Can You Sell Property You Don’t Own? Insights from Koster v Norval and the Deeds Registries Act.

Introduction

Can someone legally sell property if they are not the owner? This is a key question in South African law that was addressed in the Supreme Court of Appeal case Koster v Norval (20609/14) [2015] ZASCA 185. The court clarified the conditions under which such a transaction could be valid, challenging the assumption that only owners can sell property. Additionally, Section 96 of the Deeds Registries Act 47 of 1937 provides a legal mechanism to facilitate such sales, allowing for the simultaneous registration of property transfers. This summary unpacks the court’s decision and explains the legal framework that governs sales where ownership has not yet been transferred.

The Court’s Decision in Koster v Norval

The Supreme Court of Appeal in Koster v Norval was asked to consider whether a person who is not the registered owner of a property can sell that property. In its ruling, the court confirmed that it is not an essential legal requirement that the seller must be the owner of the property at the time of the sale agreement. Instead, the court focused on the principle of intention and the legal process of transferring ownership, which can occur after the sale agreement is signed.

Key Legal Principle: "Real Agreement"

At the heart of the court's reasoning was the concept of a "real agreement" in property law, which refers to the mutual intention of both the seller and the buyer to transfer and receive ownership, respectively. As long as both parties agree on the transfer of ownership, and the correct legal procedures are followed to register the transfer, the sale can be valid—even if the seller does not own the property at the time of the sale agreement.

The court emphasized that what ultimately matters is the registration of the property transfer in the Deeds Registry. Until the property is registered in the buyer’s name, ownership remains with the seller or the current registered owner. However, if the seller later acquires ownership and registers it in the Deeds Registry, the sale can be finalized without any legal issues.

Simultaneous Registration: The Practical Solution

The Koster v Norval decision also highlighted the practical importance of simultaneous registration. This means that the property transfer from the current owner to the seller, and from the seller to the buyer, can occur at the same time in the Deeds Registry. This resolves any potential legal issues caused by the fact that the seller was not the owner when the sale agreement was signed.

The Deeds Registries Act and Section 96

Statutory Framework for Registration

Section 96 of the Deeds Registries Act 47 of 1937 provides the legal foundation for the simultaneous registration of property transfers. This section addresses situations where a person who is not yet the registered owner enters into a sale agreement. The Act allows for multiple transactions, such as the transfer of property from the original owner to the seller and from the seller to the buyer, to be registered simultaneously, ensuring that all parties involved receive legal ownership at the same time.

How Section 96 Works

Section 96(1) specifies that when a deed or document required to be executed by the owner of immovable property has been executed by a person who has the right to receive transfer of the property, it will be treated as if it had been executed by the owner once that person receives transfer. This provision allows the sale of property before ownership is transferred to the seller, provided the transfers are registered simultaneously.

Additionally, Section 96(3) explains that all endorsements in a batch of interdependent transactions are considered to have been effected simultaneously, regardless of when each individual endorsement is signed by the registrar. This ensures that the transfer of ownership from one party to the next is legally synchronized, avoiding gaps in ownership.

Conclusion

The Supreme Court of Appeal's decision in Koster v Norval, when read alongside Section 96 of the Deeds Registries Act, confirms that it is legally possible to sell immovable property before the seller becomes the registered owner. The key conditions are:

1. The mutual intention of both the seller and the buyer to transfer and receive ownership.
2. Simultaneous registration of both the transfer to the seller and the transfer to the buyer in the Deeds Registry.

This ruling allows for flexibility in property transactions while ensuring that ownership is transferred in a legally sound manner. In conclusion, the law recognizes that the sale of immovable property can precede the seller’s acquisition of ownership, as long as the proper procedures for registration are followed.