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Important costs to consider when selling property in South Africa

The costs of selling a house quickly add up, therefore it is vital to know the costs involved in selling your property to determine the exact profit that you will make.

The costs that you should be aware of include advertising, obtaining a rates and taxes clearance certificate, bond cancellation fees, obtaining compliance certificates, estates agents commission, and capital gains tax.

Home inspection

Other sellers may require a home inspection to identify any issues before placing their home on the market. Costs range from R4 000 to R8 000. The prices of home inspections differ and will depend on the service provider.

Advertising Costs

A Fitzanne Estates property agent explained that if you are dealing with a property agent, advertising costs are usually included, however, if you are advertising the property on your own capacity you would have to pay for the advertising costs.

Agents Commission

The property agent also noted that if you are dealing with an estate agent, the standard figure of commission 7.5% excluding VAT should be paid, however, this is not a set figure. The commission rate can be negotiated before signing the contract. If you want to avoid the commission costs you can sell your property privately, but if you are not experienced this can be a mammoth task.

Bond Cancellation

Bond cancellation fees are charged when you cancel your bond after selling your property. If you cancel within 2 years of taking out a bond there can also be an early settlement fee that will be required.

Rates and tax certificate clearance

The rates and tax clearance can be obtained from a body corporate or the local authority stating that your rates, taxes, and levies are paid up to date. To get the clearance certificate it is essential to ensure that the rates and taxes have been paid 4 – 5 months in advance before registration. This required payment can add up to a fair amount of money that has to be paid upfront.

Levies

Where the seller is in an estate or sectional title property, the process that determines the levies that should be paid is similar to the rates and tax certificate. The homeowners’ association or body corporate may request that the seller pays for their levies a few months in advance to ensure these costs are covered until transfer takes place.

Electrical Compliance Certificate

Obtaining a home’s electrical certificate of compliance is another cost which sellers must be aware of. The electrical compliance certificate is required by law for the property to be transferred to the buyer’s name.

According to the South Africa’s current legislation, an ECOC (electrical certificate of compliance) is only valid for two years. This means if the ECOC is older than two years, the seller will be required to get a new one.

Electrical Fence System Compliance Certificates

According to the Fitzanne Estates property agent, an Electrical Fence System Compliance Certificate is also a requirement if the homeowner has installed electric fencing as a security measure on his/her property. “It is vital to note that an ECOC and Electrical Fence System Compliance Certificate are two separate documents,” he emphasized.

Certificate of Conformity

It is mandatory for homeowners who have installed gas lines to have a certificate of conformity which indicates that the installation has been conducted by a qualified technician.  Obtaining a certificate of conformity is therefore vital.

Beetle Infestation Clearance Certificate

Homeowners selling property in the KwaZulu-Natal and Western Cape regions will need to provide the purchaser with a beetle-free certificate. According to the Fitzanne Estates property agent, the beetle certificate is required only in respect of two types of beetles. “While the certificate may not be compulsory, in certain instances a beetle free certificate will be required before the bank will grant finance to the buyer,” the agent noted.

The Fitzanne Estates agent concluded by stating, “Knowing what costs are involved in a property transaction is essential and will give you the seller an accurate amount when it comes to the profit earned once the sale has been finalized. Working with experienced property agents is advised to ensure the best outcome when selling your property.

Property Management Pros & Cons

Purchasing property and letting it out provides a healthy income stream to willing investors over long-term periods. However, managing commercial or residential, single-family, or multi-units is a hassle and headaches are inevitable.

Patience and hard work go into finding the right tenants and maintaining the property. Hence its vital to find the best property management firm. So what type of services does a property management company offer?

Property management includes screening the credit histories, backgrounds of applicants, drawing up leases and processing rent payments. Maintaining tax and legal records and dealing with maintenance issues and complaints.

Before choosing the option of dealing with a professional property management company, the first thing to consider is if you have the time and expertise to manage your own property. Can you conduct basic handyman tasks?

Are you a reliable electrician and are your plumbing skills solid? Do you mind being on call 24/7 to handle issues that will without doubt inevitably arise? Can you confront tenants over complaints or late payments?

Hiring a property management firm can eliminate after-hours phone calls and mitigate day-to-day hassles.  Some maintenance issues (such as determining whether to repair an old dishwasher or replace it with a new one) are sure to require you to assess the situation and determine how to proceed.

A big part of what any property management firm (or hands-on landlord)  is dealing with tenants daily. Responsibilities vary from advertising open units, screening prospective tenants, drawing up leases, handling move-ins and move-outs. Dealing with complaints, collecting rent, handling late payments and managing evictions.

Property management firms have legal knowledge in law aspects of the landlord and tenant relationship. This Includes understanding the rights of each party and how to proceed legally in the event of any problems that arise.

According to a Fitzanne Estates property management agent, “hiring a property management firm a good ideal especially if you do not want to deal with a lot of paperwork. A property management firm can easily draw up lease agreements and handle the billing and accounts for monthly rent.

However, if you only have one or two rental properties with long-term tenants, dealing with paperwork shouldn’t take more than a few hours each month.  Nor should it occupy more than one drawer of a filing cabinet.

But if you own an entire building with a high turnover rate, that volume and time commitment can add up quickly. Therefore, property management is an essential need that can free up some of your time.”

 

 

The Difference between Sectional Title and Full Title

When it comes to buying property, it is important to understand the different property types. Every registered property has a Title Deed which sets out the type of property and any restrictions that may apply. The question is often asked what the difference is between a sectional title and a full title.

Sectional Title is the ownership of units within a complex or development, such as an apartment block or semi-detached homes. The section owners collectively own the common property and share all rights and responsibilities such ownership entails. Sectional title properties are governed by a body corporate which is the collective name given to the owners of all units within the development.

Pros of Sectional Title

  • Sectional Title owners share the responsibility in payment of the body corporate’s expenses;
  • Costs are lower, as these are shared between all owners;
  • Sectional title units are very popular in the rental market and are usually leased out easily;

Cons

  • Owners cannot extend sections without the permission of all the other owners;
  • All owners are jointly responsible for any expenses and debts incurred by the body corporate. Which means if one of the members of the body corporate does not contribute in the form of a monthly levy, it affects you too!
  • There are always rules to adhere to;

 

With regards to Full Title, the owner takes on the entire financial responsibility for the property.  This could mean that maintenance costs are higher, however, Full Title properties have more independence and fewer rules to abide by.  Examples of full title properties are free-standing houses and clusters, even if it is situated in an estate or smallholdings.

 

When deciding to purchase your next property, feel free to contact the expert sales team at Fitzanne Sales on sales@fitzanne.co.za

 

What is the role of the Rental Housing Tribunal?

The Rental Housing Tribunal was established in 2001 and its main aim is to help resolve disputes that arise between landlords and tenants. The Rental Housing Tribunal acts as an independent body and all services that are offered are for free.

The rental tribunal can effectively deal with non-payment of rentals, failure to refund deposits, overcrowding, unacceptable living conditions, harassment, intimidation, lack of maintenance, determination of fair rentals, unlawful seizure of tenant’s belongings, discrimination, exploitive rentals, illegal lock-out or illegal disconnections.

According to a local property lawyer any complaints can be lodged in person or by mail. “You can call 0860 106 166/ 011 355 4000/ 012 483 5020. It is important to note that while a complaint is being handled, the landlord may not evict a tenant, a tenant must continue to pay all rent payable and the landlord must remedy any and all necessary maintenance.”

He noted that the required documents to lodge a complaint include: an id/ permit/ passport, the relevant lease agreement, proof of applicable payments, proof of the physical address of both parties, and contact telephone numbers.

“Once a case is opened, and a reference number is allocated to the matter, a preliminary investigation is conducted. The investigation determines whether the complaint relates to a dispute that constitutes unfair practice.

After the preliminary investigation all parties will be informed in writing and a mediation session will be arranged to resolve the issue. If no agreement is reached, the matter will be referred for a tribunal hearing or arbitration. When the arbitration has taken place, a binding ruling will be handed down to both parties involved.

Any ruling will be enforced in terms of the Magistrate’s Court Act, if one of the parties is dissatisfied with the outcome, he/she can have the matter reviewed by a High Court.

To avoid any issues between new tenants and landlords its vital for both parties to conduct a joint inspection of a property prior to occupation,” the property  lawyer explained.

Any defects to the property should be noted and a date agreed by which time they will be fixed. To avoid any future disputes landlords should rather make use of experienced property rental agents. Property agents are experienced in dealing with rental arrangements, background checks, financial and reference checks.

Although verification and check processes may take some time this process reduce the chances of future disputes and potential defaulters and undesirable would-be tenants that can be problematic.

Tenants should also ensure that they familiarise themselves with the rules and laws pertaining to rentals so that treated unfairly or exploited by landlords

 

 

Is a Community Schemes Ombud Service Vital?

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.

Can One Object to Joburg’s Shock Property Evaluations

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.

Tenants rights when landlord sells property

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.

Does a Tenant have rights when the owner sells their property?

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.

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.”