Archives: General Interests & News Flashes

“Right timing is in all things the most important factor” (Hesiod, ancient Greek poet, philosopher and economist)

There are many “Secrets to Success” (in both our business and personal lives) but perhaps one of the most important and basic starting points is to understand how to time all the various things we do for maximum effectiveness –

• What is the best time of day to be creative?
• When should we focus on decision-making, analysing, negotiating deals?
• When are we at our most productive?
• Do different rules apply to “Night Owls”?
• What can we do to optimise performance when we have no choice but to do something at a non-optimal time?
• What time of day should we schedule doctor’s appointments and surgery for?
• When should we be most careful on the roads?
• What’s the best age to marry?
• Should you time the Bad News or the Good News to come first?

Read what science has to say about all this in “This Is the Best Time to Do Anything: 4 Powerful Secrets from Research” on the Barking Up the Wrong Tree blog here.

As Conveyancers, part of our role is often to mediate between Sellers and Buyers on contractual and practical issues which arise during the transfer process. One of the questions which we are being asked quite regularly is to deal with a complaint from a disappointed Buyer who bought a house with a pretty, well established garden and a sparkling, blue, full swimming pool, only to be confronted on transfer with the ugly reality of the drought gripping Cape Town. The garden is dead or dying and the swimming pool is a half-filled brown swamp!

Generally, in our property law, the Buyer is entitled to receive in the same condition, that which he purchased on date of sale. Delivery cannot be instant with immoveable property due to the transfer process and there is often a period of several months between date of sale and date of transfer, when delivery of ownership passes to the Buyer. Accordingly, the Seller remains responsible for the maintenance of the property unless the risk of ownership has passed, eg on occupation.

Unforeseen events are called “Acts of God” in everyday and insurance language. Our law has developed a system of rules dealing with what we call vis maior or supervening circumstances which make performance of a contract impossible. It is very difficult for parties contracting with each other to foresee any and every happening, whether due to natural causes or human or legislative agency, and contract accordingly. This system of rules prevent a Buyer from demanding delivery, when delivery is simply not possible, when the parties have not forseen the problem in their contract.

So, let’s get back to the examples above of the dead garden or dirty swimming pool. If a Seller client is confronted by an angry Buyer who will not take transfer of a property or who wishes the damage to a garden or swimming pool to be made good, my advice to them would be that there has been a partial form of supervening impossibility of performance. In our case, the City of Cape Town has prohibited the watering of gardens as well as the filling of swimming pools. Legislation is one example of supervening impossibility of performance in our law. The same argument must apply to a tenant who is required in terms of his lease, to maintain the garden and pool, and is similarly prohibited from doing so. Logic also provides that the Buyer would have been in the same position had he bought earlier in the year, and would be subject to the same water restrictions now.

I have heard a counter-argument that because people are purchasing bulk water, such a seller should have taken the effort to buy water and maintain the garden or fill the pool and restore it to its original pristine state before transfer. Technically, the National Water Act, 1998, provides that water is a natural resource that belongs to everyone, and water cannot be sold without compliance with the Act. Anyone selling water without a licence is breaking the law. I don’t think this would be lawful or ethical in the circumstances.

My practical solution to Estate Agents and clients entering into Deeds of Sale would be to make a reference to the ongoing drought in the Western Cape and disclose (especially to non-Capetonians) that it will not be possible to maintain a garden or a swimming pool due to the legislative constraints. Here is an example of such a clause:

“The purchaser acknowledges and accepts that (notwithstanding the seller’s duty to maintain the property in the same condition as when the offer was accepted, pending the passing of risk), due to water restrictions imposed by the municipal authority, the swimming pool; garden and all water dependent features (if any) will on date of registration of transfer, not necessarily be in the same condition as when purchased and hereby waives any claims against the seller in this regard for as long as these restrictions apply”.

Estate agent should also warn prospective foreign and out-of-town buyers and record in the deed of sale or disclosure document, that the City of Cape Town may also have to shut down our water supply entirely in April or May 2018.

Lets keep on saving water as we approach Day Zero!

AJ MURRAY
MILTONS MATSEMELA INC
January 2018

Can a landlord enforce a lease agreement against the tenant if the leased premises do not have approved plans or a certificate of occupancy?

This is the question that was answered in the recent case of WIERDA ROAD WEST PROPERTIES (PTY) LTD v SIZWENTSALUBAGOBODO INC, a judgement which was handed down by the Appeal Court on 1 December 2017.

In this case Wierda Road West, the landlord, was attempting to enforce payment of arrear rentals of more than R8 million from the tenant, SizweNtsalubaGobodo, after the tenant had vacated the property during the period of the lease, and stopped paying rent.

In defence of the claim, the tenant raised the fact that certain portions of the leased premises did not have approved building plans and that, accordingly, no certificate of occupancy had been issued by the municipality. On this basis, they argued that the lease agreement was void, or if not void, unenforceable.

The tenant was successful with this defence in the High Court. Here the court found that that the lease was unenforceable, and that the landlord could therefore not sue the tenant to recover arrear rentals. The landlord appealed against this decision.

In the Appeal Court, the landlord was successful and the lease agreement was upheld.

The Appeal Court found that even though the erection of a building without approved plans, and the occupation of a building without a certificate of occupancy, gave rise to criminal sanctions, it was not the intention of the legislature to render a lease agreement for such premises, by the parties involved here, void or unenforceable. The Appeal Court was of the opinion that the penal sanctions in the relevant legislation, and the powers of enforcement given to the municipality, were sufficient to deal with the non-compliance issues.

That the landlord was not the person who had carried out the un-authorised building work, was a factor which the Appeal Court considered in making its decision. If the landlord had been the builder, the situation might have been different.

The findings of the Appeal Court were also bolstered by the facts that the tenant had used the property without incident for a number of years before moving out, and that the premises appeared to be safe and fit for their purpose.

In short, therefore, the answer to the question posed in the title of this Newsflash is ‘yes’. We now have authority for the proposition that an agreement of lease for a property built without approved plans, and where no occupancy certificate has been issued, is valid and binding.

Deon Welz
January 2018

“The difference between tax avoidance and tax evasion is the thickness of a prison wall” (Denis Healey)

Honest taxpayers, particularly those struggling to get legitimate refunds out of SARS whilst its fraud prevention systems grind along slowly, will hope that potential tax cheats take fright at the stiff sentences handed down recently to three company directors.

They were convicted of submitting 198 fraudulent VAT returns over a 3 year period, involving a total of R216m, and each director received an effective sentence of 25 years’ imprisonment.

In a strong warning to would-be tax fraudsters, the High Court has sentenced three company directors to effective sentences of 25 years’ imprisonment each.

The three were convicted of fraud, forgery, uttering and money laundering involving R216m in VAT refunds paid out by SARS as a result of 198 fraudulent VAT returns submitted over a 3 year period.

Honest taxpayers, particularly those struggling to get legitimate refunds out of SARS whilst its fraud prevention systems grind along slowly, will hope that other potential tax cheats take fright at the very real prospect of a decade or two behind bars.

“Buy land, they’re not making it anymore” (Mark Twain)

There are many benefits to the “buy and build” option when you decide to buy a house, but they come with some important cautions.

One of them is that buyers who fail to build on their plots by deadline risk penalty levies and/or buy-back (retransfer) clauses. We discuss a recent SCA case illustrating both the risk to buyers of a buy-back clause, and the need for developers to beware of losing their claims through prescription.

Buying a house is an important and exciting experience. One of the first decisions you must make is whether to buy an existing house (the “turnkey” option) or to buy from a developer on a “plot-and-plan” (“off-plan”) basis.

Which option is best for you only you can decide, but with the popularity of security estate living soaring and with the flexibility of creating your own dream home, off-plan is an increasingly attractive choice both for investment and for lifestyle.

Just remember that the many benefits of “buy and build” come with some important cautions. Apart from practical considerations, there are many legal pitfalls to watch for, so have your lawyer check the agreements (normally two – one to buy the plot and the other to build the house) before you sign anything.

The building deadline – benefit and risk

One area to be particularly aware of is the common requirement that you build on your new plot within a certain period of time. In fact as a buyer you should check for such a requirement – otherwise you could be subjected to years of construction activity in the estate with all the attendant noise, dust, inconvenience and security concerns.

Your risk is that, to enforce such time limits, developers commonly provide for defaulting buyers to be subject to penalty levies and/or buy-back/retransfer clauses entitling them to take back the plot.

A recent Supreme Court of Appeal (SCA) judgment provided strong warnings in this regard for both developers and buyers.

Developers – the perils of prescription

• Two buyers of plots in a large estate failed to build on them within the required 18 month period (this requirement was registered on their respective title deeds).
• Their sale agreements entitled the developer to take back the plots against repayment of the purchase price (without interest) and the developer asked the High Court to order re-transfer to it accordingly.
• The SCA on appeal held that the developer’s claims had prescribed (become unenforceable) because it had waited more than three years before taking legal action.
• The three year period applied, said the Court, because the developer’s right was a “personal right” not a “real right”. The difference between the two is of great interest to lawyers, but all that really counts for developers and buyers is that the developer should have enforced its retransfer right within three years of the deadline date by which the purchasers were required to have built a house.

Bottom line for developers: Don’t delay in enforcing buy-back clauses!

Buyers – developers can enforce buy-back clauses

An earlier High Court decision, involving the same developer and the same clause but another buyer, had held that the buy-back clause was “grossly unfair”, and that such clauses generally “do not pass constitutional muster”. Which led to speculation that buy-back clauses might be dead in the water.

Not so. The SCA commented that the High Court should not have considered the question of constitutionality at all in the particular circumstances of that case, so (for the time being at least) buy-back clauses remain enforceable.

Bottom line for buyers: You could lose your plot if you don’t build by deadline.

These facts are from a KZN High Court judgment that went on appeal.

Mr Singh lived on Mount Edgecombe Estate. By virtue of his ownership, he is obliged to be a member of the Estate which is governed by a non-profit Association, whose obligations and functions are in turn governed by a Memorandum of Incorporation. (Very much like a Home Owner’s Association which is governed by a Constitution). In 2013 his daughter was issued with three speeding fines. These fines were issued in accordance with conduct rules.

This resulted in a number of unpleasant consequences for Mr Singh and his family, when he failed to pay the fines! He then challenged the speed fine system on the basis that the Association was purporting to carry out the functions of traffic officers as defined in the National Road Traffic Act, 93 of 1996 (NRTA) on the roads within the estate, given that they are public roads. (It is established law that despite being within a fence and appearing to be ‘private’, such roads are in fact public roads, due to the definition thereof in the NRTA. As such they fall within the jurisdiction of the NRTA.

After analyzing certain portions of the NRTA; the Constitution of South Africa Act, and the Criminal Procedure Act 51 of 1977 (the CPA), the court held that only the Minister may decide on speeding limits; only the MEC may prescribe how speeding fine signage is to be made visible, and that only “peace officers”, as defined in the CPA, (which includes traffic officers as defined in the NRTA) are permitted to issue written notifications (fines) to a person caught speeding, because, this notice sets out the amount of the fine which a court is likely to impose upon him or her – and not a private body. (After all, by law, a speeding violation could even carry a prison sentence! Would it not be funny to see HOA’s trying to impose such a conduct rule! Why limit it to a fine?)

It is established law that the relationship between a home owner in such an estate, and the governing body, is regulated by law of contract – the contract in this case, being the MOI and conduct rules. On this basis, the Association argued that its power to control and direct traffic on the public roads is governed by its own rules and is not linked to any statutory provision. The problem which this argument faced is that the legislation which the court analysed, clearly states that private bodies who do wish to play “cops and robbers” are obliged to first seek and obtain permission from the authorities to enforce speeding limits and rules of the road, in the absence of having “peace officers” on their payroll.

In granting such permission the authorities concerned would be entitled to also impose such conditions as they may consider necessary in the circumstances.

It was common cause that the Association had in fact not applied for nor ever received such permission at any stage – and for this reason the court held that the conduct rules relating to the limitation of speed and the imposition of a fine, are illegal, until and unless consent was obtained by the Association, from the authorities. In this case the court however suspended the illegality for 12 months until the Association could obtain the required consents, and in order to not allow all the owners in the Estate to be tempted to suddenly become racing drivers!

“He was a dreamer, a thinker, a speculative philosopher… or, as his wife would have it, an idiot” (Douglas Adams)

Note: Although by way of example we explore below the “international wedding” scenario, even if you are South Africans marrying in South Africa you need an ANC. Read on…

The Rand’s weakness notwithstanding, many couples still plan their dream weddings overseas. Likewise, many couples living overseas come back to South Africa to marry. If you are one of them, ask your lawyer before you get married for advice on which country’s laws will apply to your marriage.

Why get advice?

In South Africa, our default marital regime is marriage “in community of property”, and for many couples that is the worst option. You may well be better off opting rather for the “out of community” option (with or without “accrual”). The point is to make an informed choice rather than drift blindly into the default regime.

Don’t assume that you will be married out of community of property if your marriage takes place in a country where “out of community” is the default. And don’t assume that it’s your nationality/citizenship that counts.

Not so! No matter where you tie the knot and no matter what your citizenship is, what counts is where the husband is domiciled at the time of the marriage.

The difficulty – determining domicile

So you must figure out where the husband is domiciled at the time of marriage – how do you do that?

“A domicile of choice”, says our law “shall be acquired by a person when he is lawfully present at a particular place and has the intention to settle there for an indefinite period.” In lay terms, that’s where he considers his “home” to be, where he lives and intends to remain permanently. Note that in law you must be domiciled somewhere (even if you think you aren’t), and you can only be domiciled in one country at a time. In other words, you can be stateless but not without a domicile, and you can hold dual citizenship but not dual domicile.

There are two main grey areas here –

1. The “intention” bit. What if you have recently moved to South Africa? Or if you are a foreign national living in South Africa? A South African working overseas for a year or two? Or if you have plans to emigrate in the future?
   • There’s a lot of potential for uncertainty and dispute there, and the problem is that in doubt it’s a court that will have to decide. It’s difficult enough at the best of times to decide what another person’s mental “intention” is, and remember that here we’re talking about intention at the time of the marriage. Years (in some cases decades) down the line, imagine the difficulty faced by the poor judge tasked with that one! There have been cases like that and they’ve been messy.
2. The “husband” bit. Referring to only “the husband” is discriminatory and almost certainly unconstitutional, and in any event with same-sex unions which partner’s domicile are we looking at? Until parliament sorts that one out with new legislation, uncertainty will reign.

The remedy – avoid all doubt with an ANC

Fortunately, there’s an easy way to avoid all that doubt and potential for dispute, delay and cost.

Simply have your lawyer – before you marry – draw up an ante-nuptial contract (ANC) tailored to meet your particular needs. Then sign it. Then fly away and enjoy your wedding secure in the knowledge that all the annoying (but critical) little legalities have been put to bed!