A residential complex can be a breeding ground for disputes. People with different temperaments and values share the same living space, while rules and trustees restrict what residents can and can’t do. If not dealt with properly, disagreements can lead to a breakdown in relationships between neighbours, and mismanagement of the scheme.

Themba Mthethwa noted that, “South Africa needs a statutory body that will enable disputes in community schemes to be resolved easily and effectively. ” Mthethwa, who is the chief ombud of the Community Schemes Ombud Service (CSOS), explained that in the absence of an ombud service, the only recourse has been a professional arbitrator or the courts, even for minor disputes.

According to a local property agent, a judge lamented the fact that a High Court was burdened by a dispute between a homeowners’ association and an owner because of a barking Chihuahua. Most individual owners cannot afford litigation or arbitration, while the adversarial nature of the court process also acts as a deterrent against taking on people they have to live with.”

A law student, Isaac Morics noted that “The regulations, and the Act itself, are set to be a game-changer for “community schemes”, which include a variety of arrangements (residential and commercial) involving the shared use and ownership of property, the most well-known being sectional title and homeowners’ associations.”

All community schemes are now directly accountable to a body, tasked with ensuring that they are properly managed. Schemes must register with the CSOS and each year submit a return to the CSOS, listing their executives, the levies paid by each unit and their annual financial statements.

They must lodge their governance documents, such as their management and conduct rules, with the CSOS, and the service must approve any changes to these documents before they can become effective.

The CSOS is specifically mandated to ensure that sectional title schemes comply with the new Sectional Titles Schemes Management (STSM) Act, which also came into operation on October 7.

According to worldwide stats, South Africa has the fourth-highest concentration of community schemes in the world. Mthethwa noted that community schemes had an asset value of more than R800 billion in 2015 and managers of these schemes collect R11 billion in levies annually.

The launch of the CSOS was the culmination of a process that started in 2004, when the cabinet mandated a committee, consisting of representatives from various government departments, to investigate how disputes in sectional title schemes should be dealt with.

Although many people are only now starting to come to terms with the reality of the CSOS, it has been in existence since 2013, when the Minister of Human Settlements appointed the seven non-executive members of the CSOS’s board, who serve for a three-year term. The board appointed the chief ombud and the chief financial officer, who are also executive members of the board.

Mthethwa’s five-year term as chief ombud started on October 1, 2014. His priorities were to establish the CSOS’s head office, which is in Sandton, and to appoint and train staff, anticipating that the CSOS legislation would take effect the following year. As it turned out, the draft regulations were only published for public comment a year later, in October 2015.

Although the CSOS is an “ombud” service, neither the chief ombud nor any of the regional ombuds are involved in resolving disputes. They are essentially chief executives and administrators. Conciliators or adjudicators settle disputes.

The CSOS hopes that most disputes will be settled via conciliation (like mediation), where a trained conciliator works with both parties to facilitate a mutually acceptable agreement. Conciliation is a “no-fault”, informal process, and a settlement can be reached in face-to-face meetings or by the parties exchanging submissions.

If the dispute cannot be resolved by conciliation, or if conciliation is not appropriate, the case will be referred to an adjudicator drawn from a panel made up of retired magistrates and judges, and professional adjudicators.

Adjudication is more formal than conciliation, and the adjudicator will rule in favour of the parties (or dismiss the application) and issue an order that has the same status as a judgment of a magistrate’s court or the High Court.

A party who is dissatisfied with an order can appeal to the High Court, but the grounds are limited to how the adjudicator applied the relevant law. Mthethwa says this prevents litigants from resorting to the courts to delay the implementation of orders.

The CSOS could not issue adjudication orders until the final regulations were promulgated on October 7. In the 2015/16 financial year, the CSOS finalised 646 complaints, most of them (225) by conciliation, but a large number (133) were closed without being resolved because the applicants failed to submit information requested by the CSOS.

The balance of the applications was rejected, withdrawn, settled by the parties without conciliation, or referred to other tribunals.

Mthethwa says that, contrary to expectations, the vast majority of complaints were not about barking dogs or noisy neighbours, but were financial matters, including “excessive” levy increases.

The imposition of special levies and the “incorrect” calculation of levies were amongst the other complaints. He says a common problem underlies all these complaints: owners and trustees do not understand how to apply the legislation that governs sectional title schemes.

One of the CSOS’s responsibilities is to educate owners, residents and scheme executives about their rights and obligations, and Mthethwa says carrying out this mandate is crucial to ensuring harmony and good governance in community schemes. The service plans to roll out several free workshops around the country and make educational material available.

He says it’s apparent that many owners do not understand that, when they buy into a community scheme, they automatically become liable for the expenses associated with maintaining and repairing the common areas – such as the exterior of the building, corridors, lifts, gardens and paving.

“Owners don’t attend an AGM where it’s decided, for example, that the building has to be painted. Then they become angry when their levies are increased,” Mthethwa says. “But when we investigate these complaints, we find that the body corporate did, in fact, follow the proper decision-making process before the levies were increased.”

He says owners must get involved in their schemes, attend meetings, read the governance documentation, and hold their executives accountable.

According to a Fitzanne Estates property managers, many property owners would have been shocked by the steep increases in property values in the City of Johannesburg’s 2018 Valuation Roll published in February.

They noted, “Valuations have quadrupled and, in many cases, valuations seem to be up around 40% to 50%. Rates based on the new valuations will be charged from July 1 and these must be paid, regardless of whether a property owner appeals the new valuation.

In addition, inflationary annual rate increases will come into effect on this day as well, adding the typical ±6% to the adjustment because of the new valuation roll (the 2017/18 increase was 6.2%). It is not a stretch to see rates increase by at least 40% to 50% in July.”

In a newsletter to Ward 117 residents, City of Johannesburg councilor, Tim Truluck, notes that “property valuations have traditionally always been lower than the actual value. The City started to address this in the last valuation roll, but many were still undervalued.”

Truluck stated that “standard knee-jerk reaction” is that the valuation is wrong and too high. While this may be the case for some households, for others it is close to the real value of the house – i.e. how much you would sell it for if you were selling it. If the valuation is correct, then you can’t object.”

The city notes that “dissatisfaction with the number of rates payable does not constitute an objection”. Furthermore, Truluck says that “If it is within a couple of R100 000 of the approximate value, then it is a judgement call as to whether you object.”

He suggests obtaining an online valuation report for your property to get an understanding of what the range of prices from recent sales is. “This is indicative and uses an algorithm to estimate the current market value (in the same way that the Municipal Valuer used an algorithm to value the nearly 900 000 properties across the metro).

There are numerous options here, such as Lightstone Property, Lexis PropIQ (as well as some of the retail banks) and these typically cost just under R100. Free reports for suburbs are also available and this could also help your case in the objection process,” he noted.

With regards to his property, he noted that he will use two formal/official valuations from estate agents to prove that the value of his property is at the lower end of the range.  He mentioned that he has several examples from a recent Sunday Times property section which he will use to illustrate the difference between properties in Parkhurst in the R2.5 million to R2.9 million and R3 million to R3.5 million price ranges.

He argues, ” rightfully that there is a vast difference. Similar differences exist in all areas and price bands (compare R1 million to R1.2 million townhouses in Fourways, for example, with those in the R1.3 million to R1.5 million range).

Objections to the new valuation must be lodged by April 6, 2018, and these can be done online or at the city’s Revenue Walk-In Centres. Truluck points out that there were over 80 000 objections following the publication of the last roll in 2013.

This resulted in it taking three years to assess the objections. “I would assume that given the level of complaints I am getting, that there will be as many objections this time, if not more.”

So, expect it to take two to three years to get a decision on your objection. Note that if your new valuation was more than 10% above or below the original 2018 valuation, it will be automatically referred to the appeal board, which will add more time to the process.

“This means an estimated objection judgement day off somewhere in 2020 or 2021. If this decision is appealed (which must be done within 21 days of receiving written reasons), this could take another year,” Truluck says.

A property owner is entitled to put their property up for sale at any time, however, the rights of the tenant are still of utmost importance.

Most tenants do not know their rights and obligations. Yes, the tenant is required to allow reasonable access to their property for viewings to prospective buyers. A reasonable tenant should make an effort to keep the residence as neat and tidy as possible when visitors are expected.

Fitzanne Estate has been assisting in situations where a landlord sold a property whilst the tenant still had an active lease agreement. The landlord never respected the tenants’ rights. The tenant was forced to vacate the property whenever a prospective buyer had viewings. The landlord allowed visitors to wonder around the property day and night without the tenants being there.

When the tenant reported this at our offices Fitzanne had to take charge. The tenant has the right to be present when the property is being shown and view only when the tenant is available, no viewings can be done without the tenant approval. That was not the end of the violation of tenant rights. After the property was sold our tenant was caught in a situation where he had to vacate the premises, so the new landlord can move in.

This is where Fitzanne used “Huur gaat voor koop”. This clause protects the rights of a tenant to the property whilst the lease agreement is still in force. The tenant may remain in the property after it has been sold, until the expiration of the lease agreement.
Some good advice would be: Should a tenant get notified that the property is up for sale, arrange a meeting with the landlord or the agent to discuss the situation. Make sure all communication is in writing in order to avoid any misunderstandings.

According to a Fitzanne Estates agent, they receive queries regarding a tenant’s position where the owner of the leased premises sells the property, mostly from tenants indicating that they were simply told to vacate before transfer.
He noted that “the point of departure is however that in our law, a tenant is protected by the common law ‘huur gaat voor koop’ maxim. This means that the lease agreement will survive the sale and the new owner will effectively step into the shoes of and become the landlord on the same terms and conditions.”
He added, “The new owner will also be responsible to refund the tenant’s deposit, minus any claim for damages that may exist. The Consumer Protection Act may also have an impact on the rights of the landlord and tenant and it is advisable to consult with an attorney when concluding the lease.”
In terms of the legal principle ‘huur gaan voort koop’, the lease precedes the sale and the tenant is entitled to retain occupation of the property for the remainder of the lease period. The South African law states that a landlord is not prohibited from selling the property to a third party while the property is housing a tenant and a lease agreement is in place.
While a tenant can stay on the property for the duration of the lease, many occupants may feel uncertain when dealing with a different landlord or the renewal terms of the lease with the new owner.
The property agent noted that sometimes in these situations tenants might want to find other accommodation. However, a tenant’s right to cancel their lease will be determined by the lease agreement that they signed and the law.
He noted, “reading the lease agreement is the first step when it comes to knowing where you stand regarding your rights and obligations should the property you live on is sold.
Some leases may specify that the tenant has the option to cancel their current lease and find another place to stay if the property is placed on the market. If these are the terms and there is mutual consent, then the tenant is absolved from any penalties that may arise due to breaking the agreement.”
The lease will remain in effect under the new landlord and the tenant is obligated by law to respect the specified terms, as will the new landlord. In certain cases, the buyer will buy a property with an existing tenant with the intention of keeping that tenant.
The Consumer Protection Act (CPA) allows for the early termination of a fixed term contract within the fixed term on the condition that the new owner is a supplier who lets property in the ordinary course of his business.
Before making any decisions regarding terminating a lease prematurely, tenants should first speak to the landlord. Discussing the matter with the landlord could help alleviate concerns regarding the sale of the property.

 

“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.”

 

 

 

 

 

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.”

 

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

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.”.

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!

 

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.

 

2. 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.

 

3. 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.

 

4. 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.

 

5. 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.

 

6. 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.

 

7. 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.

 

8. 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.”