Archives: General Interests & News Flashes

There is not much to report on for the property sector following today’s budget speech by Minister Mboweni. Transfer duties will remain unchanged.

It was nice to hear that R9.3 billion had been allocated to finance 1409 land restitution claims, as this means that land will be redistributed, and owners will be compensated. It was however disappointing that R7 billion had to be allocated to bail out the Landbank.

Other general points of interest were:

• the shift of the personal tax brackets upwards by 5%. This will mean that all of us who are taxpayers will pay slightly less tax;
• the reduction of company tax by 1% to 27% (but this will be partially offset by a limitation in interest deductions and assessed losses);
• an increase in the fuel levy by 27c per litre; and
• (as usual) an 8% increase in excise duties on alcohol and tobacco.

Warmest regards
Miltons Matsemela

We have received reports from literally hundreds of clients who have recently sold their properties in Cape Town advising that, months after the transfer was registered, they are still receiving a municipal account. More alarmingly, the account now reflected a substantial amount owing by themselves to the municipality.

We have now received a communication from the City clarifying the position. According to their media release they have identified the source of the problem and they believe the situation will be rectified by the end of February.

We assume this means that by March the municipal accounts will be opened in the name of the new owners who will then receive their first (large) bill for the period from date of transfer until now. The previous owner will then also be refunded the amount paid to obtain the rates clearance certificate for the period beyond the date of the transfer.

While this process plays out, the municipality will not be wasting their time trying to collect the outstanding amounts from the previous owners. In addition, the municipality say they have sent SMS notifications to all the buyers and sellers who are affected advising that there would be no disconnection of services while this matter was being resolved.

Our advice to our clients therefore remains the same. Sellers must not pay anything to the municipality to settle these accounts, and neither should the buyers, as any payments on the seller’s account will be refunded to the seller when the change over takes place.  Furthermore, parties must just be patient with the process, the municipality will resolve the issue as soon as possible, as they can’t afford to carry on without this source of income.

Warmest regards
Miltons Matsemela

No one wants to contemplate their own passing, but the reality is that sooner or later it is inevitable, and particularly in these dangerous times we need always to be prepared.

The loss of a loved one is always distressing. It can however be compounded by the challenge of dealing with their assets.

Few people appreciate all the costs involved in settling an estate. Understanding these expenses and planning for how to deal with them can make a big difference to those left behind.

Executor’s fees and costs

Every estate must be wound up by an executor. Ensure that in your will you nominate an executor you can trust to act with integrity, professionalism and speed.

An executor can charge a maximum fee of 3.5% plus VAT. That equals 4.025% of the value of the estate. Depending on the size and complexity of your estate this fee may be negotiable.

The executor will also incur costs such as advertising to find any outstanding creditors, bank charges, accounting fees, conveyancing on the transfer of property and paying the fees due to the Master of the High Court. Together, these could run into tens of thousands of rands.

Taxes and estate duties

The South African Revenue Service (SARS) levies 20% estate duty on the value of any estate, but there is no estate duty payable on an estate with a net value below the R3.5 million abatement (allowable deduction). Any amount above R30 million will be taxed at 25%. An estate worth R40 million will therefore have to pay estate duties of R7.8 million (R5.3 million on the first R30 million, after the R3.5 million abatement, and R2.5 million on the next R10 million).

These taxes will not, however, be paid on any assets left to a surviving spouse. In that case they effectively ‘roll-over’ and will only be charged upon the spouse’s death.

The estate will also have to pay capital gains tax on any assets that are sold. SARS will also conduct a final income tax assessment.

In addition, South Africans need to consider that if they have assets in other parts of the world, they may be liable to pay estate taxes in those countries as well. There are double taxation agreements in place with many countries that prevent most assets from being taxed twice, but where taxes elsewhere are higher than in South Africa, the estate will still have to pay the difference. Inheritance tax in the UK, for instance, is 40%.

Outstanding debt

The estate will have to settle any debt such as credit cards, loans, or bonds on property. Interest on these debts does not stop accruing when someone passes away, so it is best to deal with them as early as possible.

It is most critical to consider how to handle home loans, especially if they are held over a property in which surviving family members are still living. Sometimes these individuals may not qualify to take over the bond due to their own financial position, which means that the house may have to be sold if the debt can’t be settled.

Being prepared – check what cash the estate will have

Even though an estate may have sufficient assets to meet all of these expenses, it can still be a problem if it doesn’t have enough available cash. That is because the executor may have to sell assets to free up money.

This not only leads to potential extra costs and taxes but can be traumatic if something like a house where a loved one is living or a car that someone needs for transport has to be disposed of. This is why it is important to prepare an estate to make sure that there is enough cash available.

One way of doing this is to take out a life insurance policy that will pay cash into the estate. This will ensure that your family members aren’t left with a potentially major financial burden and face additional stress after your death.

The above is of necessity just a summary of the cost considerations involved, so speak to your attorney about how your will and estate are structured and how you can plan to meet all the costs.

This article was published recently by LawDotNews. We credit the original author.

If you are taking advantage of our current low interest rates and reduced selling prices to buy a property, make sure that you establish the seller’s marital status with something more than what the seller tells you.

Your risk comes in if the seller is married in community of property. That’s because, whilst our law generally allows spouses in such a marriage to “perform any juristic act with regard to the joint estate without the consent of the other spouse”, there are exceptions.

And one exception relates to immovable property. A spouse needs the written consent of the other to sell, mortgage or burden the property (by granting a servitude over it for example). Without that written consent the transaction is void, unlawful and unenforceable.

Which is where the danger comes in. Consider this scenario – you pay for and take transfer of a property from a seller who you think is unmarried, but a spouse suddenly appears and says “I never consented to that sale so it’s void. The transfer to you is cancelled so out you go and good luck getting your money back”. What now?

Competing rights and a balancing act

There is of course a fine balancing act for courts involved here – on the one hand, the rights of the non-consenting spouse and on the other hand your rights as a good-faith buyer from a seller who you believed to be unmarried.

A recent Supreme Court of Appeal (SCA) judgment addressed exactly that situation.

“But I thought I was buying from an unmarried seller”

• A husband married in community of property sold and transferred a house to a buyer in 2009. At the time, his wife was not living in the house, having moved to another part of the country due to old age.
• When the seller passed away in 2013 his wife was appointed executrix of his deceased estate. Some four years later she successfully applied to the High Court for cancellation of the deed of transfer on the basis that the sale had been without her knowledge or consent.
• The buyer appealed to the SCA on the basis that the wife’s consent to the sale should be “deemed” to have been given in that the relevant legislation provides for such deemed consent where a buyer “does not know and cannot reasonably know that the transaction is being entered into contrary to [the requirement for written consent]”.
• He had, said the buyer, acted bona fide (in good faith) as he had not known of the marriage: “At the time I purchased the property from the deceased/seller, he was staying alone in the said property and he also confirmed to me that he was not married. He signed the deed of sale and also the transfer documents alone as unmarried.”

What the buyer must prove

The buyer had to prove that he did not know, and could not reasonably have known, that consent was needed but lacking.

What the Court here needed to decide was whether the buyer should at the time of the sale have known of the marriage and the lack of written consent. “A duty is cast on a party seeking to rely on the deemed consent provision” held the Court “… to make the enquiries that a reasonable person would make in the circumstances as to whether the other contracting party is married, if so, in terms of which marriage regime, whether the consent of the non-contracting spouse is required and, if so, whether it has been given.”

Finding that the buyer had indeed proved (1) that he did not know that the deceased was married and (2) that he could not reasonably have known this, the SCA allowed the appeal and the transfer to the buyer stands on the basis of deemed consent by the spouse.

The facts of each case will be different, and it is important to bear in mind that in this particular matter the husband’s claim to be unmarried was supported not only by the absence of any sign of a wife but also by two official documents – the deed of transfer and the power of attorney to pass transfer.

The bottom line is that as buyer you must make “reasonable enquiries” as to the seller’s marital status and as to whether the other spouse’s written consent to the sale is needed.

This article was published recently by LawDotNews. We credit the original author.

A recent High Court decision has been widely viewed as an important victory for the rights of unmarried opposite-sex life partners. Until now, if one such partner died intestate (without making a will), the other could not inherit on the same basis as could a married spouse. Nor could the surviving life partner claim maintenance from the deceased estate (whilst a surviving spouse can claim).

The High Court’s pronouncement that the relevant legislation was unconstitutional and invalid in this regard must still be confirmed by the Constitutional Court, but it certainly is a clear indication that our courts want to see our laws amended to protect the rights of such couples.

The life partner who will now inherit

• An unmarried 57-year-old man died leaving substantial assets. Both the executor of his deceased estate and the Master of the High Court rejected, primarily on the basis of existing law, his surviving (female) partner’s claim to inherit from the estate.
• She approached the High Court with her claim, and the Court found on the facts that the couple had been “partners in a permanent opposite-sex life partnership, with the same or similar characteristics as a marriage, in which they had undertaken reciprocal duties of support”.
• The provisions of the Intestate Succession Act and the Maintenance of Surviving Spouses Act were, held the Court, unconstitutional to the extent that they excluded opposite-sex permanent life partners from their provisions.
• The practical effect is that the surviving partner will inherit as though she was a spouse.

But, if you are in an opposite-sex life partnership –

1. You should still make a will

There’s no guarantee that the Constitutional Court will confirm the declaration of invalidity, but more importantly there are very sound reasons for everyone – married or not – to leave behind a valid and properly-drafted will.

It is quite possibly the most important document you will ever sign. Without a will, you lose your right to choose who inherits what (your spouse for example will get only a “child’s share” on intestacy), you have no say in who will be appointed as the executor of your deceased estate, and you risk exposing your surviving loved ones to the trauma and expense of family dispute and litigation.

In the context of life partners, perhaps you want your surviving partner to inherit everything, or perhaps you don’t. The only way to ensure your desired outcome is to specifically provide for it in your will.

2. You should still have a cohabitation agreement

An enduring myth in our society is that our law recognises the concept of a “common law marriage”. There is no such thing in South African law and whilst there are some limited statutory protections for life partners, if and when you part ways you could well find yourselves embroiled in a prolonged and bitter dispute. Quite possibly one of you will be left destitute after many years of “living as man and wife”.

The quick and easy solution is to enter into a cohabitation agreement, it’s the best way to safeguard both of your rights (personal as well as financial).

This article was published recently by LawDotNews. We credit the original author.

The Governor of the Reserve Bank Lesetja Kganyago has this afternoon announced that the repo rate will remain unchanged. This leaves the prime overdraft lending rate at 7%.

This announcement was expected and will allow our currency to remain stable at around R15 to the USD.

In addition, and more importantly, the bond rates, which are now the lowest rate in 50 years will remain at these levels.

This is good news for the property market!

Kindest regards
Miltons Matsemela Inc.

By now, we have all probably heard of cryptocurrencies, the most popular one, being BITCOIN. These currencies are highly volatile, not for the faint-hearted, and some are completely unregulated. People are known to have forgotten their passwords in order to gain access to their coins, and then there is no way to access them. Just last week BITCOIN shot up by 40% in value, only to come crashing down again over the weekend by 21%!

Many people have posted on Facebook that they know of people who have bought property with BITCOIN and this has given rise to an increasing number of inquiries, namely – How exactly is it possible?

Well, let’s just start by saying that we have yet to find any truth to these statements. Maybe it is being done overseas, but we have yet to learn of a transfer of immovable property in SA, where the buyer actually paid the seller, in BITCOIN or any other cryptocurrency – hereafter referred to as “CC”.

From the outset, the truth is that it is legally possible to do this. I can pay you with match sticks if we agree to this or coconuts, or even chewing gum! Doesn’t HAVE to be in Rands, physically! As long as we can attach a Rand VALUE to the property for transfer duty or VAT purposes and Capital Gains Tax, the receiver of our revenue doesn’t give a continental hoot, how you actually pay.

The question we should rather ask is whether we should even begin to entertain this notion, of paying in actual CC.

Paying someone in CC happens by transferring these cyber “coins” from one person’s “wallet” (an application on one’s cell phone or laptop) to another person’s “wallet”. And herein lies the problem. Traditionally, payment of the purchase price of immovable property (in SA), is secured, pending transfer, in one of 3 ways, and on date of transfer, the seller receives his funds: Option one: The buyer pays the funds in ZAR (SA Rands) into the transferring attorney’s trust account to be held in trust (i.e. as security) pending the transfer. Option two: The buyer instructs his bank to ring-fence the funds which are held in an account in a SA financial institution, and then to issue a bank guarantee in favour of the transferring attorney and maybe the current bondholder. Option three: The buyer has sold a property and his transferring attorney issues undertakings to pay funds to the other transferring attorney, once the buyer’s property has transferred. These are the most common ways to secure payment of the purchase price, pending transfer.

And herein lies the fundamental, and most important principle, of property transfers in SA: You want to do everything you can to ensure that when the property transfers, the seller actually gets paid! How does one do this with CC?

Well, the truth is, it is not possible. CC is not held in a bank or by a financial institution like Rands. So firstly, you cannot issue a guarantee against such funds. Secondly, you cannot transfer CC “coins” into an attorney’s trust account. And thirdly, if the buyer is a foreigner and one day wants to sell, if he/she cannot prove that the funds used to buy the property, came into SA via our forex division, then he/she will have some mountains to climb, to repatriate the funds out of SA again into a foreign bank account.

If however your seller really trusts the buyer enough, to believe, that on the day of transfer, the buyer will transfer the coins, (and believes that the buyer will still have coins of sufficient value, after the usual 2 months a transfer takes), then we suppose, it can (theoretically) be done that way. But the problem is, the payment cannot be secured.

With CC, as things stand currently, the answer is thus simple. It is possible but foolish, and ill-advised. The buyer should just sell his coins and put the funds (i.e. SA rands) into the attorney’s trust account, or any SA financial institution which can issue guarantees, and let us conveyancers do our work, the old fashioned way! At least until CCs are regulated like any other currency.

Kind Regards,
Miltons Matsemela Inc.

1. Local, specialised knowledge: Lawyers have their fingers on the pulse of what is happening locally – what is happening in the property market, who is selling and who is buying, and so on. All invaluable information for both sellers and buyers.
2. Choosing a conveyancer: A seller has the right to choose the conveyancing attorney who will attend to the transfer in the Deeds Office. Pick a lawyer you trust to act quickly and efficiently, protecting your interests at every step.
3. The Offer to Purchase/Deed of Sale: Both buyer and seller should sign nothing until they fully understand and accept all the terms and conditions in the document. The law will (with very few exceptions) hold you to your agreements – and if you sign in haste you are likely to regret at leisure!
4. Agent’s commission: Don’t risk any misunderstanding or dispute if you decide to market your property through an agent or agents – in a worst-case scenario when dealing with multiple agents, you could risk double commission. Have your lawyer check the agent’s mandate before you sign it, and as a buyer look for any undertakings you may be giving in the sale agreement regarding commission disputes.
5. Other costs: Both parties need to fully consider their total costs, and not all of them are immediately apparent. As a seller for example you need to consider things like bond cancellation costs, compliance certificate costs, tax risks (capital gains tax for example) etc. Buyers of course need to plan for transfer duty, transfer costs, bond registration costs, etc. Ask a conveyancer to give you an estimate before you make an offer.
6. Bond clauses: Our courts are regularly called upon to resolve “bond clause” disputes. A properly worded clause, correctly recording what you have both agreed to, is essential. As a seller ask about the “72-hour clause” concept if you are selling subject to the buyer getting a bond and you think you may get another and better offer in the interim.
7. Other suspensive and resolutive clauses: A “suspensive” clause is one that says the agreement “hangs in the air” until the happening of something – for example the granting of a bond to the buyer. A “resolutive” clause on the other hand provides that the agreement is binding on signature but falls away on something happening. Both can cause all sorts of confusion and their interpretation is best left to the experts.
8. Views, alterations, home businesses, title deed restrictions etc: As a buyer, if you have fallen in love with a house because of its spectacular sea views for example, or because it is perfect for adding on that second story or granny flat, or because you plan to move your pandemic-hit business into the garage, have a conveyancer check the title deeds and local town planning regulations for what is allowed and what is not. There is no such thing as a “right to a view”! Many neighbour disputes have their roots in building extensions that block views or exceed local zoning restrictions, or in objections to business activities on residential property. Do your homework and assume nothing!
9. Investment Properties: Property can be an excellent investment, but good upfront advice is essential, particularly if you plan to undertake any development or alterations. Understand the costs, the tax implications, and the risks of property “flipping” if you plan to resell, or of managing tenants if you plan to be a landlord.
10. Who will the buyer be? Trusts, joint ownership, life partners and other considerations: Should you buy in your personal name or hold your house in a trust or company? Should you buy jointly with your spouse or life partner? These are critical decisions, involving questions of estate and tax planning, marital regime if married, cohabitation agreements if not married (or even if!), financial status, risk profile in the commercial sense, and a host of other factors. Not getting this 100% right upfront is a recipe for disaster.
11. Defects and the old “voetstoots” chestnut: Avoid any risk of dispute over defects, be they “patent” (easily identified on inspection) or “latent” (hidden or non-obvious) with a properly structured voetstoets (“as is” or “without any warranty”) clause. Buyers – bear in mind that if you offer to buy a property voetstoots, you assume the risk to conduct a thorough inspection. Take your time. You are not buying a pair of shoes! Sellers – manage your potential liability for undisclosed defects by being honest about hidden defects you know of.
12. Community Schemes: Buying into a community scheme comes with many advantages – provided that you understand fully what you are letting yourself in for. But it also comes with pitfalls. Living in a community means you must live by their conduct rules. No pets; no parties after certain hours; restrictions on the colour of your outside walls; how many people may live in a certain size flat, and so forth. In a sectional title development understand exactly what you are buying and how the concepts of “exclusive use” and “common property” areas affect you.

Every situation will be different so tell your attorney everything that could possibly be relevant.

This article was published recently by LawDotNews. We credit the original author.

You own a flat or a house in Cape Town, and want to rent it out as an AirBnB. May you, or do you need Council’s permission, depending on the zoning?

With special thanks ELCO PROP Town Planners for their input, here is the answer:

Changes to the Cape Town Municipal By Law Act at the start of the year introduced a new definition, namely that of “transient guests”.

Many people think that an AirBnB is similar to a guest house, hotel, or bed and breakfast, and then look for answers in the various zoning categories available in the aforesaid By Law, when in fact, it is neither of these. If truth be told, it is alot simpler than you might think.

Allow me to introduce the concept of a “transient guest”. This is defined as “a person who is provided temporary accommodation on a land unit that is not their permanent place of residence, for a continuous period not exceeding 30 consecutive days at a time”.

This is your typical AirBnB guest. So where may this sort of guest reside, without you getting in trouble with the authorities?

The answer lies within the definition of a dwelling unit, which is now defined as “a self-contained, interleading group of rooms, with not more than one kitchen, used for the living accommodation and housing of one family or a maximum of 5 transient guests, together with such outbuildings as are ordinarily used therewith, but does not include domestic staff quarters, or tourist accommodation or accommodation used as part of a hotel”.

Given the above, any dwelling – be it a flat or a house – may be used for a maximum number of five AirBnB guests not staying more than 30 days at a time.

Zoning is irrelevant. The concept of AirBnB is covered by “transient guests”, and has nothing to do with guest houses, bed n breakfast, or hotels. Whether your property is thus zoned as Single Residential 1 or 2, or General Residential 1 or 2, is irrelevant.

So basically, ALL dwellings are allowed to be used as AirBnB now, under this By Law.

That said – WARNING!

It is important to note that one might still require permission from a Body Corporate if the Conduct Rules of a Sectional Scheme require this, or it may be forbidden in such rules, or by the Constitution, of an HOA, should the property be governed by one.

In addition, some insurers of residential Sectional Schemes consider AirBnB enterprises as commercial enterprises, and if they find out that units were being AirBnB’d, they may be entitled to refuse any insurance claims!

AirBnB’s may also add significant risk to security measures in a complex, with new people coming and going, and remotes being handed out left and right.

So please do your homework before you AirBnB your dwelling, or decide to market or buy an investment property with that intention. The mere fact that the By Law has now declared this as “open season”, is not the end of the matter.

Robert Krautkramer

Miltons Matsemela Inc.