Although applying for a joint bond with a partner to whom one is not married or a friend may be a viable option to enable persons to enter into the property market, it may become a costly and complicated exercise if the relationship ends or circumstances change. If one of the partners wishes to be free from the bond and agrees to be removed from the bond, the remaining partner will have to apply to the bank to be substituted as debtor. The bank will only approve such a substitution if the remaining partner qualifies for the loan as a whole. The partner being removed from the bond will also be required to sell his/ her share in the property to the remaining partner. Alternatively the property should be sold as a whole to a new owner and the bond should be cancelled. All of these options will result in the parties incurring costs and expenses for instance the costs to register a substitution of a debtor, transfer costs relating to sale of a share in the property, transfer duty and rates and taxes for clearance purposes. It is recommended that advice be obtained on the legal, tax and cost implications before entering into such an arrangement.
Elderly parents often consider transferring their immovable property to their adult children instead of bequeathing it to them after their death.
There may be practical advantages to such a decision but the legal, tax and cost implications should be carefully considered.
The transfer of the property is usually in the form of a donation (a gift) or the sale of the property to the child. A written contract must be entered into between the parent and child. The following should be carefully considered and the advice of an expert should be obtained.
DONATIONS TAX : If the property is donated to the child, donations tax of 20% is payable by the parent to SARS on the value of the property. Every person is entitled to an annual exemption of R100 000 in respect of donations tax. The first R100 000 of the value of the property will therefore be exempt from donations tax and the balance will attract donations tax.
ESTATE DUTY : The above tax implications should be carefully compared to the estate duty implications if the property should be bequeathed to the child. The parent may be entitled to a surviving spouse rebate and a rebate of R3,500,000.00. It may therefore not be necessary to reduce the value of the estate of the parent in order to reduce estate duty. Sufficient cash must however be available in the estate to cover the transfer costs. Estate planning advice should be obtained.
TRANSFER DUTY : Bequests of immovable property are exempt from transfer duty. Whereas if the property is transferred during the lifetime of the parent, the child who acquires the property will be liable for transfer duty on the value of the property above R900,000.00. SARS requires two independent valuations of the property if the parties to a transaction are related.
OTHER COSTS : If there is a bond over the property, the outstanding balance of the bond would have to be cancelled. Depending on the financial arrangements between the parties, the child may be required to obtain a bond in his or her name in respect of the property before the transfer will be permitted. Attorney’s fees would be payable in respect of the bond cancellation, bond registration and the transfer of the property according to prescribed rates. It is recommended that quotations of all costs be obtained to ensure that there are no unexpected expenses.
At Goldberg & de Villiers Inc, our Property Law Department, namely Adri Ludorf, Tracey Watson-Gill and Nicholas Mitchell, assisted by Bardine Hall will gladly assist you with any of your Property Law related needs. Nicholas Mitchell, heads our Estates Department will also be happy to assist you in this regard. Please contact us on 041-5019800.
All contracts are based on consensus between the parties to it. Often, the parties think that they are in agreement and have reached consensus, but in fact are mistaken. If the contract is concluded and it later turns out that it was based on a mistaken belief that a certain state of affairs existed when in fact they did not, the aggrieved party may want to opt out of the contract, or claim relief from the other party.
Mistakes are classified into two categories, namely those that are material and those that are non-material. A material mistake is one which goes to the heart of the contract and completely negates consensus. Consequently, no contract can be said to have existed. In the case of a non-material mistake, a valid contract comes into existence. However, the contract is voidable (rescindable) if consensus was reached in an improper manner by way of misrepresentation, duress, undue influence or commercial bribery.
Mistakes can relate to the subject matter of the contract (error in corpore), the true nature of the contract (error in negotio), the identity of one of the parties to the contract (error in persona) or to an attribute or characteristic of the subject matter of the contract (error in substantia). An error in substantia is usually not regarded as a material mistake, whereas all of the others generally result in a material mistake.
When concluding a contract, it is important to be very clear regarding all of the aspects of the contract, so as to avoid a situation where the contract might be considered of no force or effect due to one of the reasons mentioned above. It will be impossible to try and uphold the terms of an agreement which is rendered of no force or effect due to a material mistake.
For quality legal services contact Goldberg & de Villiers Litigation Department on 041 501 9800.
A restraint of trade is characteristically used in an employment situation where an employee has access to the employer’s client lists and due to the nature of the position gains trust, confidence and personal relationships with the clients.
A typical example of such an industry is the insurance industry. Whilst a restraint of trade may be imposed it is essential that it be well constructed and that the intention of the contracting parties be spelt out clearly.
In a recent matter, company was upset that its employee had acquired an ex-client of their business. The company launched an interdict application in the Labour Court which application centred on whether a previous client of the company is still a protectable interest in relation to the restraint of trade.
The Court held that if the restraint does not specify the definition of client, it is only capable of being interpreted as current clients of the company. The Court held further that should a client leave the company of his or her own volition and without being induced or enticed to leave by the restrained employee and move his or her business to that restrained employee, the restrained employee cannot be seen to have breached his or her retrained.
This particular case was dismissed against the company and the company was ordered to pay costs.
The important lesson to be learnt from the matter is that a restraint is only as good as its terms and only a properly reasonably drafted restraint will be enforceable.
For more information in relation to restraints of trade and other employment law aspects, please do not hesitate to contact Tracey Mouton on 082 898 7841 or firstname.lastname@example.org.
Your first step is to establish how much the debt is, and who it is owed to. The most direct way to do this is to obtain a copy of your credit report (from a credit bureau), and then confirm the information with the attorneys who acted on behalf of the party you owed the debt to. The attorney can confirm the listed judgement(s) against you, as well as the full outstanding balance. Remember this is most likely more than the amount of debt you left unpaid, as there will be additional costs such as interest and legal fees.
After you establish this information, agree upon a settlement amount and a payment schedule. Make sure that you pay the full outstanding amount (including the costs) on or before the date you agreed to.
Once you have paid all outstanding debt, you can request the following documents: Paid up Confirmation and the Consent of Rescission of the judgment.
You now need to go back to the court where the original judgment against you was obtained (e.g. Port Elizabeth Magistrate’s Court), and apply to schedule a hearing to officially rescind the judgment against your name.
You will need to provide the clerk of the court the Consent of Rescission you obtained, so that it can be made an order of court.
Once you have done this, submit the court order to the relevant credit bureaus, so that the judgment against your name can be deleted.
For more information contact us on 041 501 9800.
“The secret of getting ahead is getting started” (Mark Twain)
That’s great advice from Mark Twain, so if you are sure that you are cut out for the exciting, hurly-burly life of an entrepreneur, and if you have a viable business concept, take advice now on how to get started.
In our previous article in the series “Choosing the right legal entity for your business” we looked at the private company option. In our final article in this series we consider the plusses and minuses of trading in a business trust.
WHAT IS A BUSINESS TRUST?
In summary, a trust is a contractual arrangement that allows trustees to hold assets (without owning them) for the benefit of the trust beneficiaries.
Most trusts are not “business trusts” – they are just used to hold assets. In the case of “living” trusts (the type of trust most likely to be encountered in this context) assets are initially provided by a “founder”, “settlor” or “donor”, and then owned, controlled and managed by trustees in their capacities as such (not in their personal capacities), for the benefit of beneficiaries. The trustees can, and usually do, acquire more assets for the trust thereafter, again just to hold/control/manage.
With a business trust the trustees go one step further – they trade for profit, again for the benefit of the beneficiaries.
Strictly speaking, trusts aren’t separate legal entities like partnerships and companies, but in practice they are often treated as though they were, and some legislation (tax in particular) specifically defines them as such.
5 ADVANTAGES OF BUSINESS TRUSTS:
1. Trusts, like companies, have “perpetual succession”, so they survive the death/incapacity/insolvency/removal of trustees, with all the practical benefits that entails. For example, the business can continue to operate normally after the death of the founder or trustees, rather than be tied up in the process of winding up the deceased estate. And trusts that are properly created and administered can protect assets from creditors in the event of insolvency, divorce etc of the founder/trustees/beneficiaries.
2. The trading risks of the business lie with the trust i.e. the trust’s assets are at risk from trading liabilities, not the personal assets of the parties to the trust. Trustees, unless of course they have signed personal suretyship for any trust debts, generally risk personal liability only if they fail to comply with the provisions of the trust deed and other legal requirements. In particular they have very strong fiduciary duties towards beneficiaries, and must always act in their interests. They must also observe the fundamental requirement that trust assets be treated as such, and not as their personal assets.
3. As is the case with companies, you may find it easier to raise funding for a trust than for a sole tradership or partnership.
4. Tax: Possibly an advantage … see below.
5. Savings on death: Trusts have in the past often been used to freeze the value of growth assets as part of an estate planning exercise to reduce estate duty, capital gains tax and executor’s fees. These savings can be substantial, but be aware of factors such as the high tax rates applicable to trusts (see below) and of the various recommended changes to our tax and estate duty laws (such as the Davis Tax Committee proposals) which could – if they are ever implemented – reduce the attractiveness of trusts for this purpose.
…. AND 3 DISADVANTAGES
1. Formation: Like companies, trusts require formal procedures for formation in the form of drawing up and registration of a trust deed, and appointment of trustees by the Master of the High Court. Factor the resulting delays and costs into your plans. Don’t take shortcuts here! An incorrectly worded trust deed for example will cause you all sorts of unnecessary pain.
2. Costs of administration will generally be higher than with sole proprietorships although typically lower than with companies. But check upfront with your advisors what you will be in for.
3. Tax: Possibly a disadvantage … see below.
THE TAX ANGLE:
As with all the other possible trading entities you can choose from, it is impossible to give general advice here. But as an overall comment, trusts have lost a lot of favour in recent years as a result of various government “attacks” on trusts, and they are now highly taxed compared to individuals, partnerships and companies. Apart from generally being subject to higher rates of tax, they are also denied the various tax exemptions and rebates available to individuals.
There are a host of factors to be considered here, and you need to seek advice tailored to your particular circumstances. For instance, it may or may not affect your business trust that the primary residence CGT exemption isn’t available to trusts.
Moreover government has given out strong signals that this “hostile” trend will continue. In 2017 already, interest-free and low-interest loans to trusts have become subject to the risk of being taxed as donations. Now the “conduit principle”, whereby income can be taxed at personal rates in the hands of beneficiaries rather than in the trust at a flat rate of 45%, is reportedly under threat.
Even more so than with other types of trading entity, it is essential to get specific guidance on whether a business trust is the most tax-efficient entity for your particular situation.
The bottom line is this – take full professional advice on both the legal and the tax implications of using each type of entity (or any combination of entities) before you start trading.
This is the fifth and final article in our series “Choosing the right legal entity for your business”. We hope you have found these articles a useful introduction to a most important subject.
And if you ever wonder why your business is so important to you, read “Entrepreneurs love their companies like parents love their children: study” on MedicalXpress.
For more information and advice, give us a ring on 041 5019800.
Employers are frequently faced with delinquent employees who fail to attend work under the guise of being “too ill”. Some employees will bring a doctor’s certificate setting out an ailment that cannot really being diagnosed, such lumbago, migraine or gastro (to name a few).
Such a situation needs to be analysed carefully by the employer in order to ascertain whether there is persistent absence for short term illnesses or in fact sick absence abuse.
If the employer accepts that the employee was genuinely ill and as such accepts the certificate, that employee cannot be disciplined or dismissed for the abuse of sick leave. In such a case an employee is to be repeatedly counselled by its employer. Should the intermittent, however persistent, sick leave reach a point in which such absenteeism is affecting their contractual requirements of the employee’s contract, the employer may submit the employee to an incapacity hearing, which may ultimately lead to the employee’s dismissal.
In the case where the employee indicates that they are ill but repeatedly fails to bring a certificate and / or show signs of a troubled employee, such as taking sick leave on a Monday, Friday, a day before or a day after a Public Holiday or after pay day, such absenteeism should not be condoned and the employee is to be disciplined for the abuse of sick leave. Once corrective discipline has been carried out, continued abusive sick leave may result in the employee’s dismissal for misconduct.
For more information in relation to the above or the conducting of an HR audit to ensure policies and procedures are in place to guard against the above, please contact Tracey Mouton on 041 501 9832 or email@example.com
In terms of the Rental Housing Act the tenant and the landlord must jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain the existence or not of any defects or damage therein with a view to determining the landlord’s responsibility for rectifying any defects or damage or with a view to registering such defects or damage.
At the expiration of the lease the landlord and tenant must again arrange a joint inspection of the dwelling with a view to ascertaining if there was any damage caused to the dwelling during the tenant’s occupation thereof.
Failure by the landlord to inspect the dwelling in the presence of the tenant as contemplated above is deemed to be an acknowledgement by the landlord that the dwelling is in a good and proper state of repair, and the landlord will have no further claim against the tenant who must then be refunded with the full deposit plus interest by the landlord.
For more information, contact Bardine Hall on 041 501 9800.
Clients always ask their attorney to reclaim the costs that they are paying the attorney from the party who they have sued, or intend to sue. While your attorney will include a request for costs in the Summons that they serve on the Defendant, they can never guarantee that all of the costs will be recovered from the Defendant.
The reason for this is that even when your case is successful, the court will, in most cases, order what is called costs on a “party and party scale.” Party and party costs are governed by the tariff applicable to the court in which your case is being run. For example, if your matter falls within the jurisdiction of the Magistrate’s Court, the fees you can claim from the Defendant (assuming your case is successful) will be capped by the tariff applicable to the Magistrate’s Court.
Most attorneys will however charge at a rate higher than the tariff. This means that the fees which an attorney charges his client (ie attorney and client costs) are higher than what the court allows the successful party to recover from the unsuccessful party.
Also, party and party costs are limited to work that the attorney must do to move the matter forward. Only work which is furthering the matter and has been reasonably done to that end can be claimed on a party and party scale. However in most cases an attorney and their client will, in the interests of being thorough, engage with each other far more often than what is strictly speaking reasonable to move the matter forward.
Costs are also generally only awarded at the conclusion of a matter, whereas many attorneys will agree with their clients to submit interim statements of account to cover disbursement costs and the fees for work carried out in the billing period. Only at the end of the matter will the party and party fees actually be recovered from the unsuccessful party.
It is important to ask your attorney to discuss the costs aspect of litigation with you and come to an understanding regarding -the manner in which the case will be dealt with. Litigation can be an exercise in patience and objective decision-making and it is best that you maintain an open line of communication with your attorney.
For quality legal services and advice, give us a call on 041 501 9800.
A contract is a bilateral juristic act, founded on agreement. That is legal language for an agreement between people (natural persons or commercial entities) which creates certain rights and obligations between them. Thus, put simply a contract can be defined as an agreement entered into by two or more persons with the intention of creating a legal obligation or obligations.
The word “agreement” means that there is consensus between the parties to the contract. In other words, their minds meet regarding all material aspects of their agreement. Without consensus there can be no agreement, and therefore no contract.
Parties have freedom of contract, which means that they can agree to anything that is possible and lawful. Once the parties have reached an agreement, the terms of their agreement are binding on them.
The question is often asked, what if later on in the contractual relationship, one of the parties wants to make amendments to the contract for some reason? Can they unilaterally change the terms of the agreement to suit their current needs?
Unless the parties agree to change the terms of the contract, or have agreed at the inception of the contract that one or both of the parties can make certain unilateral changes, a new agreement must be reached to incorporate that which the one party seeks to amend.
For example, a well-known gym contracts with a 17-year-old and in signing the agreement, the gym states that as long as the new member remains on his current contract, he will always pay the student rate (notwithstanding inflation of course).
10 years later, the gym advises the member that they will be moving his contract to adult membership fees as he is now a working adult.
At the inception of the contract, the offer was made – and accepted – that the member will pay the student rates as long as he remains a member. Clearly, there was consensus on a material aspect of the contract, and in fact the parties’ minds met on this aspect, inducing the member to join. He also fulfils his obligations by paying his monthly premium and remaining a member. The gym cannot unilaterally alter the terms of the contract and force the member, out of the blue, to pay adult rates. They are bound by the terms of the contract.
Furthermore, in terms of section 50 of the Consumer Protection Act, the supplier (the gym in the example above) must provide the consumer with a copy of the written agreement, or of the transactions arising out of the contract if it was not in writing.
For legal advice, contact our professional team on 041 501 9800.