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Category: Property Law

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

Mr Reyneke owns a farm in South Africa and in terms of his last will and testament he bequeathed the said farm to his two sons in equal shares. Mr Reyneke died in 2019 and the executor of his estate requires clarification concerning the farm and the two sons.

Firstly, the distribution of a person’s estate when he dies is determined by the South Africa law of succession, subject to certain limitations. The South African law of succession is supported by the principle of freedom of testation in terms of which a person is given considerable freedom and discretion as to how his estate should be distributed at death.

One of the limitations to an executor’s freedom of testation is contained in the Subdivision of Agricultural Land Act 70 of 1970.  The Act prohibits the subdivision of agricultural land without the consent of the Minister of Agriculture. Without the consent of the Minister, the wishes contained in the will of Mr Reyneke cannot be carried out.

The following options are available to the testator and heirs:

  1. Redistribution agreement – the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit/benefit equally; or
  2. The land can be sold to a third party; or
  3. The heirs can create a company/trust whereby the heirs become shareholders/trustees and the entire farm is to be transferred to the said company/trust. The heirs can therefore work together as co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity.

It is therefore important to make use of a fiduciary specialist when drafting your last will and testament.

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)

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

DOES LIVING IN A SECURED ESTATE GIVE A FALSE SENSE OF SECURITY?

Choosing to live in a secured residential estate in South Africa is becoming ever more popular with South Africans. Entering your estate whilst security guards watch out for unknown assailants that may enter, living in your home peacefully knowing that the security guards are ensuring that people may only enter with your permission, giving the home owners a sense of security. But is this a true sense of security or is it false, and if the unfortunate happens that you are robbed or assaulted in your home, who is responsible? The Home Owners’ Association? The security company?

A Home Owners’ Association (HOA) is a body/committee comprising of the home owners of a specific estate entrusted with the running of the estate and communal affairs of those that own homes there.

On the 28th of August 2018, Judge J Unterhalter of the Gauteng Local Divison High Court handed down judgment in a matter of Van der Bijl and Another vs Featherbrooke Home Owners’ Association and Another. The Van der Bijls, home owners in a secured estate, brought an action against the (HOA) and the security company for failing to secure their safety, as their property was invaded by robbers.

On the 8th of April 2014, robbers unlawfully gained access into the estate during the night and then proceeded to enter the Van der Bijls’ home. Mr Van der Bijl suffered a gunshot wound to his abdomen and Mrs Van der Bijl sustained injuries from being assaulted. Due to these injuries, the Van der Bijls claimed damages from the HOA and the security company, alleging that the HOA and security company were wrongful in their duty to care and were negligent as they failed to take measures to ensure their safety.

The HOA defended the action and took exception to the Van der Bijls’ cause of action, citing that the HOA did not have a legal duty to take steps to protect the Van der Bijls from the robbery, thus there was no wrongfulness or negligence on their part. The court’s stance is that wrongfulness and negligence are two separate requirements of Aquilian liability. Where wrongfulness concerns the issue as to whether the law imposes liability by recognising a legal duty resting upon the defendant to prevent the harm that the plaintiff suffered, negligence concerns the defendant’s conduct judged against the standard of whether a reasonable person would have foreseen the harm and guarded against it, inter alia, a defendant may be burdened with a legal duty to prevent a harm, but his/her conduct may be blameless because the harm was not reasonably foreseeable. Thus, a defendant may be negligent but not act wrongfully because there was no duty to prevent the harm.

The HOA took exception to the plaintiff’s particulars of claim inter alia, it did not have a legal duty to protect the Van der Bijls from the robbery, citing that the Van der Bijls did not make a case for Aqulian liability as there was no wrongfulness. The plaintiff’s counsel relied heavily on the decision of the Loureiro case, wherein the Constitutional Court held that a private security company, who was employed and remunerated for crime preventing, owed a duty to stop avoidable harm. The Constitutional Court went to express the opinion that there would be wholesome deterrent effect if private security firms were not insulated from their own mistakes. Thus, the plaintiff’s counsel submitted that, as in the Loureiro case, the security company employed by the HOA had a duty to protect the residents of the estate including the Van der Bijls and the HOA bears the same duty. But the two cases do not bear the same facts, inter alia, Loureiro did not decide that Mr Loureiro, by hiring a security firm, was under any duty to secure the house, it was the security company that owed the duty to protect Mr Loureiro and his family. So the fact that the HOA employed the security company to provide security for the estate does not simply follow on that the HOA owed the same duty as that assumed by the security company. Such a duty would have to be shown to exist apart from what the security company had undertaken to do. But yes, following the logic of Loureiro, it is the security company that owed a duty to the HOA and the members it represents.

Hence the Van der Bijls may have recourse against the security company and they are one of the defendants. Further, it was noted that the robbers/assailants that caused the harm were not sued and which the plaintiff will have a claim against.

While the Van der Bijls definitely enjoy fundamental rights to security of the person, bodily, physical and psychological integrity, dignity and privacy, and these rights were infringed by being assaulted in their home, the big question is from whom can these rights be claimed. The answer is, you will have a   claim against the assailants, and based on the Loureiro case, the security company, but the Judge failed to see how the HOA, which is an extension of the collective will of the estate home owners, is burdened with the duties to secure these rights. Should the home owners be burdened with these duties, then the question is, does my neighbour have a duty to protect me in my home? He or she may come to your aid and he/she may be described as being valiant to do so but it is not out of duty. Further, there was no contractual obligation, be it in the Memorandum of Agreement or written agreement  between the HOA and the home owners,  holding the HOA liable for protecting the Van der Bijls.

In conclusion, the court found that the plaintiff’s particulars of claim did not set out a cause of action, which follows that the HOA did not have a legal duty to protect the home owners, in particular, the van der Bijls, hence not wrongful.

So, the next time you are thinking of buying a property in an estate, make sure you read the Memorandum of Agreement and understand your rights as a home owner.

Reference List:

  • Van der Bijl and Another v Featherbrooke Estate Home Owners’ Association (NPC) and Another; In Re: Featherbrooke Estate Home Owners’ Association (NPC) v Van der Bijl (12360/2017) [2018] ZAGPJH 544; 2019 (1) SA 642 (GJ) (23 August 2018)

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)

MY NEIGHBOURS ARE RENOVATING THEIR HOUSE WITHOUT COMPLYING WITH BUILDING REGULATIONS. WHAT ARE MY OPTIONS?

MY NEIGHBOURS ARE RENOVATING THEIR HOUSE WITHOUT COMPLYING WITH BUILDING REGULATIONS. WHAT ARE MY OPTIONS?

What one’s neighbour builds on their property, is not something the owner of the neighbouring property has a lot of control over. Unfortunately, it can have a negative impact on your property if the building work completed on your neighbour’s property does not comply with building regulations. Furthermore, it can be aesthetically displeasing, and be a sore eye to your property. Is there anything you can do in terms of the law to assist you in situations like these?

Buildings not complying with building regulations:

In the context of increasing state regulation, the adjudication of neighbour disputes about building has now apparently mostly migrated from the private law context of reasonableness to the public law context of legality. One consequence of this shift is that any building, first of all, has to comply with statutory and regulatory requirements before there could be any question about the reasonableness of any impact it may have on neighbours. Building works that do not comply with the applicable formal requirements (including permission to develop or subdivide, removal or amendment of restrictive conditions, compliance with zoning restrictions, and approval of building plans) are illegal regardless of their effect on neighbours.

To have these building works declared illegal (to have building work stopped or to have the completed building work demolished), neighbours do not have to prove that the buildings are unnatural, abnormal or unreasonable in the context – the mere fact that they do not comply with the formal requirements is enough to render them illegal. Building and zoning regulations are normally enforced by the relevant local authorities, but if they fail to do so, it has been decided that neighbours have the necessary locus standi to apply for a court order to enforce compliance with the relevant laws and regulations.

Remedies

The local authority or neighbours can obtain an interdict to stop the building work and – at least in some instances – an order to have the illegal buildings demolished.

It has been decided that the courts have the discretion to award monetary compensation rather than order demolition, but recently the courts have repeatedly stated that they will not be precluded from handing down demolition orders simply because buildings have been completed or because of the cost or value of completed building works or the hardship that the builder would suffer if a demolition order was granted.[1]

Views, sunlight, natural flow of air, privacy

A landowner cannot complain generally speaking, when otherwise lawful building works on adjoining or neighbouring land obstruct her previously existing view across that land or her previously existing access to sunlight, natural light or the natural flow of air.[2]

In De Kock v Saldanhabaai Munisipaliteit[3], the applicant argued that the building plans approved with regard to neighbouring land had to be reviewed and set aside because the building, once completed, would allow the neighbours to see onto his property, thereby invading his privacy. The application was dismissed because the court found no indication that the local authority had failed to apply its mind or to consider the relevant legislation and regulations in approving the plans. The implication seems to be that a landowner does not have an independent, inherent right to oppose building works on neighbouring land that would afford a view onto his property.[4]

Conclusion:

If a building does not comply with the relevant building regulations, or is not built according to an approved plan, an aggrieved neighbour’s primary remedy is to report the building to the municipality. The municipality is then supposed to interdict the person transgressing building regulations from building further and can even order for the demolition of an illegal structure. If the municipality fails in abovementioned duty, a neighbour can approach the court to enforce compliance with municipal regulations.

Building work which is only aesthetically displeasing or cause a loss of privacy, but adheres to all municipal regulations, will not constitute an actionable cause of action. The rationale behind this is because of the subjective nature of aesthetic considerations – what bothers one neighbour will not bother the next. Therefore, a neighbour’s remedies in this regard are very limited.

[1] AJ van der Walt, The Law of Neighbours, 1st edition, (2010), p. 341-343

[2] Van der Walt, The Law of Neighbours, p. 356

[3] 7488/04 (2006) ZAWCHC 56 (28 November 2006)

4] Van der Walt, The Law of Neighbours, p. 372
 
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)

LAND EXPROPRIATION BILL: WHAT IT MEANS FOR YOUR LANDOWNERSHIP RIGHTS

LAND EXPROPRIATION BILL: WHAT IT MEANS FOR YOUR LANDOWNERSHIP RIGHTS

During 2018, the African National Congress (ANC) announced its intention to drastically speed up the land reform process in South Africa when President Cyril Ramaphosa announced that he would be proposing changes to section 25 of the Constitution of the Republic of South Africa (“the Constitution”) to allow for the expropriation of land without compensation.

In essence, expropriation of land occurs when the state takes land away from its owner for public use. Where land is expropriated without compensation, the landowner is not compensated for the value of the property lost. Currently, our Constitution only allows for expropriation with compensation.

The proposed changes to the Constitution elicited much debate, as there is a rigorous process to be followed to amend a right such as section 25, which forms part of the Bill of Rights. In terms of section 74(2) of the Constitution, the Bill of Rights may only be amended by the passing of a Bill which must be approved by the supporting vote of at least two thirds of the National Assembly, as well as the supporting vote of at least six of the nine provinces of the National Council of Provinces. Once voted on, the Bill must be drafted and published in the Government Gazette allowing the public 30 days to comment thereon. Only once this 30-day period has passed may the Bill be introduced to Parliament.

Importantly, amendments to a right in the Bill of Rights may only be made where they are in line with section 1 of the Constitution and do not stray from matters directly connected to the amendment. Section 1 states that the Republic of South Africa is founded on the value of supremacy of the Constitution and the rule of law. If the rights contained in the Constitution, as the supreme law of the land, were subject to constant change, its overall credibility and reliability would be in danger. The credibility and supremacy of the Constitution are pivotal, especially in light of apartheid which was enabled by the manipulation and strategic interpretation of laws.

Following the above-prescribed procedures, the ANC introduced the Land Expropriation Bill (“the Bill”) to Parliament in February 2018.

In terms of clause 7(1), an expropriating authority must serve a notice of intention to expropriate on the owner of the land and any other person who may hold a right in the property. Clause 7(2) specifies what is to be included in such notice.

There is a misconception that the Bill allows for the expropriation of land without compensation immediately and without recourse to the owner of the land or any person who has rights therein. This is incorrect. The Bill requires the landowner and the expropriating authority to negotiate and reach an agreement as to the amount of compensation payable to the landowner. Only once such an agreement of compensation payable cannot be reached, and 40 days have passed, may the expropriating authority decide whether or not to proceed with the expropriation.

Clause 12 states that the amount of compensation to be paid to a landowner must be just and equitable and reflect an equitable balance between the public interest and the interests of the landowner. Notably, clause 12(3) of the Bill states that it may be just and equitable for nil compensation to be paid to the landowner where land is expropriated in the public interest.

In sum, the Bill entitles an expropriating authority to expropriate land against a payment of compensation determined in terms of clause 12 of the Bill. This means that the compensation awarded must be just and equitable, which, where it is in the public interest, may be nil.

Reference List:

 
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)

FIRST-TIME HOME BUYER?

FIRST-TIME HOME BUYER?

Buying a property is a rather big deal, which is why you should be sure that you are able to afford it before you end up running into debt. Owning your own home is a very rewarding experience, but there are usually some obstacles along the way. Follow the steps the below to be sure that your new home is your dream home.

  1. Make sure you have a healthy credit score

Your credit score lets banks know how well (or badly) you manage your debt. A good credit score improves your chances of getting a home loan.

In order to build up your credit score, make sure you pay all your bills on time, every time. Clear as much of your debt before applying for a home loan. If you don’t have a credit card, you should apply for one to aid your score. Check your status by getting a credit report from a credit bureau.

  1. Save up for a deposit

Having a deposit saved makes you more attractive to sellers, agents and banks, which means, if you have a deposit ready, you have a higher chance of getting your loan approved. A deposit also means that your loan repayments will be lower; you’re in a better position to negotiate an interest rate if you have a deposit since there is a lower risk for the bank.

  1. Look out for any additional costs

There are a number of additional costs that are incurred when buying and taking ownership of a house, and these may come as a shock to a first-time buyer.

Make sure to account for additional buying costs such as the loan initiation fee, transfer duty, loan registration costs and conveyancing fees. Also ensure that you take additional homeownership costs into consideration, e.g. loan repayments, homeowner’s insurance, municipal rates and taxes, water and electricity, maintenance, and security.

  1. Ensure the price is worth it

You should make sure that there are no damages to the property. Be sure to check for any leaks, as it might become a costly and annoying long-term problem.

If you’re planning to make this your forever home, you might want to consider what facilities are available nearby in case mobility becomes a problem. Is there a doctor close by? Are the transport links good?

Conclusion

From this it should be clear that buying a house is a rather complex activity that necessitates a lot of thought, calculating, and logical reasoning. It is advised to obtain the help of a professional to be absolutely sure that the money you end up paying is worth all the possible obstacles that you may encounter.

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)

JOINT OWNERSHIP: HOW DO I TERMINATE WITHOUT THE CO-OPERATION OF THE OTHER JOINT OWNER?

JOINT OWNERSHIP: HOW DO I TERMINATE WITHOUT THE CO-OPERATION OF THE OTHER JOINT OWNER?

Nature of joint ownership:

Joint owners own undivided shares in the property which they own jointly. Consequently, the joint owners cannot divide the joint property while the joint ownership remains in existence, and a joint owner also cannot alienate the property or a part thereof without the consent of the other joint owner. The rights in respect of the joint property need to be exercised jointly by the owners thereof.

Ways in which joint ownership can arise:

Joint ownership can come into existence by way of an inheritance in which an indivisible property is left to more than one person in indivisible shares; by way of a marriage in community of property, by the mixture of movable property in such a way that it forms a new movable item or by way of an agreement in terms of which the parties agree to jointly buy a property and that both will have equal indivisible shares in the property.

Division of joint property:

Any joint owner can claim the division of the joint property according to that joint owner’s share in the property.[1] It is a requirement for the division of the joint property that the parties need to try to divide the property among themselves first, before approaching the Court for an action to divide the property, which action is called the actio communi dividendo[2].

The underlying principle of the actio communi dividendo is that no co-owner is normally obliged to remain such against his will. If there is a refusal on the part of one of the co-owners to divide, then the other co-owner can go to Court and ask the Court to order the other to partition. The Court has a wide discretion in making a division of the joint property, which is similar to the discretion which a court has in respect of the mode of distribution of partnership assets among partners. 

The Court may award the joint property to one of the owners provided that he/she compensate the other co-owner, or cause the joint property to be put up to auction and the proceeds divided among the co-owners.[3]  Where there is no agreement between the parties as to how the joint assets are to be divided a liquidator is ordinarily appointed, and he can then sell the assets and divide the proceeds, if it is not possible to divide the assets between the parties.[4] If the immediate division of the joint property will be detrimental to the parties, the Court can order in certain cases that the division or the sale of the property be postponed for a period.[5]

It is beneficial that there exist means to divide assets which are jointly owned by parties, who no longer wish to be co-owners, but who cannot reach an agreement on the division of the assets. Without such an action, people might be stuck with a property which they derive no benefit from because it is in the possession of the other co-owner, who refuse to sell the property.

[1] Inleiding tot die sakereg, Van Niekerk & Pienaar, Juta, p 53 – 61.

[2] Robson v Theron 1978 (1) SA 841 (A).

[3] 1978 (1) SA 841 (A).

[4] 1978 (1) SA 841 (A).

[5] Van Niekerk & Pienaar, p 61 – 62.

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 BINDING ARE BODY CORPORATE FINES?

HOW BINDING ARE BODY CORPORATE FINES?

In an estate or sectional title scheme, it is challenging to ensure that everyone will stick to the conduct rules and to aid this, body corporates often fine the chancers. How far can the body corporates stretch their fining, and are these fines binding?

Each body corporate may choose what to impose formally in their code of conduct unless a rule is already part of the conduct rules in terms of the Sectional Titles Act. This is the only way the fines can be binding as enforceable, and they have to be reasonable and fair.

When fines are imposed, they cannot favour or benefit certain residents while leaving others out of mind. Substantially, they must serve the same purpose. The notification of a fine must be received by the owner or resident through writing. There is a correct way in which fines may be imposed:

  1. Complainants to lodge complaint

This must be lodged in writing or through an incident report to the trustees or the estate’s managing agent.

  1. Notice of particulars of the complaint

The owner and the tenant, or the resident, must be given a notice of the particulars contained in the complained as well as reasonable time to respond to the complaint. The resident/tenant must also be given enough information regarding the incident, including the rules that they may have broken.

  1. Second notice

Should the owner or resident not heed the first notice, a second notice may be issued mentioning the contravention is continuous or has been repeated. The transgressor must then be invited to a trustee meeting where they will be given a platform to present their case or defend themselves.

  1. The hearing before the fine

Before a fine is imposed, a hearing must have taken place. In the meeting, witnesses may be called to testify in favour of the transgressor and the transgressor may state their side of the story. Those who laid the complaint may also be cross-examined.

  1. Discussing evidence

Once the hearing is over, the trustees may then review the evidence presented to them and make a decision on whether or not to impose the fine.

If a fine is imposed, the amount should be reasonable, substantial and be proportionate to the purpose of the penalty.

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)

TITLE DEEDS WHEN BUYING OR SELLING PROPERTY

TITLE DEEDS WHEN BUYING OR SELLING PROPERTY

If you’re planning to buy a new property, you’ll need to get the title deed transferred into your name to prove that you’re the owner of the property. You’ll need the assistance of a lawyer specialising in property transfers (also known as a conveyancer) to help you transfer the title deed into your name.

You’ll only become the owner of the property when the Registrar of Deeds signs the transfer. After it’s been signed, a copy of the title deed is kept at the Deeds Office closest to you.

How long does it take? 

A search may take 30 to 60 minutes. In some of the larger offices, the copy of a deed is posted or it must be collected after a certain period of time.

To obtain a copy of a deed or document from a deeds registry, you must:

  • Go to any deeds office (deeds registries may not give out information acting on a letter or a telephone call).
  • Go to the information desk, where an official will help you complete a prescribed form and explain the procedure.
  • Request a data typist to do a search on the property, pay the required fee at the cashier’s office and take the receipt back to the official at the information desk.
  • The receipt number will be allocated to your copy of title.

Fortunately, a conveyancer will help you with the process so that you don’t have to worry about all the paperwork yourself. You should contact your legal advisor to find out more.

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)

References:

CAN I OBTAIN FINANCING IF I DON’T OWN IMMOVABLE PROPERTY AS SECURITY?

CAN I OBTAIN FINANCING IF I DON’T OWN IMMOVABLE PROPERTY AS SECURITY?

The article gives a brief overview of what a notarial bond is, the requirements that need to be complied with to register a notarial bond and give tips regarding clauses that will prove to be useful in a notarial bond. It also deals with the situation where a debtor disposes of an asset listed in a notarial bond, contrary to the provisions thereof.

A very useful way of obtaining financing to start a new business, is to register a notarial bond over the movable property belonging to the business. For instance, notarial bonds are regularly utilised in transport companies – a notarial bond is registered over the vehicles forming the core of the business, but the vehicles do not need to be in the physical possession of the creditor, thus the business can fully operate.

What is a notarial bond?

A notarial bond is a general or special bond where the movable assets of a debtor are used as security for a debt. In terms of the notarial bond, the debtor undertakes to pay his debt towards the creditor, failing which the creditor will be entitled to sell these movable assets and to utilise the proceeds thereof to satisfy his claim against the debtor. There are 2 types of notarial bonds: 

  • General notarial bond: all the movable assets on the debtor’s property serves as security for the debtor’s debt.
  • Special notarial bond: specific movable assets identified in the bond will serve as security for the debt.

How does a notarial bond differ from a pledge?

A pledge requires the delivery of the movable asset pledged. A notarial bond does not require the delivery of the movable assets identified in the bond, but in terms of section 1(1) of the Security by Means of Movable Property Act 57 of 1993, the movable property listed in the notarial bond will be deemed to have been pledged to the creditor as effectually as if it had been delivered to the creditor. The fact that the creditor is deemed to be in possession of the property thus places him on equal footing with that of a pledgee. The creditor, upon registration of the notarial bond in the deeds registry, acquires a real right of security in the movable property specified in the bond.

Requirements:

  1. Existence of a principal debt;
  2. Assets which serve as security must be movable, including corporeal and incorporeal assets.

Corporeal assets include furniture, vehicles, the goods of a business, animals and the future offspring of animals and stock in trade.

Incorporeal assets include an unregistered long-term lease of immovable property, a short-term lease of immovable property, a liquor license, a water use license, site permit, shares in a company, goodwill of a business, book debts etc.

What if more than one creditor uses the same asset as security for their debt?

A bond which was registered first enjoys priority over a bond registered thereafter.

Important clause to insert in the bond:

To prevent the debtor from disposing of assets which serve as security in terms of the notarial bond, a clause should be inserted disallowing the debtor to sell, alienate, dispose of, transfer or permit the removal of the asset from the debtor’s place of residence or place where he carries on business, without the prior written consent of the creditor. 

What happens if a debtor disposes of the asset identified in the notarial bond, contrary to the stipulations in the notarial bond?

The creditor will be able to apply for provisional sentence summons against the debtor, provided that the notarial deed meets the requirement of being a liquid document. A liquid document is a document which indicates, without having to consult extrinsic evidence, an acknowledgement of debt, of which the amount is easily determinable. A notarial bond will in general qualify as being a liquid document. 

A creditor will also be able to claim back an asset which has been sold, contrary to the provisions of the notarial bond, to a bona fide third party, from such third party. The reason for that is the fact that a notarial bond, which has been registered in the Deeds Registry, creates a real right, which is a right that attaches to property, rather than a person. 

It is not easy to obtain credit in the economic environment in which our country currently finds itself. However, there are ways to get your business off the ground and registering a notarial bond over the property of your business is a recognised method of securing your business’ debt. If notarial bonds can be utilised more frequently, it can help a lot of new businesses get the financing they need to buy equipment, vehicles and machinery necessary for the operation of the business.

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)

References:

  • Explanatory Notes Part 1: Course in Notarial Practice, compiled by Gawie Le Roux, Erinda Frantzen and Ilse Pretorius
  • The South African Notary, sixth edition, M J Lowe, M O Dale, A De Kock, S L Froneman, A J G Lang
UNDERSTANDING SALES

UNDERSTANDING SALES

You decide to buy a fridge and a washing machine on Gumtree. It is important to note that there are several elements involved in this seemingly simple sale: (1) the sale agreement; (2) the transfer of ownership; (3) the risk of damage to the items; and (4) defects in the item.

(1) Sale Agreement

The law distinguishes between the contract of sale and the actual transfer of ownership. These two are treated as separate events in the overall transaction. The sale agreement is the underlying contract in terms of which the seller undertakes to transfer the property to the buyer in exchange for consideration. All the remedies under the law of contract are available here and it is in terms of the sale agreement where the buyer is afforded the most legal protection e.g. if the seller guarantees the washing machine will work for 3 years and it does not, then you can claim from the seller for breach of contract; or if the seller misrepresents that the washing machine is a front-loader when in fact it is a top-loader, the contract can be cancelled on the basis of misrepresentation and the goods and monies paid are to be returned. However, the agreement of sale does not on its own transfer property from the seller to the buyer.

(2) Transfer of Ownership

To pass ownership there must be delivery of the item and the intention to actually transfer ownership. In the case of a cash sale, the price must also be paid at the same time as delivery in order for ownership to transfer. In a credit sale, ownership passes on delivery and payment of the purchase price is postponed. In our law, ownership can be transferred if these requirements are met without a valid contract of sale. However, the buyer would have a claim against the seller in unjustified enrichment.

(3) Risk

A further element to consider is who bears the risk of damage or destruction to the property before it is delivered. Risk passes from the seller to the buyer when the sale agreement is ‘perfected’. This is when the price has been set; and the item be determined or identified. Any suspensive conditions must also be fulfilled. A suspensive condition suspends the operation of the contract until the happening of a future event e.g. I will sell the washing machine to you if my cousin does not buy it by Wednesday. The operation of this contract is suspended until Wednesday. Where damage takes place prior to the fulfilment of the suspensive condition, the seller bears the risk.

(4) Defects

Where there is a latent defect (one not visible upon reasonable inspection) then the buyer can ask for a reduction in the purchase price. Only where the item is so defective that it is not fit for its purpose and that a reasonable person would not have bought the item, can it be returned. This is the extent of a buyer’s remedies for latent defects. It is only where the seller is a professional seller (e.g. retail store trading in appliances) or a manufacturer, that the buyer claim for all losses e.g. the loss suffered where a faulty washing machine damaged clothing and the surrounding walls and cupboards.

However, where an item is sold ‘voetstoots’, it is sold in its condition ‘as is’. This voetstoots clause forms part of the sale agreement. Where such a clause is present, there is a duty on the buyer to properly inspect the property and ensure that there are no defects. If the buyer notices a defect later on, he will have no remedies available against the seller.

Conclusion

In most cases where you have entered into a sale and are dissatisfied with the outcome, the most extensive relief would be contractual remedies for breach of the sale agreement. However, it is important to establish whether risk has in fact transferred to you before you took delivery of the item. Furthermore, buyers should be cautious as to whether items are being sold ‘as is’, because such a clause leaves the buyer without any remedies where the item is defective. However, this voetstoots clause would not protect a seller who is acting fraudulently. Should you wish to know more, feel free to make an appointment with our offices.

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)