Can trustees sell trust property to their own company?
The Supreme Court of Appeal (SCA) recently deliberated on whether a court sanction is necessary to validate the sale of shares owned by a trust to a company controlled indirectly by two of the trustees of the trust. This matter was addressed in the case of Kuttel vs Master of the High Court and Others. Peter Clark Kuttel, also known as “Padda” passed away on the 20th of May in 2019. He was the husband of Joy and the father of Peter, Francois, and Adrian. During March in 1981, a trust was created with Padda Kuttel being the donor. The couple named the trust the Padjoy Trust, who, along with a chartered accountant, served as the initial trustees of the trust. The trust was established to acquire and hold assets for the upkeep of Padda and Joy, who were to benefit from it following Padda’s retirement from being a successful businessman. Upon the couple’s demise, the trust’s assets would be distributed equally among Peter, Francois, and Adrian. The trustees of the trust were Padda Kuttel, until his death, Joy Kuttel, until her death a week before the application was heard, Francois, Adrian and two independent trustees, John Levin and Barry Adams, attorneys of considerable experience and expertise. Peter was the only son who was not a trustee. Writing the majority judgment, Judge Clive Plasket said, “no doubt, the enmity between Peter and his father, in particular, as well as with the family more generally, probably also contributed to him being the only beneficiary who is not a trustee.” In 2012, the trustees decided to restructure the trust’s assets as well as those of another related trust. The process was concluded in mid-2013. The sale of the trust’s shares in Southern Ropes (Pty) Ltd to Grace Investments Thirty-Two (Pty) Ltd, a company indirectly controlled by Francois and Adrian, was one part of a bigger process of consolidation of the trust’s assets. Peter applied to the Western Cape Division of the High Court for an order setting aside the sale by the trust of its shares in Southern Ropes. His application was dismissed with costs, as was his application to the high court for leave to appeal to a higher court. On petition to the Supreme Court of Appeal, it was ordered that Peter’s application for leave to appeal be referred for oral argument. Three issues arose to determine whether Peter had reasonable prospects of success: (a) whether the approval of the court was required for the validity of the sale of the shares; (b) whether the transaction was open and bona fide; and (c) whether Peter had been treated unfairly by not being allowed to bid for the shares. The Supreme Court of Appeal found that: (a) Peter did not require court approval for the sale of the shares because the rule he relied on applied only to transactions where a trustee purchases the immovable property from a trust; (b) considering Francois and Adrian’s disclosure of their interest, the fair determination of the purchase price, and the terms of the trust deed, the transaction was conducted openly and bona fide; and (c) to the extent that Peter was treated differently from his brothers, that differentiation was justified in the context of the powers of the trustees, the purpose of the transaction, the effect of the transaction and the fact that Peter as a beneficiary had no right to bid for the shares. The Supreme Court of Appeal dismissed Peter’s application for leave to appeal with costs. Reference List: Kuttel v Master of the High Court and Others (819/2021) [2022] ZASCA 156 WRITTEN BY JAN VAN ZYL This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Compliance certificates required when selling a property
There are five compliance certificates that the Seller is required to obtain at his/her own cost before the transfer of the property takes place. The following are the necessary certificates: Electrical Compliance Certificate The Electrical Installation Regulations under Section 43 of the Occupational Health and Safety Act, sets out the requirements for obtaining a valid electrical compliance certificate. Regulation 7 (1) states that “every user or lessor of an electrical installation, as the case may be, shall have a valid certificate of compliance for that installation”. Regulation 9(1) states “no person other than a registered person may issue a certificate of compliance”. The registered person may only issue the certificate of compliance after completing an inspection and a test. The test report must accompany the certificate of compliance. The certificate of compliance may not be older than 2 years. Hence, when the Seller is selling and has a certificate older than 2 years in his/her possession, he/she is obliged to obtain a new certificate to hand over to the Purchaser. In terms of Regulation 15, it is an offence should a person fail to comply. The penalty is a fine or imprisonment should the person be found guilty of the contravention. Electrical Fence Certificate As of the 1st of October 2012, the issuance of an Electrical Fence Compliance Certificate came into effect. This certificate is to be issued in terms of Regulation 12(4) of the Electrical Machinery Regulations, under the OHS ACT of 1993. All property owners that have an electrical fence must, in terms of this Regulation, obtain a compliance certificate when selling their property and only a registered Electric Fence System Installer can issue a property owner with the certificate of compliance. The Electrical Fence certificate is valid for up to 2 years from the date of issue. It must be noted that should the Seller have an electric fence, the Electrical Compliance Certificate discussed above will not include the electrical fence, as it will have its own certificate of compliance. Water Compliance Certificate In 2011, the City of Cape Town introduced a local water by-law. In terms of Section 14 of the Water By-Law, “the Seller must, before transfer of a property, submit a certificate of compliance from an accredited plumber certifying that: The water installation conforms to the National Building Regulations and this By-Law There are no defects The water meter registers There is no discharge of stormwater into the sewer system” A qualified, registered plumber may issue the certificate of compliance and this certificate must be issued every time the property is transferred. The water installation certificate of compliance is not a plumbing certificate as it is limited to the By-Law and is not as comprehensive as a plumbing certificate. Beetle-Free Certificate This compliance certificate is not a requirement by law but has become a practice in the sale of property, particularly in coastal provinces, where the wood borer beetle is commonly found. Between the 1940s and 1960s, there was an infestation of the beetle, which compromised the structural integrity of buildings and homes, thus the beetle compliance certificate was introduced to protect the Purchaser. The financial institutions that grant the home loan bond insist on this compliance certificate to protect their asset. The beetle certificate is valid for up to three months from the date of issue. It should be noted that a beetle compliance certificate is not a pest control certificate. Gas Certificate As of the 1st of October 2009, Regulation 17(3) of the Pressure Equipment under the Occupational Health and Safety Act, came into effect. This Regulation states that “an authorised person or an approved inspection authority shall issue Certificate of Conformity after completion of a gas installation, modification, alteration or change of user”. The Certificate of Conformity will be issued by the South African Qualification and Certification Committee Gas, and a registered gas practitioner for the installation, repair, modification, or maintenance. The nominated Conveyancer attending to the transfer of the property will ensure that the Seller obtains the above-mentioned certificates. The Purchaser should request the original certificates for their records and must scrutinise these certificates to ensure that an accredited service provider provided the certificates and that the certificates are valid according to the Regulations. The Purchaser should further ensure that the Seller has complied with all the required certificates by inspecting the property to ensure that for example, should there be a gas appliance, a gas certificate is obtained. These certificates afford comfort to the Purchaser that the property he/she is purchasing conforms to Building Standard norms and regulations set. Reference List: Occupational Health and Safety Act 1993, Electrical Installation Regulations Occupational Health and Safety Act 1993, Electrical Machinery Regulations City of Cape Town, Water By-Law, 2010, Promulgated 18 February 2011 Occupational Health and Safety Act 1993, Pressure Equipment Regulations Written by MEERUSHINI GOVENDER This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
How to obtain a home loan: Things to consider before you apply
With most of the major interest rate hikes now out of the way, 2023 is set to provide a more stable environment for financially savvy, would-be home-buyers to enter the property market. While the economic outlook is set to be less turbulent than during the previous year, it’s still vitally important to take charge of your spending and prioritise assets that will pay off in the long run. While some South Africans are opting to rent, ooba’s statistics indicate that there is still strong demand for home-buying among both first- and second-time buyers due to the competitive lending environment. Where to start Before starting the process of shopping around and applying for a home loan, potential homebuyers should have a clear understanding of what they can realistically afford. A good rule of thumb is that a monthly home loan repayment should not exceed 30% of your monthly salary. There are free tools online such as ooba’s Bond Indicator, that allow you to check your credit score, see what you can afford, and provides you with a prequalification certificate which is valid for 90 days. More than just a piece of paper, a pre-qualification certificate plays a vital role in boosting your chances of receiving preferential interest rates, as it ‘primes your financial profile’ prior to applying. Once this step is completed, it’s time to talk about budgeting and saving. It’s important that you budget accordingly, preparing yourself for the added costs associated with homeownership, including: the cost of registering your bond; transferring the property into your name; and paying the transfer duty on your new home (applicable to properties over R1 million). Also, while banks continue to approve 100% home loans, buyer demand for zero-deposit loans has dropped by 7% from Q4 ’21 to 57% of applications in Q4 ’22. We, therefore, recommend that buyers factor in a deposit of around 10%. For first-time South African homebuyers earning a single or joint gross monthly household income of between R3 501 and R22 000, there is also a good chance that you can qualify for the Finance Linked Individual Subsidy Programme (FLISP). Don’t forget the paperwork In addition to the general criteria that to apply for a home loan, homebuyers must be 18 years or older, permanently employed for at least six consecutive months, or self-employed for the past two years, the following five documents are required to complete your application and give you the greatest chance of successful approval: Proof of income: The majority of the banks will ask for your last three pay slips from your employer (or accountant if you are self-employed) as proof of regular income. Bank statements: Banks will request the last three months’ bank statements from your personal account. These will be used to verify your monthly income and expenditure, which includes monthly debt repayments and living expenses. If you are married in community of property or are applying for a joint home loan, your partner’s bank statements will also be required. A copy of your ID: Make sure that you have a copy of your South African identity document scanned and ready to go. Personal assets: The loaning banks will request a bird’s eye view of your personal assets and liabilities through your bank statement. The purchase agreement:The banks will need to see a copy of the purchase agreement on the home that you are wishing to purchase. Remember that a bank valuator is sent around to the property to make sure that it is valued correctly. A lot of these take place electronically these days; however, it remains a key requirement for final bond approval. Help is at hand The process of applying for a home loan especially the first time around can be daunting. A free home loan comparison service offers you tools to check your credit score and determine your affordability, helps you get your documents in order, and submits your home loan application to multiple banks so that you receive the best possible interest rate. WRITTEN BY Rhys Dyer Rhys Dyer is the chief executive officer of ooba Home Loans. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
How much home can you get for your money
Analysing the affordability of SA’s residential property market. South Africans continue to tighten their belts as the pressure of rising interest rates, inflation, and other varying economic factors put household income under strain. This puts the affordability of national residential property under the spotlight. However, while (in nominal terms) national house price inflation remains positive (+1.9% in September 2022), the national average purchase price is down among first-time homebuyers. The price of properties purchased by this demographic registered a third consecutive decline in September 2022 (down 3.5%), reflecting first-time homebuyers’ sensitivity to interest rate increases. Breakdown of the most and least affordable regions in SA Regional house price inflation for the year to 30 September 2022 is broken down as follows: Gauteng South and East: +7.3% Eastern Cape: +5.7% Gauteng North and West: +1.8% KwaZulu Natal: +1.4% Western Cape: -2.1% Interestingly, properties in Gauteng’s South and East Rand continue to register robust growth in prices, despite this region’s average house purchase price being the lowest at R1 183 032. The Western Cape, on the other hand, has the highest average purchase price in the country, but it is the only major region to report house price deflation. After peaking in March 2022 at R2.05 million, the average purchase price of properties purchased in the Western Cape eased to R1.66 million in September with purchase prices over the year to 30 September 2022 registering a decline of 2.1% compared to the same period last year. In Gauteng North and West, the average purchase price of properties purchased this year (to 30 September 2022) is pinned at R1 551 273, while in the Eastern Cape and KwaZulu Natal it sits at R1 490 898 and R1 337 229 respectively. Analysing the price-to-income ratio in SA Examining property prices in isolation reveals only one side of the story, because the price of a home is not the same as the relative affordability of a home. One way to measure the affordability of homes is to look at the price-to-income ratio. Here, the nominal house price is divided by the nominal disposable income per head. This means that in a particular region, homes may be more expensive, but incomes may also be higher thus making the homes there more affordable. In the Western Cape, for instance, the average purchase price of properties purchased from January to September 2022, compared to the same period in 2019, shows an increase of 6.1%. The average gross income of applicants has, however, increased by 17.5% over the same time period suggesting that on average, the homes purchased this year are almost 10% more affordable than those purchased during the same period in 2019. Affordability has also improved marginally in the Gauteng North and West region, as the average income of home loan applicants increases at a slightly faster pace than that of the average purchase price. However, the same cannot be said for homes in the Eastern Cape (where house prices of homes purchased increased by 18.5% during the year to 30 September 2022, compared to the same period in 2019) and, particularly, in Gauteng South and East Rand (tracking a house price increase of 21.7%). In both these regions, this rise in house prices purchased has outpaced growth in average gross incomes, resulting in a relative deterioration in affordability in these housing markets. Affordability amongst first-time homebuyers per region Gauteng is home to the largest percentage (20.3%) of potential first-time homebuyers (mostly young adults aged between 30 and 39 years), while the Eastern Cape has the lowest. Across the regions, but most notably in the coastal provinces, the average first-time homebuyer’s purchase price has decreased. Interestingly, Gauteng South and East where first-time buyers make up more than half of applications received registered the lowest average purchase price year to date. This makes it the second most affordable region for homebuyers, despite a slight deterioration in affordability. Conclusion and outlook Overall, despite varying levels of affordability across the country, the market remains stable and there are still deals to be had for those who want to capitalise on a generous lending environment and shop around using a home loan comparison service. As interest rates begin to stabilise in 2023, we expect to see activity in the market improve, especially among first-time homebuyers. WRITTEN BY RHYS DYER Rhys Dyer is the chief executive officer of ooba Group. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Transfer duty – No surprises – Part 2
The Transfer Duty Act 40/1949 (“the Act”) states that transfer duty (duty) is to be levied on any property acquired by any person by way of a transaction. The Act is clear as to whom and by when the duty is to be paid. It states that the duty shall be payable by the person who acquires the property within six months of such acquisition. Should that person fail to pay the duty within the aforesaid period he/she shall be liable to a penalty at a rate of 10% per annum on the amount of the unpaid duty. It must be mentioned that the penalty is calculated for each completed month after the expiry of the six months. It is important to therefore look at the definition of acquisition as set out in the Act. The date of acquisition is the date the transaction was entered into irrespective if the transaction was conditional or not. The date of acceptance by the seller of an Offer to Purchase will constitute the date of acquisition and will be reflected in the transfer duty receipt issued by SARS. It has been argued that should a Deed of Sale be subject to a suspensive condition the contract will only be perfected on the date of fulfilment of the suspensive condition which should then be viewed as the date of acquisition. Considering the definition hereinbefore it is improbable that this argument will be accepted by SARS. A prudent conveyancer would advise the purchaser to pay the transfer duty within the six-month period. How does SARS determine the value on which duty shall be payable? In the event consideration is payable, for example, the purchase price, then duty will be calculated on that consideration. If no consideration is payable, for example, a donation of a property, then transfer duty shall be paid on the declared value of the property. As to the declared value, the Act defines this as the amount declared by the person who is acquiring the property. However, if SARS is of the opinion that the declared value or the consideration payable is less than the fair value of the property, it may determine the fair value of that property. Fair value is defined as the fair market value of the property as of the date of the acquisition of the property. In determining the fair value SARS shall have regard, according to the circumstances of the case, to the municipal valuation of the property and any sworn valuation furnished by the person acquiring the property. In practice when a conveyancer applies for an assessment and SARS wishes to determine whether the consideration or declared value is in line with the fair market value, they request that the municipal valuation and occasionally two independent estate agents’ valuations be provided to them. Transfer duty is then paid on either the fair value or the consideration or the declared value, whichever is the highest. SARS wants its pound of flesh. One should keep in mind that SARS has the right to add certain payments to the consideration payable for the acquisition of the property and assess duty on the combined amount, for example; a) any commission or fees paid by the person acquiring the property, for example, if the purchaser of a property is contractually bound to pay the estate agents commission; b) if the property has been acquired by the exercising of an option to purchase, any consideration paid by the purchaser to the seller in respect of the said option; c) any consideration paid whatsoever in respect of the property other than rent payable by the purchaser. It is therefore inadvisable to state in a contract that the purchaser, over and above the purchase price, is paying an additional amount for certain movables as SARS might view this as part of the consideration and assess duty on the combined amount. A person acquiring a property should therefore be mindful of the above and when in doubt obtain legal advice. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Having ‘skin’ in the property game
Bigger deposits mean a smaller loan and a better interest rate. Rising inflation and several interest rate hikes have many South Africans trying their best to keep their costs down where possible, and this has also translated into their homebuying behaviour. The Q2 ’22 oobarometer statistics, released by ooba, reveal lower-than-expected home price inflation from the last quarter. This has resulted in property becoming more affordable in certain regions (in real terms, i.e. after the effects of inflation are stripped out), enabling homebuyers to put down larger deposits. However, it’s interesting to compare buying behaviour across the various regions, and to identify areas where homebuyers are prioritising deposits. Deposits are a great way to reduce the size of one’s monthly and total home loan repayments, and to negotiate a better interest rate from the banks. While the oobarometer only observed a 0.4% growth in the price of property quarter-on-quarter, the average size of deposits experienced a 16.4% increase. We also observed that in many regions, the average deposit size was significantly higher than the national average of 7.8%. In the Western Cape, which is currently the region experiencing the most homebuying activity, the average deposit size is a whopping 17%. This could be attributed to increased semigration and the scarcity of property supply in the region, resulting in homebuyers needing to put down a larger deposit to secure their dream home. Tips for saving for a deposit With the largest deposit amounts in various provinces, including the Western Cape, Limpopo/Polokwane, Eastern Cape, KZN, and Gauteng North/East Rand exceeding the generally recommended 10% deposit, it’s clear that consumers are making smart choices and prioritising long-term savings over short-term gains. The benefits of putting down a larger deposit are primarily financial, but they also indicate to both the seller and the banks that the buyer is serious about their purchase. This results in a higher chance of approval, and more favourable interest rates. While putting aside money for a deposit may be a daunting prospect in these challenging economic times, here are some budgeting tips to make saving up easier: Set a goal. Start by receiving a pre-approval to determine what size bond you will qualify for. Set a realistic savings goal of 10% of that total amount, considering your timeline for buying a home. This will give you an indication of how much you will need to put aside each month to reach your goal by your preferred deadline. Draw up a monthly budget. This involves tracking your monthly expenditure and cutting down on unnecessary impulse purchases. Go through your bank statement to determine where you can cut back this may be in the form of a debit order that’s no longer needed, or by reducing your daily coffee stops. Get rid of credit card debt. The inflation on your credit card debt is eating away at your savings. Avoid making purchases that you can’t afford to pay back immediately, and speak to your bank about lowering your overdraft limit. Put your savings in a separate account. This way you don’t risk tapping into your savings, as this account should be strictly off-limits. Make sure that the account is interest-bearing, to increase your savings efforts. Finally, once you have successfully saved up for a deposit, make sure that your hard work doesn’t go to waste by ensuring that it is protected from cybersecurity threats. Third-party options, like Buyers Trust, offer you security, full transparency, free bank guarantees, and a high return on your investment as a result of it being stored in a maximum interest-bearing account. WRITTEN BY JACKIE SMITH Jackie Smith is the head of Buyers Trust (a subsidiary of ooba Group). This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
When your tenant ‘does a duck’
Tips for landlords when their tenant does a disappearing act. Everyone who has let out property knows that sickening feeling when you find out that your tenant has disappeared. Most of the time there are signs usually unpaid or late paid rental. Some tenants plan to go without paying, while others just cannot pay. What should you do? Check on any municipal accounts, especially water and electricity accounts, if these are to be paid by the tenant. If the tenant does not pay, legally the landlord will have to. Also, check with the Body Corporate about their own accounts, because your tenant may owe them for services or (in some cases) for body corporate fines. Finally, don’t forget to check the building for any damage that your tenant is responsible for. Once you know how much is outstanding in total, you are in a position to decide how to proceed. If the amounts outstanding are small, it may cost more than you will recover, unless you go to the Small Claims Court. If the amounts are substantial, it will be worthwhile proceeding legally, provided that you are reasonably sure that your tenants have assets. First find out how much deposit is available, and deduct this off the outstanding amount. Next, have a look at the ten-ant’s application form. You will often find all sorts of helpful information, such as their previous address, relative’s address, work and home telephone numbers, etc. These will all help you to find your tenant. If you or your letting agent has access to ITC, you would also be able to do a check there, and this will give you further information. It is also possible to use tracing agents. An attorney can give you the details of one in your area. However, whether you find these tenants or not, it is important to have your attorney sue them for the outstanding amounts. If they have vacated your property, they are unlikely to defend the case. Once the amounts owing have been confirmed by the courts by way of a judgement, you have 30 years to collect this money if and when you find them in the future. If you don’t do this, then the amounts prescribe (lapse) within three years. To help prevent future lettings from ending in tears, it is important to know your tenant before you let to them. Do proper credit checks, take full deposits, and never allow tenants to pay off their deposits as this indicates that they are financially weak. Good credit control at the beginning of each month is important, and tenants must understand that if rent is not received by the owner / agent by the first day of the month, not only will there be a late payment penalty in terms of the lease, but that legal action will be taken immediately. For the most part, as soon as tenants realise that you are serious about them paying on time, they will give you little trouble. WRITTEN BY MIKE SPENCER Published in Personal Finance Issue 334 (November 2008). This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
The rei vindicatio and the actio ad exhibendum
The are a myriad of circumstances where one might be deprived of possession of one’s property. You might, for example, have given permission to your friend to use your vehicle for one year, which your friend then refuses to return the vehicle after the friendship has turned sour a year later. South Africa is a constitutional democracy that is based on the rule of law, and you can not simply take back your vehicle with force in the absence of a court order as this would amount to taking the law into your own hands. Your friend, who has had undisturbed possession of your vehicle for a year, will in such circumstances be entitled to launch, and probably succeed with, a spoliation application against you. An aggrieved owner who has been dispossessed of his or her property, will have to institute the rei vindicatio action in order to have his or her property returned lawfully. Such an aggrieved owner must allege and prove the following in order to succeed with this action: That he or she is the owner of the property; and That the defendant was in possession of the property at the time of institution of the rei vindication action. Amler’s Precedents of Pleadings state that it is not necessary for the plaintiff to allege or prove that the possession of an owner’s property by another is wrongful as it is regarded as being prima facie wrongful. There are various defences that a party faced with a rei vindicatio action can rely on. The two most obvious defences are, firstly, a denial of the plaintiff’s ownership and, secondly, a denial of possession of the property of which the return is being claimed. These two defences do not draw an onus as the plaintiff is the one who must allege and prove these elements in order to succeed with the claim. A defendant can also allege that the property in question was already returned to the plaintiff. The defendant will have the onus of proving this defence. Another defence that draws an onus in that the defendant must allege and prove it if the defendant wishes to rely on a right to possession (i.e., claim that he or she, although not the owner, is in lawful possession of the property). The bona fide disposal of possession is a complete defence, which can be raised by a defendant. However, if the defendant knew of the plaintiff’s claim to the property, then the disposal will be deemed not to have been bona fide, but in fact wrongful. The plaintiff will then be entitled to rely on the actio ad exhibendum in order to claim damages calculated on the basis of the value of the property at the date of disposal. The plaintiff must allege and prove four essential elements in order to succeed with his or her alternative claim in terms of the actio ad exhibendum. The plaintiff must firstly allege and prove that he or she is or was the owner of the property at the time when it was alienated by the defendant and, secondly, that the property was in the defendant’s possession. The plaintiff must thirdly allege and prove that the defendant had knowledge of the plaintiff’s ownership of the property at the time that he or she lost possession thereof. It must be noted here that a defendant who loses possession of the property subject to a rei vindicatio action after such action has been instituted is regarded as being mala fide as he or she would have received proper notice of the plaintiff’s claim. The plaintiff must lastly also allege and prove that the defendant intentionally or negligently disposed of the property or caused its destruction. It is clear from the above discussion that the fictional vehicle owner referred to above will not be allowed to simply attend to the former friend’s house and take the vehicle back with force. You will have to approach the court for relief and the sheriff will have to go fetch the vehicle once the court has granted an order in your favour. It is furthermore advisable to claim damages in the alternative should your former friend have severely damaged the vehicle or unlawfully sold it to an innocent third party. Reference List: Amler’s Precedents of Pleadings 5th edition This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Landlord and tenant inspections
The Rental Housing Amendment Act[1], section 4B (4) and (5) determines that the tenant and property owner must jointly, before the tenant moves into the dwelling, inspect the dwelling for any defect and damage. It further determines that the same procedure must be followed when the tenant vacates the property, and this inspection must be done at least three days before the tenant exits the property to ensure that any damage that was caused can be attributed to the tenant while still in possession of the property. Failure by the property owner to inspect the property in the presence of the tenant will be deemed to mean that the property owner acknowledges that there is no damage to the property to be noted and that everything is in order. The same situation in reverse is also applicable. If the tenant fails to respond to the property owner’s requests for inspection, the property owner must do an inspection within 7 (seven) days after the tenant vacated the property for the damage to be validly attributed to the tenant. In the first instance, the property owner must refund the full deposit, plus interest, to the tenant. In the second instance, the property owner may deduct from the tenant’s deposit any reasonable cost for repairs. The balance of the deposit must be refunded to the tenant. It is clear from the abovementioned Act that the property owner has a responsibility to do an entry and exit inspection, and it can have financial consequences for him if it is not done accordingly. The next question that the client wanted clarity on was whether the rental agency can be held liable for the damage if inspections were not done by the rental agent before handing over the keys of the dwelling to the tenant. The recently promulgated Property Practitioners Act[2] (“PPA”) refers to a Mandatory Disclosure Form. Section 67 directs that a property practitioner (which includes a rental agency) must not accept a mandate unless the property owner has provided the practitioner with a fully completed and signed Mandatory Disclosure Form in the prescribed format. The property practitioner must provide a copy thereof to the prospective tenant and it must be annexed to the lease agreement. If it is not included in the lease agreement, there is deemed to be no defects to the property. In section 67(3), the property practitioner may be held liable by an affected consumer if there are latent defects. The rental agency does not have to do the inspection themselves, as it still remains the responsibility of the property owner. If the agency was instructed to do the inspection on behalf of the property owner and failed to do it, the property owner may hold the rental agency liable for damages, but liability will have to be determined by legal process. Important to note is that the PPA also allows for the prospective tenant to undertake for his/her own account an inspection to ascertain the state of the property before entering into an agreement. This might be a useful undertaking by prospective tenants where the rental agency fails to comply with the above rules. [1] Act 35 of 2014 [2] Act 22 of 2019 This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
What you should know about the new Property Practitioners Act
The long-awaited Property Practitioners Act finally came into effect this year and brings with it significant changes to the real estate industry. The Act takes a more consumer-focused approach and is premised on the need for transformation in the property sector. Property practitioners The Act has widened its scope of application by consolidating all role players in the real estate industry under the same Act. The concept of a property practitioner is therefore not confined to real estate agents only but includes property developers, property managers and bridging financiers among others. The limitation on the relationship between property practitioners and other real estate service providers As aforementioned, the Act takes a more consumer-focused approach and is primarily aimed at protecting the consumer. This is evident in section 58 of the Act, which states, inter alia, that a property practitioner may not enter into an agreement that obligates or encourages a consumer to use a particular real estate service provider, including an attorney, to render a service in respect of a transaction of which that property practitioner was the effective cause. The Act then further provides that any person who renders services in contravention of this section is not entitled to remuneration. All property practitioners must be in possession of a Fidelity Fund Certificate In addition to the above, the Act also makes it mandatory for all property practitioners to be holders of a Fidelity Fund Certificate issued by the newly established Property Practitioners Regulatory Authority. Furthermore, the practitioner must also be in possession of a Tax Clearance Certificate, as well as a BEE certificate. In terms of section 56 of the Act, a practitioner shall not be entitled to remuneration or payment if at the time of the performance of their duties the practitioner was not in possession of a Fidelity Fund Certificate. The Act makes it mandatory for a conveyancer to first request this certificate from the property practitioner before making any payment to the practitioner. This provision will ensure that sellers and buyers deal with properly qualified practitioners. Mandatory disclosure of defects Lastly, one of the most significant changes that the Act brings forth is the obligation of sellers to now disclose any defects on the property that they are aware of. The Act compels sellers to make a written disclosure to potential buyers of all the defects on the property. The written disclosure must be signed by all parties and must be attached to the offer to purchase. In terms of section 67 of the Act, the property practitioner cannot accept a mandate if this written disclosure is not produced. Conclusion In light of the aforementioned, it is clear that the new Act primarily aims to protect the interests of the consumer. Consumers should therefore make use of the protection afforded to them in terms of the Act and before signing any offer to purchase, make sure that there is a written disclosure by the seller setting out all the defects on the property. They should also ensure that the property practitioner is in possession of a Fidelity Fund Certificate that has been issued by the Property Practitioners Regulatory Authority before mandating the practitioner to render his or her services. Reference list: The Property Practitioners Act 22 of 2019 The Property Practitioners Act and its impact on the property sector (Lethabo Mashishi) This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)