October 5, 2016
“There’s many a slip ‘twixt the cup and the lip” (very old and very wise proverb)
“Oops, we just lost R221k”
- The liquidators of a close corporation in liquidation sold a property to the buyer for R1,8m.
- The sale was vatable, in other words the sellers would have to account to SARS for VAT on the purchase price.
- Clearly the sellers intended the sale to be VAT exclusive so that they would receive the full R1.8m net of VAT. Indeed the bank holding a bond over the property, in giving its consent to the sale (a condition of the sale), specified that the offer price must exclude VAT.
- Unfortunately for the liquidators, the sale agreement itself was silent on this point, and our Value Added Tax Act specifically provides that any price charged by a vendor is deemed to include VAT. So, if you make the same mistake as the liquidators and don’t specifically provide in the sale agreement that the buyer will pay VAT on top of the purchase price, the buyer only pays the stated price. No more and no less.
- The buyer, when presented with a pro-forma invoice for VAT on the sale price, refused to pay it – and eventually asked the High Court to order the liquidators to pass transfer to him against payment of just the R1,8m.
- The liquidators asked for “rectification” of the contract to reflect the “true” agreement and the “common intention” of the parties to exclude VAT from the price. The Court however refused rectification, holding that no such common intention had been proved; and anyway, the liquidators should have formally applied for rectification, and hadn’t done so.
- The end result – the close corporation in liquidation must transfer the property to the buyer and loses the R221,053 VAT which it owes SARS. The liquidators clearly have some explaining to do to the bondholder.
October 5, 2016
SARS has launched a new TCS (Tax Compliance Status) system. See “How to Access Your ‘My Compliance Profile’ (MCP) via SARS eFiling” on the SARS website for a comprehensive guide on how to use it –
- To view your current tax compliance status (colour coded red for non-compliant,green for compliant),
- To remedy any non-compliance, and
- To challenge your compliance status if you disagree with it.
October 5, 2016
“Learn from the mistakes of others. You can’t live long enough to make them all yourself.” (Eleanor Roosevelt)
Front row v Back row: A sad tale, and a warning
- A sea-facing development in Cape Town contained two rows of houses –
- A front row of single-storey houses
- A back row of double-storey houses.
- Two front row owners decided to convert their houses to double-storey, and their building plans for the conversion were approved by the municipality.
- Unsurprisingly, the back row owners who stood to lose their views took fright and applied to the High Court for the municipality’s plan approval to be reviewed and set aside. When their application was refused, they appealed to a Full Bench.
- They lost again, the Full Bench dismissing their appeal. Unless they fund a further appeal they are stuck with watching helplessly as the neighbours’ builders deprive them of both their views and their sunlight. Their panoramic vistas across Table Bay will it seems give way to damp, moisture and mildew – not to mention a substantial drop in their houses’ market values.
- Always check the local zoning scheme – in this case for example the area’s height restriction was three storeys, which should have been a clear warning to the back row owners to investigate further.
- What counts is enforceable legal rights, not promises and good intentions. The developers and architects told the Court that in designing the development the “sacrosanct fundamentals” were to ensure that all the houses would have access to both views and “maximum light penetration”. Critically however they failed to translate these intentions into legal obligations. They could, said the Court, have formally restricted the front row houses to a single storey limit by using legal options like –
- The imposition of a servitude,
- Restrictions on the title deeds,
- A specific site development plan imposing a land use condition, or
- Registration of a homeowners’ association.
- If you are buying into a group housing scheme, don’t rely on the fact that it must be “planned, designed and built as a harmonious architectural entity”. This concept, held the Court, doesn’t give you any rights to a view, privacy or light.
- Equally, don’t put yourself in the position of having to prove any of the factors that would cause a municipality to reject building plans. These include factors like the building will be “dangerous to life or property”, or will “disfigure” the area, or will be “unsightly or objectionable”, or will “derogate from the value of adjoining or neighbouring properties”. None will be easily proved. For example there cannot, held the Court, be a derogation of value solely based upon a loss of view when the alteration complies with the law “unless the nature or appearance of the building are so unattractive or intrusive that it exceeds the legitimate expectation of parties to a hypothetical sale”.
- Indeed, if you are going to rely on having bought with a “substantive legitimate expectation” of your view remaining intact, make sure you keep proof. In this case, for instance, one of the affected owners testified that before buying her house she had undertaken a “due diligence investigation” by contacting the City and being advised by an official of the Planning and Development Department that the front row houses could not be converted to double-storey. But she could not recall the official’s name and the Court rejected her justification as vague and non-specific.