Property – Page 3 – KRUGER & CO

Sep 25

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Don’t Let Cybercriminals Haunt You this Halloween — Verify, Verify, Verify!

By Kruger & Co | Business, Criminal Law / Crime, General Interest, Property

“If you suspect deceit, hit delete!” (Online cybersecurity slogan)

October is Cybersecurity Awareness Month, a good time to note that as cybercrime continues to grow, more and more businesses and individuals are falling victim to the dreaded “BEC” or “Business Email Compromise” fraud.

The million-dollar question: Who takes the hit?

Typically in a BEC fraud, email or other electronic communications between a creditor and debtor (often a seller and buyer, or service provider and client) are hacked by criminals, who con the debtor into paying what they owe into the fraudster’s bank account. By the time the parties realise they’ve been had, the criminals are long gone, and all that remains is the million-dollar (sometimes quite literally!) question: “Which one of us takes the hit?”

Until now we have been faced with conflicting High Court decisions on this point, but now the SCA (Supreme Court of Appeal) has settled it: The risk is the debtor’s.

A car dealership must pay twice over

It was a classic case of BEC: A dealership bought two Hyundai Nissan NP200 vehicles from another dealership for R145,000 each. The seller issued invoices showing its banking details. The buyer paid by EFT and sent proof of payment to the seller, which happily (without checking that the funds had actually landed in its account) delivered the vehicles to the buyer.

As always with these cases, one can imagine the sinking feeling that greeted the parties’ realisation that the seller’s emails and the attached invoices had been intercepted, and the banking details subtly altered. As a result, the buyer had paid the full R290,000 to the criminals’ bank account.

Long story short, a real seesaw of a legal battle ensued. The buyer said, “I’ve already paid you”. The seller retorted, “No you haven’t, you paid the criminals,” and sued the buyer for the R290k. The seller won in the Regional Court, lost on appeal to the High Court, but then turned the tables again and celebrated victory in a further appeal to the SCA.

Verify, verify, verify

The SCA’s findings amount to this:

The onus is always on you as buyer to prove, on a balance of probabilities (i.e. more likely than not), that you have paid the seller.
When you pay by EFT, you must show that the seller actually got the money. In other words, that you paid into the correct bank account.
Creditors (recipients) have no legal duty to protect debtors (payers) from the possibility of their accounts being hacked where the debtor could have taken steps to protect itself but failed to do so.
The obligation therefore is on you as debtor to ensure that the bank account details in the invoice are in fact correct and verified because “it is the debtor’s duty to seek out his creditor”. Fail to follow basic verification steps, and your payment to the wrong account does not remove your liability to pay the debt — you still have to pay your creditor.

Bottom line, the buyer in this case should have verified the banking details given in the emailed invoices before paying. It didn’t, so it couldn’t prove that it had paid into an account authorised by the seller.

It must pay the seller the R290k, with interest and doubtless substantial legal costs.

Don’t make the same mistake

These scams grow more sophisticated by the day, fuelled now by AI-perfected deep fakes, cloned websites and social engineering. Treat all emails, all electronic messages, and all electronic invoices with great suspicion — even if they appear to come from businesses you have known and trusted for decades. Verify bank account details (preferably by speaking to the creditor directly on a number you know to be correct) before paying a cent.

Property sales are particularly vulnerable

Be especially vigilant when buying or selling property because these high-value sales are a particular focus for cybercriminals worldwide. There are rich pickings in the offing, and the opportunities for baddies to intercept and falsify emails is multiplied by the range of trusted role players involved — typically several sets of attorneys, estate agents, and banks as well as the buyers and sellers themselves.

A final note on online security

Let’s end off with a note to everyone: Keep reminding your whole team (not just your accounts department) that securing your computer and email systems against bad-actor compromise is no longer a nice-to-have, it’s essential. This whole unhappy saga could all have been avoided if everyone involved had followed basic security protocols. Prevention is always better than cure.

Give us a call if you need any help.

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 us for specific and detailed advice.

Aug 26

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Panhandle Access to Properties – The Mistakes to Avoid

By Kruger & Co | Property

“You aren’t buying a house, you’re buying a lifestyle.” (Anon)

As more and more residential properties are subdivided and developed, an increasing number of homes are effectively cut off from direct access to the nearest public street or road.

That’s where the “panhandle” comes into play, a narrow strip of land (looking on diagrams very much like the handle of a pan, hence the name) which gives the needed street access to the “landlocked” property. The panhandle can be owned by the property using it as an access road, or it can be a right of way in favour of the property over neighbouring land.

A recent High Court run-in between two neighbours over a panhandle right of way highlights the mistakes made by the various parties involved, and so provides a neat “must do” checklist for everyone in such a situation – buyers, sellers and neighbours alike.

“Wait, what right of way?”

You can imagine the reaction of a property buyer when he was told, only after taking transfer, that his nice little plot was lumped with a registered servitude. Not only did he have the neighbour freely crossing his land at will via a four-metre wide panhandle road, but he also found himself blocked from part of his own land by the neighbour’s gate.

Luckily for the buyer, the servitude turned out to be a temporary one. The wording stated clearly that it was to provide a right of way only until alternate access became available to the neighbour. And a consolidation of neighbouring properties (involving the creation of eight mini subdivisions for a property development) had indeed opened up such an alternative access route.

The buyer accordingly asked the High Court to declare the servitude lapsed, and to order that all “barriers and obstructions” to the panhandle be removed. His neighbour fought back, arguing amongst other things that he had paid R35,000 to the original owner of the buyer’s property as part of a verbal agreement to increase the panhandle’s width from four to six metres.

The neighbour’s problem here is that a servitude has to be in writing, so his verbal agreement with the original owner for a six-metre servitude was unenforceable – certainly against this buyer who had never agreed to it. For a servitude to bind a subsequent buyer of the property, it needs to be registered against the title deed.

The Court accordingly held that the registered four-metre servitude had lapsed and that the supposed six-metre servitude agreement was unenforceable against the buyer. End result, the neighbour loses his right of way and must remove all “obstructions” (the gate, presumably) on it.

Buyers, sellers and neighbours: Mistakes to avoid

Buyers: Don’t only wake up after transfer to the fact that your new property is subject to a right of way or other right of access – it could do serious harm both to your property value and to your enjoyment of it. Check the title deed before making an offer. As we shall see below, relying on the seller to disclose a servitude during the sales process can be wishful thinking…

Sellers: The seller in this case didn’t disclose the servitude, as he was obliged to, in the mandatory disclosure form – the form that every property seller must sign and provide to the buyer. In it a seller must disclose not only any known property defects, but also things like encumbrances, zoning and title deed restrictions, unapproved alterations or additions, and so on. Presumably the seller’s omission in this case was just an oversight, but he could still easily have been sued by the buyer. It’s vital that you always complete that form fully and accurately.

Neighbours: As the neighbour in this case found out to his cost, if you are reliant on a right of way, make sure it’s granted in a written and registered servitude. He might perhaps have been able to enforce his verbal agreement against the original owner, but it was worthless against a subsequent buyer who knew nothing of the 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 us for specific and detailed advice.

Aug 26

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Neighbours’ Facebook Feud: Cats Pics, Karens & Keyboard Muppets

By Kruger & Co | Delict and Civil Claims, Property

“Dance like no one is watching, but text, post, and email like it will be read in court one day.” (Anon)

When can the target of rude comments and insults on a community Facebook group sue?

The High Court recently grappled with a community debate over free-roaming jackals that turned sour.

The golf estate and the Facebook group

The scene here is one of Sandton’s large and secure golf estates, whose closed Facebook group, aimed at fostering community spirit, reaches some 1,800 residents.

Jackals roaming freely on the estate were at the heart of this dispute, with residents split into two opposing camps.

In one camp, those believing that all wildlife in the estate should be left alone – including the jackals.
In the other camp, those arguing that, as well as being predators dangerous to other animals (including domestic pets), jackals are carriers of rabies. Presumably this group advocates some form of control measure, no doubt an emotive topic.

Cat pics and Karen insults

The online debate between the two sides began civilly enough, but that changed with a series of posts by a prominent supporter of the “hands-off-the-jackals” lobby. In criticising the other camp, she targeted one of them by name. Stung, the recipient of what she perceived as insulting and defamatory attacks, demanded that her opponent remove the posts and apologise to her.

Central to the outcome of this case are the posts themselves. They included an image of a cat in a spiked vest (with the comment “maybe this will help the cats”), suggestions that the target of the posts shouldn’t be living in Africa, that she had published false information on the group, and that she was “stupid” and a “stupid keyboard muppet”. She read further posts as referring to her as a “B” (she took this to mean “bitch”) and as caricaturing her as a dog (with a bob haircut like hers) and as a “Karen”.

Off to court with a two-pronged attack

As a professional (actually a business rescue practitioner), the complainant wasn’t prepared to take any of that lying down. Offended by the poster’s refusal to retract, she sued her in the Magistrate’s Court for damages of R250,000, asking also for orders to remove the posts and apologise publicly for them.

She lost, appealed to the High Court and lost again. Why?

It’s important to note firstly that she had launched a two-pronged legal attack, enabling her to prove a valid claim for either or both of actionable insult (where offending statements injure your dignity or self-worth) and defamation (where they damage your reputation). To win, she needed to show either that the statements referred to her and were defamatory of her, or that they were wrongful and hurt her dignity.

Her failure to convince the Court that she had a case was partly because she hadn’t been able to prove all the facts needed to establish a case. But it was also rooted in two principles which anyone engaging in public debate (online or otherwise), and anyone thinking that an insult is perfectly fine if it’s structured as a “joke” or “jest”, needs to take note of.

Let’s have a look at each principle.

Public debate is not for sissies

The Court: “The law expects those who take part in public discourse to do so with a degree of pliancy and robustness. A subjectively hurtful remark is not wrongful unless a reasonable person in the plaintiff’s position would take exception to it.”

More particularly, this being a closed group of neighbours in a security complex: “Those who engage in online debate about matters of mutual interest between neighbours ought reasonably to foresee that the criticism they sustain may be tart and, at times, discourteous.”

In this case, while some of the posts were definitely rude and hurtful, no reasonable person would have thought that they had tarnished their target’s reputation. Rather, readers would have thought less of the poster “because she was unable to keep to civil terms of debate.”

Everything said in jest?

Some, but certainly not all, “jokes” are safely posted. The poster of this “cat in spikes” picture said it was just a light-hearted joke, and the Court agreed. A joke can certainly be defamatory if it’s a deliberate attack on the target’s reputation – but in this context, it was just “a satire of the entire debate between the parties.” It wasn’t, said the Court, “of the defamatory kind”.

Turning to what appears to have been another attempt at a joke in the form of the dog caricature and “Karen” reference, what saved the poster here was the lack of proof that this was actually aimed at the claimant. Had it been, calling her a “Karen” (“a privileged, entitled woman with a thin skin and a quick temper”) would have opened her up to ridicule and “would probably have been defamatory”.

There’s a fine line or two there. Call us before posting if you aren’t sure that you’re on solid ground!

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 us for specific and detailed advice.

Jul 28

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Your House Burns to the Ground: Can You Hold the Seller Liable?

By Kruger & Co | Property

“Time shall unfold what plighted cunning hides.” (William Shakespeare, in King Lear)

A recent High Court judgment confirms, yet again, that if a property seller knows about a hidden defect and keeps it quiet, no exemption clause will save them.

A loud roar, rolling flames, and a dream home turns to ashes

A family thought they were moving into a solid, well-built family home (a dual-level freestanding residential townhouse). They had no idea a hidden hazard was buried in the walls above their fireplace.

They found out on a cold and rainy Free State night when they lit a winter fire, as they had done many times before. This time they were in for a shock. All went well until, watching television some hours later, they heard a loud crack like a gunshot…

When the man of the house looked up the staircase, he noticed a glow. He found that the top floor spare room was on fire, with the curtains and bed already alight. A loud roar and flames rolling under the cornice caused him to retreat. He shouted to his wife to gather their pets and call for help, and they escaped outside to await the arrival of the fire department.

The family got out unscathed. But the extensive damage caused by the fire and the collapse of the roof rendered the unit uninhabitable.

The hidden fire hazard

Unbeknownst to the buyers, during construction, a roof truss beam had been built through the chimney brickwork. Building regulations read with the applicable code of practice forbid this, because any timber near a flue is a fire waiting to happen: “Combustible material such as a timber floor joist, trimmer or roof truss shall not be built within 200mm of the inside of a chimney; and … No flue pipe shall be designed and installed in such a manner that it will cause a fire hazard to any adjacent material.”

Faced with a devastated home and huge repair costs, the buyers took the developers, who had both built and sold the house, to the High Court, where a forensic fire expert explained that the origin of the fire could be traced to the beam in question. Over time, repeated heat exposure had dried out and charred the timber. On the fateful evening, it finally caught alight, and the fire spread to the polystyrene ceiling cornices, which melted and dropped flaming debris onto bedding in the upstairs room directly above the fireplace.

Voetstoots? Forget it!

The developers argued they weren’t liable because the sale agreement contained a standard exemption (“voetstoots”) clause and could not therefore be held to account for a hidden defect such as this one.

In short, the developer’s position was: “You bought the house as it stood, defects and all, whether you could see them or not.” They also pointed out that the buyers had signed an acknowledgement that they’d inspected the house.

But the Court was clear: “It is the duty of the seller to deliver the thing sold to the buyer without any defects.” Voetstoots clauses don’t give a seller free rein to hide behind the contract if there’s fraud or dishonesty:

The defect was “latent”, in that it was hidden inside the chimney and could not have been discovered by a normal inspection.
The developer, as the builder, must have known of the latent defect, and whilst “fraud will not lightly be inferred, the fact that the chimney was not represented on the approved building plans occasions the reasonable inference that it fraudulently concealed the defect.”

Bottom line? By failing to disclose a defect that was dangerous and unlawful, the developer crossed the line from simple non-disclosure to fraudulent concealment.

Here’s how to avoid disaster and dispute

Sellers: Check carefully for any possible defects and make honest disclosure part of your sale process, particularly when completing the “mandatory disclosure form” that must be attached to the sale agreement. And don’t rely blindly on a standard exemption clause – it’s no guarantee of protection if a hidden defect comes back to haunt you.
Buyers: Always ask questions. Look at approved building plans, think of commissioning an independent home inspection, and don’t be shy to raise any concerns. If you suspect fraud after buying, don’t wait – get legal advice fast.

The bottom line

Hidden defects don’t stay hidden forever, no matter how cleverly concealed. Sooner or later, as Shakespeare put it, “time shall unfold what plighted cunning hides.”

If you find yourself facing the fallout of a seller’s dishonesty, we’ll help you protect your rights and recover what you’ve lost.

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 us for specific and detailed advice.

Jun 25

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A Bond Clause Deadline Whooshes by and a Sale Dies – Can You Revive it?

By Kruger & Co | Property

“I love deadlines. I love the whooshing noise they make as they go by.” (Douglas Adams in The Salmon of Doubt)

Contracts often contain suspensive conditions, a common example being the bond clause in a property sale agreement. The standard bond clause provides that the buyer must obtain a bond by a set deadline, and everyone’s rights and obligations under the agreement are suspended until the bond is granted. If the bond isn’t granted by the deadline, there is no sale.

In practice, the buyer often struggles to meet the set deadline and asks for an extension. If that happens to you, be sure to structure the extension correctly and to get it done and dusted before the deadline expires.

Parties often think “oops, we both missed the deadline, but no worries, we want the sale to succeed so all we need do is agree to revive the agreement.” But that’s a fatal mistake, because if a suspensive condition fails, the contract dies and all your attempts to bring it back to life – usually by way of an addendum or an extension of the time limit – are doomed to fail. You will need a brand new contract if both of you still want to proceed.

Let’s illustrate this point with a Supreme Court of Appeal (SCA) decision in which the parties attempted to “revive” their agreement after the bond clause had already failed.

A deadline passes and a R5m house sale dies

In February 2020 (i.e. shortly before the economic shock of the pandemic), the buyers of a R5.15m house paid the agreed deposit on time but couldn’t raise the required bond of R4.95m before the deadline set out in the bond clause. A first addendum to the sale gave them another few days, and that addendum was valid because both parties signed it before the deadline expired.

But then the parties made a fatal mistake. Only after the extended deadline had whooshed merrily past did they sign a second addendum, agreeing to extend the date again and thus, they both believed, saving the sale.

The buyers now did more than just get a bond – they paid R1.95m in cash and provided bank guarantees for the rest. And they did all that before the second deadline expired, so all seemed well with the sale. Until Covid struck. That left the buyers with financial problems, so they tried to exit the sale and get their money back. “No deal,” said the seller, “the agreement is still valid and enforceable, you have to take transfer.”

Off to court went the buyers, eventually ending up in the SCA, which held the sale to be void and ordered the seller to refund them their R1.95m. The Court couldn’t have been clearer in ruling that when a suspensive condition (like a bond clause) isn’t fulfilled, the whole contract becomes unenforceable. This despite the fact that both buyer and seller clearly intended to proceed with the sale and thought they were validly reviving it with their second addendum.

Our law is clear – when a sale agreement has already lapsed, there is nothing you can do to revive it. Only a new agreement could have saved the sale, and the Court, on the facts, rejected the seller’s attempts to convince it that the second addendum was actually a new agreement. It was, said the Court, just an invalid attempt to revive a dead contract.

Here’s what to do to keep that sale alive and well

Every situation will be unique, but at the very least follow these three principles.

Failed suspensive conditions (in particular bond clauses) are notorious sources of dispute when property sellers and buyers come to blows. Make sure yours is clearly worded and reflects exactly what you have agreed to. A professionally drawn sale agreement tailored to your needs really is a no-brainer here.
Keep an eye on those deadlines! If you need to extend one, do so before it expires with a full, clear and signed addendum.
If you happen to miss the boat there, a whole new agreement is essential. It may well incorporate the same terms and conditions as the original (updated where applicable of course) but nothing less than a brand new deed of sale will pass muster.

As always, sign nothing until we’ve checked it for you!

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 us for specific and detailed advice.

Jun 25

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Private Prosecution: Neighbours at War

By Kruger & Co | Criminal Law / Crime, General Interest, Property

“I charge you by the law.” (William Shakespeare in The Merchant of Venice)

Victims of crime are entitled to see the perpetrators brought to justice. Feeling that the justice system has failed you can cause significant psychological harm and feelings of victimisation.

So, what happens if you believe that you are the victim of a crime, which you duly report to the police – only to be told that the NPA (National Prosecuting Authority) has declined to prosecute?

You could of course console yourself with the thought that “well, at least I tried” and walk away unfazed. But if you feel strongly enough about it, you are not without legal remedy – in appropriate cases you could be advised to go the private prosecution route.

A significant SCA (Supreme Court of Appeal) judgment last year provides an excellent example of just such a case.

Neighbours at war in an upmarket suburb

The scene here is Kloof Road in Cape Town’s Bantry Bay, renowned for its prime location on the Atlantic Seaboard, luxurious houses, and panoramic sea views.

The protagonists are next-door neighbours, whose acrimonious relationship and long history of disputes was founded in the one owner’s renovations, and the other’s strenuous objections to them. Who will eventually win that particular battle remains for another court to determine, but in the course of these disputes the one owner, a senior attorney, accessed his neighbour’s confidential credit records using a colleague’s login details.

This tactic backfired when the neighbour laid criminal charges against her adversary, saying that he had unlawfully and covertly accessed her personal and private information without the required authority or consent. She later added charges of fraud and defeating or obstructing the administration of justice, alleging that during the consequent investigation he had variously and falsely claimed firstly to have not accessed her data, then to have had her consent, then to have acted as her attorney, and lastly to have accessed her records inadvertently.

The media’s reporting of this high-profile spat created what the Court later described as a “public spectacle”, and the trial courts will have to wade through a web of hotly-contested and conflicting evidence in their search for the truth.

But for now, our interest lies in the fact that the NPA declined to prosecute on any of these charges. Undeterred, the neighbour initiated a private prosecution, a move hotly contested by her opponent all the way up to the SCA.

What must you prove to launch a private prosecution?

The SCA, in ultimately allowing the neighbour to proceed, set out our law on the matter.

The starting point is always the NPA issuing a certificate nolle prosequi (a fancy Latin term meaning simply that the State declines to prosecute), for it is that certificate which opens the door to you to have a go at it yourself. As a side note here, legislation specific to the SPCA, SARS and a few other specialised entities allows them to prosecute specified matters without a nolle prosequi certificate – but the rest of us need one.

Once you’ve got your nolle prosequi certificate you must prove that:

You have an interest in the issue of the trial.
Your interest is substantial and peculiar to you.
Your interest arises from some injury individually suffered by you.
Your injury was suffered as a consequence of the commission of the alleged offence.

In deciding whether or not to grant your application, the court will also consider whether private prosecution would offend public policy. If you are shown to be acting maliciously, vindictively, vexatiously, or without foundation, your application will fail.

Essentially, the Court performs a balancing act between your right to have your dispute “resolved by application of the law and decided in a fair public hearing before a court”, and the accused person’s “right not to be subjected to unfounded and vexatious private prosecution.”

In this case, the Court allowed the private prosecution to continue, commenting that the accused would now have the opportunity to vindicate his innocence at trial.

Think before you leap

Before you charge blithely down this route, bear in mind that private prosecution carries, in the Court’s words, “enormous financial risk”. So be very confident of your prospects of success and bear in mind that:

Even if you win it’s a costly exercise, because you are now paying your own legal team and a private prosecutor out of your own pocket rather than relying on state officials to do the job for you.
If you lose and the trial court finds your prosecution to be unfounded and vexatious (a real risk after the NPA declined to proceed), you risk punitive costs and compensatory orders. If the accused can prove you acted without reasonable cause and with malice, you could also be liable for damages in a separate civil claim for malicious prosecution.

Considering a private prosecution? We’ll help you weigh up the pros and cons.

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 us for specific and detailed advice.

May 27

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A R4.25m Warning to Choose Your Conveyancer With Care

By Kruger & Co | Property

“Trust me, I’m a lawyer.” (Popular T-shirt slogan)

South African property buyers and sellers will have been cheered by news that we are now officially the most affordable country in the world in which to buy a home. We’re only a nose ahead of the USA and Bahrain in this particular race, but it’s great to be a world leader in something so positive for a change. Have a look at BestBrokers’ analysis of house affordability in 62 countries here to see just how unaffordable property is in many other countries around the globe.

This all bodes well for the South African property market, so it’s perhaps a good time to remind sellers that it’s not just about getting a good price for your house. Equally important is ensuring that you choose the right conveyancer to attend to the transfer for you, with a recent High Court fight over a dishonest attorney’s theft sounding a stark warning in this regard.

An absconding conveyancer steals R4.25m

Having bought a house on auction for R4.1m, the buyer paid the auctioneer the required 5% deposit and the auctioneer’s commission. The auctioneer duly paid the deposit to the conveyancer nominated by the seller and the conveyancer, having not yet turned to the dark side, paid the deposit over to the seller. So far, so good.

The conveyancer then issued a pro forma invoice to the buyer for the balance of the purchase price and transfer costs, a total of R4.25m. The buyer duly paid that amount into the conveyancer’s bank account specified in the invoice.

Conveyancers are obliged to pay all such funds into a separate trust account for safekeeping, but in this case it emerged (after the buyer queried inordinate delays in the transfer process) that the bank account specified by the conveyancer in her invoice was not a trust account at all. Worse still, she had absconded with the funds.

A series of tussles followed, with the buyer demanding the house be transferred to him because he had paid in full, and the seller countering that they had cancelled the sale because the buyer didn’t “secure” payment of the balance of the purchase price by paying it into a trust account.

The seller learns a hard lesson

The High Court, called upon to sort out who must ultimately bear the loss, held that by paying the conveyancer per her invoice, the buyer had done everything required of him by the conditions of sale and was entitled to transfer. It was not the buyer’s obligation to ensure that he was paying into a trust account and to monitor its safekeeping there until transfer. Rather, it was the conveyancer’s obligation to secure the funds in her trust account until transfer.

The end result is that the seller must now transfer the property to the buyer and try to recover his losses elsewhere. He can sue the conveyancer (not a hopeful prospect) and as a last resort he can lodge a claim with the Legal Practitioners Fidelity Fund (LPFF). He’ll be wishing he’d avoided all that cost, delay and risk by choosing a more trustworthy conveyancer in the first place.

(As a side note, the conveyancer has been suspended from practice and her firm placed under curatorship – she blames her total trust account shortfall of at least R8m on a dishonest bookkeeper.)

Remember: as seller it’s you who gets to choose the conveyancer, so choose wisely! And as always, don’t sign anything until we’ve checked it all out for you.

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 us for specific and detailed advice.

May 27

0

How to Avoid Fighting Over the House – A Guide for Life Partners

By Kruger & Co | Family Law, Property, Wills and Estate Planning

“An ounce of prevention is worth a pound of bandages and adhesive tape.” (Groucho Marx)

It’s a perennial topic of dispute in our courts. A couple lives together, sharing the same roof and everything else in perfect happiness and harmony.

Until it all goes south. Then the gloves come off and, particularly if our erstwhile couple end up dragging each other through the courts, everyone takes a beating. Bloodied, battered and bandaged, they’re going to wish they’d implemented Groucho’s “ounce of prevention” in the first place.

We’ll explain how to keep things amicable. But before we do, let’s consider the case of the life partner who failed to persuade a court to give him a cut of his ex-partner’s house.

Trying to prove a “universal partnership”

Bearing in mind that our law recognises no such concept as “common law marriage” (a pervasive and dangerous myth that just won’t go away), many an ex-life partner has fallen back on trying to prove that the couple had formed a “universal partnership”. Depending on the type and form of the partnership they claim existed, that would give them a cut of the assets of their relationship. But it isn’t easy to prove.

The facts in a recent Limpopo High Court fight illustrate this point. A couple in a romantic relationship had lived in the woman’s house with her daughter. Each of them contributed equally towards household expenses. They decided to extend the house, and the man contributed R416k out of his pension payout for this purpose.

When their relationship broke down after five years, the man tried to convince the Court that a universal partnership had been formed between them, and he asked for a liquidator to be appointed to divide the partnership’s assets equally between the partners.

The Court’s thorough analysis of the law relating to universal partnerships (there are actually two types, both with fancy Latin names) will be of major interest to lawyers. But what really matters most to you on a practical level is that:

The onus is on you to prove that a partnership existed, and its terms.
You must prove that you agreed to pool your assets in order to make a profit.
A universal partnership needn’t be agreed to in writing – it can be formed verbally, by consent, or by the conduct of the parties. That requires inferences to be drawn so it’s a recipe for misunderstanding and dispute. Without a written agreement it’s never easy to prove and our case law is littered with failed attempts.
Perhaps the most pertinent factor of all is this comment by the Court (emphasis added): “The mere fact that parties cohabitate does not entitle them to a proportionate share of the other party’s estate.”

In the end, the applicant failed to prove that the relationship had been anything more than cohabitation, so he leaves with nothing (other than, of course, a large legal bill).

An ounce of prevention…

All that litigation and unhappiness could have been prevented had the parties, when they first decided to live together, entered into a cohabitation agreement.

Don’t make the same mistake, and be sure to draw up a document covering, at the very least, the following aspects of your relationship as they apply to you:

When your relationship began or when the agreement takes effect.
List who owns what both before and during cohabitation (furniture, vehicles, investments and so on).
Who is responsible for which debts.
Who owns (or rents) your house, who will pay the bond instalments if any, who will pay for what upkeep, who will pay for any major extensions or repairs, and so on.
Who will pay what in ongoing contributions to shared living expenses.
Will you use joint bank accounts and, if so, how will you manage them?
Will you run your own businesses, a joint business, or no business at all? What will you each contribute, what will you each take out, how will you manage the business/es?
Who will be responsible for the children’s financial support, schooling etc?
If your relationship ends:
- How will you terminate it?
- Who will get which assets?
- Who will be responsible for which debts?
- How will you terminate any business relationship you have?
- Will either of you be entitled to ongoing spousal maintenance?
- What happens to your children, to their financial support, and to your parental duties and rights of contact?
- Think of adding a dispute resolution clause to kick in if you can’t agree on anything.
Anything else? Your circumstances are going to be unique to the two of you, so brainstorm for anything else (who gets the pets, for example) that you’d like to record or agree on at this stage.

Herein lies the rub

Setting out an agreement doesn’t mean you’re planning for failure! In fact, you’re increasing your chances of success. Break-ups are a fact of life, and even if you do grow old and wrinkly together, your cohabitation agreement will still come into its own when one of you dies.

On that note, don’t forget to make or update your will (“Last Will and Testament”) at the same time. Both documents are essential, and the two must be compatible with each other, so make a big note to review/update both together.

Bottom line: you and your life partner should have a cohabitation agreement as well as wills. We’ll help you put all that together.

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 us for specific and detailed advice.

Apr 23

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When Does a Property Defect Justify Cancellation? A Costly Case of Buyer’s Remorse

By Kruger & Co | Property

“Look before you leap.” (Wise old proverb)

Imagine sealing the deal on your dream property, only to wake up at 3 a.m. beset by sudden doubts. Thoughts like “Can we really afford it?” or “How on earth could we have fallen in love with that old dump?” haunt you. You may have a strong urge to back out – but tread very carefully here. Trying to cancel the sale without sound legal grounds will be a big and costly mistake.

A recent High Court case provides the perfect example.

The R135m house and the “defects” that weren’t

Our buyer put in a R135m offer for a luxury three-storey house in Sandhurst. The cancellation clause in his offer document read (emphasis added): “The Purchaser at his own expense will conduct an inspection of the home within (14) fourteen days of acceptance of the offer. Should there be structural defects or defects that are unacceptable to the Purchaser then the Purchaser can at his discretion elect to cancel this agreement.”

The seller accepted the offer with that cancellation clause – deal done. But then, eight days later, the buyer tried to escape the sale with this email from his attorney: “Unfortunately after conducting due diligence, the purchaser hereby elects to cancel the agreement… Good luck with the sale.” The buyer’s remorse in this case turned out to be monetary – he had, he said, overpaid for the property. He then put in a new offer for R100m.

That was a loss the seller wasn’t going to accept, so daggers were drawn, and the fight was on.

The seller hotly denied that the buyer had any right to cancel the sale agreement, and off they went to the High Court. The buyer said that he had “unfettered discretion” to decide whether or not there were defects, and he refused to give the seller any details of them. Only in his court papers did he provide more information, claiming to have noticed cracks on the walls during an inspection. The rest of his “concerns” related to his personal preferences for the house – wanting new paving, widening the driveway, remodelling the kitchen, installing an elevator and the like.

Subjective belief in a defect isn’t enough

The Court had no hesitation in holding that the buyer had not been entitled to withdraw from the sale “based on any minor ‘imperfection’ in the property, because it does not fulfil his personal needs – at his sole discretion and without proof.”

He had failed, as required by law, to exercise his discretion reasonably and to prove the existence of a defect objectively (i.e., based on facts, not personal belief) rather than subjectively (i.e., based on the buyer’s personal opinions or interpretations). His subjective interpretation was irrelevant.

The bottom line: the seller had rightly rejected the buyer’s cancellation, and the buyer remains bound to the sale. To rub salt into his wounds he must now also pay costs on the attorney and client scale – that’s going to be expensive!

What then is a “defect”?

Per the Court, the ordinary meaning of a defect is (emphasis supplied): “an ‘abnormal quality or attribute’ of the property sold that ‘destroys or substantially impairs’ its ‘utility or effectiveness’ for the purpose for which it is generally used or unfit for the special purpose for which it was intended to be used by the purchaser.”

Personal preferences like elevators and revamped kitchens don’t count, and a wall crack justifying a R35m price reduction can’t be superficial!

Look before you leap!

Some final thoughts for property buyers:

Don’t rush (or be rushed) into buying anything. Take your time, and make sure this really is the property for you and that you can afford it.
Check the house thoroughly for any potential problems and consider commissioning an independent home inspection to look for any defects that might not be immediately obvious (damp for example). If you are worried about anything in particular, bring in the experts or insist on expert reports from the seller.
Last (but certainly not least) don’t sign anything without asking us to review all the paperwork for you first!

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 us for specific and detailed advice.

Apr 23

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Can a Body Corporate Cut the Power? It’s Complicated

By Kruger & Co | Property

“A body corporate’s lot is not an easy one.” (With apologies to Gilbert and Sullivan)

One of a body corporate’s core functions is to collect current and outstanding levies. When a section owner becomes uncooperative, recovery can turn into a difficult, costly and lengthy process. Good news for trustees is that it just became a little easier after a recent High Court ruling which authorised a body corporate to cut off an owner’s electricity for failure to pay his consumption charges.

“The pandemic made me do it”

An owner of an apartment in an 86-unit sectional title scheme in Sandton fell into arrears in 2021. Two years later he owed a total of R107,940 … R16,610 of which was for unpaid electricity charges.

The body corporate sued him, asking the High Court not only for a monetary judgment but also for authority to cut off his electricity supply pending payment. It pointed out that the scheme pays Eskom for its electricity and then invoices unit owners for consumption recorded on their individual meters. That put all owners at risk of being cut off by Eskom if the body corporate was unable to pay its monthly account.

The owner admitted owing the amount claimed, which he said had resulted from a loss of income as a result of the Covid-19 pandemic. He offered to pay off the arrears in instalments of R8,000 p.m. and opposed the application to cut his power on constitutional grounds.

The Court authorised the body corporate to disconnect the owner’s electricity supply until he pays the portion of the arrears relating to electricity.

How the body corporate won – follow this recipe

As the Court put it: “There is tension between competing interests in this matter: the right of the Body Corporate to be reimbursed for payments made on behalf of the unit owners and the right of the owner to be supplied electricity.”

In other words, it wasn’t a foregone conclusion that the body corporate would automatically succeed here. So don’t just assume that you now have carte blanche to force payment of arrears by cutting off electricity.

Rather follow the recipe for success that worked for this body corporate:

Don’t act arbitrarily: The owner relied partially on constitutional protection against “arbitrary deprivation of property”, but the body corporate was able to counter that it wasn’t acting arbitrarily at all. On the contrary, it was asking the Court for permission to disconnect. Arbitrary disconnection not authorised by a court order will in any event put you in the wrong and risk the owner obtaining a “spoliation” order. That would force you to switch the power back on immediately without any investigation into the rights and wrongs of the matter.
Give proper notice of disconnection: The body corporate had ensured procedural fairness by giving the owner proper notice which spelt out the consequences of non-payment of his levies (including application for a court order to disconnect electricity).
Make sure all your resolutions are in order: The Court analysed the various resolutions passed by the body corporate in respect of imposition of levies and collection of arrears before confirming that they were enforceable against the owner.
Proving “prior agreement”: The owner argued that he had never agreed to disconnection on non-payment, but the Court held that there was indeed a tacit (inferred) agreement by him to repay the body corporate for its payments to Eskom, and that he was bound to the scheme’s rules and regulations regarding enforcement. You need to have all your paperwork in order to achieve the same result.
Balancing competing interests: You will need to persuade the court that your scheme’s interests trump those of the owner. In this case, the scheme’s financial stability was put at risk, exposing all owners to the risk of disconnection – while the defaulting owner continued to benefit from electricity at the expense of the other owners.

An important caveat

Although the body corporate had applied for an order to disconnect electricity until the full judgment amount of almost R108k had been paid in full (i.e. including the levy portion of R91k), the Court limited its disconnection authorisation to recovery of only the arrears for electricity consumption (plus interest). It gave no reasons in its judgment for not linking reconnection to payment of the full R108k – but its comment that the electricity non-payment was the most prejudicial to the scheme suggests that it will always be safest to assume that your rights to disconnect electricity may be similarly limited.

Whether you’re a body corporate or a sectional title owner, navigating situations like this requires carefully ticking all the legal boxes. You know who to call!

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 us for specific and detailed advice.