.

Nedbank:

A spouse will have to be added as a co-applicant, and the property registered and bonded in both spouses’ names.

Absa:

A spouse must only assist and co-sign the documents and does not need to be added as a co-applicant.

Standard bank:

The spouse will have to be added a co-applicant.

FNB:

A spouse will have to be added as a co-applicant, and the property registered and bonded in both spouses’ names.

The legal capacity to enter into a contract of sale or purchase of immovable property of a person married according to the laws of a foreign country, is determined by the laws of the country where the husband was domiciled at time of conclusion of the marriage. Section 17(6) of the Deeds Registries Act stipulates that in all documents that are lodged in a South African Deeds Office where parties are married in terms of foreign law, the parties must assist each other by co-signing such documents.

The following principles will apply:

1.      Seller

Signature of the sale agreement

• The sale agreement is not a document that is lodged in the Deeds Office, therefore if the property is registered only in one spouse’s name, only such spouse must sign the agreement and the assistance of the other spouse is not needed.
• If the property is registered in both spouses’ names, both must sign the sale agreement.

• Where the property is only registered in the name of one spouse, the other spouse needs to assist, by signing the Power of Attorney to pass transfer, which document is one of the documents that is lodged at the Deeds Office.
• Should the property be registered in both spouses’ names, both spouses need to assist each other on the Power of Attorney to pass transfer.

2.      Purchaser

Cash purchase

• In the event that a property is purchased cash, no assistance is required from the purchaser’s spouse on any of the documents (sale agreement and transfer documents), as none of the documents that the purchaser signs is lodged at the Deeds Office.

• In the event that the property is purchased through bond finance, the purchaser’s spouse will have to assist on the bond documents that are lodged at the Deeds Office being the Power of Attorney and draft bond deed, as well as on all the documents that the bank requires co-signature on.  

In next week’s MC2Agent we will discuss further the rules and requirements of the banks with regards to parties married in terms of foreign law. 

When dealing with divorce and immovable property we are often asked whether it will be necessary to register the transfer by way of a formal deed of transfer in the deeds office? Will there be transfer duty payable? Does ownership pass on date of the divorce order?

The court in Corporate Liquidators v Wiggill ruled that ownership of immovable property vests immediately in the party on date of the divorce order, and the formal registration of the transfer is not necessary. This ruling was overturned by the Supreme Court of Appeal in Fischer v Ubomi Ushishi Trading & others. The court held that the Deeds Registries Act deals with the transfer of real rights in land and that the Divorce Act cannot be used to transfer ownership. The Deeds Registries Act makes provision for divorce transfers by way of a formal deed of transfer or by way of endorsement if the parties were married in community of property. This means that the spouse only becomes the owner of the property when the transfer is registered in the deeds office and not when a divorce order is granted.

In terms of the exemptions of the Transfer Duty Act, transfer duty is not payable if the transfer is in terms of a divorce order.

A mandate is the authorisation to act or cause something to be done that is given to a representative. A mandate can be written or oral, as there is no legal requirement that a mandate must be reduced to writing, although it is advisable. 

Oral mandates can cause difficulties, as it is very hard to prove what the extent of the oral agreement was.  Irrespective of how informal the communications have been, it is always advised that a mandate to sell a seller’s property, must be reduced to writing.

In the case of Pather v Wakefields Real Estate  an agent at Wakefields Real Estate entered into an oral agreement with Mr Pather in terms of which they agreed that should the agent produce a willing and able purchaser for Mr Pather’s property and that the agency would receive commission of 7.5% (plus VAT) based on the purchase price. Mr Pather knew the agent as they lived in the same street, and he knew she worked as an estate agent. The agent then introduced a potential purchaser to the property. Mr Pather and the potential purchaser thereafter signed an offer to purchase, excluding any commission to the agent.

Mr Pather denied giving any mandate to the agent.

The court held that Mr Pather knew that she was an estate agent and he also knew that estate agents charge commission for performing the task of finding a willing and able purchaser. It appeared that Mr Pather reasoned that as long as the mandate was not in writing, commission would not become due and payable.

The agent established the necessary facts to show that she was the effective cause of the sale and was therefore entitled to the commission. Mr Pather’s appeal was dismissed.

The conclusion is that oral mandates are valid, but they are very risky. 

This question was answered in Krezmann v Kretzmann and Another where the issue arose whether an option to purchase is required by law to be in writing for it to be enforceable.

In this case an oral agreement was concluded between the defendant and the plaintiffs in terms of which the defendant gave the plaintiffs an option to purchase a property on terms that were orally agreed to by them, for a period of five years. A few years later, the plaintiffs exercised their option and provided the defendant with a signed offer to purchase for the property.

The defendant refused to sign the offer to purchase and argued that the option agreement was not binding because it was not in writing as required by section 2(1) of the Alienation of Land Act 68 of 1981 and was therefore invalid.

The plaintiffs in turn relied on the 2017 Constitutional Court decision where the court declared that a right of pre-emption does not need to be reduced to writing. They argued that it was the intention of the Constitutional Court to deal with all types of contracts which have as their aim the conclusion of another contract – such as the option contract.

The court found that an option to purchase was a concept that comprised of two distinct parts: (i) an offer to purchase and (ii) an agreement to keep that offer open, usually for a fixed period. The option agreement is not an alienation as defined by section 2(1) of the Alienation of Land Act and therefore does not have to be in writing. The offer to purchase on the other hand, must be a firm offer that will become valid and binding upon acceptance, and such offer must be in writing and comply with section 2(1) of the Act at the time that the option was granted.

Fair wear and tear refers to the deterioration of the leased property caused by normal, everyday use. Any damage caused by natural elements will also be regarded as fair wear and tear. The tenant and landlord need to agree on the state of the leased premises on commencement of the lease period, which will serve as reference point from which future wear and tear will be assessed. The tenant cannot be held liable for fair wear and tear as it is the landlord’s obligation to maintain the property.

Damage to a leased property is defined as any deterioration caused by negligent or accidental destruction or damage to a property. This includes stains which cannot be removed, torn carpets, nails hammered into walls and painting the walls a different colour without the landlords consent. In the abovementioned examples the tenant has to rectify the damage or forfeit a part of his deposit in order for the landlord to rectify the situation.

At the end of the lease period the tenant must hand over the leased premises in the same condition in which it was received, with the exception of fair wear and tear.

It is often difficult to ascertain whether the repair work is due to fair wear and tear or due to damage caused by the tenant.

Feel free to contact us for our pro forma lease agreement as well as the pro forma inspection report.

As per our MC2agent last week a company or a CC can be deregistered in certain cases.

It is problematic for the seller and the agent as the property cannot be transferred until the entity has been reinstated.

There are two stages in the deregistration process

1.      Initial/Provisional deregistration

If the entity was provisionally deregistered it can be reinstated by merely submitting the outstanding annual returns and paying all outstanding annual fees and penalties for late filing to the CIPC by the auditors, whereafter the deregistration process will be stopped, and the entity will be reinstated. This process takes approximately 2-4 weeks.

2.      Final deregistration

Once the company or CC has been finally deregistered the legal entity can only be reinstated on application to the CIPC on the prescribed form together with the required supporting documents and the payment of the application fee of R 200. Notice of the application of reinstatement must appear in a local newspaper (this notice provides the opportunity to object to the re-instatement within 21 days). Normally the legal entity’s auditors attend to the reinstatement.

Once the application has been approved, all outstanding annual returns must be submitted and all annual fees and penalties for late filing must be paid to the CIPC within 15 working days, whereafter the reinstatement will be done.

The CIPC will publish the successful reinstatement on their website.

This process can be tedious and can delay transfer by up to 12 weeks.

The prudent agent will establish the status of the legal entity on the CIPC search when the property is listed.

It is important to note that a company can’t conduct business if its status at the CIPC is “in deregistration” or “final deregistration” or if the company is in liquidation. Reasons for deregistration are:

1.      The company has failed to file an annual return

2.      The company appears to have been inactive for at least seven years,

3.      Voluntary deregistration

For such a company to sell or purchase property, its status at the CIPC must be restored to “in business”.

In the next week’s article the process to reinstate a company will be discussed.

Depending on if the entity has been provisionally or finally deregistered, the reinstatement process can take approximately 6-12 weeks, which is why it is very important to verify an entity’s CIPC status at the very beginning of the transaction. 

There have been numerous instances where the residents of estates and complexes raised grievances towards the homeowners' associations in connection with traffic fines. Residents received speeding tickets in their estate when they exceeded the speed limit and the HOA’s also began to fine guests exceeding the speed limit.

Some residents feel that this rule is giving the homeowners association enormous powers in such a way that they could abuse their powers to generate an income.

However, the dispute was resolved in Mount Edgecombe Country Club Estate Management Association (RF) NPC v Singh in the Supreme Court of Appeal during March 2019. The ruling emphasized that the roads inside the estate can be seen as private roads. The estate also has the right to fine visitors as the owners give the visitors permission to enter the private neighbourhood and therefore no longer form part of the “public” and must abide by the rules of the estate. Thus, there is a contractual agreement between the owner of the property and the homeowners' association which obliges the owner to accept the rules of the estate when purchasing the property.

The property owners are responsible for the fines incurred by their guests because of the fact that the contract exists between the homeowners' association and the owner and not with the guests.

Agents must therefore properly inform their clients about the relevant rules in the estate and about the fact that the owners can be responsible for all traffic fines issued.

In terms of the Financial Intelligence Centre Act (FICA) each accountable institution (which includes attorneys and estate agents) has a reporting duty towards the Financial Intelligence Centre (FIC). They have to report any of the following:

Although, as a point of departure, it can be argued that ownership of property entails a sovereign right to use that property, this right is not absolute and is normally restricted.

Restrictive title conditions as well as zoning are, amongst other, two of the ways the usage rights on a property can be restricted. It is therefore very important to understand the rights of a property owner, with regards to the zoning and the restrictive conditions registered against the property.

If the property is used in contradiction with the restrictive title conditions and/or zoning it will constitute an illegal act.

For example if the property has a restrictive condition such as “the property may only be used for residential purposes” stipulated in the title deed or if the zoning of the property is residential then the property can only be used for said purpose. If the property is used for any other purpose, such as business purposes, it will constitute an illegal act.

Should you have any zoning related questions, you can contact iCompli2Sell at 086 006 1062 or send an email to helpme@icompli.biz.

In terms of the Financial Intelligence Centre Act (FICA) each accountable institution (which includes attorneys and estate agents) has a reporting duty towards the Financial Intelligence Centre (FIC). They have to report any of the following:

1.      Cash transactions above the prescribed limit

2.      Property associated with terrorist and terrorist related activities

3.      Suspicious and unusual transactions

4.      Politically exposed persons

Over the next few weeks we will have a look at all of the above mentioned reporting responsibilities.

The fourth reporting function is dealt with in this week’s MC2agent.

You can read the 1st ,2nd and 3rd week’s MC2agent on the first reporting function here.

4.      POLTICALLY EXPOSED PERSONS 

A politically exposed person (PEP) is the term used for an individual who is, or has been in the past,  entrusted with prominent public functions as set out below.

Accountable institutions should put in place appropriate risk management systems to determine whether a customer is a PEP.

A PEP is considered to be a high-risk client. In addition to performing the regular customer due diligence measures accountable institutions should obtain approval for establishing a business relationship with a PEP from senior management. The source of funds and wealth must be established by taking reasonable measures, such as obtaining proof of where the funds originated from. The relationship with a PEP must be monitored on an ongoing basis.

Family members of someone who is a PEP should also be given special attention by accountable institutions. This includes spouses, children, parents and siblings, relatives by marriage and may also include other blood relatives.

The following examples can be considered when establishing if someone is a PEP:

•                  Heads of state, heads of government, cabinet ministers, and Mp’s;

•                  Influential functionaries in nationalised industries and government administration;

•                  Senior judges;

•                  Senior political party functionaries;

•                  Senior and/or influential officials, functionaries and military leaders

•                  Closely associated persons. This includes close business colleagues and personal advisers/consultants to the PEP.

This concludes our series on the FICA reporting function

In terms of the Financial Intelligence Centre Act (FICA) each accountable institution (which includes attorneys and estate agents) has a reporting duty towards the Financial Intelligence Centre (FIC). They have to report any of the following:

1.      Cash transactions above the prescribed limit

2.      Property associated with terrorist and terrorist related activities

3.      Suspicious and unusual transactions

4.      Politically exposed persons

Over the next few weeks we will have a look at all of the above mentioned reporting responsibilities.

The third reporting function is dealt with in this week’s MC2agent.

You can read the 1st and 2nd week’s MC2agent on the first reporting function here.

3.      Suspicious and unusual transactions

The duty to report suspicious and unusual transactions and activities is governed by section 29 of the FIC Act.

The obligation to report suspicious and unusual transactions applies to any person who:

•                  carries on a business; (principal/director/member)

•                  is in charge of a business; (principal/office administrator)

•                  manages a business; or (Principal/team leader/office manager)

•                  is employed by a business. (Agent/bookkeeper)

All businesses, including accountable and reporting institutions (attorneys and estate agents), has to report suspicious and unusual transactions that are potentially linked to money laundering or terrorist financing to the FIC.

This reporting obligation arises when a person is indeed aware of certain facts, or even suspects that certain facts exist with regards to a suspicious or unusual transaction.

There is no monetary threshold which applies to the reporting of suspicious or unusual transactions. Once a conclusion is reached that a situation exists which gives rise to a suspicion that a transaction or activity relates to proceeds of unlawful activities, money laundering or terror financing, the transaction or activity must be reported irrespective of the amount involved.

Examples of suspicious and unusual transactions can include; but is not limited to the following:

•                  Deposits of funds with a request for the immediate transfer elsewhere;

•                  Unwarranted and unexplained international transfers;

•                  Transactions do not appear to be in keeping with normal industry practices;

•                  Unnecessarily complex transactions;

•                  A transaction seems to be unusually large or otherwise inconsistent with the customer’s financial standing or usual pattern of activities;

•                  Performing similar transactions (i.e. cash deposits) at multiple branches of the same institution on the same business day;

Next week we will deal with the final reporting function

In terms of the Financial Intelligence Centre Act (FICA) each accountable institution (which includes attorneys and estate agents) has a reporting duty towards the Financial Intelligence Centre (FIC). They have to report any of the following:

1.      Cash transactions above the prescribed limit

2.      Property associated with terrorist and terrorist related activities

3.      Suspicious and unusual transactions

4.      Politically exposed persons

Over the next few weeks we will have a look at all of the above mentioned reporting responsibilities.

The second reporting function is dealt with in this week’s MC2agent.