NEIGHBOURS BEHAVING BADLY: NIP ILLEGAL BUILDING IN THE BUD!

Bad neighbours do not just impinge on your enjoyment of your property;  they can also cause serious harm to its value.   So if you notice illegal building activity next door,  move quickly to nip the problem in the bud.

Your hand in this regard has just been strengthened.   An important new decision by the Supreme Court of Appeal (SCA) confirms that you are not limited to trying to compel the municipality to enforce its own building and zoning laws –  you can apply for demolition directly.

Demolition ordered – despite a “supine” municipality

  • A new retail/office development exceeded the local Town Planning Scheme’s coverage limit of 60% (the actual coverage as constructed was 86.13%), and insufficient parking bays were provided
  • The developer claimed to have obtained municipal approval of its building plans but the “supine and uncooperative attitude of the municipality” made it difficult for the Court to determine any more than that,  if the municipality had indeed given approval, it seemed later to have cancelled it
  • In any event,  held the Court, any such purported approval of the plans had to be set aside and the developer was ordered to partially demolish its building so as to bring it into compliance with the law.

First prize, second prize

The SCA has cleared the way for neighbours themselves to apply for demolition orders.   That is an important new weapon in the fight against illegal construction activity,  but it is still only second prize.

The problem is that where you (rather than the municipality) bring the demolition application, “private” or “neighbour” law applies and the court is not obliged to order demolition;  it has a discretion whether or not to do so.   And, demolition being a draconian remedy,  the court may rather decide to make an alternative order such as a damages award.   Indeed,  had the developer in this particular case not incurred the court’s wrath by persisting in its illegal conduct after ignoring warnings of illegality,  it might have escaped demolition altogether.

In contrast, where a municipality does its job properly and brings its own application for demolition,  “public law” applies and our courts have previously held that they then have no discretion where unlawful buildings are concerned –  they must order ‘total demolition”.

First prize it seems is still to force your municipality to fulfil its legal and moral duty to uphold the law by taking the offending builder to court itself.

Regardless,  the most important thing is to act quickly –  so get legal help as soon as you become aware of illegal construction!

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For more information, contact the professional legal team at Goldberg & de Villiers on 041 501 9800.

FROM THE HORSE’S MOUTH: HOUSE SALES AND THE VAT INCREASE

 

“If you hear something (straight) from the horse’s mouth, you hear it from the person who has direct personal knowledge of it” (Cambridge Dictionary)

We all know by now that the VAT rate increased from 14% to 15% on 1 April. How does that affect your residential property sale/purchase?

We are talking big money here – if for example you bought a house from a developer for R10m + VAT, that extra 1% adds R100,000 to your cost. Fortunately a little-known (until now) section of the VAT Act provides some relief to residential property buyers.

This is what SARS has to say about it (slightly simplified) –

Question – “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?”

Answer – “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 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.”

But what about commercial property?

Let’s quote SARS again on property generally (once again, slightly simplified) –

Question – “How will the rate increase work generally for fixed property transactions?”

Answer – “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.

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.”

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For more information, contact Tracey Watson-Gill or Adri Ludorf on 041 501 9800.

www.goldbergdevilliers.co.za

 

 

HOW TO AVOID DISPUTES OVER JOINTLY OWNED PROPERTY

       “Co-ownership is the mother of disputes” (Roman law maxim)

Buying property can be an excellent investment, but it can also be expensive. So sometimes it makes a lot of sense to share the financial burden with someone else. Perhaps for example you are spouses or life partners buying your first home. Perhaps you are a group of families planning to share a holiday house, or two firms looking to co-own business premises.

Just be very careful here…

What can go wrong?

Co-ownership (or “joint ownership” – it’s the same thing) always starts off all fine and friendly. You’re life partners, or business partners, or best friends (you may even be all of those things together) and all is good between you. So nothing can go wrong, right?

Unfortunately it can, and as many bitterly fought court cases can attest, it does. “The sting’s in the tail” as the old proverb has it, and problems tend to raise their ugly heads only down the line, long after you first became joint owners. Imagine a scenario where you can’t agree on how to run the property and/or cover its expenses, or you need to wind up your co-ownership but can’t agree on how to do so. What happens if one of you wants to buy the other out but the other refuses or you can’t agree on a fair price? Or if (as co-owners are entitled to do if not bound to a contrary agreement) they sell their share/s to a total stranger? Or the time may come when you need to/want/must sell your share and your co-owner refuses to co-operate.

The issue here is that when you are co-owners of property you don’t each hold separate title to your own physically-delineated “share”. Your title deed (registered in our Deeds Office) will reflect each co-owner as holding an undivided share in the property. You have to act jointly or call in the lawyers.

A great deal of unhappiness and dispute – perhaps even the cost, delay and hassle of litigation – beckon. For example, a court can order one of you to buy the other out, or to subdivide the property, or even to order its sale (commonly by public auction) – but it really is a last resort to ask a court to decide what is best for you.

A simple solution and a checklist for you

The trick of course is as always to plan ahead. Before you buy the property, take advice on the best structure to use for your particular circumstances. Factors to bear in mind would include things like ease of ownership, cost of ownership, the tax angle, ultimate disposal, estate planning, asset security, protection from creditors, and so on.

A whole multitude of factors, unique to each situation, will determine whether you should own the property in a legal entity like a company or trust, or register it in your names jointly, or find some other way of ensuring that you share equally in both the costs and the benefits of property ownership.

Critically, you need to put in place a written, signed agreement setting out as clearly and as simply as possible –

  • Your agreed method of ownership, and whether your undivided shares will be 50/50 or in another proportion.
  • Who will cover what expenses, and how? Think about all the transfer costs, the moving costs, the costs of municipal services, maintenance costs, bond instalments, and so on. If it’s an office held by a company for example, what rental will each of you pay? Who will pay the rates? Can co-owners make improvements to the property and if so how will they be compensated?
  • If you are trading with the property (perhaps letting it out to tenants), will you share profits and losses in the same proportion as your shares?
  • Who will attend to administrative duties? You need to cover things like paying the bond, arranging insurance, keeping financial records, dealing with tenants, and the like.
  • Who will enjoy what benefits of the property, and how? In an office-sharing scenario for example, define exclusive-use and common-use areas, who gets the best undercover parking etc. If it’s a holiday home, who gets to use it and when? Who gets the Summer Holidays each year? If you are a life partnership couple you should have a cohabitation agreement in place anyway – if you don’t, ask your lawyer to draw one up for you and to integrate your co-ownership deal into it.
  • Last, but certainly not least, you have to plan for the end game part. Without an agreement to the contrary, a co-owner can sell his/her share without the other’s consent – a recipe for dispute. And if your relationship falls apart, you need to be able to wind up your joint ownership without all the hassle, stress, delay and cost of legal action. Consider also what happens if one of you goes insolvent or is liquidated, or if a co-owner’s creditors attach his/her share for sale in execution. Specify what happens to a co-owner’s share on death. Agree on how you will value the property, or each co-owner’s share in it, if you need to.

The above is of course just a summary of some common issues, so ask your lawyer to help you with your own checklist.

For more information contact Tracey Watson-Gill at Goldberg & de Villiers Inc on 041 501 9800.

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IMPLICATIONS OF VAT INCREASE ON PROPERTY SALES

If you are currently negotiating a deed of sale to purchase immovable property or if a sale has already been concluded in writing and is still in the process, questions may  arise as to the VAT rate that will apply to the transaction.

In the following instances the 14% VAT rate will continue to apply to the sale of residential property including units in sectional title schemes and share block schemes, and plot and plan and free hold dwellings:

  • where the 14% VAT rate applied to the sale before 1 April 2018,
  • where the purchase price was determined and stated in the written agreement;
  • if the written agreement was signed by the parties before 1 April 2018;
  • where payment and registration takes place after 1 April 2018;

A VAT rate of 15% will apply to the sale of commercial property concluded before 1 April 2018 and registering after 1 April 2018.

If you have concluded a sale agreement before 1 April 2018 it is advisable to review the sales agreement and to obtain expert tax advice to ensure that provision is made for the increased VAT rate, if applicable, and appropriate mechanisms are in place.

Contact Goldberg & de Villiers Inc on 041 – 501 9800 if you require advice on your property related matters.

WHAT ARE YOU RENTAL RIGHTS DURING THE WATER CRISIS?

Although much hype has (rightfully) been made of the water crisis in the Western Cape, the Eastern Cape is also in the midst of a water crisis, although less publicised.

Tenants and landlords are encountering new problems in relation to the water shortage, such as what happens when it becomes impossible to fulfil your contractual obligations due to circumstances beyond your control, such as water shortage, or “water shedding”?

In terms of common law, the current situation is regarded as an Act of God.

However, this does not allow tenants to cancel a lease without penalties, even if there is a non-supply of water due to water scarcity. Penalties would still apply.

Likewise, a landlord cannot charge a tenant for services they are no longer receiving due to water scarcity.

Tenants and landlords are advised to carefully examine the terms of their lease agreement and to obtain sound legal advice on the provisions of applicable legislation in order to fully understand their legal position in the current circumstances.

Read http://www.bizcommunity.com/Article/196/569/174385.html for more discussion on the topic and contact Goldberg & de Villiers Inc. on 041 – 501 9800 for sound legal advice.

INVEST IN OFF-PLAN PROPERTY BEFORE 1 APRIL TO SAVE ON VAT

Just 1% difference in VAT equates to R10 000 per R1 million spent. Investors who are interested in purchasing units in new sectional title developments stand to gain if they invest before 1 April 2018.

With an economy set to experience more growth than in recent years thanks to a change in political leaders who understand the importance of encouraging investment and stimulating economic development, the time is ripe for savvy property investors to make the most of potential capital growth.

This is according to Chris Renecle, MD of Renprop, who says that even though the 2018 Budget Speech delivered by Finance Minister Malusi Gigaba outlined some tax changes that will make the general cost of living and off-plan property investment more expensive due to the increase in VAT from 14% to 15%, investors who purchase residential property that is subject to VAT before 1 April 2018 stand to save more and gain more.

With regards to residential property sales, the increase in VAT will have an impact on estate agent’s commission, transfer and bond registration fees, as well as the sale price of property where the seller is VAT registered, as is the case with most off-plan sectional title developments, says Renecle.

Renecle points out that investors who purchase before implementation of the revised tax figures on 1 April 2018 will still be able to qualify for 14% VAT provided certain conditions are met.

He explains that even if the handover of the property occurs after 1 April 2018, the purchase of the property will be subject to VAT at 14% if the offer to purchase is concluded before 1 April 2018, the payment of the purchase price and the registration of the property can happen on or after 1 April 2018, as the VAT-inclusive purchase price was determined and stated as such in the offer to purchase agreement.

CAN YOU STILL SELL AS IS? CPA V THE VOETSTOOTS CLAUSE

Both sellers and buyers (of anything – houses, cars, you name it) need to understand how the CPA (Consumer Protection Act) has impacted on the very common “voetstoots” (“as is”) clause.

Firstly, what’s the difference between “patent” and “latent” defects?

Before we get into the meat of this question, let’s understand two important terms –

  • “Patent defects” are those that can be easily identified on inspecting the goods – like a broken door, damaged tiles, cracked mirror or windscreen, and so on.
  • “Latent defects” on the other hand are hidden or non-obvious. They “would not have been visible or discoverable upon inspection by the ordinary purchaser”. Think for example of seasonal roof leaks, broken underground drains, leaking geysers and the like.

Exactly what is a voetstoots clause?

A general rule in our law is that when you sell something, you give the buyer an “implied warranty” against defects. That can be disastrous for the seller as it allows the buyer, on finding a defect, to claim a price reduction (or sometimes cancellation of the whole sale).

Hence the very common voetstoots or “as is” clause. In effect as seller you are telling the buyer “you agree to take the goods as they are, the risk of defects is on your shoulders, and I give no guarantees”. Note however that a seller cannot always hide behind such a clause – if he/she is aware of a latent defect and deliberately conceals it with the intention to defraud the buyer, all voetstoots protection falls away.

And then along came the CPA

The Consumer Protection Act has been a game changer when it comes to consumer rights. In a nutshell, as a buyer you are entitled to receive goods that are of good quality, “reasonably suitable” for the purposes for which they are generally intended, defect-free, durable and safe.

If anything you buy fails, or turns out to be defective or unsafe –

  • You can return the goods to the supplier – without penalty, and at the supplier’s risk and expense – within 6 months of delivery, and
  • You can require the supplier to give you a full refund, or to replace the goods, or to repair them.  The choice is yours; the supplier cannot dictate your options to you.

But does the CPA apply to all sales?

Here’s the rub for buyers – the CPA applies only when the seller is selling “in the ordinary course of business”, so generally “private sales” will fall outside its ambit.

In other words, if you buy a movable like a car from a trader or dealer, the CPA applies and overrides the voetstoots clause. But if you buy from a private seller, the voetstoots clause applies and you have no CPA protection.

What about property sales?

Developers, builders, investors and the like are clearly bound by the CPA.  But for private sellers the position is less clear. Although it seems very likely that one-off private sales of residential property don’t fall under the CPA, there is some suggestion that we won’t be 100% sure on that until either our courts rule definitively on it, or the CPA is amended to provide clarity. On the “better safe than sorry” principle, don’t take any chances – cover yourself as below.

Practical advice for sellers

Cover yourself by disclosing any defects you know of to the buyer, and record any such disclosure/s in a written and signed annexure to the deed of sale. A buyer cannot complain if you have informed him/her of the condition of the goods and they have been bought on that basis.

Then if you are selling in the “ordinary course” of your business, be very aware that the CPA applies to you. Understand its very strict requirements (what is said above is of necessity only a brief overview) and the risks of not complying.

If on the other hand you are a “private seller”, make sure you are covered by a properly-drawn “voetstoots” clause. On the off-chance its validity is challenged, you can avoid later disputes with a “belt-and-braces” approach – have the goods checked out by an independent expert (like a home inspection service when selling a house) and have your lawyer incorporate that into the sale agreement.

Practical advice for buyers

Don’t risk having to fight in court over whether or not the CPA applies to your purchase, and over whether or not any voestoots clause is valid. Be warned that depriving a private seller of the protection of a voetstoots clause is never going to be easy, particularly since you will need to prove that the seller intended to defraud you by concealing a defect.

Rather be sure of the condition of the goods before you buy. If the seller hasn’t provided you with an expert report as above, commission one yourself.

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SHOULD RESIDENTIAL HOME OWNERS BE CONCERNED ABOUT THE POSSIBILITY OF LAND EXROPRIATION TOO?

Newly appointed President Ramaphosa’s State of the Nation Speech caught the attention of many fixed property owners when he highlighted the possibility of expropriation of land without compensation.

Many assumed this would only apply to agricultural land, but others have pointed out that it could apply to all and any types of land, including residential property.

It must be noted that the expropriate of land is not yet an Act, but still a Bill, and must still pass the various procedures and checkpoints before it becomes law that is binding.

It is also important to note that all laws must be in line with the Constitution.  Expropriation of property without compensation directly contradicts Section 25 of our Constitution.

Any mechanisms of expropriation would need to also consider all stakeholders, which includes the greater community, the property owner, the financer of property (in the case of residential property that would most likely be a bank holding the mortgage), etc.

To expropriate residential property without compensation to the holder of the mortgage would undermine the business confidence in the property sector, which contradicts many of the key points of the State of the Nation Speech.

In addition, it would be necessary to change the Land Restitution Act, and present there are no proposed amendments (or even draft amendments) to either this Act, or the Constitution.

Before you sell your residential property off and invest the money elsewhere, read the discussion on:

http://www.bizcommunity.com/Article/196/568/173866.html

TRUSTEES: YOUR RISK OF PERSONAL LIABILITY IN PROPERTY SALES

Firstly, a warning to anyone selling or buying property to/from a trust – have your lawyer check upfront that you are adequately protected by the terms of the sale agreement.

The problem is that contracting with trusts has its own specific set of rules and, as a recent High Court case illustrates, standard sale agreements don’t always provide adequately for them.

A seller sues an unauthorised trustee for R2m – personally

  1. A company sold a “real right of extension” (a right to build additional buildings in a sectional title development) to a trust,
  2. The agreement of sale was signed by only one of two trustees,
  3. The sale agreement was invalid because the trustee who signed had no authority to sign alone,
  4. The seller sued the trustee in an attempt to hold him personally liable for payment of the purchase price of R1,45m (almost R2m with interest),
  5. The seller relied on a clause in the sale agreement – standard in such agreements – in which the trustee “warrants and binds himself in his personal capacity” that he had authority to sign and that the trust would perform in terms of the sale,
  6. A further provision bound any unauthorised signatory as surety and as the purchaser in his/her personal capacity.  The seller’s problem here was that this provision specifically only applied to anyone signing for a company or close corporation yet to be formed.  There was nothing specifically binding an unauthorised trustee to similar personal liability,
  7. The seller tried to persuade the Court that the trustee was nevertheless liable as a surety, or that there was an implied term in the agreement holding him personally liable, but the Court was unimpressed on both counts and dismissed the seller’s claim.

The risk for trustees

As the Court pointed out, the seller could have sued the trustee personally not for the purchase price as such, but rather for damages arising from the trustee’s “breach of warranty”.

There’s a warning there for all trustees – you risk a damages claim in your personal capacity if you don’t make sure that you are fully authorised to sign, that you hold the necessary letter of appointment from the Master of the High Court, that your trust has the power to do whatever you are binding it to do, and that all the terms of the trust deed have been complied with.

And a lesson for property sellers and buyers

On the other hand the seller, to succeed in such a damages claim, would have had to prove the extent of its loss, causation of that loss, mitigation of its damages and so on. Its position would have been much clearer, safer and easier had it, before signing the sale agreement –

  1. Checked for all the necessary signing authorities, compliance with the  trust deed etc (prevention being as always better than cure), and
  2. Inserted a clause giving it clear and strong personal remedies against any unauthorised trust signatory.

The same advice applies of course to anyone buying property from a trust.

Mistakes here will be expensive – take legal advice before you sign anything!

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SECURITY ESTATES: ARE YOUR RULES ENFORCEABLE?

“It is well established that contractual provisions are against public policy ‘… if there is a probability that unconscionable, immoral or illegal conduct will result from the implementation of the provisions according to the tenor’” (extract from judgment below)

When you choose to buy into a security estate or other community scheme, you will invariably become a member of a Home Owners Association (HOA), Body Corporate or the like, and you will be bound to comply with all its rules and regulations.

It’s essential to check that you are happy with them all before you buy because our courts have often confirmed that you will be held to whatever you agree to.

But there are limits, as a recent High Court judgment illustrates…

Speeding fines and dusk-to-dawn curfews

  • A large Golf Estate, comprising a mix of freehold and sectional title properties with extensive common areas and communal facilities, included in its Conduct Rules two sets of provisions –
    • Enforcing a 40 km/hr speed limit on estate roads, and
    • Restricting domestic employees to, amongst other controls, a 6 p.m. to 6 a.m. curfew, limited use of estate roads, and annual renewal of access cards.
  • A homeowner locked horns with the Estate over its enforcement of these rules, initially around its suspension of his and his family’s access to the Estate (and thus to their own home) over unpaid speeding fines.
  • The Court held that both sets of rules are unlawful and invalid, but gave the estate 12 months to regularise them.

First set of rules:  Speed limits and traps

Holding that although the roads in question are within the estate’s boundaries they are still “public roads” as defined in our Road Traffic laws, the Court held that the Estate could not lawfully impose speed limits nor enforce them without the necessary authority from the relevant MEC or municipality.

The Court suspended its invalidity ruling for 12 months to allow the Estate time to apply for such authority. Presumably that’s likely to be given to the extent that the authorities consider the rules to be reasonable in light of the Estate’s expressed need to protect children, pedestrians and wildlife on the roads.

Second set of rules: Restrictions on domestic employees

These, held the Court, severely restricted the constitutional rights of the employees in question and affected their basic rights to human dignity, equality, freedom of association, freedom of movement, freedom of occupation and fair labour practices. “Their position within the estate”, said the Court, “is reminiscent of the position that prevailed in the apartheid era: while they are good enough to perform domestic duties for their employers on the estate, which include the task of pushing perambulators on the roads, they are precluded from exercising any rights derived from public law and the Constitution.”

Thus, held the Court, “to the extent that these rules restrict the rights of domestic employees from freely being on and traversing public roads in the estate, I consider them to be unreasonable and unlawful.”  This invalidity ruling was also suspended for 12 months.

A warning to all estates

All HOAs and Bodies Corporate need to check their rules and regulations for legal validity.  The Court again: “If in fact there are other associations and/or estates in the country who, like the first respondent herein, either through ignorance or plain arrogance on their part, have seen it fit not to comply with statutory provisions, it’s time that they did.”

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