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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SELLERS AND LANDLORDS: USING AN UNREGISTERED ESTATE AGENT

With media reports suggesting that up to 50,000 agents may be operating without the required Fidelity Fund Certificate (FFC).  The real figure is likely to be a lot less in that many former agents have probably just closed up shop in the last 10 years, but even so there is a chance that the agent who sold or rented out your house for you is (whether inadvertently or by design) unregistered.

Using an unregistered agent …

  1. Only registered estate agents (and those practicing attorneys not required to register as agents) have the legal right to claim remuneration/commission.  So an unregistered agent won’t be able to enforce any commission claim against you.
  2. Of course you would then stand to save a great deal of money in commission.  The question is, should you take the risk of not checking upfront?  It boils down to this – can you afford to trust your most important asset to someone who may not be registered with a professional body and backed by a Fidelity Fund?

For most of us the best advice is to rather err on the side of caution.  Check for registration, and in any doubt ask your lawyer for help before agreeing to anything.

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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.

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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