Snyman de Jager Attorneys / Prokureurs

PA ROADSHOW - LEGAL UPDATE
MARCH 2005

Good Morning Ladies and Gentlemen, I thank your for the opportunity to present this year's legal update, once again. It's been almost a year since our last legal update and even in the legal fraternity where things take ages to develop and transpire into case law, there have been interesting developments in the 2004 period.

What my aim is during this legal update rather than to discuss general legal principles, as we have done on previous occasions, is to give you an update on the latest issues of concern amongst the homeowners coupled with the latest legislation and case law relating thereto, for example:

Homeowners are liable for outstanding water- and electricity consumption costs of their tenants.
Municipal service fees enjoying preference over mortgage bonds.
Restructuring of the Property Rating Bill and the threat of higher property rates.
Requirement that clearance certificates should be valid for 4 months during transfer.
The liability of owners of sectional title units for the rest of the year's levy after sale of the unit.
The latest judgment on the "Voetstoots" principle.
The latest judgment on the principle of a nominee.

A Homeowners are liable for outstanding water-and electricity consumption costs of their tenants

As you are duly aware a requirement to successfully transfer a property includes the lodgement of a clearance certificate from the Local Municipality in the area in which the immovable property is situated. This clearance certificate certifies that all amounts, which always only included property rates, refuse removal and cleansing charges are paid in full to the Local Municipality involved in terms of section 118 of the Municipal Systems Act, 2000 (act 32 of 2000).

This changed however during 2004 and Municipalities started to add water and electricity consumption to these figures that caused an outcry from the public, especially in those instances where registered owners who had tenants in the property for some time, try to sell the property, only to find out on their rates clearance memo that the tenant never made the payments for water and electricity.

In many instances the service agreement is still between the owners and the Municipality and the only amendment is the postal address, sending the account to the postal address of the tenant who never pays. Although the owner can argue that the services should be suspended in the event of non-payment, liability cannot be escaped in the event of it not taking place.

In the case of Mkontwana v Nelson Mandela Metropolitan Municipality the plaintiff challenged the Local Municipality stating that it is unconstitutional to add these service charges to the clearance amount. The Constitutional Court however did not agree and stated that section 118 of the Municipal Systems Act 32 of 2000 includes such charges. If one looks at the wording of the section:

"118.(1) A registrar of deeds or other registration officer of immovable property may not register the transfer of property except on production to that registration of a prescribed certificate-

issued by the municipality in which that property is situated and
which certifies that all amount due in connection with that property for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties during the two years preceding the date of application for the certificate have been fully paid."

Obviously after the judgment of the Constitutional Court the Local Municipalities were strengthened in their actions and continue to add these charges to the clearance figures. The ruling of the Constitutional Court is however not the end of the matter and the dispute as to whether owners are liable for the service charges of their tenants has been postponed to later this year in the Supreme Court.

My viewpoint is however that if the service agreement has been entered into by the Municipality and the tenant there is no way that the service charges can be collected from me (the owner) for I am not a party to the agreement. The problem will however arise if the service agreement is still in my name (the owner) and the postal address has been changed to that of the tenant without him keeping the payments up to date.

The following proposals can be considered by owners for purposes of their rental agreements:

Rental agreements should make provision for water and electricity consumption and non payment of accounts will result in breach of contract enabling the owner to cancel the agreement and utilize the tenant's deposit to bring the account up to date.
Deposits should be enough to make provision for such payments and maybe the owner should remain the party responsible and request payment from the tenant on receipt of the account.
Request a duplicate statement to be posted by the City Council to you as owner.
Stricter evaluation of tenants and accounts has to be monitored and scrutinized.
Cancel the service agreement and require the tenant to enter into a new one.

Remember it still remains the responsibility of the registered owner and ignorance is not a defence in law!

B Municipal service fees enjoying preference over mortgage bonds

"118. (3) An amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property."

As afore mentioned the Municipal Systems Act 32 of 2000 is quite clear as to the preference of municipal service charges over amounts due under a mortgage bond.

In the case of Ex Parte Summer Symphony Properties 13CC the matter under consideration by the Courts in 2003 was as follows:

The property was sold in execution for R725 000.00, a clearance certificate had to be obtained prior to transfer which required R287 900.29 for debt younger that 2 years and a further amount of R655 273.83 for debt older that 2 years. The mortgagee argued that payment of the mortgage bond enjoyed preference over the old debt.

The Supreme Court stated in its judgment that section 118(3) was not retrospective; therefore the Municipal Systems Act gives all council debt preference over any mortgage bond.

The legal question was however put to the test again in 2004 by means of the case FNB v Geovy Villa which had the following facts:

FNB was the mortgagee of the unit and the Body Corporate obtained a judgment against the owner for outstanding levies and costs. The property sold in execution for a mere R32 000 of which R8 600 was due to the Body Corporate and FNB was the mortgagee for an amount of R108 000.00, thus FNB refused to accept the offer.

The Body Corporate however claimed that in terms of section 118(3) it enjoyed preference above that of the bank and therefore did not require the approval of the bank. The Supreme Court ruled in favour of the Body Corporate. FNB however appealed.

The Court of Appeal's viewpoint in interpreting the act was however different than of the Supreme Court in that preference will only be applicable assuming there is enough funds to pay both the mortgagee and the Body Corporate and seeing that the owner was not sequestrated the principle of preference of claims were not in question.

The writer's viewpoint is that the judgment of the Court of Appeal might have been a very humane one, but the Court of Appeal's interpretation of the act is in my view too subjective as they read in it certain provisions that are not there. The solution in this regard lies further in an amendment and qualification to the Act rather than questing the true intention of the legislator.

C Restructuring the Property Rating Bill and the threat of higher property rates

Throughout 2003 and 2004 the word concerning the proposed Municipal Property Rates Act went around creating fear amongst consumers, the property rates are going to shoot through the roof once the act has been promulgated.

This however turned out to be greatly exaggerated when the new Municipal Property Rates Act (Act 6 of 2004) came into effect on 11 May 2004, and when reading through the act one gets the feeling that the objective of the act is more to introduce a uniform method of levying rates than to increase the existing ones.

What the Act is effectively doing is saying that market value will be the rates assessment method used countrywide, which is a step forward because each province used to have its own method of determining the rates levied which made it very difficult for property professionals to relate to the different assessment procedures.

Although there are no indication in the Act as to the rates that Municipalities may levy section 3(1) of the act provides for a policy consistent with the act that has to be adopted by each Municipality.

Section 4 goes further in requiring that the draft rates should be published for comments by the community.

Section 10 requires that individual billing will take place in the event of sectional title units which is an interesting change, meaning that sectional title complexes will in future not be billed as an unit but individual accounts will be sent out. The writer foresees huge administrative problems in this regard especially with older blocks.

After the rate policy has been finalized it will be promulgated in the Provincial Gazette (Section 14) and made public knowledge.

Section 16 indicates that the new rates policy will not entertain exorbitant rates for it states that "a municipality may not exercise its power to levy rates on property in a way that would materially and unreasonably prejudice

national economic policies
economic activities across its boundaries
the national mobility of goods, services, capital of labour.

All property in the municipal area will be revaluated by municipal valuators being one of its own officials or a person in private practice, but must be a professional valuator. (Section 33 and 39)

The valuation role should then be updated once a year (Section 77).

According to the City of Tshwane the revision of the valuation role would have started in any case by 30 June 2005 and the revaluation of property will take place over a period of 4 years. The existing valuation role will therefore be used until at least 2006.

According to the Council it is so that taxes will be levied on buildings for the first time but the rate policy adopted by a City Council will compensate for this lessening the percentage in the rand ratio, as Municipalities are not entitled to enrich themselves by means of the new act.

It might be possible that there will be increases in certain areas but this will be due to the updated valuation rather that the rates policy adopted.

D   Requirement that clearance certificates should be valid for 4 months during transfer

In August 2004 an amendment to Section 118(1) of the Municipal Systems Act 32 of 2000 came into affect requiring a clearance certificate in the event of transfer of a property valid for 120 days from the issue date effectively requiring sellers to make provision for payment of 4 months rates and taxes in advance before transfer may take place.

Prior to August 2004 Conveyancers requested the rates and taxes approximately 1 - 2 months in advance as registration normally takes place within this period, seeing that registrations take place quicker than the required 4 months the City Council will be sitting with a huge overpayment on rates and taxes and our experience is that repayment of these credits takes up to 4 months.

In the light of the aforementioned sellers are not happy with the additional deductions from their selling prices and some conveyances have started to increase the pro rata rates and taxes payable on the purchaser 's account from the standard R500.00 to R2 500.00 which again upsets the purchaser.

Unfortunately the additional rates have to be paid whether recovered from the seller or purchaser as the law requires these additional payments.

E   Liability of owners, of sectional title units for the rest of the year's levy after sale of the unit.

An amendment in the Sectional Titles Act (Section 37(2) of the Sectional Titles Act 95 of 1986), holding the owner/seller of a sectional title unit liable for the outstanding levies for the year in which he sold the unit caused outcries amongst sectional title owners, for it was always the practice that the owner will be liable up until date of registration after which the purchaser will be liable for such payments.

The reason for the change is basically that the act does not provide for a Body Corporate to collect levies from the new purchaser as there is no agreement between the parties and the only party with whom the Body Corporate has a standing arrangement for payment and from which the act permits collection of the levies is the seller and therefore the act provides for keeping him liable until an alternative arrangement is in place.

This alternative arrangement is also our solution to the problem and is called a tri-partite agreement, which is provided by the Body Corporate (managing agent) to the conveyancer, which is basically an agreement between the body corporate, seller and purchaser, binding the purchaser contractually to the body corporate for future levy payments and releasing the seller after registration.

So although we have the amendment it is basically business as usual with exception of the addition of the tri-partite agreement.

F   The latest judgement on the "Voetstoot" principle

Everyone knows that the "Voetstoots" principle entitles the owner to sell the property "as it is" or "as it stands" based on the fact that he disclosed all defects to the purchaser of which he was aware at the time of the sale.

Liability of the seller is thus excluded in respect of all defects in the property of which the seller was genuinely ignorant.

In the case of Waller and Another v Pienaar and Another in which judgment was delivered on 27 May 2004, these principles were reconfirmed. The defendant was sued for restitution of the contract based on

poor compacted filling
a cracked gable wall
failure of internal walls
inadequate foundations

The Defendant however had a slip of the tongue in pleading that "the plaintiff did not see the crack and if he would have been the purchaser he would have enquired about it" causing the court to believe that he "designedly concealed" and "craftily refrained" from disclosing a latent defect that was to his knowledge at date of sale, thus the "Voetstoots" remedy will not be to his rescue.

G The latest judgment on the principle of a nominee

As all of you are aware the "luxury" of nominations in that purchasers could purchase a property on auction in his personal name or that of a nominee and placidly look for another purchaser at an inflated price and nominate him was dealt a serious blow by our Minister of Finance on 1 September 2003.

The requirement has been changed from the aforementioned date that a purchaser acting on behalf of an undisclosed principal immediately upon acceptance by the seller has to disclose the principal (meaning at least within 24 hours) and if a purchaser acts on behalf of a CC or Company to be formed, it has to be inserted in the agreement and the registration documents have to accompany the application for transfer duty, by default of which it will be classified as two transactions and bear double transfer duties. This requirement was confirmed in the case of Noormohamed v Visser and Another on 19 November 2004.

THE 7 HABITS OF HIGHLY UNSUCCESSFUL ESTATE AGENTS

Good morning Ladies and Gentlemen. The privilege is once again mine to address you today and continue our legal exploration of important contractual issues. For those who can remember our previous discussion included contractual claims for estate agent's commission latent defects in property and restraints of trade to mention but a few.

But today I thought it is time to have a look at the atrocities that some estate agents create in their agreements due to a lack of knowledge, which has devastating effects on the deal as a whole.

Before we have a look at these 7 habits it is important that we have a look at the requirements for a valid agreement and what these requirements entail.

These requirements include :

Consensus (agreement on all the aspects of the contract)
The legal capacity to contract
A contract must be lawful
Performance must be possible
Formalities has to be complied with

1. CONSENSUS

Before it can be said that consensus has been reached between the parties, it must be clear that the parties have reached agreement on all the aspects of a contract and this has to be apparent by merely looking at the agreement (Scheepers v Vermeulen 1948 (4) SA 884 (O)). "An agreement which is still incomplete is not a contract even though the parties may firmly believe that a binding contract has been concluded." If parties agree on certain aspects in the course of negotiations but leave others open for later discussion the contract only becomes binding once the latter aspects have also been agreed on (Johnston v Leal 1980 (3) SA 927 (A)).

Consensus is important, because if it depends entirely on the will of one party to an alleged contract, to determine the extent of the performance of either party, the purported contract is void due to vagueness (Lambons (Pty) Ltd v BMW (SA) (Pty) Ltd 1997 (4) SA 141 (SCA))

There are further situations that can cause a party to allege that consensus has been given improperly for example:

Misrepresentation - for example where a seller in person (or via his estate agent) falsely states to a prospective purchaser that the foundations have been adequately strengthened this constitutes a material misrepresentation (Davidson v Bonafede (1981 (2) SA 501 (C)). A contract containing such a misrepresentation can be set aside if it can be proven that the purchaser would not have proceeded with the deal if the false statement had not been made. However an opinion for example by an estate agent that a property is well constructed is not a misrepresentation (Naude v Harrison 1925 CPD 84) and "puffing" does not attack the validity of the agreement.

Failure to disclose material defect of which the seller is aware constitutes a misrepresentation for example where the seller knows the roof leaks (Trotman v Edwick 1951 (1) SA 443 (A)) or where the seller is aware that a squatter camp is going to be established adjacent to the property and fails to inform the purchaser (Mayes and others v Noordhof 1992 (4) SA 223 (C)).

Duress or undue influence - for example where the purchaser threatens to damage the seller's property if he does not sell it to him. The threat must however be real, imminent and must be of such a nature that any reasonable man would have taken it serious. A person signing a contract without reading it can however not escape liability (Glen Comeragh (Pty) Ltd v Colibri (Pty) Ltd 1979 (3) SA 210 (T)).

2. PARTIES MUST HAVE THE CAPACITY TO CONTRACT

There are certain situations that places an impediment on a person's capacity to contract alone, for example his marital status, whether he is solvent or not, his sanity, whether he is a minor or not, to name but a few, for example the requirement that where parties are married in community of property both should be a party to the agreement or written consent by the other party should be obtained, if not it renders the contract null and void (Amalgamated Banks of SA v Lydenburg Passesiersdienste CC 1995 (3) SA 314 (T)).

3. THE CONTRACT MUST BE LAWFUL

All agreements are lawful unless their conclusion is prohibited by legislation or common law.

For example a contract disposing of unproclaimed land is prohibited by the Town Planning and Townships Ordinances 15 of 1986.

The contract selling land to a foreigner who is in South Africa but not in possession of a residential permit is prohibited by the Aliens Control Act 96 of 1991.

4. INITIAL PERFORMANCE UNDER THE CONTRACT MUST BE POSSIBLE

A contract is void if at the time of its conclusion performance is impossible (Wilson v Smith 1956 (1) SA 393 (W))

Performance should be objectively impossible

A party to a contract cannot be blamed for the impossibility, for example where the house burnt down before conclusion of the contract and the parties were unaware (Stansfield v Kuhn 1940 WPD 238 at 246)

5. THE PRESCRIBED FORMALITIES MUST BE COMPLIED WITH

As a general rule contracts may be concluded without formalities meaning in writing or verbally but there are certain formalities that are required in certain instances for example :

A contract concerning the sale of land must be in writing and signed by the parties (section 2 (1) of the Alienation of Land Act 68 of 1981)

A long lease agreement (10 years or longer) has no effect on creditors unless it has been registered against the title deed and creditors have been given notice (Section 2 (1) of the Lease of Land Act 18 of 1969).

THE SEVEN HABITS OF HIGHLY UNSUCCESSFUL ESTATE AGENTS

1. INSUFFICIENT PROPERTY DESCRIPTIONS

A description of immoveable property has to be determined or determinable, but what is important is that it has to be apparent out of the agreement and the agreement alone what property the parties intended to buy and sell.

The description of the property will be seen as an essential element of the agreement and omitting it or an incorrect description may render the contract void.

Contracts are subject to the "parol evidence" rule meaning that if a contract is in writing the written portion is the only reference to the property description that may be used in a court of law, and no external evidence is permitted to clarify the parties' intentions. (Harlin Properties v Los Angeles Hotel 1962 (3) SA (A)). These problems normally occur in the event of newly developed sectional titles or un-proclaimed townships.

2. INCORRECT DESCRIPTION OF PARTIES

There are numerous changes in the status of a person that places an impediment upon a person's capacity to contract. And it is essential that those contracting parties would either have to be assisted or represented or the necessary consents would have to be obtained by default of which the contract will be void.

Married in community of property - the written consent of the spouse is required and the Deeds Registry Act 47 of 1937, section 17 (4) requires that if parties married in community of property obtain immoveable property it has to be registered in both parties names.

Minors - despite the fact that minors have to be assisted by their legal guardians, consent has to be granted for the sale of a minor's property by the Supreme Court (above a R100 000-00) and the Master of the Supreme Court (below R100 000-00) to name but a few (for further examples kindly refer to the annexure relating to description of parties.)

Problems also arise in connection with nominations, in the past the Receiver of Revenue allowed nominations to take place within a period of 30 days (CIR v Knight) and the transaction was then still seen as one transaction for purposes of transfer duty but recently the Receiver of Revenue stated in a circular that nominations should take place within 24 hours otherwise it is deemed to be two transactions.

Nominations can also only take place reflecting the same purchase price and not a higher price, as some may believe. The Receiver grants a grace period for Companies, Close Corporations and Trusts that have to be formed but requires proof of those registration documents once transfer duty is paid.

3. BOND APPROVAL AND GUARANTEES

Agreements for sale of immoveable property as a general rule contain suspensive conditions of which the most common condition would be the obtaining of a loan. The nature of a suspensive condition is that it suspends the effectiveness of the agreement up until such time as the condition has been fulfilled. (Van der Walt v Stassen 1979 (3) SA 810 (K)

A logical result following the approval of a bond is that guarantees are issued against such bond, and many estate agents complete agreements stating that guarantees have to be delivered before approval of the loan which is obviously impossible, an oversight like this can render your contract void.

4. PAYMENT OF VAT OR TRANSFER DUTY

It is alarming to see how few estate agents truly know what the difference is between VAT and Transfer duty and when the one or the other applies.

There can only be VAT or Transfer duty payable, never both simultaneously. VAT will only and always be applicable where your seller is a VAT Vendor, if not Transfer duty will be payable by the purchaser.

Remember that VAT is normally included in your selling price, ensure your seller who is a VAT vendor, knows this!

5. FAILURE TO SPECIFY GOODS THAT ARE ABOUT TO BE REMOVED

All agreements between parties have to be in writing, many agents see verbal agreements between parties in relation to items that either remains or are to be removed on date of transfer as sufficient, and it's not!

A handy test whether an item forms part of a sale or not, can be found in the case of (MacDonald v Radin 1915 (A1) 454).

1. Is the item attached?
2. Was it the intention that attachment should be permanent?
3. Can the attachment be removed without causing structural damage?

6. DOMICILIUM NOTICES AND OCCUPATION

Estate agents frequently complete the agreement reflecting the Purchaser's domicilium address as being his current address, knowing that he will occupy the newly bought property in a matter of days giving rise to difficulty in the event of notices.

The completion of occupation clauses in an agreement is of the utmost importance as well as the clause dealing with the risk of damage to the property. Normally the risk of damage will remain with the seller until registration takes place even though occupation has taken place, which is not satisfactory especially where the occupants do not take adequate care of the property.

In the case of (Smit v Walles 1985 (2) SA 189 (T)) it was decided that if the occupation date is an essential element of the agreement and the contract states that occupation will take place on a date to be agreed upon between the parties, renders the contract, invalid.

7. OMMITTANCE OF SECTION 29 A

If the purchase price is R250 000-00 or lower, the cooling off clause in the contract is essential, omitting it will render the agreement, invalid.

Exemptions to this requirement are : a) If the purchase price exceeds R250 000-00

b) If the purchase is not a natural person (trust, Close Corporation or (Pty) Ltd)

c) The purchaser and seller concluded a contract for the same portion of land previously

d) Where a purchaser purchases in his name or nominee

e) Where he purchases the property by exercising an option which was open for more than 5 days.

CONTRACTING PARTY		DESCRIPTION
MARRIED Passport in case of a Foreigner	1. In community of property	1. Sean Smith, Identity number Sue Smith, Identity number, married in community of property
	2. Out of community of property	2. Sean Smith, Identity number, married out of community of property
	3. Out of community of property - each party - half a share	3. Sean Smith, Identity number and Sue Smith, Identity number, married out of community of property
	4. According to the law of a foreign country	4. Sean Smith, Identity number/Birth date and Sue Smith, Identity number/Birth date, married, according to the laws of Zambia
UNMARRIED	1. Minor: (a) Buyer	1. (a) Sean Smith, Identity number/ Birth date, herein assisted by his guardian...
	1. Minor: (b) Seller	1. (b) Sean Smith, Identity number/Birth date, herein assisted by his guardian... Duly authorised by the supreme court
	2. Major	2. Sean Smit, Identity number, unmarried
DIVORCED Divorce order and settlement agreement are needed in all circumstances	1. Divorced person	1. Sean Smith, Identity number, Divorced or married
	2. Was married in community of property -one spouse retains property	2. Relevant spouse - Identity number, Divorced
	3. Was married in community of property -each spouse - half share	3. Sean Smith, Identity number, Sue Smith, Identity number. Divorced
	4. Property was registered in one spouses name	4. Relevant party, Identity number, Divorced
	5. Property was registered in both spouses names	5. Sean Smit, Identity number, Divorced & Sue Smith, Identity number, Divorced
COMPANY Form CM22 & CM29& resolution	1. Existing	1. Sean Smith, in my capacity as director of S S Construction Pty Ltd Registration No 83/789/07, hereby duly authorized by virtue of a resolution dated
COMPANY Form CM22 & CM29& resolution	2. To be formed	2. Sean Smith, Identity number, in my capacity as trustee for a company to be formed
CLOSE CORPORATION Form CK1 and a resolution	1. Existing	1. Sean Smith, in my capacity as a member of SALES cc Registration number CK98/1 234/23 hereby duly authorized by virtue of a resolution dated ....
CLOSE CORPORATION Form CK1 and a resolution	2. To be formed	2. Sean Smith, Identity number, in my capacity as trustee for a Close Corporation to be formed
TRUST Deed of Trust & Letter of Authority	1. Existing	1. Sean Smith, in my capacity as Trustee of the SANSUN Trust No IT 123/97 duly authorised by virtue to a letter of authority No (T 123/97 issued by the Master of the supreme court at Pretoria on ....
TRUST Deed of Trust & Letter of Authority	2. To be formed	2. Sean Smith, Identity number, married out of community of property as a stipulation on behalf of a third party (the said third party being a trust to be formed)
PARTNERSHIP Partnership agreement	1. The partners	1 . Sean Smith, Identity number, and Nick Nolte, Identity number, a partnership carrying on a business under the name of SeanNick partnership
REPRESENTATIVE	1. The power of attorney "Power of attorney by conveyancer signed in RSA	1. Sean Smith herein represented by Mike Meyer duly authorised thereto, by virtue of a power of attorney signed in RSA, dated ....
INSOLVENT Sequestration order & letter of appointment & master's permission	1. The Curator/Liquidator	1. Mike Meyer in my capacity as curator in the insolvent estate of Sean Smith,identity number, married out of community of property, and duly authorised thereto by letter of appoinlment No T1 23/97 issued by the Master of the supreme court in Pretoria on ....
DECEASED PERSON Will & Death Notice Executor's letter & Master's permission	1. Was married out of community of property	1. Nick Nolle in my capacity as executor of the estate of late Sue Smith, duly authorised thereto by Executor letter No 123/97 issued by master of the supreme court in Pretoria on .... and Sean Smith, Identity number
	2. Was married in community of property	2. Nick Nole in my capacity as executor of the estate of late Sue Smith duly authorised thereto by executor letter No 123/97 issued by the master of the supreme court in Pretoria on and Sean Smith, identity number
CHURCH	1. The Church council	1. Sean Smith, in my capacity as scriba /pastor of XYZ congregation duly authorised thereto by virtue of a resolution of the church council dated...
BANK	1. The bank manager	1. Nick Nolte, in my capacity as bank manager of ABC Bank Ltd Reg No: 87/05437/06 duly authorised thereto by virtue of a resolution dated ....
MENTALLY HANDICAPPED	1. The curator	1. Mike Meyer, in my capacity as curator of Sue Smith, Identity number, unmarried, a mentally handicapped person, duly authorised thereto by a letter of appointment No. 1 23/98 issued by the master of the supreme court in Pretoria dated ....

PA ROADSHOW JULY & AUGUST 2003

LATENT DEFECTS, RESTRAINTS OF TRADE AND FIXTURES

Ladies and Gentlemen thank you for the opportunity to address you today. Today's talk will continue our discovery of important contractual issues that cross your path on a daily basis and which you need to know. For those who are acquainted with these principles I might just confirm certain info which may assist you.

Our discussion today includes latent defects to a object and the seller's recourse by means of the voetstoots clause, the validity of restraints of trade in your workplace and lastly the principles of improvements to property that are seen as fixtures and form part of the sale.

LATENT DEFECTS

A latent defect is a defect in the object of the sale of a non insignificant nature which affects the use and enjoyment of the object and which was not known to the purchaser on date of conclusion of the contract and could also not be established by him with reasonable inspection. Firstly it is important to note that a latent defects refers to a shortcoming in the object itself and not to the title, zoning, quantity or weight of the object (Dutch Reform Church Council v Crocker 1953 (4) SA (K)).

REMEDIES IN THE EVENT OF A LATENT DEFECT (PURCHASER)

ACTIO EMPTI

The purchaser must not only prove that the object had a latent defect but also one of the following :

The seller expressly or impliedly warranted the absence of defects (Minister van Landbou Tegniese Dienste van Scholtz 1971 (3) SA 188 (A))
The seller was the manufacturer and had expert knowledge (Holmdene Brickworks (Pty) Ltd v Robinson Construction 1977 (S) SA 670 (A))
The seller concealed defects of which he knew Glaston House (Pty) Ltd v Inag (Pty) Ltd 1977 (2) SA 846 (A))

ACTIO REDHIBITORIA (payment of purchase price and interest)

The purchaser must prove

The object has a defect that impaired on its utility and effectiveness (Holmdene Brickworks (Pty) Ltd v Robinson Construction Co Ltd).
The defect existed at the time of the sale (Seboko v Soll 1949 (3) SA 337 (T))
The defect was latent in that it was not visible upon inspection and the purchaser was not aware of it (Holmdene Brickworks (Pty) Ltd v Robinson Construction Co Ltd)
the purchaser would not have purchased the property if he was aware of the defect
he is willing and able to effect restitution (Hall - Thermotank Natal (Pty) Ltd v Hardman 1968 (4) SA 818 (D))

ACTIO QUANTI MINORIS (reduction in purchase price)

If the purchaser cannot prove (d) and (e) of the actio redhibitoria he can request a price reduction. The reduction will be the difference in the selling price and the value of the object with its defect.

(Labuschagne Broers v Spring Farm (Pty) Ltd 1976 (2) SA 824 (T))

REMEDIES IN THE EVENT OF A LATENT DEFECT (SELLER)

VOETSTOOTS

The voetstoots clause is no defence in the event of the seller's fraudulent non disclosure of the defect, but the purchaser will have to prove that the seller was aware of the defect on date of the contract.

(van der Merwe v Meades 1991 (2) SA 1 (A))

LIABILITY OF SELLER - EXCLUDED

When the defect was not present when the contract was signed. (registration - merely giving effect to the contract)
If suspensive conditions are still unfulfilled
Where the purchaser was aware of the defect prior to the contract date
Where the purchaser should have known of the defect (caveat emptor)
Where liability of the seller has been limited or excluded in the contract
Where the purchaser only pays a nominal price for the object
Where the object was sold by judicial sale
Where the defect has been restored
When the action cannot be instituted due to prescription (3 years)

FIXTURES OR NOT?

In the past huge disputes developed due to a lack of communication or clarity in the agreement as to what items will be removed by the seller and what forms part of the sale. Although it is always advisable in the event of doubt by any of the parties to specify such items in the agreement or in a separate addendum, it is not always possible or parties have no reason to believe at signing of the agreement that the item in question will ever pose a problem. These problems have not only surfaced recently but were present since much earlier times and a good case to refer to with a practical test would be the case of Mac Donald vs Radin 1915 AD 454 where the test to determine whether an item was a fixture and therefore formed part of the sale was as follows :

Was the item attached to the immovable property?
Was the way in which the item was attached to the immovable property done in such a way that it was the party's intention that such attachment should be permanent?
Can such item be removed from the immovable property without causing structural damage? To put these questions to the test one can take the example of a satellite dish attached to the immovable property then ask the following :
Was the dish attached to the immovable property? - Yes
Was it the parties' intention that such attachment should be permanent? - No
Can it be removed without structural damage? - Yes

The satellite dish will not necessarily form part of the sale and if the purchaser has the intention of purchasing the property together with the satellite dish it is advisable that the inclusion of it should be specified in the agreement

RESTRAINTS OF TRADE

In terms of the case of Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 4 SA 874 (A) the principal of restraints of trade long debated, has been settled referring to a quote from the case.

"From the judgements that were delivered one learns the following, all of which is now clear. Convenants in restraint of trade are valid. Like all other contractual stipulations, however, they are unenforceable when, and to the extent that, their enforcement would be contrary to public policy."

It is against public policy to enforce a convenant which is unreasonable, one which unreasonably restricts the convenator's freedom to trade or to work. In so far as it has that effect, the convenant will not therefore be enforced. Whether it is indeed unreasonable must be determined with reference to the circumstances of the case. Such circumstances are not limited to those that existed when the parties entered into the convenant. Account must also be taken of what has happened since then and, in particular, of the situation prevailing at the time enforcement is sought.

Restraints of trade were also measured against the constitution which gives everyone the right to freely engage in economic activity and to pursue a livelihood anywhere in the national territory - In Fidelity Guards Holdings (Pty) Ltd v Pearmain 2001(2) SA 853(SE) it was held that the restraints of trade are constitutional as they are reasonable and justifiable in an open and democratic society.

A restraint of trade agreement between an employer and an employee which goes further than reasonably necessary to safeguard any protectable interest of the employer is unenforceable - Tor Industries (Pty) Ltd v Gee-six Superweld CC and others 2001(2)SA 147(W).

HOME SWEET HOME - THE REGISTRATION PROCESS

You have spent days on end in your search to find a dwelling, which you can call home, and now you can relax, safe in the knowledge that the registration of transfer into your name will be speedy and painless - but why are you still feeling uncomfortable?

A great deal of uncertainty is caused by the various terms, processes and the different parties and institutions taking part in the process, thus making the already difficult registration of transfer processes a nightmare for the layman to understand.

At SDJ we are well aware of the fact that by acquiring a property - be it a house, flat or smallholding - the average South African is most probably making the single greatest and most important investment of his/hers life.

We have drafted this document to answer some of the many questions regarding the registration of the transfer process, and to the familiarize you with some of the terms used in the process, and trust you will direct any further questions to one of our professional staff.

PROPERTY - REGISTRATION SYSTEM

The South African system of the registration of transfer of immovable property has a long and colourful history, resulting into the highly specialized registration system with its primary goal of protecting and safeguarding the rights to ownership on our law.

CONVEYANCER

A conveyancer is an attorney who has specialized knowledge and qualifications in the registration of transfer process and other related transactions in the Deeds Office.

PURCHASE CONTRACT / AGREEMENT OF SALE

The ALIENATION OF LAND ACT stipulates that any alienation of immovable property (be it a house, flat, vacant land, small holding):
a) must be in writing
b) and must be signed by both the PURCHASER and the SELLER.

The document in which the above is contained is the contract/agreement of sale, and is the starting point of the transfer process. Once the suspensive conditions in the agreement have been met (such as the obtaining of a loan, and or sale of the buyer's property) the Conveyancer will draft the documentation in order to transfer the property.

TRANSFER / BOND / BOND CANCELLATION

The crucial factor in the transaction is the registration of the property in the name of the Purchaser. In most instances the following related issues also need to be registered simultaneously with the transfer:

Where the purchase price is payable by way of a bond, the purchaser must obtain a bond. The bank (BONDHOLDER) give their attorneys instructions to register a bond simultaneously with the above.
Should there be an existing bond over the property to be transferred, such a bond must be cancelled, upon payment of the outstanding amount and interest on the bond amount.

Due to the fact that the Conveyancer who is entrusted with the transfer is not necessarily also entrusted with the bond and the bond cancellation - the situation often arises that three different Conveyancers from three different firms are involved - the Conveyancer constantly needs to liaise with other Conveyancer in order to effect simultaneous lodgement and registration of the various transactions.

Please take note that due to the fact that Snyman de Jager earned a position on most of the large financial institution's panels of attorneys we can confidently state that we can ensure that timeous registration can be affected, because if we are doing a certain transfer we automatically receive the bond instruction as well.

DURATION

The burning question is usually "HOW LONG WILLTHIS WHOLE PROCESS TAKE, BEFORE THE PROPERTY IS REGISTERED INTO THE NAME OF THE PURCHASER?

If the agreement of sale is subject to suspensive conditions, such conditions must first be complied with before the process can proceed. Examples of such conditions:
1. The sale of the purchasers property
2. The granting of a bond, etc.
Due to the various institutions and people who are actively involved in the process, delays can occur in obtaining the relevant documents, certificates, end permissions, eg:
1. CLEARANCE CERTIFICATE
  - 5 - 10 Days
  - This document is required from the City Council or Body Corporate (in case of a Sectional Title) or the Section 21 Company and confirms that levies and/or rates and taxes have been paid up to a certain date
2. TRANSFER DUTY RECEIPT
  - 7 - 14 Days
  - The receipt is issued by the Local Receiver of Revenue and states that the relevant duty has been paid for the acquiring of a certain right in immovable property by the purchaser.
  - If the seller is registered for VAT
  - The Receiver of Revenue will issue an exemption but the process can be delayed due to additional requirements
3. GUARANTEES
  - 7 - 14 Days
  - Financial institutions issue guarantees in order to ensure that the purchase price or part thereof will be paid on date of registration by producing guarantees.
4. CONSENT TO CANCELLATION
  - 7 - 14 Days
  - The existing bondholder gives consent for the cancellation once guarantees for the payment of all moneys has been received.
UNFORSEEN PROBLEMS

As stated above, due to the various factors involved in the process, unforeseen problems might occur - making it difficult to accurately predict the exact duration of the transaction.

It takes approximately 8 - 10 work days for registration once the documents have been lodged in the Deeds Office. During this time the Deeds Office examines the Deeds.

We are committed to register your transaction within 45 days, provided that all the conditions have been met and no special circumstances arise.

On the date of registration the Conveyancer finalises the finances, drafts a final statement of account and any funds payable should be available the very next day.

The Deeds are only received back from the Deeds Office after 6 - 9 weeks, after which they will be delivered to the new owners or the bondholder (where applicable).

We wish to confirm our commitment to affect timeous registration. Our advanced computer systems and the fact that we have 3 offices in Pretoria, enable our team of professionals to be available at all times and to give regular reports to our clients.

BELANGRIKE KENNISGEWING

Die ontvanger implementeer verreikende nuwe hereregte stelsel.

Groter verantwoordelikheid op agent

Belasting ontduiking hok geslaan

Vanaf 1 Mei 2005 moet alle Hereregte verklarings en koopkontrakte vir die uitreiking van Hereregte Kwitansies / vrystellings elektronies ingedien word.

Die vorms is ook aangepas en baie meer inligting word vereis

Kopers en verkopers moet hulle inkomstebelasting verwysing nommers verskaf en hierdie inligting word nagegaan om te verseker dat belasting opgawes en betalings op datum is. Waar 'n verkoper belasting verskuldig is aan SARS, sal die transport prokureur aangestel word om op die verkoper se fondse beslag te lê. Waar state of belasting (deur die koper) verskuldig is sal die uitreiking van die Hereregte kwitansie vertraag word totdat SARS stappe geneem het om die posisie reg te stel.
Waar die koper of verkoper nie vir inkomste belasting geregistreer is nie moet die jaarlikse inkomste uit alle bronne op die hereregte dokument vermeld word. Kopers se BTW registrasie nommer word ook vereis.
Kopers en verkopers se sake met SARS moet dus op datum wees, anders kan dit die oordragproses aansienlik vertraag.
Die eiendomsagentskap se naam en BTW registrasie nommer, asook die naam van die eiendomsagent betrokke sowel as die bedrag agente kommissie word vereis. Waar die eiendomsagent nie vir BTW geregistreer is nie moet die inkomste belasting nommer verskaf word.

SARS vereis ook nou inligting aangaande die okkupasie huur betaalbaar.

Kapitale wins belasting speel nou ook 'n groot rol en die verkoper moet nou meld of die transaksie onderhewig is aan KWB met gepaardgaande vrae rondom die gebruik daarvan, naamlik: was dit geokkupeer as primêre woning, verhuur, of vir besigheidsdoeleindes gebruik.
Die BTW moet vermeld of BTW insette ten opsigte van die eiendom geëis is. As die eiendom vroeër verkoop was en die koop was gekanselleer moet 'n afskrif van die gekanselleerde koop met gepaardgaande ooreenkoms verskaf word. Die koper moet die doel vir die aankoop van die eiendom aantoon en indien die koper 'n BTW ondernemer is en die eiendom as belasting inset gaan eis, word die koper se BTW registrasie nommer vereis.
Eiendomsagente word ook nou verplig om die Ontvanger in te lig van transaksies waar aandele, ledebelange en trust belange verkoop word aangesien in hierdie gevalle geen oordrag van eiendomme plaasvind nie. Die agent moet die besonderhede verskaf binne 6 maande, anders is die agent skuldig aan 'n misdryf met die moontlikheid van 'n boete of tronkstraf !!!
SARS gaan voortaan ook baie strenger optree teen nul koers transaksies waar die eiendom as 'n lopende saak verkoop word en dit nie streng voldoen aan die bepalings van die BTW Wet nie.
Drieledige transaksies sal voortaan ook belas word vir hereregte doeleindes en selfs waar die middel ooreenkoms gekanselleer word sal daar nou ook hereregte betaalbaar wees hierop.

Daar berus 'n groot verantwoordelikheid op prokureurs en eiendomsagente om beide verkopers en kopers van al hierdie verwikkelinge in te lig, anders kan transaksie lank vertraag word. Koopkontrakte behoort ook aangepas te word om voorsiening te maak vir die addisionele inligting wat verlang word en gepaste boeterente klousules moet oorweeg word sou daar ? vertraging met die registrasie proses wees.

Volledige inligting met die nodige dokumentasie is beskikbaar op SARS (www.sars.gov.za) sowel as Snyman de Jager se webwerf.

Ons vertrou dat u hierdie inligting nuttig sal vind.

REAL RIGHTS - (SOME REAL CONCERNS)

1. BACKGROUND:

1.1 THE TRADITIONAL POSITION (UNTIL 1997)
A Developer had to wait for monies until registration of completed unit(s) into purchaser(s) name(s).

1.1.1 The Sectional Title Act made provision for the retention by a Developer of the Right to develop the Common Property in a Sectional Title Scheme in phases for his benefit.
1.1.2 On completion of the first phase a Certificate of Real Rights is issued in favour of the Developer simultaneously with the opening of the Sectional Title Register.
1.1.3 The Developer then completes further phases for his own account on the Common Property and after completion of each phase a Sectional Plan of Extension is lodged in the Deeds Office whereupon the new units can only then be transferred to the purchasers thereof and a Developer can at last receive his due remuneration.

1.2 THE CURRENT POSITION (FROM 1997)
A Developer can now be paid upon cession of the Real Rights even before construction of the unit on it.

1.2.1 A Developer is now entitled to "subdivide" his Real Right into portions (for each unit to be erected) and to sell and cede such portions of his Real Right to individual purchasers thereof.
1.2.2 Mortgage bonds can be registered over such portions of Real Rights.
1.2.3 The Developer can now receive payment for such Real Right without having to first develop a unit on it.

2. SOME OF THE MAJOR LEGAL PROBLEMS:

2.1 THE PURCHASER DOES NOT KNOW WHAT A REAL RIGHT IS
2.1.1 Purchasers, Estate Agents and even Developers believe that erven is being transferred and that upon registration of the Right in the Deeds Office the purchaser becomes owner of an erf upon which he can develop the unit.
2.1.2 Very few agreements contain an adequate description of what a Real Right entails.

2.2 THESE RIGHTS WILL LAPSE IF NOT EXERCISED TIMEOUSALY
2.2.1 All these subdivided rights are subject to the development of the unit on it within the time chosen by the Developer for completion of the total development when he initially reserved the Right to develop at opening of the Sectional Title Register.
2.2.2 If the unit is not fully developed within this period the Real Right will lapse and revert back to the Body Corporate.

2.3 DEVELOPERS DO NOT COMPLY WITH THE REQUIREMENTS OF THE SECTION 25(2)(A) (PLAN)
2.3.1 At the time of the reservation of the Real Right in favour of the Developer a plan must be lodged describing all the buildings to be developed, their citing, extent and elevational treatment.
2.3.2 Developers (Purchasers) cannot deviate from these as any owner is entitled to approach the Court for an appropriate order in terms of Section 25(13) enforcing compliance with the original plan.
2.3.3 The increase in size of any unit requires a special resolution from the Body Corporate and in lieu of Section 25(13) we believe that all other holders of Real Rights should consent as well. All Bond holders must also grant consent except where the deviation is less than 10%.

2.4 PURCHASE AGREEMENT SHORTFALLS
2.4.1 Agreements must contain an adequate description of the limited nature of the Real Rights purchased.
2.4.2 An owner of a Real Right only becomes a member of the Body Corporate upon conversion of his Real Right into a Sectional Title.
2.4.3 Real Right Owners cannot vote except where the Body Corporate deals with the Common Property.
2.4.4 There exists no legal duty upon a Real Right owner to pay the standard levies to the Body Corporate. Only upon completion of a unit is an owner of a Real Right obliged to pay the standard levies. A Real Right owner can at least be expected to pay a limited contribution similar to that paid by the Developer (Section 25(2)(e)).

3. PRACTICAL PROBLEMS

3.1 ESSENTIAL SERVICES
3.1.1 Due to the vast majority of Real Right developments being on traditional farmland very few control measures exists in respect of quality control over the essential services.
3.1.2 The registration of a Real Right can take place without any of the services being installed.
3.1.3 A Developer must provide the purchaser with full details about the status of these services and only after the individual portion of the common property affected by the Real Rights is fully serviced ought registration thereof be allowed.
3.1.4 The Purchaser must be informed if there exists any guarantee by the Developer in respect of services after installation.
3.1.5 The services to be fully compliant with relevant authority requirements.

3.2 DEVELOPER TO ACCEPT RESPONSIBILITY FOR COMPLETION OF UNIT
3.2.1 Traditionally a Developer had to ensure the completion of the unit and although the Real Right may now be ceded to a new purchaser it still remains a right to develop a Sectional Title Unit on a specified portion of the common property and not a right to own a portion of the land.
3.2.2 The Developer should remain responsible towards the purchaser of the Right to ensure the completion of the unit and the conversion thereof to a full Sectional Title.
3.2.3 A substantial amount of the purchase price of the Real Right should be held in retention until date of conversion of the Real Right into a Sectional Title.

3.3 COMPLETION PERIODS
3.3.1 The Developer must commit himself to install the services and complete the common facilities within specified times.
3.3.2 The new unit must be completed as soon as practically possible and time restraints are essential.
3.3.3 After completion of the unit(s) conversion to Sectional Title must be dealt with as a matter of priority.

4. SOME SOLUTIONS TO RECTIFYING PROBLEMS EXPERIENCED WITH REAL RIGHT DEVELOPMENTS

4.1 NEW DEVELOPMENTS
4.1.1 Obtain the recommended certificates from the professional team as prescribed by ABSA Bank. (Refer Clause 7.1 - 7.4 of Notice to Developers)
4.1.2 Retain sufficient retention amount until conversion to Sectional Title.
4.1.3 Ensure compliance with all ABSA Bank's requirements.

4.2 EXISTING DEVELOPMENTS
4.2.1 Conduct a proper audit of state of affairs and if non compliant inform all owners and obtain their co-operation to rectify.
4.2.2 If required lodge new Section 25(2)(a) plan and Participation Quota Schedule in Deeds Office with consent of all owners.
4.2.3 Approach ABSA Bank for assistance in rectifying problems.

5. EXTRACTS FROM THE SECTIONAL TITLE ACT

Section 17 - Owners and holders of Section 25 Real Rights to grant a unanimous resolution in dealing with Common Property.

Section 16 - Common Property is owned by owners of sections in proportion to Quota.

Section 32(3) - Quota of a section determine vote and levy payment.

Section 32(4) - Developer may change votes and levy payment liability of Owner of a section.

Annexure 8 Rule 62 - Owner of section has 1 vote.

Section 34 - Share of Developer in buildings and land (common Property) is equal to total of Quotas of sections owned by him.

Section 36(2) - Developer (or Successor in title) ceases to be a member of Body Corporate when he ceases to have a share in Common Property.

Section 37(1)(e) - Body Corporate to raise levies from owners in proportion to quotas of their sections.

Section 25(5A)(b) - Owner of Real Right to pay levies to Body Corporate from date of completion of unit.

NOTICE TO DEVELOPERS IN RESPECT OF SECTIONAL TITLE SCHEMES TO BE DEVELOPED IN PHASES BY MEANS OF THE RESERVATION OF AND SUBSEQUENT CESSION OF REAL RIGHTS

ABSA Bank Ltd wishes to caution all developers to study the provisions and implications of the relevant legislation and requirements of all authorities for any proposed Real Right Development carefully before commencing with such development.

Developers are welcome to approach ABSA's specialist consultants for assistance in this regard as there is much confusion and many pitfalls to be avoided.

Please take note of the following:
1. The total development must be completed and the rights converted to Sectional Title within the stipulated time failing which the rights are forfeited to the body corporate and everything is lost! It remains a "right" which will lapse if not exercised (developed) and converted from a right to a Sectional Title unit. Sect 25(6)

2. The development must be done strictly in accordance with the Section 25(2)(a) plan initially lodged in the Deeds Office at the time of the opening of the Sectional Title Register. Purchasers of individual rights cannot build what they want where they want on their respective portions of the common property. Any other owner can upset the apple cart by obtaining a court order for proper compliance. (Section 25 (13) ). There is simply no way past this requirement.

3. ABSA will only finance the sale of Real Rights provided it is a packaged deal i.e. the developer must complete (or take responsibility for the completion of) the building on the Real Right and the developer must also attend to the conversion of the Real Right to Sectional Title within the respective time frames as stipulated by ABSA.

4. ABSA Valuators will determine the retention amount to be retained until completion of the development and conversion to a Sectional Title Register.

5 Purchasers must be made aware of the nature of the Real Rights they purchase and for this purpose the agreement of sale must contain provisions dealing with the time frames and consequences as well as the limited nature of these rights i.e.
a. No voting rights until conversion.
b. The levy payment obligation must also be correctly addressed to as there exists no obligation on any Real Right owner to contribute fully to the levy fund until after completion of the unit. Sect 25 (5A)(b).
c. Any deviation in size (from the original plan) has to be approved by the Body Corporate and where such deviation is more than 10% every bond holder in the scheme must also consent thereto. Developer cannot get carte blanche consent from purchasers for future deviations
d. In the event of a Real Right development on farmland with traditional "Resort Rights" the Department of Agriculture (i.t.o Act 70/70) may grant permission for the Sectional Title Development subject to such Resort Rights. In these circumstances purchasers must be made aware of the 3 month occupancy restriction which can have a major impact on prospective purchasers' decision to buy.

6. Due to the specialized nature of Real Right developments ABSA will use their own panel of attorneys to attend to the registration of mortgage bonds over Real Rights and developers and their Transfer Attorneys are welcome to approach them for assistance.

7. In addition to the standard conditions associated with the approval of finance ABSA must also be provided with the following certificates:
7.1 A certificate from an Architect that the placing and elevational treatment of the buildings comply with the Section 25(2)(a) plan
7.2 A certificate from the engineer that the services were installed and complies with the relevant specifications of the SABS, National Building Regulations, Local Authority and NHBRC.
7.3 The Transfer Attorney is to certify that no onerous conditions and restrictions are applicable and he is not aware of any requirement or condition which may prejudice the Bank in the granting of finance.
7.4 The Town planner must certify that from a town planning perspective all required consents had been obtained and the development complies with all requirements pertaining to such consents.

8. Attached is a list of documents associated with Real Right Developments to be provided to ABSA:

DOCUMENTS TO BE PROVIDED PRIOR TO CONSIDERATION OF FINANCING.

Original scheme approval by local authorities (i.e. Act 70/70, DFA, Ord 20/86 + conditions of establishment)
GDACE, EIA Compliance/Exemption (Record of decision)
Copy of Deed of Transfer
Site Development Plan
Layout Plan ito Section 25(2)(a)
Sectional Plan
Real Rights Layout Plan
Certificate of Real Rights
Deed of Sale
Building Plans for unit on Individual Real Rights to be financed
NHBRC Registration and Enrolment Certificates
Schedule of Services Installation and Progress Report
Services Warranty and Handover to Local Authority
Building Activity Progress Schedule
Common Facilities to be Erected, Value and Progress Report iro clubhouse, entertainment areas, pool, clubhouse, guard home, entrance, perimeter fencing etc
Total Development Cost Schedule - land acquisition, essential services, facilities, construction
Building agreement (if not contained in Deed of Sale)

SECTION 25
Extension of schemes
(1) A developer may … reserve the right to erect … within a period stipulated a further building or building.
(2) … the application … shall be accompanied by
  (a) a plan to scale of the building or buildings to be erected and on which

   (ii) the siting, height and coverage of all buildings
   (vi) the typical elevation treatment of all buildings
… are indicated
  (c) a schedule of the estimated participation quotas of all the (future) sections in the scheme.

(6) … if a reservation … has lapsed, the right to erect a scheme … shall vest in the body corporate.

(13) A developer or his successor in title … shall be obliged to erect … the Building(s) … strictly in accordance with the documents referred to in Section 25(2) … and an owner of a unit in the scheme who is prejudiced by his failure to comply in this manner may apply to Court, whereupon the Court may order proper compliance with the reservation …

LEGAL UPDATE - PA ROADSHOW - MARCH 2006

Good morning Ladies and Gentlemen, the privilege is once again mine being here today, providing you with the latest legal news and views since our last gathering.

In 2005/2006 we have seen a substantial amount of positive judgments by South African Courts which were truly encouraging in these days. In the time afforded I will discuss some of these interesting and relevant issues which I think you may find very informative, a short summary of today's update includes the following:

1) The legal war of financial institutions selling mortgaged properties in execution.
2) Electricity certificates your responsibility or not?
3) Eviction of unlawful tenants hopefully made easy in 2006.
4) Delivery of guarantees as a requirement under contract.
5) My view or yours?
6) Pre emptive rights in contracts, and the effect on estate agent's commission.
7) The first challenges in relation to revised property rates and taxes fails.

1. The legal war of financial institutions selling mortgaged properties in execution:

The first problems in this regard arose in November 2004 in the case of Jaftha and others v Van Rooyen and others. In terms of sections 66(1) and 67 of the Magistrate Court sales in execution of people's homes are permitted where they fail to pay their debts. This section has however been tested in the Constitutional Court as being unconstitutional as it violates peoples rights to have access to adequate housing (section 26(3) of the Constitution).

Both appellants come from a small poverty-stricken community in Prince Albert in the Karoo. They were unemployed and had few assets and were now threatened with losing their house as a result of not paying initial debts of R250-00 and R198-00 respectively.

Both appellants bought their homes with state subsidies and if they were to lose them as a result of a sale in execution they would be disqualified from future state subsidies.

Although the Supreme Court ruled in favour of the creditors the Constitutional Court proceeded in determining that section 66(1)(a) of the magistrates Court Act 32 of 1944 was unconstitutional and that the words after consideration of all relevant circumstance, the court may order execution should be inserted. This obviously opened the door for numerous defaulters to contest eviction applications in the event of non payment of their mortgage bonds, which was exactly what happened in Standard Bank van Saunderson and Others in December 2005.

Obviously the value of a mortgage bond as an instrument of security lies in the confidence with which the law will give effect to its terms and therefore the outcome of the aforementioned case was very important to all financial institutions.

The Saunderson's based their defence on the Jaftha and others v Van Rooyen case stating that if the Bank would be permitted to sell the property in execution it would deprive them of their basic Constitutional right to adequate housing. The Court of Appeal however slammed this argument and stated that there is a big difference between Government subsidized housing as in Jaftha's case and luxury housing which has been bonded by the owners.

The Court further stated that the owners entered into the finance agreement's with the Bank out of their own free will knowing what the consequences would be in the event of default. The Court therefore ordered that the existing procedure followed by the Banks selling properties in execution remains in order.

Just as everyone thought that the matter has been finally settled the Campus Law Clinic at the University of KwaZulu-Natal who was never a party to any legal proceedings appealed to the Constitutional Court with their main argument being that innocent dependants of the defaulting mortgagees are the parties that suffer when the properties are sold in execution.

I have little doubt that the Constitutional Court will uphold the Court of Appeal's decision and find the existing execution procedure not to be unconstitutional.

2. Electricity certificates your responsibility or not?

Although the topic on the requirement of electricity certificates has been exhausted over the past year, I could not help to include the subject once again after the opinion in this regard given by Judge DJH Le Roux on request of the Pretoria Association of Attorneys.

In March 2005 a stringent attack was launched by Magistrate Peet Van Vuuren of the Pretoria Magistrates Court against estate agents who do not obtain valid electricity certificates.

"Dit is ontstellend dat eiendomsagente wat die situasie moet fasiliteer, skotvry rondloop en duisende rande se kommissie verdien terwyl die publiek ter slagting gelei word vir eie gewin, grootliks deur eiendomsagente se lus vir meer geld".

It was further held by Van Vuuren that the immovable property should not be marketed without an electrical certificate according to section 22 of the Occupational Health and Safety Act of 1993 and if so the agent could be held criminally liable for contravening the act.

Despite the interpretation of Judge Le Roux the writer is of the opinion that no agent can be held liable for a default of his principal surely the purchaser and the seller are parties to the agreement and the estate agent acts merely as a representative for the seller.

In November 2005 Judge DJH Le Roux gave his opinion in this regard:

No statutory obligation to obtain a certificate on the sale of a dwelling-house or domestic property exists as the Occupational Health and Safety Act of 1993 was not intended to apply outside the industrial or worker sphere.
Neither sellers nor estate agents have to obtain C.o.C's when marketing or selling dwelling-houses.
As far as Conveyances are concerned, they cannot be held liable for any defect in a C.o.C and it is merely his responsibility to collect the document which has been duly completed and he has no liability as to the contents thereof.
Provision of a C.o.C in an agreement becomes a contractual as opposed to a statutory obligation and no criminal liability could result from non compliance - only civil remedies.

3. Eviction of unlawful tenants hopefully made easy in 2006

In 2002 shockwaves were sent through the property market when the Appellant Division of the Supreme Court ruled that in terms of Section 26(3) of the Constitution no one may be evicted from their home without an order of Court made after considering all the relevant circumstances.

In the case of Ross v South Peninsula Municipality it was held that a lessor seeking the eviction of a lessee must establish more than merely that he is the registered owner of the property and that the lessee is in unlawful occupation of it.

The lessor had in future to establish "all relevant circumstances"' changing the relative cumberless Magistrates Court eviction process to a costly, cumbersome Supreme Court application in terms of which the same rights as a squatter in terms of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act No 19 of 1998 (PIE ACT)

Early in 2006 Mrs Zou Kota (chairman of the Parlement's portfolio committee on housing) said that after the judgement the need for the amendment of the act was realized, in that bona fide lessee's who lease premises in terms of a lease agreement should be excluded from the "PIE" Act.

According to her the amendment will be tabled in Parlement soon and although she did not want to bind herself to a specific time she gave the assurance that this matter is currently enjoying priority.

4. Delivery of guarantees as a requirement under contract

In the case of Ronlou Property Development (Pty) Ltd v Lotter Frank Lackay and others (2005). The applicant bought the property from the respondent although the contract did not provide for a date for guarantees to be delivered the respondent required guarantees prior to lodgement and the appellant's failure to do so resulted in the respondent cancelling the agreement due to non compliance.

The court held that whether the respondents were in a position to lodge the documents or "in a position to immediately take the necessary steps to effect the transfer's as the respondent's alleged was irrelevant.

Enough cases like Wilson v Spitze, Hammer v Klein ect. provides for the common law principle that when a seller is ready to lodge the documents in the Deeds Office he can require a guarantee from the purchaser even though no date for such delivery is determined in the agreement.

And to quote the judge "Daar is dus genoegsame nakoming van die reël as dit aan die koper duidelik by ontvangs van die aanvraag vir die waarborg blyk dat die verkoper in die posisie is om onmiddellik stappe te doen om oordrag te bewerkstellig".

More or less the same question arose in the case of Butler v Du Preez (February 2006). Butler purchased a property for R950-000 from Du Preez and in terms of the agreement the purchase price would be payable by means of a R30-000 deposit and the balance by means of such bank or other guarantees as approved by the seller and payable in cash against registration but no date for delivery of the guarantees were determined. Butler did however react on the letter of demand of Du Preez by delivering a guarantee but only for R760,000,00 and after expiry of the demand period a undertaking from his attorney for the balance of R160 000,00.

But at this time Du Preez did not want to proceed with the transaction and cancelled it due to non fulfilment of the required guarantees.

The court held that Du Preez was ready to proceed with transfer of the property by the time he requested the guarantees and this had a right to request the guarantees the partial fulfilment by Butler was however not sufficient.

5. My View or Yours?

The war in relation to structures obscuring the view of a neighbour has been the subject of heated court battles for many years, and it is quite informative to note the Court's latest viewpoint in this regard.

In December 2003 the case of Clark v Faraday and Another was heard in the Supreme Court Cape of Good Hope Division, in this case the applicant sought an urgent interdict to prevent his neighbour from building a home on his vacant stand on grounds that it would obstruct the view from his property and cause him irreparable harm. It was common cause that the view contributed to the value of his property and after completion of his neighbour's property the new dwelling will impair his view considerably.

The respondent argued that his proposed property will comply with all required building regulations and would the applicant succeed he will be permitted to obtain greater rights for himself than the respondent merely because his house was there first?

The Court found that "an owner of land that uses his property in an ordinary and natural manner is not guilty of committing injuria even if by doing so he causes damage to the property of others - the application was denied.

The same argument repeated itself in 2004 in the case of Gregory J Paola v Jaivadan Jeeva where the Court stated that for purposes of town planning the loss of a view is not something that should be taken into account.

In the more resent case of Motala and Paruk v Chetty in October 2005 the Court dismissed the applicants request to prevent the respondent from building his three story dwelling which according to them would obstruct their view over the Westville George.

It would seem that the courts would entertain applications based on controventions of Town Planning or building regulations, but it has been shown over and over again that the court will not deny or stop building activities based on an applicants claim to a view.

6. Pre-emptive rights in contracts, and the effect on estate agent's commission:

The facts were as follows in the case of Biggs v Muller (September 2005) Shelfcorp 75 CC made an offer to Muller to purchase his property for R545 000,00, R30-000,00 estate agents commission would be paid leaving the seller with R515 000,00 in his pocket.

The deal was however made subject to the pre emptive right in favour of the existing tenants not being exercised by them. The tenant informed Muller that he was going to exercise his pre-emptive right and countered the existing off by offering to purchase the property for R515-000,00 (being the initial offer less estate agents commission of R30-000,00)

A dispute then arose between the seller and the tenant and the seller alleged that the pre emptive right was not properly exercised and therefore he can proceed with the first offer.

The question the Court had to answer was whether the execution of a pre emptive right needed to place the seller in the same nett financial position of whether it had to be the same in rand and cent.

The Court found as follows: "Whatever commission may be payable by respondent to an estate agent in consequence of the sale is a matter between him and the agent" the offer in execution of the pre emptive right has therefore got to be equal in rand and cent.

The pre-emptive right was not properly exercised and Muller could proceed in selling the property to Shelfcorp 75 CC.

7. The first challenges in relation to revised property rates and taxes fail

In the case of City of Cape Town v Robertson and another, the Robertson's approached the High Court for an order restraining the City of Cape Town from charging property rates based on the provisional valuations roll which the City opened for inspection and objection.

The validity of the provisional valuation roll was challenged on 3 grounds:

The ordinance is not a law in force and therefore the City could not rely on it to levy rates.
As the City of Cape town consisted of the integration of 6 local authorities into one municipality known as the City of Cape town and did not comply with the definition of a local authority as prescribed in the Ordinance.
There was no law empowering the City to levy rates and taxes based on a provisional valuation roll.

The Minister in answer to the aforementioned passed on amendment to the lqw govering local governments and section 21 of the Amendment Act saw the light. The Robertson's then amended their application challenging the constitutionality and validity of the amendments stating that the City's recourse to parlement does not correct the prior wrong.

The Supreme Court upheld the Robertson's claim and declared the section 21 amendment invalid due to the wrong procedures being followed. Although the rate amendment act created the illusion of transparency it seems that the government will eventually amend it to "perfection".