Am I prejudiced by an arbitration clause in my building contract?

B4Contracts for the building of a house or providing for substantial alterations to a house commonly contain an arbitration clause.  This article looks at the advantages of resolving disputes relating to building contracts by arbitration rather than by litigation in the courts.

I had a written contract with a builder to make substantial alterations to my house. I was very unhappy about how the work was done and I then went to consult my attorney with a view to taking the builder to court. My attorney informed me that the contract contained an arbitration clause which required all disputes relating to the contract to be referred to arbitration. When I signed the contract with the builder, my attention was not drawn to the arbitration clause and I had no idea what the consequences were.

As a general point of departure, before entering into a contract with another party it is important to understand all the contractual terms, including the arbitration clause. An arbitration clause requires the parties to refer their dispute for resolution outside the courts to a private arbitrator appointed by or on behalf of the parties. The arbitrator, who is required to be impartial and independent, must decide the dispute by fairly considering the parties’ evidence and arguments. The decision of the arbitrator, referred to as an award, is final and binding on the parties and can only be reviewed by a court for serious procedural irregularities. There is therefore no right of appeal to the court if a party disagrees with the arbitrator’s decision on the merits. The client could approach the High Court to have the arbitration agreement set aside, but this will be expensive and time-consuming. The client will have to show “compelling reasons” why the arbitration agreement should be set aside. The client must also be aware that arbitration offers certain advantages.

What are the advantages of arbitration instead of litigating in court?

In this context, arguably the most important benefit is the opportunity to appoint an arbitrator with specialised knowledge of building disputes. The right arbitrator will have experience in resolving such disputes. If the parties cannot agree on an arbitrator when the dispute arises, the arbitration clause will typically confer the power on a specified institution to appoint the arbitrator. It is preferable that the appointing body should be a specialist arbitral institution, which will ensure that the appointee has experience in building disputes and has the necessary training as an arbitrator. Non-specialist appointing bodies tend to appoint a person from their own profession, irrespective of that person’s training and experience as an arbitrator.

Another important advantage of arbitration compared to litigation is its flexibility. Because arbitration is based on an agreement, the parties under the direction of the arbitrator can design a process tailor-made for their dispute, instead of being bound by rigid court rules. This should result in the arbitration being considerably quicker and also less expensive than litigation. The relative informality of the process compared to a court means that arbitration is less traumatic for the parties and is less damaging for their relationship. The confidentiality of the process and the award can be another advantage.

The Arbitration Act of 1965 requires an arbitration agreement to be in writing, but it does not need to be signed by the parties. The purpose of this written agreement is to provide a record of its contents rather than to prove consent. At the time the contract is entered into, the home owner must ensure that the building contractor is registered as a home builder under the Housing Consumers Protection Measures Act of 1998. If the builder is not registered, this can affect the validity of the building contract and deprive the homeowner of statutory protections.

The arbitrator will typically convene a preliminary meeting with the parties and their legal representatives as soon as practicable after the arbitrator’s appointment. By that stage, from the client’s request for arbitration and the builder’s response, the arbitrator will have a fair idea regarding what the dispute is about. It is at this stage that the arbitrator can design an appropriate procedure to resolve the dispute, which will differ significantly from that used in court. The arbitrator may even suggest that the parties consider allowing the arbitrator to mediate their dispute.

Reference List:

  • Arbitration Act 42 of 1965 s 1 “arbitration agreement”; s 3(2) regarding the court’s power to set aside the arbitration agreement.
  • The Housing Consumers Protection Measures Act 95 of 1998, s 10(b).
  • Regarding the purpose of the agreement being in writing, see the International Arbitration Act 15 of 2017 schedule 1, article 7(3).
  • Regarding how a court should exercise its discretion under s 3(2) of the Arbitration Act, see De Lange v Methodist Church 2016 2 SA 1(CC); [2015] ZACC 35, paras 34-37.
  • Regarding the need for the contractor to be registered as a home builder, see Cool Ideas 1186 CC v Hubbard 2014 4 SA 474 (CC).

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Is your business legally compliant?

B3Compliance refers to a company obeying all of the legal laws and regulations regarding how they manage the business, their staff, and their treatment towards their consumers. The point of compliance is to make sure that corporations act responsibly.

Is compliance for every business the same?

Certain businesses may be required by law to register with an industry association. For instance, if you want to practice as a public auditor and issue an opinion on assurance engagements, you must be registered with the South African Institute of Chartered Accountants (SAICA) and the Independent Regulatory Board of Auditors (IRBA). Compliance in this regard would depend on the type of business involved.

What are general requirements for all businesses:

Tax compliance (SARS, VAT Act) – First and foremost, the business enterprise must be registered with SARS for tax purposes (to be taxed on the income that it makes), secondly, if the business is an employer it must register itself as such and as an agent of government required to deduct employees’ tax from the earnings of employees and pay the amounts deducted over to SARS on a monthly basis. Thirdly, if applicable, a business may register for VAT in terms of the VAT Act.

The Occupational Health and Safety Act – The government requires businesses that employ people to provide a work environment that is safe and without risk to the health of employees.

Skills Development Levy (SDL) – Employers must pay 1 percent of their workers’ pay to the skills development levy every month. The money goes to Sector Education and Training Authorities (SETAs) and the Skills Development Fund to pay for training.

The Compensation for Occupational Injuries and Diseases Act (COIDA) – This Act seeks to ensure that employers are duly covered to provide compensation for disablement caused by occupational injuries or diseases sustained by employees in the course of their employment, or for death resulting from such injuries or diseases.

Unemployment Insurance Fund (UIF) – Employers must register with the Department of Labour to ensure that their employees are appropriately covered when out of employment.

Auditing requirements – Depending on the type of company you register, it may be required to be audited on an annual basis.

Financial Intelligence Centre Act (FICA) – If your company will be engaged with financial services, estate agencies, insurance, etc. you are required to comply with this Act in order to combat money laundering.

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Unopposed and opposed divorce: What’s the difference?

B2My spouse said that he/she won’t ‘give me a divorce’. What can I do? Your spouse can oppose the divorce, but it is the Court that grants a divorce, not your spouse. If you convince the court that the marital relationship has irretrievably broken down, the court can grant a decree of divorce even if your spouse does not want to get divorced.

There is a process, called a ‘rule 58’ application, whereby you can ask the court to give an order regarding the care of and access to the children and maintenance pending the finalisation of the divorce. You can even ask for a contribution to your legal costs.

How much does it cost?

In the case of an unopposed divorce (i.e. there is no dispute between yourself and your spouse about the divorce or what should happen), your fees are likely to be limited to the Sheriff’s fees and minor expenses for transport, photocopies, etc. Sheriff’s fees can vary widely, depending on the distance he has to travel and how many attempts he has to make at serving pleadings on the opposing party, but generally these fees would be a few hundred rand. Where a divorce is opposed, the costs become unpredictable and entirely dependant on the specifics of the case.

How long does it take?

Where a divorce is unopposed and there are no complications or children involved, it can sometimes be finalised in as little as four weeks.

Where a divorce is opposed, it can easily take two to three years, or more. In most cases, however, divorces get settled before the parties have to go to Court – even where the divorce started out as an opposed divorce. As soon as the parties in an opposed divorce reach a settlement agreement and the divorce becomes unopposed, it can again be possible to finalise the divorce in as little as four weeks.

What you need to do

Before you approach the Court to start divorce proceedings, you will should get certified copies of as many of the following documents as you can:

  • Your identity document
  • Your Ante-Nuptial Agreement, if any
  • The children’s births certificates, if any and
  • Your marriage certificate

Also make sure you have the following information handy:

  • Your full names, surname, identity number, occupation and place of residence
  • Your spouse’s full names, surname, identity number, occupation and place of residence
  • Date when you got married and where the marriage took place
  • Children’s full names, surnames, identity numbers and
  • Comprehensive details of any funds (such as pension funds, retirement annuities and provident funds) which you or your spouse belongs to.

You may institute divorce proceedings in either a High Court or Magistrates’ Court (Regional Court), but where the parties are representing themselves in a simple divorce, they should approach the Regional Court.

Reference:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Safeguarding children’s rights during divorce

B1Divorce and the resulting challenges regarding child custody and the responsibilities of parents can be an ugly and difficult process. This is especially true of the children whose emotional and physical wellbeing would have to be taken into account during the entire process. However, the office of the Family Advocate offers an efficient and free service with the wellbeing of the child in mind.

The Family Advocate (FA) manages disputes regarding the responsibilities and custody of children during and after a divorce. The point of the FA is to protect the rights of children and ensure that their best interests are taken into account when it comes to their custody and the parent’s responsibilities. The office of the FA is not just one person but consists of lawyers and social workers who all assist in getting the best outcome for the child/children.

What can the Family Advocate do?

Section 28(2) of the Constitution says, “A child’s best interests are of paramount importance in every matter concerning the child”. This forms the basis of the FA’s role in disputes.

The Family Advocate has the ability to:

  • Institute an enquiry so as to be able to furnish the court with a report and recommendation on any matter concerning the welfare of the minor child;
  • Appear at the trial or hearing of any relevant application;
  • Adduce any available evidence; and
  • Cross-examine witnesses giving evidence at such trial or hearing of an application.

*According to Mediation in Certain Divorce Matters Act (Act 24 of 1987)

The Children’s Act 2005 (Act 38 of 2005) has also made mediation by the FA compulsory for all parties involved in parental rights and responsibility disputes over children born out of wedlock.

What’s the point of the Family Advocate?

The FA has many advantages when there is a dispute over children. The FA can change the parental rights and responsibilities agreements of the parents without the need to go to court. A court will also take into consideration a report by the FA before making any decision on the child, they are even required by law to do this. Furthermore, a registered parental rights and responsibilities agreement would be considered the same as a court order. The office of the FA also allows for the children involved to express their point of view and desires. In order to ensure the best for the child/children, the FA will work together with social workers, psychologists and other professionals when dealing with disputes.

Reasons to see the Family Advocate

  • The parties disagree about how to contact or care for a child.
  • They want to draft, register or change their parental rights and responsibilities agreement.
  • Disputes about whether an unmarried father of a child born out of wedlock fulfils the requirements making him eligible for the full parental rights and responsibilities of the child.

A court may also order the FA to provide a report on what is best for the children involved in a dispute. Altogether, the FA’s goal is to ensure the child gets the best out of a divorce process and that their rights are protected. They can not only help in disputes, but also provide a comfortable environment and process for what can be a stressful time for the children involved.

Reference:

  • “The Office of the Family Advocate”. The Department of Justice and Constitutional Development. Accessed from: http://www.justice.gov.za/FMAdv/ on 13/05/2016.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

VAT increase and the effect on property transfers and the registration of transfers before and after 1 April 2018.

The increase was announced in the Minister of Finance’s Budget Speech on 21 February 2018. The standard rate of VAT will change from 14% to 15% on 1 April 2018 (the effective date). 

How will this VAT increase affect property transactions, property registrations and estate agent commissions?

Question 1: How will the rate increase work generally for fixed property transactions?

The rate of VAT for fixed property transactions will be the rate that applies on the date of registration of transfer of the property in a Deeds Registry, or the date that any payment of the purchase price is made to the seller – whichever event occurs first. (See, however, the exception in Question 2 below where registration (delivery) of the fixed property occurs on or before 23 April 2018.)

If a “deposit” is paid and held in trust by the transferring attorney, this payment will not trigger the time of supply as it is not regarded as payment of the purchase price at that point in time. Normally the sale price of a property is paid to the seller in full by the purchaser’s bank (for example, if a bond is granted) or by the purchaser’s transferring attorney.

However, if the seller allows the purchaser to pay the purchase price off over a period of time, the output tax and input tax of the parties is calculated by multiplying the tax fraction at the original time of supply by the amount of each subsequent payment, as and when those payments are made. In other words, if the time of supply was triggered before 1 April 2018, your agreed payments to the seller over time will not increase because of the increase in the VAT rate on 1 April 2018.

Example:

A vendor sells a commercial building and issues a tax invoice to the purchaser on 10 January 2018. If the property will only be registered in the Deeds Registry on or after 1 April 2018 and payment will be made by the purchaser’s bank or transferring attorneys on the same date, then the time of supply will only be triggered at that later date. In this case, VAT must be charged at 15% as the rate increased on 1 April 2018 which would be before the time of supply. It does not matter that an invoice or a tax invoice was issued before the time of supply and before the VAT rate increased. The tax invoice in this case would also have to be corrected as it would have indicated VAT charged at the incorrect rate of 14%.

See also the next questions below for the rate specific rule that provides an exception for the purchase of “residential property” or land on which a dwelling is included as part of the deal.

Question 2: Is there a rate specific rule which is applicable to me if I signed the contract to buy residential property (for example, a dwelling) before the rate of VAT increased, but payment of the purchase price and registration will only take place on or after 1 April 2018?

Yes. You will pay VAT based on the rate that applied before the increase on 1 April 2018 (that is 14% VAT and not 15% VAT). This rate specific rule overrides the rules as discussed in Question 1, which applies for non- residential fixed property.

This rate specific rule applies only if:

  • you entered into a written agreement to buy the dwelling (that is “residential property”) before 1 April 2018;
  • both the payment of the purchase price and the registration of the property in your name will only occur on or after 1 April 2018; and
  • the VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes:

  • an existing dwelling, together with the land on which it is erected, or any other real rights associated with that property;
  • so-called plot-and-plan deals where the land is bought together with a building package for a dwelling to be erected on the land; or
  • the construction of a new dwelling by any vendor carrying on a construction business;
  • a share in a share block company which confers a right to or an interest in the use of a dwelling.

Question 3: How will the VAT increase affect the seller of the property and estate agent commission?

Two possible scenarios can apply:

Scenario 1:

Should the contract of sale read that a percentage commission plus VAT is payable, that will be calculated at 14% if transfer takes place before 1 April 2018 and at 15% when registration takes place on or after 1 April 2018.

The net result is that the seller (who sold prior to 31 March 2018) will receive a lower net amount on the selling price because of the increased VAT, should transfer take place after 31 March 2018.

Scenario 2:

Should the contract of sale refer to a fixed commission amount inclusive of VAT, the opposite will apply. The seller will receive the same amount, but the agent will receive less because of the increased VAT.

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For more information on the VAT Increase, download the SARS VAT Increase general guide and FAQs here:

Please contact us should you have any specific questions.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

How to get divorced if it’s your only option

B1If a married couple has decided on getting divorced, the process may seem daunting and uncomfortable. However, it can be done efficiently, but there may still be a lot of emotional difficulty involved. It’s important to note that divorce is a last resort in a marriage. If it’s a civil marriage, it needs to be dissolved by a court, and like a court case, good grounds for the divorce have to be given. Divorce isn’t a do-it-yourself matter.

What reasons are good reasons?

  1. Firstly, and most importantly, you have to be absolutely certain that divorce is the only option for you and your spouse. This is because you would have to prove to a court that you and your spouse can’t live together anymore and there is no possibility of reconciliation or for you two to love one another again. An unconsciousness or mentally ill spouse, for example, could also be a valid reason for divorce.
  2. Other forms of proof or grounds needed for a divorce are evidence that you and your spouse haven’t been living together for a very long period of time, one of the partner’s cheated, one partner left or that there was abuse involved in the relationship, such as physical abuse.

Steps to take

  1. The first step is to prepare a summons for a court. Going through a Family Court will be cheaper than a High Court. The summons would include details such as who will have custody of the children and how the other parent will see the children, if there are children involved. Other details would include maintenance and how property will be split.
  2. You can consult an attorney beforehand to help you with the divorce summons and the court proceedings. The Sheriff of the Court will serve the summons to the other spouse or ‘defendant’. In some cases, the defendant may decide to oppose the summons, in which case their attorney will send back a plea (answer to the summons).
  3. The two parties may try reach a settlement agreement before the hearing. Regardless of whether or not the they have reached an agreement the case will still be heard in a court before a decree of divorce is issued. As mentioned earlier, divorce has to go through a court.
  4. After the summons has been submitted to the court a hearing date will be set. A divorce order will be granted after the judge at the hearing has settled everything and confirmed what has been presented as grounds for the divorce.

References

  • Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.
  • Westerncape.gov.za. Western Cape Government. Getting Divorced Page. [online] Available at: https://www.westerncape.gov.za/service/getting-divorced/ [Accessed 25/05/2016].

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The Rental Housing Tribunal: I have a complaint against my landlord/tenant

B2Formed in 2001, the tribunal is comprised of five members (including a chair and vice chairperson) appointed by the Provincial Minister of Human Settlements, who each have expertise in property management, housing development and consumer matters pertaining to rental housing.

The tribunal seeks to:

  1. Harmonise relationships between landlords and tenants in the rental housing sector.
  2. Resolve disputes that arise due to unfair practices.
  3. Inform landlords and tenants about their rights and obligations in terms of the Rental Housing Act.
  4. Make recommendations to relevant stakeholders.

How do I lodge a complaint?

  1. First complete the relevant forms available from the Rental Housing Tribunal.
  2. The Rental Housing Tribunal will investigate the matter and find out what the problem is and try to resolve it amicably and as soon as possible.

What will the Rental Housing Tribunal do?

  1. They will establish whether there is any dispute between the landlord and tenant.
  2. They will try to resolve the matter through mediation – if the dispute cannot be resolved it should be referred to a hearing.
  3. They will conduct a hearing, where the landlord and tenant will be summoned for hearing by the Tribunal.
  4. A just and fair ruling will be made.
  5. Where a mediation agreement has been concluded, make such an agreement a ruling of the Tribunal. This ruling is binding on both parties.
  6. The Tribunal may make a ruling as to who pays whose costs.

What happens after I have lodged a complaint?

  1. After a complaint has been lodged with the Tribunal until the date of the ruling on the matter, the:
  2. landlord may not evict the tenant;
  3. tenant must continue to pay the rent; and
  4. landlord must maintain the property.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

How to apply for spousal maintenance?

B3Maintenance is the obligation to provide another person, for example a minor, with housing, food, clothing, education and medical care, or with the means that are necessary for providing the person with these essentials. This legal duty to maintain is called ‘the duty to maintain’ or ‘the duty to support’.

The duty to maintain is based on blood relationship, adoption, or the fact that the parties are married to each other.

An application for maintenance can be made against a defendant (person who must pay maintenance) at any Maintenance Court (“court”) in the district where the complainant (person who applies for maintenance) or the child, on whose behalf maintenance is claimed, resides or works.

The parents, guardians and/or caregivers of a child can apply for maintenance on behalf of such a child.

What should a person take to court when applying for maintenance?

  • Identity document of the complainant.
  • Complainant’s contact details, such as telephone numbers and home and work addresses.
  • If maintenance for a child is claimed, the birth certificate of that child.
  • If maintenance for the spouse is claimed, the marriage certificate or divorce order where maintenance order was granted.
  • A full list of expenses and any proof of same, such as receipts.
  • The complainant’s payslip and proof of any other income.
  • As much detail as possible regarding the defendant, such as telephone numbers, home and work addresses, list of known income and expenses, and so on.

What happens after the application has been made?

  • The maintenance officer will inform the defendant of the application and will hold an informal enquiry with the complainant and defendant being present.
  • The defendant must take any proof of his/her income and expenses to the informal enquiry.
  • The purpose of the informal enquiry is to assist the complainant and the defendant in reaching a settlement.
  • If a settlement is reached, an agreement will be entered into between the complainant and the defendant, which will be made an order of court.
  • If a settlement cannot be reached, the maintenance officer will place the matter before court for a formal enquiry to be held.
  • The court will consider the facts and evidence of the claim and decide, by way of a maintenance order, whether maintenance should be payable and the amount of such maintenance.
  • The complainant and the defendant must both be present at the informal and formal enquiry, and will be allowed to have legal representation.
  • If the defendant fails to appear at the formal enquiry in court, an order may be given in his/her absence.
  • It will not be necessary for the complainant and/or defendant to appear in court if they consent in writing to the maintenance order being granted.

Reference

  • Justice.co.za
  • Legalwise.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

 

 

Reference

 

Justice.co.za

Legalwise.co.za

 

Cancelling a lease agreement early

B4If you want to end your contract early, this can only be done “in situations where the Consumer Protection Act or Rental Housing Act apply” – or if there’s a clause in the contract that allows for early cancellation, or if both parties agree to it.

If, on the other hand, one of the parties wants to cancel because the other is in breach of the contract, then certain notice periods come into effect – the first of which being, of course, that the aggrieved party is required to “give written notice for the breach to be remedied. Failure to remedy the breach in the stipulated time period, will entitle the innocent party to cancel the lease and (where relevant) claim damages suffered from the offending party.”

A tenant has the RIGHT to cancel a lease agreement, be it in the 1st month, 4th month or second-to-last month of the lease agreement. He cannot be ‘punished’ for doing this and the cancellation does not constitute a breach of the lease agreement.

What must an agent do if a tenant decides to cancel?

1. Obtain the cancellation in writing from the tenant.
2. Ensure the cancellation gives the requisite 20 business days’ notice.
3. Charge rental until the end of the 20 business days (even if this is not a full month’s rental).
4. Log on to TPN and end the lease as at the end of the 20 business days.
5. Keep in mind the lease now ends as at the end of that 20 business days.
6. Should the tenant remains in the premises a new lease MUST be signed as once cancelled, a lease cannot be revived at law. If you fail to do this, you essentially have no long-term lease in place.
7. Begin advertising the property immediately- the onus is on the agent/landlord to find a replacement.
8. Keep all invoices from the advertising as this is one of the costs you may pass along to the tenant in terms of a ‘reasonable cancellation penalty’.

What can an agent charge the tenant that cancels early?

The idea behind this reasonable cancellation penalty is not to penalise the tenant, but to recover any actual loss suffered by the landlord as a result of the cancellation. The following cost could be applicable:

  • Credit check costs for any prospective replacement tenants (even those who are not accepted);
  • Advertising costs (only the actual amounts on the invoices);
  • Rental – the exact number of days that the unit remains vacant after the tenant vacates.

It is important to keep in mind that all calculations of the penalty can only be made once a replacement tenant has been found. It must also be kept in mind that where a tenant cancels, for example, in month 10 or 11 of a 12-month lease, you cannot charge the tenant the full remainder of the lease as this would negate the cancellation. The principles behind cancellation penalties lie in our law of undue enrichment. A landlord/agent cannot make a financial gain or benefit off of a tenant’s cancellation.

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

 

How do I register a trust?

B1A trust is an agreement between the person who owns the assets and the appointed trustees. A trust can be a good way to preserve your wealth for your family and children. A well-managed trust will make sure that anyone who is a beneficiary of the trust benefits from it. The trustees have the important job to administer the trust and its assets objectively with the best interests of the beneficiaries in mind.

Trusts and their administration fall under the Trust Property Control Act no 57/1988.

What types of trusts are there?

It’s important to note that there are two types of trusts. An inter vivos trust and a testamentary trust. A testamentary trust is one that’s formed from the will of a deceased person.  In the case of a testamentary trust the deceased’s last will serves as the trust document. An inter vivos trust is created between living persons, and will form the basis of this article. Inter vivos trusts can limit estate duty and preserve your assets and wealth for your descendants. Certain financial institutions assist in setting up a trust and can act as trustees.

Registering an inter vivos trust

To register an inter vivos trust with the Master of the High Court, the following documents must be lodged.

  • Original trust deed or notarial certified copy thereof.
  • Proof of payment of R100 fee, for registration of a new Trust.
  • Completed Acceptance of Trusteeship (J417) and Acceptance of Auditor Application (J405) forms.
  • Bond of security by the trustees – form J344 (if required by the Master)

* There are no costs involved in amending an existing Trust.

These documents are also required for the Master to issue the trustees with letters of authority for administering the trust. A trustee may not proceed to administer the trust without the written authority of the Master.

If the trust’s assets or majority of its assets are located in a particular area, then the inter vivos trust has to be registered with the Master who has jurisdiction in that area.

De-registering of a trust

The Master can de-register the trust only once it has been terminated. The common law makes provision for the termination of a trust as the Trust Property Control Act makes no such provision. The following circumstances can be grounds for a trust to be terminated:

  • by statute
  • fulfilment of the object of the trust
  • failure of the beneficiary
  • renunciation or repudiation by the beneficiary
  • destruction of the trust property
  • the operation of a resolutive condition

You will still need the original letter of authority, bank statements reflecting a nil balance on the final statement and proof that the beneficiaries have received their benefits.

Administering the trust

Trustees are required to comply with the Trust Property Control Act, which determines how trusts should be administered and the role of the trustees. If trustees fail to comply with the Act they may face criminal prosecution. The trustees have to always act with the best interests of the beneficiaries in mind.

Some legal requirements of trustees include not being able to make secret profits, taking care and being objective when administering trust assets and always acting in good faith.

Reference:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)