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Why a purchaser pays fees but the seller nominates the attorney

 

“Can a seller of a property refuse to use a conveyancer provided by a purchaser?” was a question that sparked a lot of interest from the crowd who attend the weekly property workshop hosted by a Johannesburg based local property.

In response to this question, a local property estate manager, noted, “Our common law determines that a seller is the party entitled to nominate who the transferring attorney must be, given that the seller carries more risk than the purchaser.

Nothing prohibits parties from agreeing that the purchaser can nominate the transferring attorney, although often in practice, the seller refuses to agree to such a condition and the purchaser then concedes for want of having the property.”

He added,  “it could be said that it makes more sense for the seller to nominate the transferring attorney as the purchaser is required to raise the purchase price, cover the transfer fees, meet suspensive conditions such as financing etc

The seller would generally feel more protected by his attorney managing these important elements and ensuring a speedy transaction and receipt of the purchase price.”

The transferring attorney must ensure that the purchase price is secured and available and a purchaser’s attorney may be persuaded to rely upon assurances of his client that the money is available, with dire consequences for both purchaser and attorney.

Should this prove to be incorrect, it is generally seen that the seller, as the owner of the property to be transferred, stands to lose more and therefore has a stronger claim to the appointment of the conveyancer.

The property agent added, “In spite of, of who appoints the conveyancer, the conveyancer owes a duty of care to both parties and must represent both parties fairly. Unless a dispute arises, in which case the transferring attorney will be allowed to act on behalf of the party who nominated him.”

“It remains open for parties to negotiate the appointment of the transferring attorney and include a clause to such effect in the contract of sale and good grounds may exist which supports the purchaser being entitled to appoint the transferring attorney.”

 

 

 

 

Payment of future rates for clearance certificates not allowed in terms of the Systems Act

 

The question addressed in the Nelson Mandela Bay Municipality vs Amber Mountain Investments 3 (Pty) Ltd (576/2016) [2017] ZASCA 36 judgment was whether, for purposes of issuing a rates clearance certificate, the seller of immovable property can be held liable to pay the full annual rate on the property or only the rates calculated until the property is transferred.

According to a local property lawyer, Amber Mountain Investments 3 (Pty) Ltd (AMI) was the previous owner of immovable property which it sold to another company. Before transfer of the property, AMI required a rates clearance certificate, in terms of section 118 of the Local Government: Municipal Systems Act 32 of 2000 from the Nelson Mandela Bay Municipality (the Municipality).

The Municipality required payment of rates until the end of its financial year, being 30 June 2010, as a condition for furnishing the certificate, and presented AMI with an account for the sum of R2,281,014.68.

“This was in accordance with the Municipality’s rates policy which required that in the case of an application for a certificate in terms of s 118 of [the Systems Act], the full amount which remains unpaid, inclusive of all instalments, for the remaining financial year shall be payable”

He noted “AMI paid the amount, under protest, in order to obtain the certificate and to effect transfer. At the time of payment, AMI’s actual indebtedness to the Municipality was R1,214,482.68.

AMI therefore claimed that this constituted an overpayment of its obligations to the Municipality and successfully claimed reimbursement thereof in the High Court. (The judgment did not indicate whether or not the ‘overpaid’ amount was reimbursed to the seller by the purchaser or if any such arrangement was in place between the parties to the sale agreement.”

In this case, the Municipality’s appeal to the Supreme Court of Appeal, the issue was the validity of the Municipality’s rates policy. The Municipality contended that in terms of sections 12 and 13 of the Rates Act, an owner was obliged to pay one annual property rate and that such liability arose, and was fixed, on the first day of the Municipality’s financial year, namely 1 July. It was thus entitled to claim the full year’s rates upfront, as per its policy.”

  • Section 13(1) (a) of the Rates Act provides that “(a) rate becomes payable . . . as from the start of the financial year”.
  • The words “as from” denotes a commencement period, as opposed to the word “on” which would have denoted a particular date for payment. (The use of the singular noun, ‘a rate’, so the argument went, in these sections and other sections of the Rates Act, is indicative that a single rate, for the entire financial year, is payable at the start of such financial year.)
  • The section in the Rates Act must be interpreted to mean that the rate was payable within the period of the financial year and not at the beginning thereof as contended by the Municipality. The word “payable” only fixed the rate for the financial year, but did not mean that rate was also due at the same time.

The Rates Act distinguished between what was “due” and what was is “due and payable”. Section 26 of the Rates Act empowers a municipality to determine when the rate was due. If it were payable in instalments, then (in terms of section 27 of the Rates Act) the municipality would be required, by way of written accounts, to advise the payee of the date on which the rate would be due, and the obligation to make payment would only then arise.

The argument advanced on behalf of the Municipality, that the determination of an annual property rate was indicative of an intention that a single rate for the entire year was payable at the start of each financial year therefore could not be sustained.

  • The clear intention of the legislature was to limit the period in section 118(1) to two years preceding the date of application for the certificate. Section 3 of the Rates Act empowers a municipality to make a rates policy that was ‘consistent’ with the Act. The lawyer concluded by stating, “The appeal was therefore dismissed with costs.”

 

Great News for New Homeowners – New Owners NOT liable for previous owner’s debt

The question on everyone’s mind is when the Constitutionality of Section 118 of the Municipal Systems Act (MSA) will be tested by our courts. Well that time has come and the Constitutional Court has spoken.
The Constitutional Court recently handed down judgement in the Jordaan and Others vs City of Tshwane Metropolitan Municipality and Others, and declared that a new owner is not liable for the previous owner’s debts arising before transfer of the property.
The unconstitutionality of Section 118 has cause of a lot of concern under homeowners, as this section is viewed as enabling a municipality to hold a new homeowner responsible for the arrear municipal debts of a previous owner. According to this section, an amount due for municipal fees is a charge upon the property and enjoys preference over any mortgage bond registered against the property, thereby creating a security provision in favour of the municipality for the payment of the outstanding debts. No time limit is attached to this provision and it does not matter when the secured debt became due.
The Court stated that Section 118(3) does not require public formalisation (e.g. registration in the Deeds Registry) and thus is required to give notice of its creation to the world. Therefore, to avoid unjustified arbitrariness in violation of Section 25(1) of the Bill of Rights, Section 118(3) of the Municipal Systems Act must be interpreted so that the charge it imposes does not survive transfer to a new owner. According to the Constitutional Court, section 118(3) is constitutional and is well capable of being interpreted so that the charge does not survive transfer to the new owner and it declared that, upon transfer of a property, a new owner is not liable for debts arising before transfer from the charge upon the property under Section 118(3) of the Local Government: Municipal Systems Act 32 of 2000.
New homeowners can feel relieved knowing they are free of historical debt from previous owners

Vital Overview of the Property Practitioners Bill

A local property agent noted, “in terms of Section 1 of the Bill a “property practitioner” will now include a bond broker, home inspector, facilitator of an agreement of sale or lease (including a Homeowners’ Association), a seller of timeshare or fractional title, a property manager, and a property developer.
Exclusions from this definition are attorneys and candidate attorneys, sheriffs of the court, a person offering property practitioner services but not in the normal course of his business, and a person selling his own property (but excluding a property developer).”
The requirement that the person earns some sort of gain for their services has been omitted from the definition. Even persons performing the above functions without reward may be deemed to be property practitioners hence subject to the regulatory requirements.
He also noted that Section 20 of the Bill brings Real Estate in line with other service industries like insurance and banking, as it establishes the Property Practitioners Ombud. This takes the responsibility for consumer complaints away from the regulatory authority.
The Ombud will deal with complaints from the public against property practitioners and follow a process to handle these complaints, a mediation process will be utilised. The Ombud’s authority may also hear disputes between property practitioners, but only if both parties agree to this.
The new Bill seeks to imbue inspectors of the regulatory authority with the power to enter any premises (other than the private home) of a property practitioner and to seize certain articles, without a warrant.
This is a potentially dangerous power to put into the hands of persons who may not be conversant with constitutional rights and, if this provision passes into law, it is likely to generate litigation against the authority.
The existing Act prohibits a person from offering estate agency services whilst not in possession of a Fidelity Fund Certificate (FFC). The act goes on to state that a person who is not in possession of a current FFC is not entitled to a commission.
The new Bill preserves the spirit of the existing Act in this regard and goes one step further in requiring that any remuneration earned by a property practitioner whilst not in possession of an FFC must be refunded to the person who provided the remuneration upon demand.
The local property agent mentioned that three new additions to section 49 which deals which deal with instances in which a property practitioner has disqualified automatically from being issued an FFC from the authority and thereby prohibited from trading lawfully.
“The first is the requirement to be in possession of a tax clearance certificate. It is highly unfair and probably not legally sustainable to disqualify a person from being issued with an FFC where they have a genuine dispute with SARS, and therefore cannot obtain a tax clearance.
Secondly, being on the Treasury tender defaulters list as a provider (even as a director, member, trustee, partner, or shareholder) is now an instance for disqualification. The practicality of this provision is questioned as it will be very difficult for the authority to determine who the shareholders of public companies on that list are.
Thirdly, a property practitioner who is not is possession of a BEE certificate is automatically disqualified. This provision is unlikely to remain in its current form as the new schedules to the BBB-EE Act deem an enterprise with an annual turnover of less than R10 million to be an “exempt micro-enterprise” (“EME”). Such EME is not permitted to be issued with a BEE certificate, even if it required one.”

Property practitioners may not accept a mandate to sell or let a property without a mandatory disclosure from the seller or landlord. This applies to both commercial and residential properties.
The signed mandatory disclosure will form part of the sale or lease agreement. If a written mandatory disclosure is not included, then the agreement will be interpreted as if no defects or deficiencies were disclosed.”
He concluded by stating “We await an additional revision of the Bill in due course as the property sector is still contributing more commentary and input.”.

Breaking News for Property Owners!

The Constitutional Court ruling on Tuesday, 29 August 2017, favours all property owners! The ruling stated that municipalities cannot hold a new property owner liable for a previous owner’s historical municipal debt.

What does this ruling mean for Business and Property Owners? The precedent-setting ruling will provide relief to owners, who have been struggling with this burden for years and have been denied municipal services until the debt had been paid. According to Justice Edwin Cameron, “…the court found that upon transfer of a property, a new owner is not liable for old municipal deb.” The historical debt includes water, electricity, rates, and taxes charges associated with a property.

When a property is sold, municipalities would be the first to claim the debt from the proceeds of a property sale. But if the previous owner still owed the municipality debt spanning over 2 years, the property was not allowed to be transferred to the new owner, according to section 118 (1) of the Municipal Systems Act. Judge Dawie Fourie declared Section 118 (1) and (3) of the Municipal Systems Act unconstitutional, as these sections “…unjustifiably limited the property rights of new owners under the Constitution.” Arguments against Section 118 included that making a new owner liable for historical debt could promote the deprivation of property, in line with the prescripts of the Bill of Rights.

What does this mean for the Municipalities? According to the ruling by the Constitutional Court, municipalities may not attach and sell the property to settle the debt of the previous owner. Furthermore, municipalities may not refuse to supply municipal services because of outstanding historical debts. Property owners can now breathe a sigh of relief knowing that they will not be charged with others debt!

8 Valid Reasons Why Renting Can be Amazing

 

Homeownership is an ultimate goal set by many. Both renting and buying has financial advantages. However renting does have an edge especially when the economy is unstable and poor.

There are great financial benefits to renting as opposed to buying a house. Check out eight reasons why renters can have the better financial deal than homeowners.

  1. Renting a property, means that your landlord is responsible for all maintenance and repair costs. Unless you are directly responsible for the repairs that have to be done.

 

  1. Renters have the better financial deal upon signing as a house with a mortgage requires a sizable down payment. The deposit for renting a property is much lower compared to buying a property.

 

  1. Most Rent amounts are certain for the span of the lease agreement, if it’s a fixed-term contract. This makes it easier to budget your money as you know how much you are meant to pay.

 

  1. Property values go up and down over the years. The property value of where you stay depends on the area you live. This affects homeowners in a big way. It affects renters to a much lesser because they can move out to a cheaper place anytime.

 

  1. By renting you can save more than a homeowner. Homeowners that have debts can have trouble saving if they cannot properly manage their budgets. Renting is mortgage-free.

 

  1. When you purchase a house you are tied down to living in that location for at least a few years. Whereas if you are renting a property you are flexible to move.

 

  1. You can also share your rental space if it can accommodate more people. Housemates are useful because you can split the bills and end up having best friendships.

 

  1. Rental properties usually have a more compact floor plan that is set. Therefore renters can often expect to face lower utility costs.

 

The choice between renting and buying is a big decision to make. Before making a hasty move, review the details and make the financial decision that is the best for you and your family.

Kelly Philiphs who is happy with renting states, “There are so many considerations when deciding whether to buy a home. It’s not the ‘ideal’ scenario for all families.

Don’t be fooled by promises of tax savings that is not always the case.

A home is a huge investment so be sure to research what it might mean for you before taking the leap and don’t be afraid to say no. I did.

As I sit on my rented porch, staring out at my rented view while my kids happily play inside a house that they’ve already made their home, I don’t regret my decision one bit.”

 

 

Installation of a Fibre Network Within a Common Property

 

A Fitzanne estate property agent noted “I was recently confronted by the trustees of various bodies corporate concerning the installation of a fibre network.

Fibre technology is the latest trend as it is designed to push large amounts of data very quickly making it much more attractive for its users than using a telephone, ADSL line or mobile service such as 3G.

However, installing the fibre network normally requires the lifting of paving and the laying of conduits and there is uncertainty amongst trustees as to whether they need consent for the installation.

As well as if the installation of the fibre network amounts to an improvement to common property that is necessary or not.”

He also stated that an improvement to common property is dealt with in the prescribed Management Rule (PMR) 29, Annexure “1” to the Regulations promulgated under the Sectional Titles Schemes Management Act 8 of 2011 (the “STSM Act).

He explained that the installation of the fibre network is paid for by the owner/s requiring the service and not by the body corporate. “This applies in most cases and has applied in all the instances that I have dealt with.

In my view, the question whether or not an improvement to common property is reasonably necessary will only be relevant when the body corporate pays for such improvement, e.g. the installation of a swimming pool or tennis court. Therefore, and in my view, PMR 29 does not apply.”

He gave an example to clarify, “To simplify the situation, it can be compared with Telkom installing a phone or the local council installing an electricity infrastructure on the common property for prepaid services to the residents.

In such instance, the trustees must ensure that any damage to the common property is repaired and the common property is restored to its original state.

Therefore, it is my considered submission that the trustees are able to consent to the installation of a fibre network subject to reasonable conditions, such as the owner accepting liability for any damage caused to the common property by the service provider.”

He added, “Should the service provider fail to repair such damage or fail to restore the common property to its original state, the Body Corporate can attend thereto and keep the owner liable for the reasonable repair costs.”

 

 

How to avoid sectional title parking conflicts

 

Living in a sectional title scheme sometimes results in arguing and fighting over parking spaces. Who is responsible for deciding where one parks? Is it a free for all parking matter?

According to a Fitzanne Estates property agent, “When it comes to parking bays in a sectional title scheme you must note the type of ownership that one has in a sectional title scheme.

Firstly, you will have full ownership of your section that you purchased. Secondly, you will have an undivided share in the common property of the scheme”

He added, “Thirdly, you may have a right to an exclusive use area such as a parking bay or a garden area. This does not imply full ownership.

The owner or occupier of a section must not (except in the case of an emergency) without the written consent of the trustee of the scheme park a vehicle, allow a vehicle to stand or permit a visitor to park or stand a vehicle on any part of the common property.”

Problems can arise in a sectional title scheme especially when home owners do not agree on who can use additional bays. Some home owners tend to want to use exclusive certain parking places and this hence causes conflicts.

The solution to this problem can be solved if the body corporate can set up a rental pool which allows homeowners to lease parking bays on an annual basis

The property agent noted, “Letting of common property in this way is covered in the Act, and such a system also means that the body corporate receives a steady income from the parking, because any bays that go vacant can immediately be re-let to other owners that need them.”

He also stated, “Another problem is what to do with a common parking bay that has been used by a homeowner, who is then selling their home. A general rule that can be used to solve this issue is to prevent homeowners to have the power to transfer the lease over to anyone else, including the new owners of their unit.

 

These parking bays should go back into the rental pool and let to the next person on the waiting list. Indeed, the only time that a unit owner can sell a parking bay is if it is an exclusive use area in terms of the plans.

 

We advise anyone who is buying a sectional title unit and being asked to pay for such a space to first confirm that this is actually the case by referring to the sectional title plan.”

It is also vital for the body corporate to make sure that solutions to sectional title schemes parking are in place so as to avoid conflict and to make sure that all homeowners are on the same page.

Many sectional title schemes have tacit arrangements, generally established over long periods of time, in respect of who is “entitled” to park where. Hence it’s vital to seek clarity and full understanding of where you can park.
 

How to conduct meetings at a sectional title scheme?

A Fitzanne Estates property agent noted that members of a Body Corporate must be aware of the Sectional Titles Schemes Management Act 8 of 2011 (“STSMA”) as it clearly outlines how meetings should be conducted.

“A Body Corporate is obliged to comply with the provisions of the STSMA and regulations. A notice period of at least 14 days’ written notice must be provided for an annual general meeting

A shorter period of 7 days’ written notice is allowed if the trustees find it necessary to provide shorter notice due to the urgency of a matter or where all members have agreed thereto in writing. At least 30 days’ written notice is required where a special or unanimous resolution has to be passed at the meeting.”

They also explained that a method of notice is where a special or unanimous resolution will be passed. The notice must be delivered by hand or by pre-paid registered post. In addition (not in substitution of the mentioned methods of delivery), a notice may also be provided by fax or email.

“A notice of a meeting, where only an ordinary resolution will be passed does not require notice by pre-paid registered post. Notice by normal post will suffice.”

For the meeting location, the general meeting must be convened within the local municipal area where the scheme is situated unless the members have by special resolution decided otherwise.

Quorum requirements for schemes with less than four primary sections must have two-thirds of the total votes in value and eligible to vote present. Schemes with four or more primary sections must have one-third of the total votes in value and eligible to vote present at the meeting to have a quorum present.

He also explained the voting rights, “members who are in arrears with their levy contributions or are breaching the rules of the Body Corporate, after a court or adjudicator has given a judgment, or ordered to pay the arrear contributions, or to comply with the rules of the Body Corporate, will not be entitled to vote at general meetings.

However, these members are still entitled to cast a vote when a special or unanimous resolution are considered. Proxies: a member may be represented either in person or by proxy at a meeting, provided that a person does not act as a proxy for more than two members.”

They also noted that failure to provide proper notice of a meeting does not invalidate decisions taken at such a meeting, if the Body Corporate made a reasonable attempt to give proper notice of such a meeting to all parties entitled to notice.

“It is important that trustees and members of a Body Corporate familiarise themselves with the requirements prescribed in the STSMA and regulations to ensure that a meeting is called and convened correctly,” they concluded.

Dealing with arrear rent collection and eviction of tenants the right way.

It has become widespread that owners of property, which is leased to tenants and their appointed leasing agents, find it difficult to obtain redress with regards to due payable rental money.

The money is used as a reimbursement for repairs of damage to property by a tenant or the eventual eviction of tenants who are in breach of the lease agreement. Reasons that landlords experience such difficulties are because legislative procedures are not properly followed.

According to a Fitzanne Estates property agent, collecting arrear rent and obtaining an eviction order against any defaulting tenant could be a complex and disheartening process. He, however, noted that should a tenant breach the terms of the lease agreement the process of obtaining redress should be as painless as possible, if done correctly.

The lease agreement is vital, and it’s important to ensure that the person signing the agreement as the lessee is the person who will be responsible for payment of the rent. If someone else will occupy the premises is should be disclosed as such.

The lease agreement should contain clauses dealing with payment of rent, duration, occupation, guests, overcrowding, breach of the agreement, legal costs, and the delivery of notices in terms of the lease agreement and legal proceedings. A well-written lease agreement complies with the provisions of the Consumer Protection Act, Act 68 of 2008 and the Rental Housing Act, Act 50 of 1999. Should the agreement not comply with the provisions of these Acts, certain clauses in the agreement or the entire agreement could be declared void by the Court.

Non-compliance with legislative provisions could result in a long and costly Court process, as tenants predominantly raise technical defences with specific reference to the agreement and legislative compliance.

It has become increasingly hard to find good tenants, hence investigating the tenant’s history, and to check previous lease references is essential. Tenants who cause damage to the property have a tendency to repeat the same behaviour.

The property agent also added, “It’s also vital to follow up with owners of previous properties rented by the prospective tenant with regard to payment of rent and maintenance of the property. Proper inspections of the premises must be conducted at commencement and termination of the Lease with the tenant in terms of the provisions of the Rental Housing Act. Failing to conduct these inspections or failing to note any damage to the property may result therein that a claim for damages against the tenant could fail. Should a tenant be in breach of the agreement, notice of such breach should be delivered as a matter of urgency. The notice of breach should provide the tenant with sufficient notice to remedy the breach.”

The Consumer Protection Act provides that a lessor may cancel an agreement, should a tenant not remedy a breach within 20 business days after being notified of such breach. Should the agreement contain a clause in which the tenant should remedy any breach within a period less than the 20 business days, as provided in terms of the Consumer Protections Act.

It would, therefore, be prudent to include both the notice period, in terms of the Consumer Protection Act, and any other notice period provided for, in terms of the agreement, and warn the tenant that should he fail to remedy the breach within the former notice period the agreement will be cancelled. Should he fail to remedy the breach within the latter notice period, legal action can be taken to cure such breach.

A lessor should ensure that after the expiry of the 20 business days, as mentioned above, a notice of cancellation is delivered to the tenant. Once the notice of cancellation has been delivered correctly the agreement will be cancelled and the tenant and all other persons occupying the premises through him will be unlawful occupants of the premises in terms of the Prevention of Illegal Eviction and Occupation of Land Act, Act 19 of 1998.

According to Lourens Grobler, “It is important to note that the key to the successful collection of arrear rent and the eviction of unlawful occupants is swift action and legislative compliance. As a lessor, you should ensure that the correct steps are taken decisively and without delay. Proper groundwork, i.e. the lease agreement, inspections, references and the correct notices will close the door on technical defences and ensure the cost and time efficiency of any legal action to be taken.”