WHAT TO LOOK OUT FOR BEFORE BUYING A PROPERTY

You’ve searched far and wide for the perfect home for you and your family, and you’ve finally found it, or so you thought. Buying a home, especially for the first time, is as overwhelming as it is exciting.

You’ve viewed your dream home, but remember, you receive so much information during your viewing, that you could easily become overwhelmed and miss important details. Especially if you have fallen in love with your potential new home. It is important to remember that there are various “red flags” that you need to look out for before purchasing, as missing these “red flags” could have significant financial repercussions. Before signing, make sure to look out for the following:

1.Foundation and structural faults

What do you think is the most important part of a house? The double garage? The interior? How well-lit the rooms are? No. The most important part of the house, and arguably the costliest to repair, is the foundation of the house. Make sure to look out for large cracks in the walls, as this could be a sign of some serious structural problems with the foundation. Make sure to thoroughly investigate the door frames; if door frames don’t appear to be square or if the doors have difficulty closing, it could be a sign of structural problems.

2.Poor drainage/grading

In most cases, water problems in a house are directly related to poor drainage or grading. However, it is often difficult to detect if a house has poor drainage or grading. An obvious sign of the above-mentioned faults is pools of water or a bouncy bathroom floor which could indicate that there is a leaking shower drain. Make sure to also look out for overflowing gutters, water stains and cracks in the foundation.

3.Patches of fresh paint

A coat of fresh paint is an excellent and quick way to spruce up your home, but if there are random patches of fresh paint around the house, it could be cause for concern. Why? Because it is possible that the seller is trying to hide something beneath the coat of paint.

4.Faulty electrical wiring

If you are looking to buy an older home, make sure that the electrical wiring is not faulty, as house fires caused by faulty wiring is not as uncommon as we would hope. This is especially the case in older homes, as these homes don’t always have an ample supply of power and the number of electrical outlets like newer homes have. Also look out for any exposed wires, as this could cause significant harm to either the home or your family.

5.Neighbourhood condition

When looking for your perfect home, always remember that you are not only investing in the property itself, but also in the neighbourhood. Make sure to ask enough questions about the neighbourhood. For example, if you move into a neighbourhood that is deteriorating or crime-ridden, it could have a significant impact on your return on investment.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHEN DOES A FOREIGN SYSTEM OF LAW APPLY TO YOUR CONTRACT?

It is a requirement in the South African Law of Contract that, for a contract to come into existence, an offer to contract must be made by one party to the agreement (“the offeror”), which must then be accepted by the other party to the agreement (“the offeree”). It is pivotal to determine when and where such a contract is concluded, as this will give an indication as to which country’s system of law will govern the contract (assuming that all other elements for a valid contract have been satisfied).

The offeree may communicate his decision to accept the offer to contract by posting a letter to the offeror, or by sending the offeror an email. The method of communication utilised by the offeree will affect the place where and moment when the contract comes into existence; and, ultimately, which system of law is applicable to the contract.

The general rule is that a contract comes into being when and where consensus between the parties has been reached. This is typically the place where and moment when the offeror learns that the offeree has accepted the offer. However, there are exceptions to this general rule, which are discussed below.

  • Postal contracts

The court in Cape Explosive Works v South African Oil and Fat Industries Ltd 1921 CPD 244 explained that, when an offeree posts an acceptance letter to the offeror, the contract comes into being once the letter accepting the offer is posted to the offeror. In other words, the offeree need not follow up and ensure that the offeror has received his acceptance for the contract to be binding and enforceable.

  • Section 22 and 23 of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”)

Section 22 of the ECTA provides that “[a]n agreement concluded between parties by means of [electronic communications] is concluded at the time when and place where the acceptance of the offer was received by the offeror”. Further, section 23 reads as follows: “[electronic communications] used in the conclusion […] of an agreement must be regarded as having been sent by the [offeree] when it enters an information system outside the control of the [offeree] or […] when it is capable of being retrieved by the [offeror]”.

Therefore, unlike with a postal contract, the contract only becomes binding and enforceable when the offeree has sent off his electronic communication of acceptance of the offer to contract and the offeror has received or is able to retrieve such communication. In other words, the ECTA holds that a contract will come into existence where an email appears in the offeror’s inbox, but it has not been read; or, where the offeree leaves a message on the offeror’s answering machine, but the offeror has not listened to it yet.

For example, if X, who lives in South Africa, sends an email to Y, who lives in America, informing him that he accepts his offer to contract, the contract will come into existence at the moment that the email has been sent to the offeror and once it is received or capable of being retrieved by the offeror. For that reason, as the email will be received or be capable of being retrieved in America, the system of law applicable in this situation would be American Law (assuming that all other elements for a valid contract have been satisfied).

  • Agreement by the parties

As South African Contract Law emphasises the freedom of contract, parties to a contract are entitled to agree to terms stipulating when and where a contract comes into existence.

In sum, the system of law applicable to the contract will depend on whether the parties have agreed on a moment when and place where the contract should come into being. If no such agreement is reached, the applicable system will depend on the means chosen by the offeree to communicate his acceptance of the offer to the offeror.

It is, therefore, advised that parties to a contract agree on a moment when and a place where the contract should come into existence in order to avoid confusion as to which system of law will be applicable to the contract.

Reference List:

  • Cape Explosive Works v South African Oil and Fat Industries Ltd 1921 CPD 244.
  • Electronic Communications and Transactions Act 25 of 2002.
  • Van der Merwe et al Contract: General Principles 4 ed.
  • Hutchinson et al The Law of Contract in South Africa 3 ed.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

CORPORATE GOVERNANCE: RETENTION OF COMPANY RECORDS – ORIGINAL, ELECTRONIC SIGNED DOCUMENTATION VS COPIES

The Companies Act 71 of 2008 (“Companies Act”) addresses various aspects not adequately dealt with in the old Companies Act 61 of 1973, including the use of:

  • information in electronic form;
  • electronic communications; and
  • technology.

The Companies Act recognises electronic communications as defined in the Electronic Communications and Transactions Act 25 of 2002 (“ECT Act”), to be a “communication by means of data generated, sent, received or stored by electronic means and includes: (a) voice, where the voice is used in an automated transaction; and (b) a stored record.”

The Companies Act provides for electronic compliance. In many ways, it eases the administrative burden by enabling people to use technology and the electronic form of documents and communications.

The Companies Act requires that companies retain certain documents, records or statements. Examples of these include:

  • a copy of its Memorandum of Incorporation, and any amendments or alterations;
  • a record of its directors with certain specified details; and
  • accounting records.

In terms of this section, it is sufficient if any electronic original or reproduction of the document is retained as provided for in section 16 of the ECT Act. In terms of section 16 of the ECT Act, a company will meet the requirement of the Act to retain information if:

  1. the information is accessible “so as to be usable of subsequent reference”;
  2. it is in the format in which it was generated, sent or received, or in a format which can be demonstrated to accurately represent the information generated, sent or received; and
  3. the origin and destination of that data and the date and time it was sent or received can be determined.

Where the Companies Act requires a document to be signed or initialled, the person may sign or initial by using an electronic signature as provided for in the ECT Act. For example, a Memorandum of Incorporation can now be signed electronically as well as resolutions passed by the board of directors and shareholders of a particular company – no more posting resolutions around the country, or printing, signing and scanning them. Once Annual Financial Statements have been approved by the Board, an authorised director may sign the statements with an electronic signature.

In terms of section 63 (2) of the Companies Act, a company can now conduct shareholder meetings by electronic communication, as long as the Memorandum of Incorporation does not prohibit it. The entire meeting can be conducted electronically, alternatively, certain shareholders can participate through electronic means. In case of the latter, all persons must be able to communicate concurrently without an intermediary. Shareholders must also receive notice that electronic participation will be available.

According to section 73(3) and 74(1) of the Companies Act, board meetings can occur by way of electronic means, as long as the Memorandum of Incorporation does not provide otherwise. A decision to be voted on at a board meeting can now also be adopted through written (including “electronic writing”) consent of the majority of directors, provided that all directors have been notified of the matter and the Memorandum of Incorporation does not prohibit it. Therefore, an email vote will suffice.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

KORPORATIEWE BEHEER: AARD VAN BESLOTE KORPORASIES EN HUL LEDE

Die Maatskappywet No 71 van 2008 (“die Maatskappywet”) hou belangrike gevolge vir beslote korporasies in. Daar kan onder andere geen inkorporasie van nuwe beslote korporasies kragtens die Wet op Beslote Korporasies ná die inwerkingtreding van die Maatskappywet (1 Mei 2011) plaasvind nie en geen maatskappy kan ná 1 Mei 2011 in ’n beslote korporasie omskep word nie. Beslote korporasies wat reeds op die datum van inwerkingtreding van die Maatskappywet bestaan het, sal toegelaat word om vir ’n onbepaalde tydperk te bly voortbestaan, maar geen nuwe beslote korporasies mag tot stand gebring word nie.

’n Beslote korporasie het nie aandeelhouers nie, maar wel lede. ’n Beslote korporasie is ’n afsonderlike regspersoon en staan onafhanklik en verwyderd van sy lede. ’n Beslote korporasie kan uit een tot tien lede bestaan. Die beperking op die aantal lede in ’n beslote korporasie beklemtoon die Wetgewer se bedoeling dat beslote korporasies bestem is vir kleiner ondernemings, waar die verhoudings tussen die lede soortgelyk is aan dié van vennote.

Slegs natuurlike persone mag lede van ’n beslote korporasie wees en geen regspersone mag ’n ledebelang in ’n beslote korporasie hou nie. ’n Maatskappy of beslote korporasie kan dus nie ’n lid van ’n beslote korporasie wees nie. ’n Beslote korporasie mag wel ’n lid van ’n maatskappy of vennootskap wees en ’n beslote korporasie kan selfs die beherende aandeelhouer van ’n maatskappy word.

’n Trustee van ’n trust, hetsy ’n inter vivos of testamentêre trust kan in sy hoedanigheid as ’n trustee ’n lid van ’n beslote korporasie wees. Daar bestaan egter sekere beperkings op die toelating van ’n trustee van ’n trust inter vivos om ’n lid te wees, soos die vereiste dat geen regspersoon ’n begunstigde van sodanige trust kan wees nie.

Nuwe lede wat ná die registrasie van ’n beslote korporasie aansluit, moet hul ledebelang óf van ’n bestaande lid verkry, óf deur ’n bydrae, in die vorm van geld of ander bates, aan die korporasie maak. Die Wet maak uitdruklik voorsiening vir die vervreemding van ’n lid se belang in die geval van dood of insolvensie van ’n lid, asook waar daar op ’n ledebelang beslag gelê word en dit dan in eksekusie verkoop word. Elke vervreemding van ’n ledebelang, of deel daarvan, moet bewerkstellig word óf ingevolge die samewerkingsooreenkoms (as daar een is) óf met die instemming van al die ander lede in die vorm van ’n resolusie en die indiening van ’n CK2-dokument by die CIPC (“Companies and Intellectual Property Commision”).

Die Wet op Beslote Korporasies maak veral vir twee wyses van regsverhaal of remedies vir lede onderling teen mekaar voorsiening, naamlik a) die beëindiging van die betrokke lid se lidmaatskap deur ’n hofbevel ingevolge artikel 36; en b) bystand van die hof waar ’n lid of lede skuldig was aan onredelike benadelende optrede ingevolge artikel 49.

Ingevolge die Wet op Beslote Korporasies het lede twee spesifieke pligte teenoor beslote korporasies, naamlik, a) ’n vertrouensplig; en b) ’n sorgsaamheids- en vaardigheidsplig.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies. (E&OE)

KORPORATIEWE BEHEER – PBO’S NPO’S EN NPC’s

Daar bestaan baie verwarring rondom die onderskeid tussen ’n ‘Public Benefit Organisation (“PBO”)’, ‘Nonprofit Organisation (“NPO”)’ en ’n ‘Nonprofit Company (“NPC”)’. Alhoewel daar soortgelyke karaktereienskappe tussen hierdie liefdadigheidsentiteite bestaan en alhoewel hulle in ’n sekere mate met mekaar verband hou, is elkeen van hierdie tipes entiteite verskillend van die ander entiteite en elkeen dien ’n ander doel.

Elkeen van voornoemde entiteite word ook by verskillende regeringsorganisasies en departemente geregistreer, wat die onderskeid verder beklemtoon.

’n NPO word gedefinieer deur die Nonprofit Organisations Act No 71 of 1997 as ’n trust, maatskappy of enige ander assosiasie van individue wat gestig word vir:

  1. ’n publieke doel; en
  2. waarvoor die inkomste en eiendom nie verdeel word onder die direkteure of lede andersins as vir die verkryging van redelike vergoeding vir dienste gelewer aan die entiteit nie.

Die doel rondom die registrasie van ’n organisasie as ’n NPO is om toelaes te ontvang vanaf die regering, soos byvoorbeeld fondse wat verkry word vanaf die Nasionale Lotery Raad. ’n NPO word geregistreer by die Departement van Sosiale Ontwikkeling.

’n NPC word gedefinieer deur die Maatskappywet No 71 van 2008 (“die Wet”) as “’n maatskappy wat:

  1. geïnkorporeer word vir openbare voordeel soos vereis word deur item 1(1) van Skedule 1 van die Wet; en
  2. waarvan die inkomste en eiendom nie verdeel word onder die direkteure, beamptes of persone wat verbind is enigsins tot die maatskappy nie.” ’n Organisasie moet aansoek doen om geregistreer te word as ’n NPC by die Companies and Intellectual Property Commission (“CIPC”). Die organisasie sal dan dieselfde eienskappe en voordele hê van ’n privaat of openbare maatskappy. ’n NPC kan met of sonder lede geregistreer word.

Die Inkomstebelastingwet 58 van 1962 (“die Inkomstebelastingwet”) definieer ’n PBO as enige organisasie wat:

  1. ’n nie-winsgewende maatskappy, trust of assosiasie van persone is soos gedefinieer in artikel 1 van die wet wat geïnkorporeer of gevorm is in terme van wetgewing; of
  2. enige tak van ’n maatskappy, assosiasie of trust wat geïnkorporeer of gevorm is en wat vrygestel is van inkomstebelasting waarvan die hoofdoelwit is om een of meer openbare belang aktiwiteite te dryf waar –
  1. sulke aktiwiteite uitgevoer word op ’n nie-winsgewende manier met ’n filantropiese bedoeling; en
  2. hierdie aktiwiteite nie bedoel is om direk of indirek enige belanghebbende of werknemer van die organisasie ekonomies te bevoordeel nie, andersins as vir betaling van redelike vergoeding vir die werknemer of belanghebbende se diens aan die maatskappy; en
  3. die aktiwiteite wat deur die organisasie uitgevoer word vir die voordeel is van die wyer publiek.

Wanneer daar verwys word na ’n PBO, word daar nie verwys na ’n organisasie wat geregistreer of geïnkorporeer moet word as ’n liefdadigheidsentiteit soos by ’n NPC of NPO nie. Die doel van PBO-status is om die organisasie die geleentheid te bied om vrygestel te word vir belastingdoeleindes.

Vir ’n organisasie om te kwalifiseer vir PBO-status, moet ’n organisasie onder andere een of meer van die verskeie ‘openbare belange aktiwiteite’ beoefen in terme van die Inkomstebelastingwet. ’n Aansoek vir PBO-status word aan die Suid-Afrikaanse Inkomstediens (“SAID”) gerig.

Dit is belangrik om daarop te let dat alhoewel ’n NPO, NPC en ’n entiteit met PBO-status verskillende karaktereienskappe het, sluit die werking van een van hierdie tipes organisasies nie die werking van ’n ander een uit nie. ’n Organisasie kan dus registreer as ’n NPO, NPC en PBO solank as wat al die kriteria en vereistes vir die tipe registrasie aan voldoen word.

Hierdie is ‘n algemene inligtingstuk en moet gevolglik nie as regs- of ander professionele advies benut word nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of enige skade of verlies wat volg uit die gebruik van enige inligting hierin vervat nie. Kontak altyd u regsadviseur vir spesifieke en toegepaste advies. (E&OE)

MAINTENANCE OF SURVIVING SPOUSE

The idea of freedom of testation is a core value of South African law and enjoys wide protection. The Maintenance of Surviving Spouses Act, 27 of 1990, was drafted to give a spouse legal recourse if disinherited or negatively affected by the wishes of the testator, or in the case of intestate succession. The goal of this piece of legislation is to ensure a person is not left destitute after the death of their spouse.

Who can claim?

The definition of the Act describes a surviving spouse as follows:

survivor means the surviving spouse in a marriage dissolved by death.”

What can be claimed?

Section 2(1) of the Act determines as follows:

“If a marriage is dissolved by death after the commencement of this Act the survivor shall have a claim against the estate of the deceased spouse for the provision of her reasonable maintenance needs until her death or remarriage in so far as she is not able to provide therefor from her own means and earnings.

What is the definition of own means?

“own means” include any money or property or other financial benefit accruing to the survivor in terms of the matrimonial property law or the law of succession or otherwise at the death of the deceased spouse.”

What is reasonable maintenance means?

Section 3 of the Act determines as follows:

“Determination of reasonable maintenance needs – In the determination of the reasonable maintenance needs of the survivor, the following factors shall be taken into account in addition to any other factor which should be taken into account:

  1. The amount of the estate of the deceased spouse available for distribution to heirs and legatees;
  2. The existing and expected means, earning capacity, financial needs and obligations of the survivor and the subsistence of the marriage; and
  3. The standard of living of the survivor during the subsistence of the marriage and age at the death of the deceased spouse.”

The executor of the deceased estate has to take the requirements above into account when determining the amount of the claim against the estate.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

SELLING YOUR PROPERTY? HOW TO STAGE YOUR HOME

If you want to ensure that your property sells quickly, staging your home could help. If you stage your home, you are presenting it in the best possible light and condition, which will make it easier for potential purchasers to imagine themselves living there. So, how do you stage your home?

1.Declutter your home

When staging your home, the first thing you should do is remove any clutter and clean your home. Remove any small and personal items from all surfaces. Make sure to box up spare belongings, rather than throwing them in drawers and closets as purchasers tend to open them. Once you have decluttered your home, do a deep cleaning. Make sure that your kitchen and bathroom is spotless and clean anything that your pet touches, as no purchaser will be attracted to pet odours. If you do not have the time to clean your home, hire a professional cleaning company to ensure that your home is spotless.

2.Light and bright is the way to go

Purchasers usually like bright, sun-filled rooms, so lighting is an essential part of staging your home. Make sure to open your blinds/curtains before a showing. Also, ensure that your light fixtures are appealing and that your lampshades aren’t dated and lopsided. With the correct lighting, your home will feel welcoming and bright and will capture the hearts of potential purchasers as soon as they walk through the door.

3.Start with the most important rooms first

If you want to stage your entire house, you can, and it will certainly get your home sold quicker. However, if you don’t have the time or money to stage your entire home, try only staging the most important rooms. The most important rooms include the living room, the master bedroom and the kitchen. Any extra bedrooms should be at the bottom of your list of priorities.

4.Remove furniture

The last thing you want is for your home to look cramped. Consider removing some furniture, as your home will look bigger and more appealing.

5.Rearrange your furniture

Now that you have removed some of your furniture, position all couches, chairs and tables away from your walls. You can then anchor your space with an area rug, which will create a cosy, intimate space which is ideal for socialising with friends and family.

6.Don’t just focus on the interior of your home

If you neglect the outside of your home, you might not attract as many potential purchasers. You can get potential purchasers to walk through the door by power-washing your house and walkways, cleaning your windows, mowing the grass, planting flowers etc.

7.Add the finishing touches

Finally, now that your home is picture-perfect, add some finishing touches, such as fresh flowers in vases, a bowl of fresh fruit on the counter and folded towels in the bathroom. Your home is now ready to meet and impress its potential new owner.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

PRIVATE USE OF GROUNDWATER RESOURCES

This article will provide a brief overview of how the abstraction and usage of groundwater resources are regulated, with specific reference to the Cape Town Metropole which has made headlines over the past few years for being one of the first big metropoles in the world to almost run out of this valuable resource.

The usage of groundwater in the Western Cape is regulated by three important pieces of legislation, namely the National Water Act (1998), the Water By-law (2010) and the Water Amendment By-law (2018). It is from the outset important to note that all groundwater in South Africa has been a national resource since 1998 as per the preamble of the National Water Act and no private person may thus use and abuse water which they abstract on their private property as they wish.

Installation of mechanisms to abstract groundwater:

Groundwater is most commonly abstracted by way of a borehole, well-point, or well. This article will only refer to boreholes as the relevant legislation defines a borehole as a “hole sunk into the earth for the purpose of locating, abstracting or using subterranean water, and includes a spring, well and well-point”. This definition is thus broad enough to include almost any method of abstracting groundwater.

The City of Cape Town requires a property owner who plans to sink or dig a borehole to notify the director in writing at least 14 days before such action of his or her intention to do so. The “director” is defined in the City’s by-law as the employee of the City who is responsible for water and sanitation. This notice must also inform the director of the exact location where one intends to sink or dig the borehole, as well as the purpose for which the groundwater will be used for.

It is furthermore important to take note of section 57 of the Water By-law which requires the owner of a premises on which a borehole is located to ensure that:

  • the borehole is adequately safeguarded from creating a health nuisance;
  • the borehole is not filled in a way or with material that may cause an adjacent well, borehole or underground source of water to become polluted or contaminated; and
  • no interconnection is made between a water installation supplied from the main and any other source of water supply, meaning that your groundwater system may not in any way be connected to the municipal water supply system.

Section 61 of the Water By-law is also important to take note of as it states that the owner of a premises on which non-potable water, which includes groundwater, is used must ensure that “every terminal water fitting and every appliance which supplies or uses the water is clearly marked with a weatherproof notice indicating that such water is unsuitable for domestic purposes”. This notice must be in three official languages and must be clearly visible.

Usage of the groundwater:

It is important to note that groundwater may not be used for domestic purposes. Water is deemed to be used for domestic purposes when it is used for drinking, ablution and culinary purposes, excluding water used for toilets and urinals. You may thus use your borehole water for any non-domestic purpose, subject to certain restrictions. One such restriction relates to the watering of your garden. The Water Amendment By-law of the City of Cape Town states that no garden may be watered between the hours of 09h00 and 18h00, and watering within the permitted hours may not exceed one hour in duration.

Complying with the above-mentioned regulations is important for two main reasons. Groundwater is a limited resource which must be used sparingly. Scientists have warned that lower rainfall figures will become the norm due to factors such as global warming. Furthermore, the preamble of the National Water Act emphasises the fact that water must be used in a sustainable manner and that it must be used to the benefit of all people. Another very important consideration is that non-compliance with any of the above regulations is an offence and a person who is convicted of such an offence shall be liable to pay a fine or to serve a term of imprisonment of up to five years, or both.

Readers who are not resident in the Cape Town Metropole are strongly encouraged to check if their local municipalities have their own by-laws regulating the use and abstraction of underground water as non-compliance therewith may carry similar penalties.

Reference List:

  • National Water Act 36 of 1998
  • City of Cape Town Water By-law (2010)
  • City of Cape Town Water Amendment By-law (2018)
  • http://www.capetown.gov.za/Family and home/Residential-utility-services/Residential-water-and-sanitation-services/Residential-water-restrictions-explained

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

SALE OF PROPERTY AGREEMENTS: TYPES OF CLAUSES

Non-refundable or Forfeiture Clause

Sellers are sometimes sold on the idea of including a non-refundable deposit clause in the Contract of Sale. More often than not, sellers are under the impression that they will be entitled to all of the non-refundable deposit or monies already paid to the conveyancer on account of the purchase price if the purchaser breaches a Deed of Sale and such breach results in the cancellation thereof.

The seller will, however, then find out that after cancellation of the contract due to breach, that not all amounts may be retained as liquidated damages or as a non-refundable deposit.

In terms of our case law, Matthews v Pretorius (1984) (3) (SA547W) and the Conventional Penalties Act 15 of 1962 (“the Act”), any penalty or liquidated damages contained in a contractual obligation shall be subject to the provisions of the Act which affords the Court the discretion to, on hearing a claim for a penalty or a non-refundable deposit, find that it might be out of proportion to the prejudice suffered by the creditor and the Court may reduce the penalty to such extent as it may consider equitable under the circumstances, taking in due consideration the interests of all concerned.

This means that any forfeiture stipulation resulting from the cancellation of an agreement, including non-refundable deposits, as well as the retention of certain monies already paid by a purchaser as liquidated damages, will be subject to the measurement as described in the Conventional Penalties Act.

Estate agents should be very careful not to create an expectation with the seller that he or she will be entitled to all of the non-refundable deposit or monies already paid to the conveyancer on account of the purchase price if a purchaser breaches a Deed of Sale of immovable property and such breach results in the cancellation thereof.

The role of conveyancers is important to understand as well. It is not expected from conveyancers to act as a Judge and Jury when dealing with monies in their trust account when a dispute arises about who should be the rightful recipient of such monies once the Deed of Sale is cancelled. Unless and until such time as an agreement has been reached between the parties or a competent Court has made an order, it cannot be expected of conveyancers to pay the monies to either party.

Breach of Contract

The relationship between a purchaser and seller is governed by the Contract of Sale. The breach of contract occurs generally when a party to a contract without lawful excuse fails to honour his or her obligations under the contract.

When a contract is cancelled in terms of the breach clause of the said contract, the aggrieved party would normally have the right to claim damages from the guilty party. When claiming damages, the aggrieved party must note that the Conventional Penalties Act will also be applicable to the amount of damages that may be claimed.

In the instance of the seller, the seller's damages will often only be liquidated once the property is resold and the seller's claim will only be for the deficit between the amount of resale and the original contract sum of the cancelled agreement.

Rouwkoop

A rouwkoop clause in its pure form comes from our common law. It is derived from the Dutch words meaning “regret and purchase”. Such a clause entitles a party to a contract to pay a sum of money in order to be allowed to withdraw from the contract. It essentially sets a purchase price for freedom from the contract payable by the purchaser. If the purchaser then withdraws from the contract and pays the agreed rouwkoop amount, he will be acting in accordance with the terms of the agreement and his withdrawal will not constitute a breach of contract. (It is not regarded as a penalty.) This is clearly very distinguishable from a penalty clause which would come into operation only where there was a breach of contract.

Unfortunately, many sale agreements confuse the position in law whereby the forfeiture clause is merged with a rouwkoop clause, which provides that if the purchaser breaches the agreement and the seller cancels the agreement as a result thereof, the purchaser will forfeit his or her deposit as rouwkoop.

In a decision of Royal Anthem Investments 129 (Pty) Ltd v Yuen Fan Lau and Shun Cheng Liang (941/2012) (2014) (ZASCA 19) (26 March 2014), the Court had to interpret a rouwkoop clause in a Deed of Sale which read as follows: “Will have the right to cancel the agreement and to keep other amounts payable as rouwkoop, or by means of any pending decision by a Court of the real damages suffered”.

The Court in this instance found that the deposit was not an amount as envisaged by the rouwkoop clause in the true intention of the rouwkoop clause history. A penalty clause will only come into operation when there was a breach of the contract.

Conclusion

From the said case law and the provisions of the Act above, it is clear that:

  1. Non-refundable deposits are a myth and together with forfeiture clauses, subject to scrutiny by the Courts. Unless the parties to the agreement can come to an agreement regarding the penalty, the Court must be sought to quantify the amount payable as a penalty.
  1. A rouwkoop clause in a Deed of Sale must be clearly distinguished from the penalty clauses above as it is not subject to the provisions of the Conventional Penalties Act.

So, be sure to demystify the myth before you enter into one of the most important transactions of your life. Consult with an attorney.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TRUSTEES’ DUTIES AND POWERS

All the powers of a trustee are ‘fiduciary’, which means that they must be exercised as follows:

  • in the best interests of all the beneficiaries;
  • only for the benefit of the beneficiaries and not for third parties;
  • not for the trustees’ benefit, unless specifically authorised; and
  • not to defeat the terms of the trust, but in compliance with them and in consideration of all other relevant circumstances.

Duties

A trustee owes a duty of honesty, integrity, loyalty and good faith to the beneficiaries of the trust. A trustee must at all times act exclusively in the best interests of the trust and be actively involved in any decisions. Prior to accepting the position of trustee, a potential trustee must ensure that:

  • there is no conflict of interest between his or her own personal circumstances and those of the beneficiaries;
  • they have read and understood the trust deed;
  • they understand the nature of the beneficial interests and as much about the beneficiary’s personal circumstances as will be necessary to administer the trust;
  • they are satisfied there are no outstanding breaches of trust by the existing trustees; and
  • they have determined the extent of the trust property and will ensure that, once appointed, it is vested in the names of the new trustees.

General Duties of a Trustee:

  • To always act in good faith and jointly – the common law rule is that the trustees must always act jointly in a transaction with third parties and contractual powers must be exercised by all the trustees acting together.
  • To observe the trust deed – trustees must inform themselves of the terms of the trust deed and comply strictly with the duties and directions set out in therein.
  • To take possession of the trust property – the trustee needs to take charge of the trust property and he must, as soon as possible, acquaint himself with the nature and extent of thereof and take possession of the property so that it comes under his/her control.
  • To act independently between the beneficiaries – trustees must not allow one beneficiary to suffer at the expense of another and must balance potentially competing interests for income and capital.
  • To provide information – trustees are under a duty to provide clear and accurate accounts and produce any information or other documents relating to the trust when required to do so by a beneficiary.
  • To act unanimously.
  • To exercise reasonable care and ensure the correct distribution of assets.
  • To provide an income for the beneficiaries and to preserve the value of the capital.

Powers

The precise powers that a trustee has will be defined by the trust deed and by law. However, a trustee will normally be given the following powers:

  • investment;
  • dealing with land;
  • delegation to agents, nominees and custodians;
  • insurance;
  • remuneration for professional trustees;
  • advancement of capital;
  • maintenance of minor beneficiaries; and
  • to pay, transfer or lend funds to beneficiaries.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)