Tag Archives: property

My brother’s keeper: The unfortunate building contractor and the enriched owner

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A4BA building contractor entered a binding and legal, written building contract with a closed corporation to erect a residential house on land registered to the sole member of the corporation and a third party.

Occupation was taken and the builder released the property (and thus his builder’s lien) to the owners of the land, in spite of the final certificate still outstanding, due, owing and payable.

The building contractor has issued summons in terms of the written building contract against the corporation, which has no assets. The question arose whether the building contractor has an alternative claim against the co-owners of the land for enrichment as the land has been improved with the residence.

The development of the law of enrichment in South African was dealt a severe blow in the judgement of Couws vs Jester Pools (Pty) Limited 1968 (3) SA 563 (T) when Justice Jansen took quite a narrow view on enrichment and claims in terms thereof.

Jester Pools erected a swimming pool on a property under the impression that it was contracted by the owner, whilst in fact they contracted with a third person. The court ruled that the building contractor had no claim against the actual owner of the property based on enrichment either calculated on the increase in value of the property or the actual expense of the swimming pool. Jester Pools had to accept the loss and pay the legal cost of the owner as well.

The keeper of his “brother’s” goods, a person or entity thus acting on behalf or in the interest of another, in certain circumstances, could incur costs or expenses in the process. The recovery of these costs or expenses can be problematic.

Depending on the facts, a claim can be instituted either on enrichment (conditio indebiti or condition sine causa) or based on unauthorised administration (negotiorum gestio).

Any claim based on enrichment, whether conditio indebiti or condition sine causa conditio indebiti or condition sine causa each has four, almost similar essential elements a claimant must fulfil to be successful.

In short, the elements entail enrichment of the other party at the expense of the keeper, impoverishment of the keeper and absence of justification thereof.

A claim in terms of the negotiorum gestio also has four essential elements.

Firstly, the affairs managed by the keeper must be those of another. The keeper can be a company, trust or a natural person and the affairs that of a company, trust or a natural person.

Secondly, the other must be oblivious of the fact that his affairs are being managed.

Thirdly, and a very important element, is that the keeper must have had the intention to manage the affairs of another.

Fourthly, the management of the affairs should be conducted in a reasonable manner. Even if the management was unsuccessful, the caretaker shall have a claim against the other. However, if the management was unreasonable, the caretaker will have no claim.

To succeed in a claim based on the negotiorum gestio, our builder will have to fulfil all of the above essential requirements. The contractual obligations between the builder and the corporation negate the intention to manage and the reasonableness thereof. In terms of the Couws vs Jester Pools judgement the builder will be limited to a claim in terms of the contract, with the risk of an empty judgement with little if any hope to recover any of the outstanding amount.

Luckily for our builder, thirty years after the Couws vs Jester Pools matter, two judgments have paved the way for an extension of the negotiorum gestio or unauthorised administration on behalf of a third party by the “extended” actio negotiorum gestorum or the actio negotiorum utilis. This development will specifically assist the building contractor as he had no intention to manage the affairs of another and it could assist where the reasonableness of his actions is questioned.

In ABSA Bank Limited t/a Bankfin vs Stander t/a CAW Paneelkloppers 1998 (1) SA 939 (C) J Van Zyl detailed the development of South African enrichment law. The judgement will provide any reader thereof with a cursory yet detailed background knowledge of this specific area in our law.

This judgement extends the reach of the enrichment law in that, although a general enrichment action is still not accepted or proposed, the holes caused by Couws vs Jester Pools are at least plugged.

In the second judgement, McCarthy Retail Limited vs Shortdistance Carriers CC, delivered by JA Schutz on 16 March 2001 under case number 110/1990, the Supreme Court of Appeal again carefully considered the position. The judgement refers to the predicament of our builder, but does not make a ruling which would constitute applicable case law. The comments do take the position further and clarify the case law noted.

The perceived injustice of the Couws vs Jester Pools-judgement has been rectified.

The last two cases combined does open an alternative claim to our building contractor against the actual registered owners of the stand on which the residence has been erected. In the event of the corporation not being able to fulfil its payment obligations towards our building contractor, the owners of the stand might just find themselves indebted to their keeper.

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 my tenant responsible for the worn out carpet?

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There are several damages a landlord can deduct from a tenant’s deposit. However, there are certain household items that will experience normal wear and tear over time. This is referred to as “fair wear and tear”.

Fair wear and tear is seen as damage or loss to an item at the property which happens as a result of ordinary use and exposure over time.

According to the Rental Housing Act, a landlord is free to claim compensation for damage to the property caused by the tenant, except for fair wear and tear.

It’s important to remember that the original condition and age of the item at commencement of the lease agreement needs to be taken into account, and therefore cost of depreciation of the item due to normal wear. Paint fades, doors and walls get scuffed with use, and everything wears or breaks over time, even with a tenant who really cares for the property, and one can’t hold a tenant liable for this.

If a tenant or landlord has a problem, they can go to the Rental Housing Tribunal to resolve it.

The Rental Housing Tribunal

The Rental Housing Tribunal is a useful resource for both landlords and tenants who are dealing with rental property disputes in different forms. Cases that the Rental Housing Tribunal deals with include:

  1. Tenants defaulting on their rent
  2. Failure to repay a deposit
  3. Invasion of a tenant’s privacy
  4. Overcrowding of a rental property
  5. Determining a fair rental amount
  6. Illegal seizing of a tenant’s property
  7. Discrimination against a prospective tenant
  8. A receipt for rent not being issued
  9. Unacceptable behaviour by a tenant
  10. Lack of maintenance and repairs to the property
  11. Illegally refuse a tenant access to the property or interrupt services
  12. Unacceptable living conditions

A general rule of thumb is that, if a tenant has damaged something that does not normally wear out, or the tenant has substantially shortened the life of something that does wear out, the tenant may be charged the prorated cost of the item. The landlord should take into account how old the item was and how long it may have lasted otherwise, as well as the cost of replacement.

Conclusion

Ordinary wear and tear to carpets should not count against the tenant, however large rips or stains would be considered damage. Any deduction for the tenant’s deposit should take into account the age of the carpets, compared with the expected total time of usage.

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)

Implications of estate duty

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Estate duty is charged on the dutiable value of the estate in terms of the Estate Duty Act. The general rule is that if the taxpayer is ordinarily resident in South Africa at the time of death, all of his/her assets (including deemed property), wherever they are situated, will be included in the gross value of his/her estate for the determination of duty payable thereon.

The current estate duty rate is 20% of the dutiable value of the estate. Foreigners/non-residents also pay estate duty on their South African property.

To minimise the effects of estate duty you need to understand the calculation thereof. The following provisions apply in determining your liability:

  • Which property is to be included.
  • Which property constitutes “deemed property”.
  • Allowable deductions: the possible deductions that are allowed when calculating estate duty.

Property includes all property, or any right to property, including immovable or movable, corporeal or incorporeal – registered in the deceased’s name at the time of his/her death. It also includes certain types of annuities, and options to purchase land or shares, goodwill, and intellectual property.

Deemed property

Insurance policies

  • Includes proceeds of domestic insurance policies (payable in South Africa in South African currency [ZAR]), taken out on the life of the deceased, irrespective of who the owner (beneficiary) is.
  • The proceeds of such a policy are subject to estate duty, however this can be reduced by the amount of the premiums, plus interest at 6% per annum, to the extent that the premiums were paid by a third person (the beneficiary) entitled to the proceeds of the policy. Premiums paid by the deceased himself/herself are not deductible from the proceeds for estate duty purposes.
  • If the proceeds of a policy are payable to the surviving spouse or a child of the deceased in terms of a properly registered antenuptial contract (i.e. registered with the Deeds Office) the policy will be totally exempt from estate duty.
  • Where a policy is taken out on each other’s lives by business partners, and certain criteria are met, the proceeds are exempt from estate duty.

Donations at date of death

Donations where the donee will not benefit until the death of the donor and where the donation only materialises if the donor dies, are not subject to donations tax. These have to be included as an asset in the deceased estate and are subject to estate duty.

Claims in terms of the Matrimonial Property Act (accrual claim)

An accrual claim that the estate of a deceased has against the surviving spouse is property deemed to be property in the deceased estate.

Property that the deceased was competent to dispose of immediately prior to his/her death (Section 3(3)(d) of the Estate Duty Act), like donating an asset to a trust, may be included as deemed property.

Deductions

Some of the most important allowable deductions are:

  • The cost of funeral, tombstone and deathbed expenses.
  • Debts due at date of death to persons who have their ordinary residence in South Africa.
  • The extent to which these debts are to be settled from property included in the estate. This includes the deceased’s income tax liability (which includes capital gains tax) for the period up to the date of death.

Foreign assets and rights: 

  • The general rule is that foreign assets and rights of a South African resident, wherever situated, are included in his/her estate as assets.
  • However, the value thereof can be deducted for estate duty purposes where such foreign property was acquired before the deceased became ordinarily resident in South Africa for the first time, or was acquired by way of donation or inheritance from a non-resident, after the donee became ordinarily resident in South Africa for the first time (provided that the donor or testator was not ordinarily resident in South Africa at the time of the donation or death). The amount of any profits or proceeds of any such property is also deductible.

Debts and liabilities due to non-residents: 

  • Debts and liabilities due to non-residents are deductible but only to the extent that such debts exceed the value of the deceased’s assets situated outside South Africa which have not been included in the dutiable estate.

Bequests to certain public benefit organisations:

  • Where property is bequeathed to a public benefit organisation or public welfare organisation which is exempt from income tax, or to the State or any local authority within South Africa, the value of such property will be able to be deducted for estate duty purposes.

Property accruing to a surviving spouse [Section 4(q)]:

  • This includes that much of the value of any property included in the estate that has not already been allowed as a deduction and accrues to a surviving spouse.
  • Note that proceeds of a policy payable to the surviving spouse are required to be included in the estate for estate duty purposes (as deemed property), but that this is deductible in terms of Section 4(q).
  • Section 4(q) deductions will not be granted where the property inherited is subject to a bequest price.
  • Section 4(q) deductions will not be granted where the bequest is to a trust established by the deceased for the benefit of the surviving spouse, if the trustee(s) has/have discretion to allocate such property or any income out of it to any person other than the surviving spouse (a discretionary trust). Where the trustee(s) has/have no discretion as regards both the income and capital of the trust, the Section 4(q) deduction may be granted (a vested trust).

Portable R3.5 million deduction between spouses

The Act allows for the R3.5 million deduction from estate duty to roll over from the deceased to a surviving spouse so that the surviving spouse can use a R7 million deduction amount on his/her death.

Life assurance for estate duty

Estate duty will also normally be leviable on these assurance proceeds.

Reference:

  • Source: Moore Stephens’ Estate Planning Guide.

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)

Transfer of a property: Is VAT or transfer duty payable?

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cm_09_a1A purchaser is responsible for payment of transfer cost when acquiring an immovable property, but it should further be established if the transaction is subject to the payment of VAT or transfer duty to SARS.

When an immovable property is transferred, either VAT or transfer duty is payable. To determine whether VAT or transfer duty is payable one should look at the status of the seller and the type of transaction.

VAT

If the seller is registered for VAT (Vendor) and he sells the property in the course of his business, VAT will be payable to SARS. A vendor is a person who runs a business and whose total taxable earnings per year exceed R1 000 000. He will then have to be registered for VAT. A further stipulation is that the property that is being sold must be related to his business from which he derives an income.

The Offer to Purchase should stipulate whether the purchase price includes or excludes VAT. If the Offer to Purchase makes no mention of the payment of VAT and the seller is a VAT vendor, it is then deemed that VAT is included and the seller will have to pay 14% of the purchase price to SARS. It is the seller’s responsibility to pay the VAT to SARS, except if the contract stipulates otherwise.

When a seller is not registered for VAT, but the purchaser is a registered VAT vendor, the purchaser will still pay transfer duty but can claim the transfer duty back from SARS after registration of the property.

Transfer duty

When the seller is not a registered VAT vendor it is almost certain that transfer duty will be payable on the transaction. A purchaser is responsible for payment of the transfer duty. Transfer duty is currently payable on the following scale:

  1. The first R750 000 of the value of the property is exempted from transfer duty.
  2. Thereafter transfer duty is levied at 3% of the value of the property between R750 000 and R1 250 000.
  3. Where the value of the property is from R1 250 001 up to R1 750 000, transfer duty will be R15 000 plus 6% on the value of the property above R1 250 000.
  4. If the value of the property falls between R1 750 001 and R2 250 000, transfer duty will be R45 000 plus 8% of the value of the property above R1750 000.
  5. On a property with a value of R2 250 001 and above transfer duty is R85 000 plus 11% on the value of the property above R2 250 000.

Transfer duty payable by an individual or a legal entity (trust, company or close corporation) is currently charged at the same rate.

Transfer duty is levied on the reasonable value of the property, which will normally be the purchase price, but should the market value be higher than the purchase price, transfer duty will be payable on the highest amount. Transfer duty is payable within six months from the date that the Offer to Purchase was signed.

In instances where a party obtains a property as an inheritance or as the beneficiary of a divorce settlement, the transaction will be exempted from payment of transfer duty.

Where shares in a company or a members’ interest in a close corporation or rights in a trust are transferred, the transaction will be subject to payment of transfer duty if the legal entity is the owner of a residential property.

Zero-rated transactions

This means that VAT will be payable on the transaction but at a zero rate. If both the seller and the purchaser are registered for VAT and the property is sold as a going concern, VAT will be charged at a zero rate, for instance when a farmer sells his farm as well as the cattle and the implements.

Exemption

Transfer duty, and not VAT, will be payable when a seller who is registered for VAT sells a property that was leased for residential purposes.

It is thus important for a purchaser to establish the status of the seller when buying a property. The seller who is registered for VAT should carefully peruse the purchase price clause in a contract before signing, to establish if VAT is included or excluded.

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)

Usufruct, Usus and Habitatio: What is the difference?

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Usufruct, usus and habitatio are personal servitudes. These servitudes are sometimes considered as an estate planning tool to reduce estate duty, but testators don’t always realise what this entails and the burden it could place on the heirs.

 

What is a personal servitude?

A personal servitude is always constituted in favour of a particular individual on whom it confers the right to use and enjoy another’s property. This servitude is enforceable against the owner of the property that is burdened with it but cannot be transferred by the personal servitude holder. It may be constituted for a fixed term or be granted until the occurrence of a future event or for the lifetime of the beneficiary, but not beyond his death.

How is a personal servitude constituted?

It is usually constituted by a last will, but can also be created by agreement.

USUFRUCT

A usufruct is a right that entitles a person to have the use and enjoyment of another’s property and to take its fruits without impairing the substance. For instance, the object of a usufruct over a farm will normally extend not only to all buildings but presumably also to livestock, farming equipment and the furniture in the homestead.

The general duties of the usufructuary

The usufructuary is only entitled to the use and enjoyment of the property; he does not acquire ownership of it. The usufructuary may not consume or destroy the property, but he is obliged to preserve its substance. The property must be used in the manner it was intended to be used. A new manner of exploitation is, however, permitted if it is considered to be the sensible thing to do under the circumstances.

Right to fruits

The usufructuary may take, consume or alienate the fruits, whether they are natural, industrial or civil. This means that the usufructuary is entitled to all the products of the land and all profits and revenues derived from the property. The young of animals as well as all products derived from the animals, including milk, wool or eggs become the property of the usufructuary. The usufructuary acquires the ownership of natural and industrial fruits by gathering it or by someone else gathering them in the name of the usufructuary. Growing crops are regarded not as fruits but as part of the soil and must be gathered and separated from the soil first. Fruits not gathered at the expiry of the usufruct do not pass to the successors of the usufructuary. Civil fruits (for example rental income or interest) become the property of the usufructuary when due. On the expiry of the usufruct civil fruits are divided between the now former usufructuary and the owner of the property in proportion to the time for which the usufruct existed.

Repairs and expenses

The usufructuary is bound to maintain the property and to defray the costs of all current repairs necessary to keep it in good order and condition, fair wear and tear excepted. He is also responsible for paying all rates and taxes. Payment of insurance premiums, costs of capital expenditure such as structural reinforcements necessary to prevent a building from falling into ruin and other similar costs, are excluded from his responsibilities.

Improvements

If the usufructuary makes improvements to the property he is not entitled to compensation, though the improvements made can be removed, provided the usufructuary makes good any damage that their removal may cause.

Alienation

A usufructuary may not alienate or encumber the property, but he may dispose of the right to the use and enjoyment of the property and its fruits whether by sale, lease or loan, provided that such arrangement does not exceed the period for which the usufruct has been granted.

Termination

A usufruct is usually created for the lifetime of the usufructuary, but sometimes for a fixed period, terminable on death.

Juristic acts by the owner

The owner may not do anything to prejudice the usufructuary’s rights. The owner may not prevent, hinder or diminish the right of use or enjoyment and may only burden the land held in usufruct with a predial servitude if the written consent of the usufructuary has been obtained. Any further actions by the owner regarding the property, for instance the sale of the property and the registration of a mortgage bond, require the consent of the usufructuary. The owner together with the usufructuary may mortgage the property, or the usufructuary can abandon his preference so that the mortgage is registered free from the usufruct. Most banks prefer the latter.

USUS

A servitude of use or usus resembles a usufruct but the holder’s rights are far more restricted. If the property is movable he may possess and use the property and if the property is immovable he and his family may occupy it. The holder may take the fruits for his and his family’s daily needs. The holder may not sell any fruit, nor may he grant a lease of the property. There are a few exceptions, for example should the house be too large for the holder’s use, he may let a portion of it. The holder’s use must, however, be without detriment to the substance of the property.

HABITATIO

The servitude of habitatio confers on its holder the right to dwell in the house of another, together with his family, without detriment to the substance of the property. The holder may grant a lease or sublease to others.

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)

Usufruct, Usus and Habitatio: What is the difference?

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CM_05_02Usufruct, usus and habitatio are personal servitudes. These servitudes are sometimes considered as an estate planning tool to reduce estate duty, but testators don’t always realise what this entails and the burden it could place on the heirs.

What is a personal servitude?

A personal servitude is always constituted in favour of a particular individual on whom it confers the right to use and enjoy another’s property. This servitude is enforceable against the owner of the property that is burdened with it but cannot be transferred by the personal servitude holder. It may be constituted for a fixed term or be granted until the occurrence of a future event or for the lifetime of the beneficiary, but not beyond his death.

How is a personal servitude constituted?

It is usually constituted by a last will, but can also be created by agreement.

USUFRUCT

A usufruct is a right that entitles a person to have the use and enjoyment of another’s property and to take its fruits without impairing the substance. For instance, the object of a usufruct over a farm will normally extend not only to all buildings but presumably also to livestock, farming equipment and the furniture in the homestead.

The general duties of the usufructuary

The usufructuary is only entitled to the use and enjoyment of the property; he does not acquire ownership of it. The usufructuary may not consume or destroy the property, but he is obliged to preserve its substance. The property must be used in the manner it was intended to be used. A new manner of exploitation is, however, permitted if it is considered to be the sensible thing to do under the circumstances.

Right to fruits

The usufructuary may take, consume or alienate the fruits, whether they are natural, industrial or civil. This means that the usufructuary is entitled to all the products of the land and all profits and revenues derived from the property. The young of animals as well as all products derived from the animals, including milk, wool or eggs become the property of the usufructuary. The usufructuary acquires the ownership of natural and industrial fruits by gathering it or by someone else gathering them in the name of the usufructuary. Growing crops are regarded not as fruits but as part of the soil and must be gathered and separated from the soil first. Fruits not gathered at the expiry of the usufruct do not pass to the successors of the usufructuary. Civil fruits (for example rental income or interest) become the property of the usufructuary when due. On the expiry of the usufruct civil fruits are divided between the now former usufructuary and the owner of the property in proportion to the time for which the usufruct existed.

Repairs and expenses

The usufructuary is bound to maintain the property and to defray the costs of all current repairs necessary to keep it in good order and condition, fair wear and tear excepted. He is also responsible for paying all rates and taxes. Payment of insurance premiums, costs of capital expenditure such as structural reinforcements necessary to prevent a building from falling into ruin and other similar costs, are excluded from his responsibilities.

Improvements

If the usufructuary makes improvements to the property he is not entitled to compensation, though the improvements made can be removed, provided the usufructuary makes good any damage that their removal may cause.

Alienation

A usufructuary may not alienate or encumber the property, but he may dispose of the right to the use and enjoyment of the property and its fruits whether by sale, lease or loan, provided that such arrangement does not exceed the period for which the usufruct has been granted.

Termination

A usufruct is usually created for the lifetime of the usufructuary, but sometimes for a fixed period, terminable on death.

Juristic acts by the owner

The owner may not do anything to prejudice the usufructuary’s rights. The owner may not prevent, hinder or diminish the right of use or enjoyment and may only burden the land held in usufruct with a predial servitude if the written consent of the usufructuary has been obtained. Any further actions by the owner regarding the property, for instance the sale of the property and the registration of a mortgage bond, require the consent of the usufructuary. The owner together with the usufructuary may mortgage the property, or the usufructuary can abandon his preference so that the mortgage is registered free from the usufruct. Most banks prefer the latter.

USUS

A servitude of use or usus resembles a usufruct but the holder’s rights are far more restricted. If the property is movable he may possess and use the property and if the property is immovable he and his family may occupy it. The holder may take the fruits for his and his family’s daily needs. The holder may not sell any fruit, nor may he grant a lease of the property. There are a few exceptions, for example should the house be too large for the holder’s use, he may let a portion of it. The holder’s use must, however, be without detriment to the substance of the property.

HABITATIO

The servitude of habitatio confers on its holder the right to dwell in the house of another, together with his family, without detriment to the substance of the property. The holder may grant a lease or sublease to others.

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)

Sale of immovable property and the national credit act

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CMulder_04_A3It often happens during a sale of immovable property that the parties agree to a deferred payment of the purchase price. The purchaser will then pay the purchase price in installments and the seller will charge interest on the outstanding amount from time to time. Sometimes the parties even agree to the registration of a bond over the property to secure the payment of the purchase price.

What the parties don’t keep in mind, however, is that this agreement between the parties constitutes a credit transaction as defined in the National Credit Act (hereinafter called the Act) and that in certain circumstances the seller will have to register as a credit provider in terms of the Act.

To establish if the Act will be applicable and if the seller should register as a credit provider one should carefully consider the following:

  1. The Act will apply to all written credit agreements between parties dealing at arm’s length. This is probably to curb underhand dealings between family members at the peril of other third parties.
  1. Arm’s length transactions are not defined in the Act but they exclude, for example, transactions between family members who are dependent or co-dependent on each other and any arrangement where each party is not independent of the other and does not strive to obtain the utmost possible advantage out of the transaction.

The Act does not apply where:

  1. The consumer is a juristic person whose annual turnover or asset value is more than R1m;
  1. The purchaser is the State or an organ of the State;
  1. A large agreement (i.e. more than R250 000, such as a mortgage) is entered into with a juristic person whose asset value or turnover is less than R1m.

A credit agreement includes a credit facility, credit transaction and credit guarantee or a combination of these. The relevance is the following:

  1. A credit facility requires fees or interest to be paid;
  1. A credit transaction does not necessarily require interest or fees to be paid. An instalment agreement would suffice to qualify as a credit transaction.
  1. An instalment agreement is defined and relates only to the sale of movable property.
  1. A credit transaction also includes any other agreement where payment of an amount owed is deferred and interest or fees are charged.

A mortgage agreement qualifies as a credit transaction [Section 8(4)(d)] and the importance is that mortgage is defined in the Act as a pledge of immovable property that serves as security for a mortgage agreement. Mortgage agreement is also defined as a credit agreement secured by a pledge of immovable property.

Section 40 of the Act requires one to register as a credit provider should you have at least 100 credit agreements as credit provider OR if the total principal debt under all credit agreements exceeds R500 000. Principal debt means the amount deferred and does not include interest or other fees.

It follows that if you sell your home to an individual in a private sale (i.e. where he does not get a bond from the bank) and you register a bond as security, you have to register as a credit provider UNLESS the principal debt is less than R500 000 or the buyer is a juristic person and the price is more than R250 000.

The implications for the seller could be far-reaching if he is not registered, as the agreement will be unlawful and void, and a court must order that:

  1. The credit agreement is void as from the date the agreement was entered into;
  1. The credit provider must refund to the purchaser any money paid by the purchaser under the credit agreement, together with interest;
  1. All the purported rights of the credit provider under the credit agreement to recover any money paid or goods delivered to, or on behalf of the purchaser in terms of the agreement, are either cancelled or forfeited to the State.

The application form to register as a credit provider and also the calculation of the registration fee that is payable to the National Credit Regulator (NCR) can be found on the NCR’s website. If the seller has not registered by the time he enters into the loan agreement he may still register within 30 days after entering into the loan agreement.

Sellers, be careful when you enter into these types of agreements, as non-compliance with the Act could be a costly exercise.

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)

Tenant and landlord – what are your rights and obligations?

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CMulder_04_A2Sandra would like to move into her own place but like many people she is unsure what a lease is and what responsibilities it will place on her. A lease agreement is defined as the agreement entered into between the tenant and the landlord for the leasing of a property. The lease agreement regulates the rights and obligations of both parties and protects the parties mutually.

The Rental Housing Act No 50/1999, as amended by the Rental Housing Amendment Act No 43/2007, regulates the relationship between a tenant and a landlord, even before commencement of the lease agreement.

The Act determines that the landlord may not discriminate against the prospective tenant, his family or friends, including on grounds of race, sex, pregnancy or marital status. This applies as early as placing an ad for the leasing of a property or even during negotiations between prospective tenants and the landlord.

The lease itself does not have to be in writing to be binding on both parties and should a tenant request that an oral agreement be reduced to writing, the landlord may not refuse the request.

A written lease agreement must contain the following information:

  1. The names of the parties, as well as their South African addresses;
  2. A description of the property being leased;
  3. The monthly rental payable and reasonable increases;
  4. The deposit payable, if applicable;
  5. The period for which the property will be leased. Should the agreement not mention a specific period of lease, the agreement must indicate the notice period required should one of the parties wish to terminate the contract;
  6. Any other consideration, besides the monthly rent, which may be payable;
  7. A complete list of defects that are present at the time that the parties entered into the lease agreement.

If the property is situated in a complex that has its own rules, a copy of those rules should be attached to the lease agreement. The landlord must ensure that he/she gives effect to the provisions contained in the lease agreement.

As mentioned, mutual rights and obligations are created for both parties in the lease agreement. These rights and obligations include the following:

Tenant’s rights:

  1. To jointly inspect the property before the tenant moves in and record any defects or damage to the property. This provision protects the tenant at the end of the lease period to ensure that the tenant will not be held liable for damages that already existed at the time the lease was entered into.
  2. During the lease period, the tenant has the right to privacy and the tenant's property, home or person may not be searched.
  3. If the landlord fails to inspect the property upon expiry of the lease, the tenant can assume that the landlord acknowledges that no damage has been done to the property, and that the full deposit, together with interest thereon, must be refunded to the tenant.

Landlord’s rights:

  1. To request a deposit, in the amount agreed upon between the parties, before the tenant takes occupation of the property.
  2. To receive timeous payment of the monthly rent and also to collect overdue payments, after a court order or order from a Tribunal has been obtained.
  3. To receive the property in a good condition upon termination of the lease.
  4. To jointly inspect the property within three days before the lease expires and determine if any damage has been done to the property for which the tenant should be held liable.
  5. To recover the cost of repairs, should the property be damaged, from the tenant.
  6. Should the tenant not give access to the property for a joint inspection before expiry of the lease, the landlord should inspect the property within seven days after expiry of the lease and utilise the deposit for necessary repairs. The balance of the deposit, if any, should be refunded to the tenant within twenty-one days.

Landlord’s obligations:

  1. To invest the tenant’s deposit in an interest-bearing account at a financial institution, with an interest rate equal to or higher than the interest rate at that time earned on a savings account at such financial institution. The tenant may request proof that the deposit is invested and the landlord may not withhold such evidence.
  1. To furnish the tenant with a receipt for each payment made by the tenant, which receipt should clearly describe the property, be dated, and indicate in full what the payment is made for (e.g. Rent for the month of February 2013, or deposit).
  1. To utilise the deposit to repair any damage to the property or to recover arrears rent after expiry of the lease, and to pay the balance together with interest earned thereon to the tenant within fourteen days after the expiry of the lease.
  1. To keep all receipts in respect of repairs done to the property which were deducted from the tenant’s deposit, and make such receipts available to the tenant.
  1. To refund the tenant's deposit together with interest thereon, within seven days of the expiry of the lease, in the event that no repairs are to be made to the property.

Should a dispute arise between the parties, the Rental Housing Tribunal in the area where the dispute arises, can be contacted.

It is very important for both the tenant and the landlord to make sure that their intentions are clearly defined in the lease and that they understand the terms of the lease before the lease agreement is signed. All provisions, responsibilities and obligations should also be clearly set out in the agreement. It is advisable to seek legal advice if any uncertainties arise, before the lease agreement is signed.

References:

Rental Housing Act No 50/1999, as amended by Rental Housing Amendment Act No 43/2007

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)

Private defence of property

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A3BThe common law provides that an owner may protect his property from harm or damage even though there might not be any physical risk of harm to the owner himself.

A person may use force in order to protect property and his or her rights therein. Private defence of property can only be resorted to if there is serious danger to the property or the owner’s rights therein. The danger must involve risk of loss, damage or destruction of the asset. The question is whether there were reasonable grounds for the defender to think that because of the offender’s unlawful conduct the danger existed.

There must be evidence that the property, movable or immovable, was in danger of unlawful damage and destruction at the moment action was taken. Unlike self-defence the danger need not necessarily have commenced or be imminent. Thus, private defence of property by means of protective devices is permitted in response to merely anticipated danger.

In order for a situation of private defence to arise, there must be evidence that:

  • l action was necessary to avert danger;
  • l the defence was a reasonable response;
  • l the defence was directed against the attacker;
  • l the attack was unlawful.

The measures taken to protect the defender’s proprietary interests must have been the only means whereby he could avoid danger. The rule regarding retreating has no application in the defence of property. One is not expected to abandon one’s property. Likewise, the inhabitants of dwellings are not expected to flee from homes, rather than resist the intrusion of a burglar.

The test is whether the means of defending the property were reasonable by having regard to all the circumstances, such as the nature and extent of the danger, the value of the property, and the time and place of the occurrence. The value of the property seems an important factor in determining the reasonableness of the defence.

In Ex parte Minister of Justice: In re S v Van Wyk the Court decided that killing in defence of property can be justified in circumstances where no other less dangerous or effective method is available to protect property.

In Ex Parte Minister of Safety and Security: In re S v Walters  2002 (CC), Judge Kriegler stated that while it was unnecessary to say whether our law allows for killing in defence of property, what is material is that the law applies a proportionality test, weighing the interest protected against the interest of the wrongdoer. These interests must now be weighed in the light of the Constitution. Judge Kriegler said that surely in Constitutional terms, the value of a life must be prized above the value of property.

The decision in Van Wyk is ripe for reconsideration by the Constitutional Court. Arguably the best route they could take is to draw a distinction between an excuse and a ground of justification. They could say that killing in defence of property is unlawful or wrongful, but in exceptional circumstances could be excusable if a reasonable person would have done the same thing.

It could therefore be argued that a deadly attack in defence of property would only be regarded as justifiable in extreme circumstances.

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)

Capital Gains Tax and the sale of a property

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A3B_newCapital Gains Tax was introduced on 1 October 2001. Capital Gains Tax is payable on the profit a seller makes when disposing of his property.

What is meant by Capital Gain?

A person’s capital gain on an asset disposed of is the amount by which the proceeds exceed the base cost of that asset.

What is base cost?

The base cost of an asset is what you paid for it, plus the expenditure. The following can be included in calculating the base cost:

  1. The costs of acquiring the property, including the purchase price, transfer costs, transfer duty and professional fees e.g. attorney’s fees and fees paid to a surveyor and auctioneer.
  2. The cost of improvements, alterations and renovations which can be proved by invoices and/or receipts.
  3. The cost of disposing of the property, e.g. advertising costs, cost of obtaining a valuation for capital gains purposes, and estate agents’; commission.

How was base cost of assets held calculated before 1 October 2001?

If the property was acquired before 1 October 2001 you may use one of the following methods to value the property:

  1. 20% x (proceeds less expenditure incurred on or after 1 October 2001)
  2. The market value of the asset as at 1 October 2001, which valuation must have been obtained before 30 September 2004.
  3. Time-apportionment base cost method. Original cost (proceeds – original cost) x number of years held before 1 October 2001 divided by the number of years held before 1 October 2001 number of years held after 1 October 2001).

How is Capital Gains Tax paid?

Capital Gains Tax is not a separate tax from income tax. Part of a person’s capital gain is included in his taxable income. It is then subject to normal tax. A portion of the total of the taxpayer’s capital gain less capital losses for the year is included in the taxpayer’s taxable income and taxed in terms of normal tax tables.

How is Capital Gain calculated?

If you are an individual, the first R30 000 of your total capital gain will be disregarded. Then 33.3% of the capital gain made on disposal of the property must be included in the taxable income for the year of assessment in which the property is sold. When the property is owned by a company, a close corporation or an ordinary trust, 66.6% of the capital gain must be included in their taxable income.

Primary residence and Capital Gains Tax

As from 1 March 2012 the first R2 million of any capital gain on the sale of a primary residence is exempted from Capital Gains Tax. This exemption only applies where the property is registered in the name of an individual or in the name of a special trust. The property should furthermore not exceed 2 hectares. If the property is used partially for residential and partially for business purposes, an apportionment must be done.

If more than one person holds an interest in a primary residence, the exclusion will be in proportion to the interest held by each party. For example, if you and your spouse have an equal interest in the primary residence, you will each qualify for a primary residence exclusion of R1 million. You will also be entitled to the annual exclusion, currently R30 000.

This newsletter 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).