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MC2Agent

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MUST AN OPTION TO PURCHASE BE REDUCED TO WRITING TO BE ENFORCEABLE?

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.



Published: 04 December 2020

FAIR WEAR AND TEAR OF A LEASED PROPERTY

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.



Published: 27 November 2020

RE-INSTATEMENT OF A CC

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.



Published: 20 November 2020

DEREGISTRATION OF A COMPANY

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. 



Published: 13 November 2020

TRAFFIC FINES IN ESTATES

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.



Published: 30 October 2020

TITLE DEED CONDITIONS AND ZONING REQUIREMENTS

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.



Published: 16 October 2020

FICA & THE REPORTING OBLIGATION – PART 4

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.