PLOT-AND-PLAN: GREAT OPTION, JUST BEWARE THE BUILDING DEADLINE

“Buy land, they’re not making it anymore” (Mark Twain)

Buying a house is an important and exciting experience.  One of the first decisions you must make is whether to buy an existing house (the “turnkey” option) or to buy from a developer on a “plot-and-plan” (“off-plan”) basis.

Which option is best for you only you can decide, but with the popularity of security estate living soaring and with the flexibility of creating your own dream home, off-plan is an increasingly attractive choice both for investment and for lifestyle.

Just remember that the many benefits of “buy and build” come with some important cautions.  Apart from practical considerations, there are many legal pitfalls to watch for, so have your lawyer check the agreements (normally two – one to buy the plot and the other to build the house) before you sign anything.

The building deadline – benefit and risk

One area to be particularly aware of is the common requirement that you build on your new plot within a certain period of time.  In fact as a buyer you should check for such a requirement – otherwise you could be subjected to years of construction activity in the estate with all the attendant noise, dust, inconvenience and security concerns.

Your risk is that, to enforce such time limits, developers commonly provide for defaulting buyers to be subject to penalty levies and/or buy-back/retransfer clauses entitling them to take back the plot.

A recent Supreme Court of Appeal (SCA) judgment provided strong warnings in this regard for both developers and buyers.

Developers – the perils of prescription

  • Two buyers of plots in a large estate failed to build on them within the required 18 month period (this requirement was registered on their respective title deeds).
  • Their sale agreements entitled the developer to take back the plots against repayment of the purchase price (without interest) and the developer asked the High Court to order re-transfer to it accordingly.
  • The SCA on appeal held that the developer’s claims had prescribed (become unenforceable) because it had waited more than three years before taking legal action.
  • The three year period applied, said the Court, because the developer’s right was a “personal right” not a “real right”.  The difference between the two is of great interest to lawyers, but all that really counts for developers and buyers is that the developer should have enforced its retransfer right within three years of the deadline date by which the purchasers were required to have built a house.

Bottom line for developers: Don’t delay in enforcing buy-back clauses!

Buyers – developers can enforce buy-back clauses

An earlier High Court decision, involving the same developer and the same clause but another buyer, had held that the buy-back clause was “grossly unfair”, and that such clauses generally “do not pass constitutional muster”.   Which led to speculation that buy-back clauses might be dead in the water.

Not so.  The SCA commented that the High Court should not have considered the question of constitutionality at all in the particular circumstances of that case, so (for the time being at least) buy-back clauses remain enforceable.

Bottom line for buyers: You could lose your plot if you don’t build by deadline.

Credit: LawDotNews

SELLING PROPERTY THIS FESTIVE SEASON? 3 TIPS FOR A SMOOTH TRANSFER

The Festive Season can be a great time to sell property, and to buy it.  Warm weather, sunny gardens and bright rooms, lots of holidaying visitors, and more time on your hands generally all help to stimulate the property market.

Just bear in mind that, Summer Holidays or not, whether you are selling a property or buying one, you want the whole process to be handled professionally and smoothly, with as little delay as possible.  After all, both of you are dealing with what is probably one of your most important assets.

Here are some tips to help you achieve that smooth and hassle-free transfer

  1. Choose the right conveyancer

Central to ensuring that all goes well is the choice of which conveyancing attorney you nominate to carry out the specialist task of transferring the property from the Seller’s name to the Buyer’s. Choosing a conveyancer is one of the things that is technically up for negotiation, but as a seller, you should always insist on making the choice.

Why?  You carry more risk than the buyer who, having to raise the purchase price within an agreed time period, is more likely to default or cause delay in the process than you are.  Moreover it is your asset – your house – at stake, so it makes sense to have your own attorney directing the process and ensuring that the purchase price is fully paid or secured.

The fact that the buyer invariably pays the costs of transfer isn’t relevant here.  A nervous buyer can always appoint his or her own attorney to keep a watching brief on the transfer, although – unless and until a dispute arises – that really shouldn’t be necessary seeing that conveyancers have a professional duty of care to act fairly to both parties.

Bottom line – as a seller, choose an attorney you can trust to act with speed and integrity.  And don’t be persuaded by anyone to give up your right to do the nominating!

  1. Avoid any possible uncertainty

Clearly record your choice of attorney in your written sale agreement.  Otherwise you could be opening the door to dispute.  That’s true for all provinces but is a particular risk in KZN where historically the buyer had the choice if the agreement was silent on the matter (the current legal position on that is uncertain).

  1. Bring your attorney into the picture from Day One

Sellers in particular should remember this basic principle – agree to nothing (verbally or in writing) until your lawyer has checked it out for you!  A lot can go wrong with property sales, from your initial choice of who to appoint to find a buyer for you, through to the wording and signing of the agreement of sale itself.

Our law reports are bursting at the seams with bitter, expensive and disruptive legal disputes which could have been avoided had the parties sought legal assistance before putting pen to paper.

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RIGHT OF FIRST REFUSAL

Many people have heard of “right of first refusal” on their property rental contracts, but what does that mean, and how does one exercise this “right”?

In essence, it is a legal agreement between and Landlord and a tenant, that should the landlord ever decide to sell the property, the tenant has the first opportunity to make an offer to purchase the then rented property. This is often to the advantage of both parties, as tenants get to purchase a property they like, and the landlord saves time in securing a buyer.

But, with all legal documents there are complicities, for more on this aspect read:
http://www.bizcommunity.com/Article/196/569/170753.html

For quality guidance on your legal matters, contact Goldberg & de Villiers Inc. on (041) – 501 9800

Sale of your house: What about the tenants?

In our law the rights of tenants are protected when a property is sold. The new owner is obliged by law to take over any existing lease agreement in respect of the property and will become the new landlord until the lease terminates.

Tenants cannot be requested to vacate the property because of the sale thereof. The existing lease agreement must be lawfully terminated or cancelled in terms of the provisions of the lease agreement. These aspects must be kept in mind when a property that is subject to a lease agreement is sold.

Provision must be made for rental to be remitted to the new landlord and a possible refund of rental paid in advance to the previous landlord must also be arranged. If a deposit was paid arrangements should also be made to pay this over to the new landlord.

For advice or assistance contact our professional team on Tel 041 5019800.

 

 

I BOUGHT A HOUSE, BUT CHANGED MY MIND. CAN I CANCEL MY AGREEMENT OF SALE?

 

There are some instances where the agreement of sale lapses, and does not need to be cancelled.

This happens when the sale is subject to a suspensive condition (for instance, the approval of a mortgage bond, or sale of the purchaser’s property) to be fulfilled within a certain time period, and that time period expires without the condition being fulfilled.

In this instance, no cancellation is necessary, as the agreement of sale automatically lapses.

Once the suspensive conditions have been fulfilled, and a valid and binding agreement of sale has come into existence, then cancellation would need to take place if you no longer want to proceed with the sale. In this instance, it is recommended that you take advice from a property law expert.

Bear in mind that if you are the purchaser and the sale is subject to you obtaining a mortgage bond or selling your existing property, you are obliged to do whatever is reasonably possible in order to obtain such mortgage bond or sell your property, and cannot rely on the lack of fulfilment of the suspensive conditions in order to withdraw from the sale.

Unlawful cancellation may bring about a damages claim, and entail lengthy and costly litigation, so it is always a good idea to get advice from a property lawyer / conveyancer.

More restrictions may be imposed: Demolition of buildings older than 60 years

A provincial heritage resources authority may when it permits the demolition of a 60 year old building also impose conditions as to how the property may be developed in the future to conserve heritage resources.

In terms of the National Heritage Resources Act 25 of 1999, (the Act), no person may alter or demolish any structure or part of a structure which is older than 60 years without a permit issued by the relevant provincial heritage resources authority. In terms of a recent court case the provincial heritage resources authority granted a demolition permit in terms of the Act for the demolition of a structure older than 60 years situated on a property. The building had no formal heritage status yet the authority also imposed conditions controlling future development on the property. The owner of the property applied to court to review the conditions that were imposed on the basis that they were ultra vires the powers of the appeal tribunal and heritage authority. The court found that s 48(2) of the Act gave a wide discretion to the appeal tribunal and heritage authority to impose terms, conditions, restrictions or directions in the permit and held that such conditions were lawfully imposed.

The owner of the property also argued that conditions controlling future building or development on the property, permits the arbitrary deprivation of property contrary to the provisions of s 25(1) of the Constitution.

The court found that although the curtailment of the owner’s right to deal with his/her property may to a certain extent be regarded as a deprivation of property it was not arbitrary. The court stated that in our present constitutional democracy an increased emphasis has been placed upon the characteristic of ownership which requires that entitlements must be exercised in accordance with the social function of law in the interest of the community. The conditions in the demolition permit stems from the purpose of the Act namely the conservation of a heritage resource. (Gees v Provincial Minister of Cultural affairs and Sport, Western Cape and Others (974/2015) [2016] ZASCA 136; 2017 (1) SA 1 (SCA) (29 September 2016)).

For advice or assistance contact our professional team on Tel 041 5019800.

Right to a View?

South African law does not recognise an inherent right to the existing view from a property. A beautiful view is considered a mere incidental advantage of property ownership and not an actionable right. Views can be protected by registering a servitude, restrictive title conditions or through contractual provisions. The wording of such a servitude or restrictive condition should be clear and as wide as possible to prohibit obstruction by buildings or plants.

Neighbours often use the provisions of the National Building Regulations and Building Standards Act 103 of 1977 to object against building plans relating to buildings that would obstruct the views of their property. In terms of section 7(1)(b)(ii) of the National Building Regulations and Building Standards Act 103 of 1977, a municipality is compelled to reject building plans if the value of a neighbouring property would diminish because of the specific nature or appearance of the proposed building.

However, case law has established that building plans do not have to be rejected even if the proposed buildings would obstruct a neighbour’s view from his/her property.

Know your rights! For advice or assistance contact our professional team on Tel 041 5019800.

Do property owners have an unlimited right to develop their property to the full extent provided by the zoning scheme?

Property owners may have the perception that they can develop their property to its full extent as long as they comply with the parameters provided by the zoning scheme and other legal restrictions such as title deed restrictions. The perception exists that any building erected within the permitted legal parameters is one that neighbours are obliged to tolerate and that they cannot object to building plans that comply with all the legal requirements.

This perception or understanding is at odds with the provisions of the National Building Regulations and Building Standards Act 103 of 1977 (the Act) as construed by the Constitutional Court.

Guidance may be obtained from a recent judgment in the matter of Da Cruz and another v City of Cape Town and another[2017] 1 All SA 890 (WCC) where the Western Cape High Court ruled that this notion that a property owner may develop its property to the maximum extent permitted by a zoning scheme regardless of the nature of the adverse effect on the utility of its neighbour’s property is inconsistent with the provisions of the Act and it also runs counter to the precepts of the common law. The court found that the moderating principle in the regulation of neighbour relations in the common law is reasonableness.

In this matter the court clarified that the building control officer must follow a two phased approach in approving building plans. It should firstly be determined if the building plans comply with all legal requirements. i.e. comply with the zoning scheme etc. and if so, a further assessment should be conducted in terms of section 7(1)(b)(ii) of the Act to assess whether the building is to be erected in such manner or will be of such nature or appearance that the area in which it is to be erected will probably or in fact be disfigured thereby; it will probably or in fact be unsightly or objectionable; it will probably or in fact derogate from the value of adjoining or neighbouring properties; it will probably or in fact be dangerous to life or property. The court referred to this second phase as a contextual assessment of the effect of any building development on the neighbouring properties.

In the matter before the court, the owner of building A obtained approval to extend building A with further storeys that would be flush with the walls of the neighbouring building B.  This was entirely in line with the zoning and legal building parameters.

Building B contained residential apartments with balconies. The construction to building A changed the character of the balconies into small courtyards confined between towering walls. The owner of building B objected to the higher levels of building A built flush up against the balconies. The grounds of objection included the ground that the construction was so exceptionally intrusive and objectionable that it would not reasonably have been foreseen by any notional purchaser of an affected unit in building B. It was also contended that the balconies were previously approved and that a “reasonable notional purchaser and seller of a unit with balconies would never expect that the City having approved those balconies – would then approve a building on the next property which has the effect of rendering those balconies entirely useless”.

The court found that the zoning scheme is not, of itself, dispositive of what may be built on a land unit, and that a statutorily prescribed contextual assessment of the effect of any building development on the neighbouring properties should prevent a building that was unreasonably intrusive, overbearing or otherwise unsightly or objectionable from being erected. Know your rights!

For advice or assistance contact our professional team on Tel 041 5019800.

 

HOW THE “HISTORICAL RATES” JUDGMENT AFFECTS YOU

 “It is declared that, upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property …” (Constitutional Court Order)

How does the recent Constitutional Court decision on “historical rates” affect you in practice?

Understanding the issue

At issue was that some municipalities would force new property buyers to pay the seller’s “old” municipal debts (rates, municipal services etc).  So you could buy a house thinking that all you had to pay was the purchase price and transfer costs, and end up having to pay old municipal debts run up by previous owners.

We’re talking potentially big money here – R6.5m in one of the cases in question.  And you had to cough up or face losing your home to a sale in execution, as well as threats to disconnect electricity and other services.

Property owners 1, Municipalities 0

In a major victory for property owners, a 2016 High Court decision held that procedure to be unconstitutional.  And whilst the Constitutional Court on appeal said there was actually nothing unconstitutional about the legislation in question, it also confirmed that municipalities cannot use it to collect pre-transfer municipal debts from the new owner.

So how does that decision from our highest court affect you?

Buyers

You are no longer the “soft target” for municipalities and you no longer risk having to pay the seller’s historical debts; you are only liable for rates etc after you take transfer.  The other side of the coin is that municipal debt write-offs generally are bound to increase, and those losses will be passed on to us all as consumers.

Sellers

To avoid delays in transfer, keep all municipal accounts up to date. Remember you cannot pass transfer without a “clearance certificate” certifying payment of rates etc due for the past 2 years. Debt older than 2 years cannot now be claimed from the buyer so expect municipalities to be extra vigilant from now on in collecting arrear rates and service accounts as they arise.  Get legal help immediately if your municipality demands payment of debts older than 3 years – rates prescribe after 30 years, but other debts survive only 3 years (unless of course prescription is interrupted by for example an admission of liability or the service of a summons).

Agents

This decision has been touted as positive for the property market generally and it certainly will reassure any potential buyers holding back from making offers for fear of having to pay huge hidden municipal debts.

Municipalities

“Historical debts”, said the Court, “exist only because municipalities have not recovered them”.  Every municipality is obliged to –

  • “Collect all money that is due and payable to it”,
  • “Implement a credit control and debt collection policy”,
  • “Send out regular accounts, develop a culture of payment, disconnect the supply of electricity and water in appropriate circumstances, and take appropriate steps to collect amounts due”, and
  • “For the sake of service delivery … do everything reasonable to reduce amounts owing”.

You have, in the Court’s words “a full-plated panoply of mechanisms enabling efficient debt recovery” – use them to stop arrears building up in the first place.

For more information, contact our professional team on 041 501 9800.

Credit: LawDotNews

 

PROPERTY SELLERS: DON’T PAY “FUTURE RATES”

 

“Cause they told me everybody’s got to pay their dues
And I explained that I had overpaid them” (Sixto Rodriguez in ‘Cause’)

Before you as seller can transfer your property to the buyer, you must have a clearance certificate from your local municipality confirming that you have paid in full all rates and taxes, services etc due to it on the property.

What happens though when the municipality refuses to issue the clearance certificate until you have paid not only rates currently due, but also future rates i.e. rates payable by the buyer after transfer as new registered owner?  If you are forced to pay, you will be left with a claim against the buyer and that could well mean dispute and delay.

But now here’s good news for you from a recent SCA (Supreme Court of Appeal) decision.

At issue – a R2.28m rates bill paid under protest

  • A municipality presented a seller with a rates account of R2,281,014-68 in terms of its rates policy which required it to recover all rates due for the seller’s “remaining financial year”.
  • The seller said it only owed R1,2m but it was forced to pay – with reluctance and “under protest” – the whole amount due in order to get the clearance certificate. It then sued the municipality for return of the R1,066,532 “overpayment”.
  • On its interpretation of the relevant legislation, the Court held that the municipality’s policy on future rates was inconsistent with the Rates Act, and therefore void. The seller had therefore overpaid, and the municipality must repay it, together with interest and costs.

For advice, phone us on 041 501 9800.