January 13, 2021
I trust you have had time to reflect on 2020 and spend quality time with loved ones over the festive period.
What can we expect from the property market This year? Although 2020 has taught us that we should not try and predict the future, let’s look at a short overview of where we are at the moment.
As a result of the low-interest rates, the lowest in 50 years, a great opportunity developed for South Africans to enter the property market or even purchase investments properties. Tenants and first time home buyers are now able to afford to buy properties. People can afford bigger houses, with the prospects of working from home also becoming a reality. Although the stats indicate that millennials are still hesitant to purchase, the average age of buyers is younger. The forecast is that the interest rate will remain stable for the rest of the year.
The additional stress that COVID-19 has caused in the economy, like unemployment, has filtered down to the household, not just financially but also personally. The result has been an increase in property sales caused by forced sales and even unfortunate events like divorces. We could also expect an increase in distressed property to enter the market, leading to more competitive house prices. I recommend that you use expert agents and mortgage originators to assist with finding accurate market-related property prices and finance options.
Compliments for 2021, remember the lessons learned from 2020. To not plan too far ahead, be adaptable and agile this year! Let us hold on to our faith, celebrate our small daily “wins” and control the controllable’s.
Finally let us remember to have some fun every now and then!
Diaan Van Wyk | Director
January 13, 2021
“Home, Sweet Home”
2021 is shaping up to be a busy year for both property sales and home builders, thanks in no small measure to the pandemic-induced concept of “work from home, live anywhere”.
If you are one of the many landowners about to invite a team of contractors onto your property to build your new dream home, or holiday house, or perhaps a house-to-let on an investment property, remember to check for full compliance with the Housing Consumers Protection Measures Act. It offers you, as the “housing consumer”, significant protection against dishonest contractors and faulty workmanship, plus access to its mediation services should any dispute arise. Your home is probably one of your more significant assets so it will be time well spent.
On the other side of the coin, any building contractor or property developer not complying with the Act risks both criminal prosecution (with a penalty of up to a R25,000 fine or a year’s jail time) and loss of all rights to claim payment from your client. You could, in other words, lose everything – as a recent High Court judgment shows…
High Court: Builder registration is not enough
For the builder, first step is registration with the NHBRC (National Home Builders Registration Council), but a recent High Court decision confirms that there is also a vital second step – enrolment of the house itself. Note that the NHBRC certificate of enrolment must be issued before construction starts.
The facts were these –
- A builder (a close corporation) contracted to build five homes for a housing consumer. The builder had been duly registered with the NHBRC.
- But, as it was involved in a dispute with the NHBRC, the builder did not itself enrol the homes. They were registered under the name of another entity.
- The builder however carried out the work itself, and in due course it sued the housing consumer for R1.1m.
- The builder lost, the Court holding that because of non-compliance with the registration requirements, it was “not entitled to claim compensation or payment for services rendered.”
- The end result – the builder (both the close corporation and its members) leaves with nothing. Except of course a doubtless substantial legal bill and the risk of prosecution for giving false or misleading information to the NHBRC.
Before you build…
- Make sure your builder is registered with the NHBRC and get a copy of the registration certificate – check that it is not expired. Go to www.nhbrc.org.za, call the NHBRC on 0800 200 824 or email it at firstname.lastname@example.org. Note that if you are an “owner builder” you may be exempt.
- You must have the NHBRC “certificate of proof of enrolment” of the house before any construction starts (you will need it anyway to get a bond for new house construction).
- Check that you are dealing with an experienced and reliable builder by asking for at least three recent client references, visit any active building sites to check quality of construction and materials for yourself, check with the NHBRC for the total number of houses enrolled by the builder and for any complaints lodged (check also on online consumer complaint sites for any negative or positive reports).
- Sign a full written contract with the builder, but only after your lawyer has checked it for you. Look for things like timelines, detailed building specs and plans, compliance with NHBRC technical requirements and its Home Building Manual, warranties given, deposits payable, agreed progress payments and the like.
- Make sure that all necessary municipal requirements have been met and that building plans have been approved.
- Keep your neighbours in the loop every step of the way – there is nothing like clear and open communication to nip any unhappiness or problems in the bud!
January 13, 2021
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 –
- You should still make a willThere’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.
- You should still have a cohabitation agreementAn 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).
January 13, 2021
“If it sounds too good to be true, it probably is” (wise old adage)
2021 could well be a bumper year for Ponzi schemes (and their equally evil cousins, pyramid schemes). They flourish in all countries and at all times, but with our pandemic-related economic woes and general disruption we will no doubt provide the scamsters with particularly fertile ground this year.
And these schemes just never go away. As soon as one collapses or is shut down, it is immediately replaced by a new one – or more (like the Hydra’s heads, cut off one and two grow back).
Who is at risk?
Everyone! It’s not just pensioners and retrenched employees desperate to recoup their 2020 investment losses. Past schemes have counted some of South Africa’s wealthiest and most savvy citizens as victims, the problem being of course that the con artists who originate them are highly skilled at picking their targets and at creating cover stories to make everything seem legitimate. Perhaps most importantly, they are skilled at the social engineering side of it, building trust and credibility in their target markets with endorsements and “success” stories.
2020’s R9.45bn parting shot at us
There’s often big money involved too. Witness 2020’s parting shot at us in the form of the late-December provisional liquidation of Mirror Trading International (MTI), reportedly involving some R9.45bn worth of Bitcoin and some 280,000 investors from all over the world, lured by promised returns of up to 10% per month. At time of writing MTI apparently still denies that it runs a Ponzi scheme or indeed that anything is amiss, plus its website is still up, but a flood of media reports to the contrary no doubt have investors panicking and wondering whether they have just lost everything.
See also the recent press reports of the Asset Forfeiture Unit’s seizure of R106m worth of assets (11 chunks of land, 5 aircraft and a motor vehicle) linked to a suspected pyramid scheme.
During the lockdown, another alleged scheme took R42m in deposits from over 230,000 unsuspecting investors.
Stand by for more…and protect yourself and others by knowing the warning signs.
Red flags to watch for
See Sanlam’s Infographic below for a summary of how to spot a Ponzi scheme.
As the infographic suggests, let your watchword be: “If it sounds too good to be true, it probably is”.
Another possible indicator of a fraud is a promoter with no physical address – and if you are given a physical address, make sure it is real!If your proposed investment is presented as a being a part of a legitimate multi-level marketing (MLM) scheme, it may or may not be genuine – tread very carefully and read “Understanding pyramid schemes and multi-level marketing” here for some pointers.
Warn others (including your staff and the “early birds”)
Please think of passing on this warning, and if you are an employer alert all your staff. These criminals often target workplaces because of the trust factor between fellow employees and colleagues.
Tell everyone not to fall into the trap of thinking that they can be winners by “getting in early”. Statistically, 88% of “investors” lose everything. And, as a number of South African court cases have shown, even the 12% “early bird winners” must, if sued by a liquidator or trustee, cough up not only their “profits” but also their initial stakes.
That’s because a liquidator (“trustee” in the case of a person or a trust) can recover any monies paid out by a liquidated scheme during the 6-month period prior to liquidation, unless the recipient can prove that the disposition was made “in the ordinary course of business” and without intention to prefer one creditor above another. That’s likely to be impossible to prove with an illegal scheme. Even after 6 months the investor is still at risk, although the onus of proof then shifts to the liquidator.
In other words, even the “early birds” stand to lose everything.
So the bottom line is this – if you are approached by anyone with a “too good to be true” deal, don’t part with a cent until you are 100% sure it is legitimate!
January 13, 2021
Whether 2020’s lockdown gave you a great idea for a new business, put you out of a job, or killed your old business, 2021 may well be a year full of new opportunities. If the excitement and rewards of entrepreneurial life appeal to you, have a look at “Starting a Business” on the Small Business Site here for checklists and articles like –
- “Small business compliance guide”,
- “Where can I register my company in South Africa”, and so on.
Your first port of call however should always be your lawyer – not only are there important legal requirements to consider before you start up, but you need to choose the right vehicle and structure for your business (sole trader, partnership, company, trust etc) upfront.
December 17, 2020
We are almost through 2020. What a year it has been. I have learnt that life happens on its own despite our own planning or expectations. How we respond to the unexpected is what determines the real outcome.
I have been in a wheelchair for eight years now. My wife has a photo of us dancing at a wedding in the November just before the accident. Little did we know that was the last dance we would have had. As the song goes save the last dance for me. The lesson for me now in 2020 is to have that last dance, because tomorrow may not come. Enjoy the moment and be present in the moment. Time is precious and all of us have the same minutes per day. Make them count. Make the call, go on the date, write the book, and do whatever it is you dream of. If not today when? Tomorrow might change, or worse, it may never come.
I wish you all a very merry Christmas and prosperous new year. My wish for you is to be present in the moment and live life to its fullest. We all have the time and ourselves to give and dedicate to others. Let’s make it a better world for you and me and the entire human race.
2020 gave us a world of opportunities to do just that. Let us continue with it into 2021.
Roy Kapp | Director
December 17, 2020
“Who acts in haste repents at leisure” (Aesop)
Our Festive Season is always a busy time for property sales, and this year should be no different – pent up demand, increased affordability, relocations, record low interest rates and availability of bonds are all factors likely to drive a busy property market for at least the next few months.
If you are one of the many property sellers or buyers planning to take advantage, you are in for an exciting time, and as far as practical advice goes you have a treasure trove of it awaiting you on the internet.
Just don’t neglect the legal aspects – rushing in without legal advice risks falling foul of any one of the many pitfalls out there, and if that happens you really will “repent at leisure”.
Here’s 12 reasons to call your attorney first
Let’s look at some of the benefits of making your lawyer your very first port of call –
- 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, what marketing strategies are producing results, which banks are granting bonds on the best terms, and so on. All invaluable information for both sellers and buyers.
- Choosing a conveyancer: As a seller insist on choosing which conveyancing attorney 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.
- The Offer to Purchase/Deed of Sale: Typically a written offer from a buyer becomes the Deed of Sale on acceptance by the seller, and it is that Sale Agreement that is at the heart of whether a sale proceeds smoothly or whether it devolves into a nightmare of cost, delay and dispute. Prevention being as always better than cure, both buyer and seller should sign nothing until they fully understand and accept all the terms and conditions in the document. Our law will with very few exceptions hold you to your agreements – and if you sign in haste you are likely to regret at leisure!
- 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 even 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.
- 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 can be a big factor here) and the like. Buyers of course need to plan for transfer duty, transfer costs etc. Ask your lawyer to give you an estimate.
- 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.
- Other suspensive and resolutive clauses: A “suspensive” clause is one that says the agreement is “suspended” until the happening of something – for example the granting of a bond to the buyer as we covered above, or the granting of a sub-division or something similar. 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.
- 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 your lawyer check the title deeds and local town planning regulations for what is allowed and what is not. Many a bitter neighbour dispute has its roots in building extensions that block views or exceed local zoning restrictions, or in objections to business activities on residential property. A title deed inspection will also reveal any hidden pitfalls such as servitudes, usufructs and the like.
- 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.
- 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, 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.
- 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 the old “buyer beware” maxim. Sellers – manage your potential liability for undisclosed defects.
- Community Schemes: Buying into a community scheme comes with many advantages, provided that you understand fully what you are letting yourself in for. For example, our courts will hold you to whatever housing complex rules and regulations apply. It will avail you nothing to say you weren’t aware of them when buying. 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.
December 17, 2020
“…where there is disharmony, the essential test is whether it imperils the Trust estate or its proper administration” (extract from judgment below)
Trustees are of course supposed to work together to protect and further the interests of their trust and its beneficiaries, but the fact is that on occasion serious disputes can and do arise.
If settlement negotiations fail and if there is no alternative but to forcibly remove a trustee our courts have the power to do so, on the application of either the Master of the High Court or of “any person having an interest in the Trust property”.
What must you prove for removal?
As to the grounds on which a court will agree to remove a trustee, a recent Supreme Court of Appeal (SCA) judgment confirms that “loss of mutual trust and respect does not, without more, translate to a ground for the removal of a trustee, or to a conclusion that the Trust property has been imperiled [Put at risk of being harmed, injured, or destroyed]. It must further be established that, as a result, the Trust property has been imperiled or the administration of the Trust and the management of its property are at risk. That is a factual enquiry …The determinative test is always whether any state of affairs – be it incompetence, misconduct, incapacity, or lack of trust and respect among trustees or beneficiaries – has resulted in the Trust property or its proper administration being placed at risk.” (Emphasis supplied).
Importantly the Court added that in exercising its power to remove a trustee, “the courts do so with circumspection”.
Your work, in other words, is cut out for you.
Fighting in a family trust – the outcome
- A deceased businessman’s R2.8m share portfolio and a 75% share in a property-owning company were vested in a family trust, in which the deceased’s mother, step-father, brother, wife, adult children and accountant were all involved in one capacity or another.
- In short, relationships between the role-players soured, involving a flurry of accusations and counter-accusations of theft (reciprocal criminal charges being laid), oppressive conduct, conflicts of interest, collusion, vendettas – the list goes on.
- The wife (as trustee and beneficiary) together with her sons (the other beneficiaries), applied for the removal of the trustee in question, and after a long – and no doubt expensive – trek through the courts, ended up in the SCA.
- Finding on the proved facts that “the state of the relationship of the appellant and the respondent has not imperiled the Trust property or its proper administration. I find no other basis on which it would be in the interests of the Trust and its beneficiaries to remove the appellant” the SCA reversed a High Court order removing the trustee. The trustees are it seems just going to have to work this one through themselves.
December 17, 2020
“An inability on the part of the parents to maintain a child must be established before a grandparent will be legally liable to do so” (extract from judgment below)
One wonders how many grandparents are aware of (let alone plan for) the possibility that they may have a legal duty to support their grandchildren in certain circumstances.
It could be a heavy blow – trying to navigate one’s retirement financially can be hard enough without suddenly having to maintain not only yourself and your spouse but also a grandchild, possibly for decades. And what about the risk that when you die your deceased estate might remain liable – a drain, possibly a critical one, on your estate’s sufficiency to support your surviving spouse?
A recent Supreme Court of Appeal (SCA) decision confirms that –
- As a grandparent you are potentially liable for maintenance during your lifetime but
- When you die, your deceased estate will (as the law currently stands) not be liable.
The adult granddaughter’s claim and the law
This was a damages claim against the executors of a grandfather’s deceased estate based on the proposition that the estate was liable to pay maintenance for a 30-year-old granddaughter unable to support herself because of psychiatric issues, mild intellectual disability and an autism spectrum disorder. The father had emigrated, had paid no maintenance, and was allegedly untraceable, whilst the mother’s ability or inability to fully support her child had not been established.
The SCA was asked to break new legal ground by extending a grandparent’s liability to his or her deceased estate, but on the evidence before it in this case (i.e. our courts may revisit this issue in the future) the Court declined to extend the law in this way, and set out our current law as follows –
- Liability for maintenance generally depends on three factors –
- The claimant’s inability to support him or herself.
- His or her relationship with the person from whom support is claimed.
- That person’s ability to provide support.
- The primary caregivers are the parents who have a duty of support as far as they are able to do so (this applies also to the parents’ deceased estates when they die).
- Parents and children have a reciprocal duty of support.
- “If parents are unable to support their children who are in need of support, other relatives including grandparents, may be obliged to support them … But that duty is imposed first upon a nearer relative before it moves to remoter ones.” (Emphasis supplied).
- However, as our law stands, a grandparent’s deceased estate is not liable.
In summary – 3 factors for liability
In other words, you (but currently not your deceased estate) could be liable to pay maintenance if –
- Your grandchild is not self-supporting,
- Neither parent (nor their deceased estates) is financially able to provide the necessary support, and
- You are financially able to do so.
December 17, 2020
It’s been a hard year but at long last the Summer Holidays are here! Here’s a selection of websites to help you enjoy your break –
Holiday safely in the time of COVID-19
Read Daily Maverick’s “How to go on holiday safely in the time of Covid-19: A practical guide” here for some thoughts on how to travel to your holiday destination, what to do on arrival, and how to have fun – all with minimal risk.
Dodging the dangers – an interactive graphic
Then from Spain (which knows a thing or two about this virus!) comes an interactive and somewhat alarming graphic showing how Covid-19 spreads through the air, how transmission works, and how you can avoid it.
See “A room, a bar and a classroom: how the coronavirus is spread through the air” on the El País website here.
And Now for Something Completely Different – “Tax Can Be Fun!” and Other Online Curiosities
“What a strange world we live in” said Alice to the Queen of Hearts (Lewis Carroll, Alice in Wonderland)
Finally, after such a surreal and challenging year let’s follow through with a few of the many strange webpages out there.
For a start here’s one that’s definitely worth a visit, and it comes courtesy of our very own SARS (not the virus 😀) on its “Tax Can Be Fun!” page.
“Curiouser and curiouser”, cried Alice
To end, a whole collection of strange webpages (warning: there is some really interesting, even useful, stuff here – but you are about to waste a lot of time prospecting for the gems!) on The Black Stump’s “Latest Bizarre, Oddball and Weird Sites” webpage.