Imagine sealing the deal on your dream property, only to wake up at 3 a.m. beset by sudden doubts. Thoughts like “Can we really afford it?” or “How on earth could we have fallen in love with that old dump?” haunt you. You may have a strong urge to back out – but tread very carefully here. Trying to cancel the sale without sound legal grounds will be a big and costly mistake.
A recent High Court case provides the perfect example.
The R135m house and the “defects” that weren’t
Our buyer put in a R135m offer for a luxury three-storey house in Sandhurst. The cancellation clause in his offer document read (emphasis added): “The Purchaser at his own expense will conduct an inspection of the home within (14) fourteen days of acceptance of the offer. Should there be structural defects or defects that are unacceptable to the Purchaser then the Purchaser can at his discretion elect to cancel this agreement.”
The seller accepted the offer with that cancellation clause – deal done. But then, eight days later, the buyer tried to escape the sale with this email from his attorney: “Unfortunately after conducting due diligence, the purchaser hereby elects to cancel the agreement… Good luck with the sale.” The buyer’s remorse in this case turned out to be monetary – he had, he said, overpaid for the property. He then put in a new offer for R100m.
That was a loss the seller wasn’t going to accept, so daggers were drawn, and the fight was on.
The seller hotly denied that the buyer had any right to cancel the sale agreement, and off they went to the High Court. The buyer said that he had “unfettered discretion” to decide whether or not there were defects, and he refused to give the seller any details of them. Only in his court papers did he provide more information, claiming to have noticed cracks on the walls during an inspection. The rest of his “concerns” related to his personal preferences for the house – wanting new paving, widening the driveway, remodelling the kitchen, installing an elevator and the like.
Subjective belief in a defect isn’t enough
The Court had no hesitation in holding that the buyer had not been entitled to withdraw from the sale “based on any minor ‘imperfection’ in the property, because it does not fulfil his personal needs – at his sole discretion and without proof.”
He had failed, as required by law, to exercise his discretion reasonably and to prove the existence of a defect objectively (i.e., based on facts, not personal belief) rather than subjectively (i.e., based on the buyer’s personal opinions or interpretations). His subjective interpretation was irrelevant.
The bottom line: the seller had rightly rejected the buyer’s cancellation, and the buyer remains bound to the sale. To rub salt into his wounds he must now also pay costs on the attorney and client scale – that’s going to be expensive!
What then is a “defect”?
Per the Court, the ordinary meaning of a defect is (emphasis supplied): “an ‘abnormal quality or attribute’ of the property sold that ‘destroys or substantially impairs’ its ‘utility or effectiveness’ for the purpose for which it is generally used or unfit for the special purpose for which it was intended to be used by the purchaser.”
Personal preferences like elevators and revamped kitchens don’t count, and a wall crack justifying a R35m price reduction can’t be superficial!
Look before you leap!
Some final thoughts for property buyers:
Don’t rush (or be rushed) into buying anything. Take your time, and make sure this really is the property for you and that you can afford it.
Check the house thoroughly for any potential problems and consider commissioning an independent home inspection to look for any defects that might not be immediately obvious (damp for example). If you are worried about anything in particular, bring in the experts or insist on expert reports from the seller.
Last (but certainly not least) don’t sign anything without asking us to review all the paperwork for you first!
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
“A body corporate’s lot is not an easy one.” (With apologies to Gilbert and Sullivan)
One of a body corporate’s core functions is to collect current and outstanding levies. When a section owner becomes uncooperative, recovery can turn into a difficult, costly and lengthy process. Good news for trustees is that it just became a little easier after a recent High Court ruling which authorised a body corporate to cut off an owner’s electricity for failure to pay his consumption charges.
“The pandemic made me do it”
An owner of an apartment in an 86-unit sectional title scheme in Sandton fell into arrears in 2021. Two years later he owed a total of R107,940 … R16,610 of which was for unpaid electricity charges.
The body corporate sued him, asking the High Court not only for a monetary judgment but also for authority to cut off his electricity supply pending payment. It pointed out that the scheme pays Eskom for its electricity and then invoices unit owners for consumption recorded on their individual meters. That put all owners at risk of being cut off by Eskom if the body corporate was unable to pay its monthly account.
The owner admitted owing the amount claimed, which he said had resulted from a loss of income as a result of the Covid-19 pandemic. He offered to pay off the arrears in instalments of R8,000 p.m. and opposed the application to cut his power on constitutional grounds.
The Court authorised the body corporate to disconnect the owner’s electricity supply until he pays the portion of the arrears relating to electricity.
How the body corporate won – follow this recipe
As the Court put it: “There is tension between competing interests in this matter: the right of the Body Corporate to be reimbursed for payments made on behalf of the unit owners and the right of the owner to be supplied electricity.”
In other words, it wasn’t a foregone conclusion that the body corporate would automatically succeed here. So don’t just assume that you now have carte blanche to force payment of arrears by cutting off electricity.
Rather follow the recipe for success that worked for this body corporate:
Don’t act arbitrarily: The owner relied partially on constitutional protection against “arbitrary deprivation of property”, but the body corporate was able to counter that it wasn’t acting arbitrarily at all. On the contrary, it was asking the Court for permission to disconnect. Arbitrary disconnection not authorised by a court order will in any event put you in the wrong and risk the owner obtaining a “spoliation” order. That would force you to switch the power back on immediately without any investigation into the rights and wrongs of the matter.
Give proper notice of disconnection: The body corporate had ensured procedural fairness by giving the owner proper notice which spelt out the consequences of non-payment of his levies (including application for a court order to disconnect electricity).
Make sure all your resolutions are in order: The Court analysed the various resolutions passed by the body corporate in respect of imposition of levies and collection of arrears before confirming that they were enforceable against the owner.
Proving “prior agreement”: The owner argued that he had never agreed to disconnection on non-payment, but the Court held that there was indeed a tacit (inferred) agreement by him to repay the body corporate for its payments to Eskom, and that he was bound to the scheme’s rules and regulations regarding enforcement. You need to have all your paperwork in order to achieve the same result.
Balancing competing interests: You will need to persuade the court that your scheme’s interests trump those of the owner. In this case, the scheme’s financial stability was put at risk, exposing all owners to the risk of disconnection – while the defaulting owner continued to benefit from electricity at the expense of the other owners.
An important caveat
Although the body corporate had applied for an order to disconnect electricity until the full judgment amount of almost R108k had been paid in full (i.e. including the levy portion of R91k), the Court limited its disconnection authorisation to recovery of only the arrears for electricity consumption (plus interest). It gave no reasons in its judgment for not linking reconnection to payment of the full R108k – but its comment that the electricity non-payment was the most prejudicial to the scheme suggests that it will always be safest to assume that your rights to disconnect electricity may be similarly limited.
Whether you’re a body corporate or a sectional title owner, navigating situations like this requires carefully ticking all the legal boxes. You know who to call!
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
You pay no transfer duty if the property you are buying sells for less than the set threshold. The threshold wasn’t increased last year, so this year’s proposed 10% increase from R1,100,000 to R1,210,000 (from 1 April) is a welcome adjustment for inflation.
With all the brackets adjusted upwards by 10% as per the table below, properties at every level become that much more affordable to buyers, and by extension sellers will also benefit.
The proposal to increase VAT from 15% to 16% over two years, with a 0.5% hike planned to take effect on 1 May 2025 and the other 0.5% on 1 April 2026, has met with fierce resistance from business, consumers and trade unions – and from the opposition benches in parliament.
As to when we can expect clarity on whether government will be able to muster enough support in parliament to convert this and its other proposals into law, we are sailing in uncharted waters and only time will tell. Hold thumbs!
The unchanged tax tables, and no new taxes
Individual taxpayers: Your tax rates (and the associated rebates and medical tax credits) are unchanged, so we can at least be thankful that there were none of the major increases that had been hinted at.
What will hurt us is that for the second consecutive year there is no inflation adjustment to the tax brackets, which means that “fiscal drag” (also referred to as “bracket creep”) will leave you paying more tax if you receive an increase – particularly if it pushes you into a higher tax bracket.
Trusts: Special trusts are by and large taxed as individuals, but other trusts are taxed at a flat rate of 45% – again unchanged from last year.
Corporate and other taxes: Corporate and dividend tax rates, capital gains taxes, donations tax and estate duty all remain unchanged. With all the pre-Budget speculation about possible increases in these taxes, perhaps coupled with a new wealth tax and/or new taxes to fund the NHI (National Health Insurance), this is good news.
How much will you be paying in income tax, petrol and sin taxes? Use Fin 24’s four-step Budget Calculator here to find out.
Note: There is (at time of writing) uncertainty as to whether or not the Minister will proceed with his proposed tax changes – even if he fails to garner sufficient political support to ultimately ensure their adoption by parliament. If he does proceed, it’s equally unclear how long they will be valid for. Regardless, expect a lot of political manoeuvring and perhaps some major changes in the weeks ahead!
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
“All that glisters is not gold” (William Shakespeare in Merchant of Venice)
Buying or selling a home could be one of the most important financial decisions you’ll ever make. It’s an exciting time – but don’t lose sight of the need to tread with care.
A key player in the process is likely to be an estate agent, to whom you will be entrusting one of your most significant assets. It goes without saying that you need to choose someone both competent and trustworthy.
Fool’s gold?
Be particularly careful here, because not everyone who claims to be an estate agent is genuine – and you will be in for a world of pain if you inadvertently trust your property transaction, and your money, to a charlatan. A fake agent may be actively dishonest or merely incompetent, but (in the way of all con artists) is probably first and foremost a persuasive and convincing liar. Lots of “glister”, but absolutely no gold!
Quite apart from the competency angle, just Google a phrase like “fake estate agent sentenced” to get an idea of how much full-on “bogus agent” fraud there is.
Let’s have a look at one recent case.
The Hawks swoop, and a fake agent gets 23 years
A fraudster operating in Bloemfontein and pretending to be an estate agent conned his victim into signing a sale agreement and paying him R100,000 for a house she’d set her heart on. Too late, she discovered that the “agent” was neither registered as such nor entitled to sell the house.
The matter was handed over to the Hawks, and the fake agent is currently serving an effective 23 years’ direct imprisonment. Justice served, and let’s hope the victim, to whom R100,000 is clearly a substantial sum, is also able to recover her hard-earned money from the fraudster.
A timely warning
A timely warning from the PPRA (Property Practitioners Regulatory Authority) in February confirms that, quite apart from the risk of fraud, it’s crucial for your protection to ensure that the agent you decide to work with is properly registered with the PPRA and holds a valid Fidelity Fund Certificate (FFC).
Why is PPRA registration important?
The PPRA is the official body that oversees estate agents and other property practitioners. Registration with the PPRA ensures that:
The agent operates legally and is subject to the PPRA’s Code of Conduct.
The agent has met the necessary training and compliance standards.
You can claim against the Property Practitioners Fidelity Fund for any theft of trust money by an agent with a valid FFC.
Four checks before you engage an agent
Before giving a mandate to an estate agent or agency, it’s important to check that they are legit. You can do this by:
Confirming their registration and FFC: Ask for proof that the agent and the firm are registered with the PPRA. Request copies of their FFCs and verify their validity for the current year by phoning the PPRA on 087 285 3222.
Verifying supervision for candidates: If dealing with a candidate property practitioner, confirm that they are working under the supervision of a fully registered agent.
Checking their trust account: If you pay money to an agent (a deposit perhaps), make sure the firm is registered with the PPRA and has an active trust account held at a registered South African bank. The funds should be deposited into this trust account and not into the agent’s personal or business account.
Asking us! We can help you with all these checks – and if you aren’t sure who to use, we’ll point you in the right direction.
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
“O, I do not like that paying back.” (Falstaff, in Shakespeare’s Henry IV Part I)
A standard clause in loan agreements, suretyships and the like is the “certificate of balance” or “COB” clause.
Typically, it will read something like this (but normally with a lot more verbiage, and bear in mind that every lender has their own version or versions): “A certificate signed by a bank manager will be prima facie proof of the amount owing in terms of the loan agreement, unless the contrary is proved.” Most homeowners will have encountered a COB clause in what we all refer to loosely as “mortgage bond agreements” (actually loan agreements where the loans are secured by bonds).
The question is, should you be intimidated by that wording into accepting whatever amount a bank or other creditor demands from you?
Definitely not, confirms a recent High Court decision: a COB is not conclusive proof of the amount that is owing. Rather, it is a tool to assist the creditor in proving the amount owing.
The couple who challenged the bank’s R2.1m calculations – and won
A couple fell into arrears with their monthly repayments on a bank loan which was secured by bonds over two of their properties.
The bank sent them a “Section 129 Notice” in terms of the National Credit Act (NCA). That’s a formal letter of demand to a consumer that must be sent by the creditor before it can go ahead with court action. It warns the debtor that they are in default and sets out alternative ways for them to sort the matter out – payment, debt counselling, alternative dispute resolution, and so on.
The bank in due course applied to the High Court to enforce the loan agreement (putting both properties at risk of sale in execution). The couple, in opposing the application, said they couldn’t accept the accuracy of the R2.1m claimed by the bank in the COB. That, they said, was because they hadn’t received any statements since 2019, so they demanded a breakdown from the bank of the total amount owing.
The bank declined to provide statements, saying that the couple had to set out a basis for requesting them, and arguing that the COB was conclusive proof of indebtedness. It was for the debtors, said the bank, to disprove the accuracy of the claim.
Not so, held the Court: the COB is simply prima facie (“at first sight”) proof of indebtedness, and it is not up to the debtors to prove what the correct amount is.
The bank, held the Court, had failed to set out in the Section 129 Notice both the correct amount of the arrears and a breakdown of that amount, and its application accordingly failed.
Lessons for lenders and borrowers
Lenders: Ensure that the amounts you claim are accurate and supported by documentation. We can help you with that, and with checking that all your loan agreements and other documents are correctly worded and updated.
Borrowers: If you receive an NCA Section 129 Notice or any other letter of demand, don’t just ignore it! If you aren’t sure what to do, ask us for help – and if you don’t agree with the amount claimed, demand a full breakdown and check it for accuracy.
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
“Home wasn’t built in a day.” (Jane Ace, radio comedian)
You find the perfect plot on which to build your dream home in a security estate. Your offer is accepted and transfer proceeds – happy days!
So, imagine your distress when, having proudly taken ownership, you are suddenly told by the HOA (Homeowners’ Association) that you are liable for penalty levies because the previous owner didn’t build on the plot within the deadline period set out in the HOA’s constitution.
You ask the HOA for an extension – after all, it was the seller who was in default, not you. And besides, no one said anything to you about the problem until now. Most importantly, even with the best will in the world (and the best architect and builder!) it will take you many months to get plans approved and start laying foundations. The last thing you need now is the crippling financial burden of unforeseen penalty levies.
The HOA is unsympathetic. “You should have checked before buying,” they say. “The seller and the agent should have told you all about it – take it up with them.”
Can that really be correct?
A recent High Court decision addresses exactly that situation. All HOAs, owners and buyers need to understand the ramifications of the Court’s findings.
“You owe R190k in penalty levies and interest. Pay up!”
The scene is an upmarket security estate in Midrand, managed by a HOA.
In terms of the HOA’s constitution, construction of a house has to start within 18 months of the land first being sold, and be completed within 30 months. Fail to meet this deadline and the landowner is liable for penalty levies of twice the normal levy plus the normal levy. That’s triple levies – payable until completion. Critically, the constitution also specifies that “successors in title” (i.e. buyers of vacant plots from existing owners) fall squarely into this net.
Our buyer, as soon as she became aware of these hefty penalty rates, challenged them with the HOA on the basis that – as she had just bought the property and was awaiting approval of building plans – it was physically impossible to expect her to start building immediately after taking transfer. Therefore, she said, it would have been reasonable to give her the same time periods as the previous owners before charging penalties. In any case she could not be held liable for the previous owner’s failure to build.
The HOA declined to offer her any relief, and the dispute went before the CSOS (Community Schemes Ombud Service), with the buyer asking for an order that “the unreasonable and therefore incorrect imposed fines/penalties be rescinded”. The CSOS ruled the penalties to be invalid because the HOA had not followed fair procedure in imposing them, and the High Court confirmed this decision on appeal.
The details of the dispute are highly technical and will be of little practical import to anyone but lawyers. But what are highly relevant to all HOAs, owners and buyers are the Court’s findings that:
When you buy into a complex, you agree to its rules: When you buy property and automatically become a member of an HOA, you agree to its rules and are contractually bound to comply with them.
Late building penalties are justified: As our courts have previously pointed out, penalty clauses like this one are often found in residential complexes as an incentive to owners to “start and complete building works as soon as possible.” This is because “building works inherently cause prejudice to the homeowners’ association and the owners of the Estate … as a result of the nuisance (such as noise and dust) caused by such works, the security risk it presents and the potential for damage to common property…. It also affects the attractiveness and hence the market value of properties in the estate.”
Subsequent owners can also be bound: HOAs can bind not only original buyers, but also subsequent buyers, to building deadlines. And they can attribute the previous owner’s non-compliance to the new buyer.
Wording is critical: HOAs must ensure that the wording of their building penalty provisions is wide-ranging enough to include subsequent buyers. Otherwise, as shown in previous High Court decisions, they will struggle to enforce the penalties against anyone other than the original owner.
Fair procedures are essential: In this particular case, the Court set aside the imposition of penalty levies as “unreasonably and unfairly imposed” and therefore invalid. This after finding that the HOA’s outright refusal to allow the buyer a chance to remedy the default, and its refusal to consider her application for an extension of the building deadline, “was unreasonable and contrary to the spirit of the constitutional provision in question.”
While the HOA’s constitution did unequivocally bind subsequent buyers to the penalties, this was not enough to satisfy the Court to rule in its favour. This is because the HOA did not act fairly in its treatment of the buyer. HOAs take note!
Buyers: Do your homework!
Although the buyer in this case is off the hook (for now, at least), things could have gone completely pear-shaped for her if the HOA had acted more reasonably in imposing the penalty levies.
The lesson for buyers therefore is this: Before you put an offer in for any property in a complex, make sure you understand exactly what you are letting yourself in for, and what you are agreeing to. Ask us for help if you’re unsure about anything.
Disclaimer: The information provided herein should not be used or relied on as 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 us for specific and detailed advice.
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