Property

“If you want to make your house easy to sell, make it easy to buy” (Anon)

You are overjoyed at receiving a good offer for your property – not easily achieved in these hard times and of course you certainly don’t want to do anything to jeopardise the sale.

But perhaps do that little bit extra homework before accepting the offer if it comes from a trust. The pitfall here – and it’s one that perennially takes sellers by surprise – is that the trustee/s signing the offer to purchase/sale agreement must have the necessary authority to do so. Drop the ball on that one and you will find yourself without any sale at all.

As a seller learned to its cost recently in the Supreme Court of Appeal (SCA)…

For want of a second signature the seller goes down R3m 

• In 2013 a company sold to a trust for R1.45m a “real right of extension” in a sectional title development (a right in this case to build on common property).
• An agreement to sell a “real” property right of that type must, as with a standard property sale, be in writing and signed by both seller and buyer (or their authorised agents) to be valid.
• The seller’s problem here was that only one of the trustees signed the sale agreement. The other trustee refused to sign, and in 2017 the seller found itself trying to convince the High Court to order the trust to pay it the R1.45m plus interest (by then a total just shy of R2m), alternatively to order the trustee who signed the deal to pay up personally in return for taking transfer into his own name.
• The High Court however pointed out that where a trust has more than one trustee, they must act jointly, and a property sale agreement needs the signatures of all the trustees. One trustee signing alone would be regarded as an agent and would need either general authorisation in the trust deed or written authorisation to sign the particular agreement. Otherwise, as in this case, the signing trustee acted without authority and the sale was void.
• Defeated in the High Court, the seller appealed to the SCA, abandoning its claim against the trust itself and now trying only to hold the signatory trustee liable in his personal capacity.
• Its argument was that, despite the invalidity of the sale, the trustee was still liable – in his personal capacity – to pay and take transfer as he was guilty of breaching the clause (standard in property sale agreements involving corporates and trusts) that he “warrants and binds himself in his personal capacity by virtue of his signature hereto … that he is duly authorised to enter into this agreement on behalf of the company, close corporation or trust”.
• No claim there, held the SCA, commenting that “The ingenuity of this argument is surpassed only by its lack of substance … what [the seller] is essentially seeking is specific performance of a void and invalid contract against the person who signed that contract but was not a party to it – this on the basis that if he’d had the authority to sign, which he had not, the property would have been sold to another. This merely had to be stated to be rejected.” This appeal, said the Court, was doomed to fail.
• The end result – six years down the line the seller loses its claim (no doubt over the R3m mark including interest by now) and its legal bill will be a hefty one.

Could you sue the trustee personally for damages?

“Theoretically”, said the SCA, the signing trustee could be held liable to the seller for damages flowing from his breach of warranty, and that is of course a strong warning to those signing for trusts and companies – make 100% sure that you have full authority to do so!

But, said the Court, the seller in this case didn’t formulate its claim as a damages claim against the trustee personally and even it had, it would have had to provide evidence as to what damages it had actually suffered.

Indeed proving damages in a case like this is never going to be easy – the seller would have been much better off insisting upfront on proof of the trustee’s authority to sign alone.

As always, get professional advice before you sign anything.

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“He who hesitates is lost” (Wise old proverb)

In January 2019 new amendments to Regulations for the replacement of lost title deeds (and similar documents like mortgage bonds and notarial bonds – see below) were published. They were very onerous and slated to come into effect at short notice, but after criticism they were suspended – until now.

Revised amendments have been published, to come into effect on 1 January 2020.

Firstly, what is a “Title Deed”?

A title deed (deed of transfer) is legal proof of ownership of a property. It also contains a lot of other important information relating to the property, such as a full description, its size, names of previous owners, bonds registered over it, conditions and legal restrictions relating to it and so on.

Why should you care if yours is lost?

Without the original title deed you cannot pass transfer to a buyer. So if you sell your property, your conveyancing attorney will need the title deed from you (if your property is mortgaged and the bond not yet paid off and cancelled, the bank should be holding the title deed as security). 

All good if the title deed is readily to hand, but if it has been lost your attorney must apply for a certified copy. Until now – and this changes on 1 January 2020 – this was a relatively quick and cost-effective matter of attesting to an affidavit in which you confirm that a “diligent search” has failed to locate the title deed and that it isn’t pledged or held as security by anyone. All being well, a few weeks and a reasonable legal fee later, the Deeds Office issues a certified copy of the title deed and the transfer proceeds.

Act now!

• All property owners (not just active sellers): The new procedures to come into effect on 1 January are not quite as onerous as the January amendments were, but what is new is that your attorney will have to publish “a notification of intention to apply for such certified copy in an issue of a newspaper circulating in the area in which the land is situated and in the case of a notarial bond in an issue of one or more newspapers circulating in the area of every deeds registry in which such notarial bond is registered.” Any “interested person” then has two weeks to object to the issue of a copy. 

  That’s extra expense and complication, but perhaps more important is the extra – and potentially very costly – delay. The good news is that all of that is avoidable if you act before the new requirements take effect. 

  So – whether or not you intend to sell your property in the near future – check immediately that you know where your title deed is, and if you can’t find it ask your attorney to apply urgently for a certified copy. 

• Buyers: You and the seller are no doubt in the same boat here in that the last thing either of you wants is unnecessary delay in the transfer process. So if you are buying property, forward this to the seller or estate agent with a request that they confirm possession of the title deed or act to replace it immediately. 
• Agents: Again, unnecessary delay in transfer will prejudice both you and your client. So forward this to everyone with a property on your books (you’re doing them a favour as well as yourself).
• Bondholders: As mentioned above, the new amendments apply equally to lost mortgage bonds, notarial bonds, registered leases, holders of real rights etc, so what is said above applies equally to you. 

With Deeds Offices always closing earlier than normal in December, don’t hesitate – act now!

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“If you don’t like where you are, move. You are not a tree” (Jim Rohn)

The upcoming festive season, with its mass migrations of happy holiday-makers to their dream destinations, has always been a busy time for both sellers and buyers.

In these hard times however, an increasing number of sellers are feeling pressured to accept offers well under their expectations, so cases of “seller’s remorse” are much more likely now than they have been for many years. The question is, just how easy or difficult is it for a seller to escape a sale agreement signed in haste?

Equally common no doubt are sales “subject to the sale of the buyer’s property” – for a specified amount and within a specified time period. That raises an important question – must the buyer’s transfer actually be registered in the Deeds Office within the deadline period, or is enough that the buyer has signed a sale agreement for his/her property?

A recent High Court decision addressed both those questions, as well as two others relating to defences raised by a seller who changed her mind shortly after accepting the buyer’s offer (the judgment doesn’t say why she changed her mind, but the fact that a bank offered the buyers a bond of R3.9m suggests that the sale price of R2.6m may have been very low).

A serious case of seller’s remorse, and the 3 defences raised

In the case in question the seller had second thoughts shortly after accepting a R2.6m offer for her house from a couple who were married in community of property. When the seller then refused to pass transfer to the buyers, they asked the High Court to order her to do so.

Any one of the three defences put forward by the seller to the buyer’s claim could have sunk the sale, so let’s have a look at how the Court answered the three main questions they raised –

1. Does “subject to successful sale of the buyer’s house” require transfer?
   
   The sale was subject to the “successful sale” of the buyers’ property within 60 days, failing which the sale would lapse. The buyers had indeed “sold” their house by entering into a sale agreement for it, and their buyers had taken occupation. But, so the seller argued, that was not a “successful sale” because actual Deeds Office transfer hadn’t been registered within the 60 day period.

   Bad defence, ruled the Court, commenting: “I cannot think for a moment that the parties had the intention that the [buyers] were to find a purchaser for the property, that they had to sign a deed of sale after a purchaser was found, that possible suspensive conditions in that deed had to be fulfilled, and that the registration of transfer into the purchaser’s name, all had to take place within the limited period of 60 days only … I therefore find that the phrase ‘successful sale’ in the present agreement means nothing more than the successful signing of a deed of sale” (emphasis added).     

   On a practical note, both seller and buyer in any property sale should have their attorneys confirm that the “subject to” clause specifies clearly what exactly is required. Is a signed sale agreement enough? Must all suspensive conditions have been met? Or must actual transfer have been registered? Provide enough time for your agreed requirements to be met, and cover scenarios like an unexpected glitch or delay in the buyer’s transfer (neither buyer nor seller wants to be in the position where a buyer can’t pay the purchase price when transfer is eventually tendered).   

   As a less important side note, the sale in this case was also subject to another suspensive condition. This was a “bond clause” requiring the buyers to obtain a bond within 30 days – which clause, held the Court, had been fulfilled by a bank informing the buyers in writing that their application for a mortgage loan was approved for a total amount of R 3.9m, well over the required R2.6m. 
   
   

2. Married in community of property – must both spouses sign?
   
   The buyers being married in community of property, the seller argued that the sale agreement was invalid because only one spouse had signed it. Not so, held the Court, “both husband and wife have equal capacity to perform juristic acts and equal powers to manage the joint estate, which powers can in most cases be exercised without the consent of the other spouse”.   

   The Court found that this was not a case requiring such written consent (there are conflicting court decisions on this point so ask your attorney for specific advice if this question arises in your sale*), therefore the signing spouse “had full capacity to bind the joint estate by signing the Offer to Purchase without the written consent of the Second Applicant”.    

   *(Best practice of course is to avoid any possibility of dispute by getting both signatures wherever possible!)
   
   

3. Must acceptance of an offer be communicated to the buyer?
    
   The seller claimed to have called her estate agent 30 minutes after signing the agreement, instructing her to withdraw it and terminating her mandate as agent. Thus, argued the seller, the acceptance of the offer was never validly communicated to the buyer and no contract ever came into existence.     

   Not so, held the Court. Although our law is that “unless the contrary is established, a contract comes into being when the acceptance of the offer is brought to the notice of the offeror”, no communication of acceptance was necessary in this particular case. The offer was headed “Offer to Purchase (This constitutes an Agreement of Sale upon Acceptance by the Seller)” and it stated that “the Seller agrees to sell the immovable property, together with the improvements thereon, to the Purchaser whom purchases from the Seller on the terms and conditions as set out in this Agreement.”     

   The unavoidable inference, said the Court, was that the parties intended “that the mode of acceptance would be the signature of the First Respondent, and nothing more.” 

“Sign in haste, repent at leisure” 

Our law as a general rule holds you to your agreements, so sign a sale agreement and you will have an uphill battle getting out of it.

As always speak to your attorney before you sign anything. Proper advice upfront is the best way to avoid seller’s remorse (and buyer’s remorse for that matter), grey areas that risk dispute and litigation, and uncertainty over whether your rights are properly protected in the sale agreement. 

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“Spoliation is the wrongful deprivation of another’s right of possession. The aim of spoliation is to prevent self-help. It seeks to prevent people from taking the law into their own hands … The cause for possession is irrelevant – that is why a thief is protected … The fact that possession is wrongful or illegal is irrelevant, as that would go to the merits of the dispute” (extracts from a 2012 Supreme Court of Appeal decision)

As a landlord in dispute with your tenant you may well be tempted to avoid the delay and cost of litigation by taking your own eviction or enforcement action. 

Bad idea. No matter how good your overall case may be (or how good you may think it is), taking the law into your own hands automatically puts you in the wrong.

Let’s look at how that works, firstly the theory of it and then with reference to a practical example recently decided by the High Court.

The tenant’s right to immediate return of possession

Our law requires that you approach a court for assistance; self-help is not an option. So if you remove the tenant’s access to the leased premises without a court order, you face having to immediately restore possession to the tenant via a “spoliation order”.  

The important thing is that at this stage the court has no interest in how strong or weak your actual case against the tenant is. That you can fight about in a full court action down the line. All that counts now is how you dispossessed the tenant, not whether you are the owner nor whether you have any legal right to possession. 

So to succeed in obtaining a spoliation order, all the tenant has to prove is –

1. That he/she was in “peaceful and undisturbed possession”, and 
2. That he/she was “unlawfully deprived of that possession.” The critical question here is whether or not the tenant consented – freely and genuinely – to the dispossession. If so, the dispossession was lawful. If not, it was unlawful. Thus spoliation “may take place in numerous unlawful ways. It may be unlawful because it was by force, or by threat of force, or by stealth, deceit or theft” – or just without consent.

Let’s move on to the practical example of the shopping centre tenant …

The internet café and the self-help landlord

• An internet café business owner was locked in dispute with her landlord over its method of electricity billing.
• The landlord’s response was firstly to cut electricity to the premises, then to change the locks.
• After trying without success to resolve the dispute, the tenant applied for a spoliation order. 
• The landlord did not dispute that the applicant was in possession of the premises, nor that he had dispossessed her with neither consent nor court order.
• What the landlord did argue was that the tenant’s application was not urgent, that it should have been brought in the magistrate’s court and not in the High Court, and that it was really not about spoliation but about the tenant trying to enforce her rights in terms of the lease.
• Rejecting all these contentions, the Court held that the landlord had committed two separate acts of spoliation – 
  • The first when it disconnected the electricity supply thus denying the tenant use of the premises – “a limitation of her rights as a possessor” and
  • The second when it changed the locks to the premises, thus dispossessing her entirely.
• The end result – the landlord must pay all costs, immediately restore possession of the leased premises to the tenant, and immediately re-connect the electricity. 

Landlords – the self-help option automatically puts you in the wrong. Rather go the legal route!  

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“Reliable electronic communications go beyond just benefiting the commercial interest of licensees to the detriment of ownership of property. The statute [Electronic Communications Act] is designed to avoid this no-winner conflict. What it seeks is to bring our country to the edge of social and economic development for rural and urban residents in a world in which technology is so obviously linked to progress.” (Extract from Constitutional Court decision quoted in the judgment below)

If you haven’t already done so, you are no doubt thinking of upgrading soon to the “superfast broadband” provided by fibre optic cabling. In any event ADSL is about to disappear with Telkom’s plans to shut down its copper network and migrate ADSL customers to either fibre (where available) or LTE.

In a community scheme, your challenge is that your chosen fibre service provider must either use your existing underground ducting or start digging new trenches and putting in new ducting, sleeves and manholes. The expense and disruption of the latter option naturally make it very much second prize.

So Telkom no doubt celebrated its 2017 High Court victory over Vodacom and a Home Owners Association (HOA) restoring to Telkom exclusive and undisturbed possession of its underground ducting in a residential estate. 

The fight, however, had only just begun. The HOA and Vodacom took this decision on appeal to the SCA (Supreme Court of Appeal), and this time they succeeded.

The complex and the copper cables

• In what is no doubt a pretty standard historical scenario for residential complexes, the developers of a private security lifestyle residential estate had some 20 years ago asked Telkom to provide telecommunication services to the estate, and had built and installed the infrastructure at the developer’s cost but in compliance with plans provided by Telkom and under Telkom’s oversight.
• Correspondence at the time indicated that “Telkom envisaged that the infrastructure would be for its exclusive use”, and since then it had always had access to the network and maintained it.
• When the HOA rejected an offer by Telkom to install fibre and instead awarded a contract to do so to Vodacom, Vodacom installed its fibre in the Telkom ducting. Long story short, Telkom successfully asked the High Court for a “spoliation order” restoring “undisturbed possession” of the infrastructure to it.
• On appeal however, the SCA ruled that in fact “Telkom’s actual use of the ducts, cables and its service to its customers remains undisturbed.  It has not lost possession of anything. It remains entitled to enter into [the estate] for the purposes set out in s 22 [of the Electronic Communications Act] and its network remains fully functional as it was prior to Vodacom’s conduct. There was accordingly no spoliation.” The spoliation order was accordingly set aside.

Note that the judgment itself contains much that will be of interest to lawyers on the questions of “servitutal rights”, “quasi-possession of rights”, and the ins and outs of the Electronic Communications Act – but the important practical outcome for HOAs and complex homeowners is that it is now easier to choose your own fibre installer because, provided your installer does nothing to disturb Telkom’s use of the ducts (and its service to its clients), the free space in the existing underground infrastructure is available for use.

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“A verbal contract isn’t worth the paper it’s written on” (Samuel Goldwyn)

Verbal agreements in South Africa are generally as binding and valid as written ones. Of course not recording your agreements in writing is a bad idea – oral agreements are a recipe for doubt and dispute, and proving the exact terms agreed on will be challenging if not impossible.

Moreover certain types of contract have to be in writing, and signed by all parties, to be valid at all. For example in South Africa an oral contract for the sale, exchange or donation of land, or of any “interest in land”, is unenforceable. 

A recent High Court case shows the danger of overlooking this requirement… 

Two properties, no right of way access

• The buyer of two properties intended to build two new houses on them.
• He orally agreed with one of the sellers “to right of access (right of way) for both new second dwellings through his property” and “to provide and sign all necessary documents for effecting the agreed upon right of way through his property”. The right of way was supposedly a 3m wide corridor for vehicle access across the property.
• However the sale agreement itself made no mention of this arrangement which accordingly remained verbal only.
• When a series of disputes arose (involving amongst other things hotly-denied allegations of forgery, breach of contract and cancellation of the deed of sale), the buyer asked the High Court to declare the right of way servitude agreement “valid and in full force”, and to order the seller to sign the documentation for its registration.
• The Court refused, holding that “the right of way in issue in this matter constitutes an ‘alienation ‘ of an ‘Interest in land’”. In other words, it was a “servitude” (simply put, a right given to A over B’s property – such as to live on it or to gain access to another property through it) and had to be in writing to be valid and binding. 

The bottom line 

As always, when buying or selling property take legal advice before you sign anything, and remember to tell your attorney about any verbal agreements you have made. In this case, the oral right of way agreement should have been recorded in the written and signed agreement of sale, then registered against the title deeds in the Deeds Office to ensure its enforceability “against the world” (thus including subsequent owners of the other property).

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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“…the Act is consumer-protection legislation designed to offer protection against incompetent builders and the construction of homes having structural defects” (extract from judgment below)

In order to promote housing consumer rights, home builders (including residential property developers and builder/contractors – an “owner builder” may apply for exemption) must, in terms of the Housing Consumers Protection Measures Act (“the Act”) register with the NHBRC (National Home Builders Registration Council). They must also enrol houses they build with the Council, and pay an enrolment fee – which, as we shall see below, can be substantial. 

Failure to comply is a serious matter for builders – it’s not only a criminal offence (with penalties of a R25k fine or a year’s imprisonment) but it means no payment can be claimed for work done. In other words you could be fined/jailed as well as lose your right to payment.

Two recent SCA (Supreme Court of Appeal) cases deal with specific types of home builder but they provide a timely reminder to all builders, big and small, of the need to comply with the Act.

Trusts – must you register?

• The first case dealt with a trust which was building a sectional title housing development. 
• It failed to renew its original registration and then refused to comply with non-compliance notices served on it.
• It argued that it was not a “person” and therefore did not fall under the Act. 
• The SCA was having none of that, saying that the question was not whether a trust is a “person” but whether it fell under the Act. Commenting that “To exclude trusts from the ambit of the Act would result in a consequence which is arbitrary and unjust”, it declared that trusts must indeed register.

What about “build to let” developers?

• In the second case, the developer/builder of a property development comprising shops and 223 residential apartments refused to pay the (over R1.5m) enrolment fee required by the NHBRC.
• Saying that it planned to rent the apartments out to tenants, and had no intention of selling them or developing them in terms of a sectional title scheme, the developer argued that it was itself the “effective end user” of the apartments and therefore it was “absurd to expect it to insure against itself”. 
• Eventually however the developer paid the fee under protest, and then successfully applied to the High Court for an order that it was not obliged to comply with the Act’s enrolment provisions.
• On appeal however the SCA held that the enrolment provision of the Act “does apply to homes being built for lease and rental purposes”. It also rejected the developer’s alternative argument that the requirement was “unconstitutional, unlawful and invalid” because it was irrational to expect the developer to “insure itself against itself”. 

To register and enrol, or not to register and enrol?

There are some exceptions to the Act’s application, and “owner builders” can apply for exemption. But there are grey areas here and our courts have signaled a willingness to interpret the Act as having a wide reach. As we have seen, the penalties for getting this wrong are substantial so if you aren’t 100% sure where you stand, specific legal advice is a no-brainer!

Disclaimer: The information provided herein should not be used or relied on as 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 professional adviser for specific and detailed advice.

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