July 7, 2017
“The effect of PIE is not and should not be to effectively expropriate the rights of the landowner in favour of unlawful occupiers. The landowner retains the protection against arbitrary deprivation of property. Properly applied, PIE should serve merely to delay or suspend the exercise of the landowner’s full property rights until a determination has been made whether it is just and equitable to evict the unlawful occupiers and under what conditions.” (From judgment below)
Buy-to-let property can be an excellent investment.
Just take into account the possible difficulty, cost and delay of evicting a defaulting tenant – or indeed any unlawful occupier – who refuses to budge. The problem of course is that you have to keep on paying all your property expenses whilst the legal processes grind their way slowly, painfully and expensively through the courts.
It is however an entirely manageable risk if you take steps to do so upfront, and if you have factored it into your initial calculations.
A recent Constitutional Court judgment illustrates.
An expensive 4 year court battle; and counting …
- An investor used the proceeds of his pension to buy an apartment block from a close corporation in liquidation, intending to spend over R3m on upgrading it for leasing out to tenants.
- The building was however already occupied by 184 people (men, women and children), most of them either low income earners or unemployed, and some of them with long histories of occupation (up to 26 years).
- When they refused to vacate, the liquidators and the investor approached the High Court for an eviction order, which was granted – supposedly by agreement with the occupiers, who at that time had no legal representation.
- The occupiers – by now represented at no charge by a human rights organisation – made a succession of failed attempts to have the eviction order rescinded in both the High Court and on appeal to the Supreme Court of Appeal.
- The Constitutional Court however rescinded the eviction order and sent the matter back to the High Court for further investigation.
- The practical position therefore is this – 4 years down the line, the investor is still fighting for vacant occupation. Litigation like this doesn’t come cheap and whilst the occupiers carried no legal expenses, the investor ran out of money and in the end had to rely on his attorneys to represent him pro bono (free of charge).
- The Court found on the facts that “there was no legally effective and informed consent by the applicants when the eviction order was granted against them”. More importantly, it held that in all eviction applications – even where occupants consent to an eviction order – the court must still investigate whether there has been compliance with PIE (the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act).
- And that ruling – from our highest court – raises the risk factor for landlords, as we see below.
When homelessness is a risk, factor in more delay and cost
PIE requires, as the Constitutional Court put it, that a court only makes an eviction order “after having considered all the relevant circumstances and satisfying itself that it is just and equitable to do so”.
And, said the Court, “An order that will give rise to homelessness could not be said to be just and equitable, unless provision had been made to provide for alternative or temporary accommodation.”
The High Court should therefore have joined the local municipality into the court action, it being the municipality’s duty to provide temporary emergency accommodation. The potential for further delay and cost is obvious.
July 7, 2017
If you plan to form a trust, you need to know about a new directive from the Chief Master of the High Court to all Master’s Offices in the country.
The directive applies to all new trusts (those “registered for the first time”) by the Master.
Following a series of court cases in which the “trust form” was held to have been abused by the trustees (often in the form of trustees treating trust assets as their own), and in particular a 2004 Supreme Court of Appeal decision suggesting the appointment of independent outsiders as trustees in certain family trusts, the Chief Master has directed that Masters “must consider appointing” an independent trustee where any new trust is a “family business trust”.
“Family business trust” is defined as having “the following combined characteristics:
- The trustees have the power to contract with independent third parties, thereby creating trust creditors; and
- The trustees are all beneficiaries; and
- The beneficiaries are all related to one another.”
Note: There appears to be no requirement that the trust actually trades as a “business”.
“Independent trustee” is described (in summary – the actual list is a long one), as follows –
- Must be “an independent outsider with proper realisation of the responsibilities of trusteeship” and “competent to scrutinise and check the conduct of the other appointed trustees”
- “Does not have to be a professional person such as an attorney or accountant” (bear in mind though the clear practical advantages of having a qualified professional as your independent trustee – also in practice Masters may well insist on professional qualifications and membership of a professional association)
- Cannot have any “family relation or connection, blood or other, to any of the existing or proposed trustees, beneficiaries or founder of the trust”
- Must be “knowledgeable about the law of trusts” and have “knowledge and experience of the business field in which the trust operates”
- Must have no interest in the trust property as a beneficiary.
The Master can elect not to appoint an independent trustee in certain circumstances, either on the basis of good cause shown, or subject to the lodging of security, or subject to appointment of an auditor to produce annual audited financial statements under an instruction “to inform the Master when potential harm to creditors is likely.”
July 7, 2017
“In war and litigation, both sides suffer” (old Roman proverb)
Here’s yet another reminder from our courts on how important it is – if you want to avoid the trials of litigation – for you to have your property sale agreement drawn up professionally. One thing it must do, as the case in question clearly shows, is record the terms of your agreement precisely and without any room for argument.
This High Court case revolved around a “bond clause” in a sale agreement. A bond clause is a standard protection for any buyer who needs finance in order to pay the purchase price. It’s a “suspensive” clause that means the sale agreement only becomes enforceable if and when it is fulfilled.
The bond clause and the better offer
- The bond clause in an agreement of sale required the buyers, within 30 days, to obtain from a bank a loan offer, quotation and pre-agreement. It did not specify that these had to be lodged with the seller.
- The buyers duly obtained a loan offer (not accompanied by a quotation or a pre-agreement) and told the seller about it. Thereafter they accepted the bank’s loan offer but also asked the seller for more time so they could try and find another loan offer at a better interest rate.
- The seller refused, having decided that the bond clause had not been fulfilled in time and that therefore the sale agreement was now void. She then put the property back on the market and accepted a better offer for it.
- The buyers were having none of that and asked the High Court to interdict transfer to the “new” buyer and to instead order transfer to them.
- The seller argued that there was no valid sale to the original buyers because they hadn’t fulfilled the bond clause by giving her the bank’s loan documentation within the 30 day period. She was therefore, she argued, entitled to regard the original sale as invalid, and to re-sell the property at a better price.
One clause, two interpretations
It boiled down to this – the seller and the buyers had each interpreted the obligations imposed by the bond clause differently. The buyers thought they had fulfilled the suspensive condition, the seller thought they hadn’t.
A hard lesson for the seller
The Court disagreed, holding that on the particular wording of this particular clause, it was enough for the buyers to obtain a loan offer from a bank. They could receive the offer and accept it without having to give the bank’s loan documentation to the seller. They could waive the protection given to them by the clause’s other requirements. In other words, they were entitled to regard the bank’s loan offer to them as fulfilment of the condition, and the sale agreement is valid and enforceable. Accordingly the seller must transfer the property to the original buyer at the lower price and will now have to suffer the consequences of breaching her contract with the “new” buyer.
As a seller, if you want certainty on whether or not your buyer really has obtained bond finance within the set time limit, make sure that your bond clause clearly and unequivocally requires the buyer to lodge with you proof that the bank has granted the loan.
More broadly, whether you are a buyer or a seller, the last thing you need is to have to go through the expense, stress and waste of time that litigation will inevitably subject you to. So have your lawyers draw up the sale agreement for you: or at the very least have them check it out before you sign anything!
July 7, 2017
KVV Inc is proud to announce the appointment of our new Director, Mr Joseph Leotlela.
As a director and shareholder, Joseph will be involved in Marketing and liaison with the Banking institutions at KVV Inc.
Joseph is an admitted attorney with a right of appearance in the High Court of South Africa and has extensive experience in Commercial Litigation and Dispute Resolution. His experience is derived from serving clients in the Public Sector, Regulatory bodies and the Manufacturing Industry. He has been involved in several high profile matters, including appearances in the Supreme Court of Appeal.
He is a multifaceted leader with the ability to adapt to different environments and thrive. He is involved in initiatives where he interacts at high level with Boards and Executives. His ability to quickly understand the dynamics of various businesses places him in an ideal position to contribute meaningfully in any environment as a legal practitioner.
He obtained his LLB from the North West University in 2007 and is currently studying toward an LLM in Corporate Law at UNISA. After completing his articles in Pretoria he became a director at one of the oldest and most prominent law firms in Pretoria where he worked for several years and was also the recipient of several awards. He then went on to join a prominent parastatal where he became the Head of Legal Services.
We are honored to welcome Joseph to the KVV Inc family and look forward to many years of successful partnership.
Roy Kapp, Diaan van Wyk
and Mariette van Zyl | Directors