Can new owners be held liable for historic municipal debt on their property?

In the case of Jordaan v Tshwane municipality, the Constitutional court handed down a judgment on 29 August 2017, dealing with the constitutional validity of S118(3) of the Local Government Municipal Systems Act, which provided that “an amount due for municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties is a charge upon the property in connection with which the amount is owing and enjoys preference over any mortgage bond registered against the property”.

The Constitutional Court had to decide if this provision allows a municipality to claim the debts of a former owner from the new owner, and if so, whether this provision was constitutional.

In this case, the applicants approached the High Court (and won) by alleging that it was unlawful for a municipality to suspend municipal services or refuse to conclude a consumer services agreement for municipal services until the historical debts relating to the property had been cleared.

The municipality appealed to the Constitutional Court and lost. The court found that:

·         while a municipality has the constitutional obligation to collect revenue and pursue debtors, it can only claim the money from the actual debtor (previous owner) and cannot claim the historic debt from the new owners;

·         holding the new owners liable for the debt was an arbitrary deprivation of property.

Presumably, this outcome will open the floodgates to many actions against the municipalities that recovered historic debt from the new owners.  

Must a contract be in writing to be binding?

Elements of a contract

·         A contract consists of an offer by the offeror (the seller or service provider) to the offeree (the buyer or client) to buy goods (movable or immovable) or services, for an agreed price or fee;

·         A contract becomes binding when the offeree accepts the offer;

·         Obviously, there must be agreement as to what is being offered;

·         There must be an intention to contract freely and voluntarily. Any misrepresentation by either party will render a contract void. Anyone who is coerced or bullied into signing a contract will have a defence of duress.

·         The person who wants to conclude a contract must also satisfy certain legal requirements:

o    He or she must have mental and contractual capacity. This means that the person must be sane and not under the influence of any drugs or alcohol which could affect his ability to fully appreciate what he is agreeing to;

o    He or she must be a major (18 years or older) unless his parents or guardian assist him;

Oral or written

As a rule, parties can do a deal with a handshake, or even orally.

However, in South Africa, there are a few contracts that must be written to be enforceable:

·         An agreement to sell immovable property (land, house or building);

·         Suretyship agreements, credit agreements, antenuptial (marriage) contracts, leases over ten years, and contracts for executionary donations (to be made later);

·         Wills.

Some contracts, both oral and in writing, may not be enforceable, e.g. if they are illegal, contra bonis mores (that means against public policy or norms) or impossible to perform.

Importance of written contracts

Why is it important to reduce a contract to writing, even if you don’t have to, in law?

·         It’s easier to prove the existence of a written contract;

·         Written contracts provide individuals and businesses with a legal document stating the expectations of both parties;

·         If a party breaches a term of the contract, the consequences of a breach and the remedies, are set out.

Contracts in business

·         Written contracts are for your protection;

·         A business contract states the terms and conditions of any business transaction, including product sales and delivery of services. This helps the parties involved avoid any type of misunderstanding that may arise, in the absence of a written contract;

·         If you use written contracts, it is far less likely that you will end up in court - your clients will be much more inclined to work with you to find a solution and work things out.;

·         If you have an oral agreement, you might forget some points that you have agreed on verbally, with the passage of time. But with a written agreement, all the terms and conditions are clear, and you can always amend the agreement with the consent of both the parties.

·         Companies also can use non-compete agreements to limit the type of services offered by former employees who have specific knowledge about the company’s specialized business services.

Termination of a contract

·         Some agreements terminate automatically after a fixed term (such as a property lease) or event (fixed term employment contract),

·         Parties to an agreement that carries on for an indeterminate period, can mutually end a contract if the business relationship has ended;

·         An oral contract can be terminated, verbally;

·         Parties should formally terminate a written contract, in writing.

·         If a party is in breach of a written contract (e.g. the goods sold are defective or the services provided, are poor), the other party has the remedies set out the contract, or at law (such as the Consumer Protection Act);

·         Some contracts require the one party to give the party in breach written notice to remedy the breach, before the first party can cancel.   

·         Termination will not affect any liabilities for breach of contract that occurred before the contract is ended.

All about annual leave

With the December break just around the corner, I thought that this snippet would be useful.

·         The provisions in the Basic Conditions of Employment Act that apply to annual leave do not apply to an employee who works less than 24 hours per month or to employees who earn above the earnings threshold laid down in the Act (currently as from 1 July 2014, R205 433.30 per annum);

·         Employees are entitled to 21 consecutive days annual leave on full remuneration, in respect of each annual leave cycle;

·         If an employee works a five-day week, this is equal to 15 working days (or 1,25 days per month);

·         If the employee works a six-day week, this is equal to 18 working days (or 1,5 days per month);

·         Working days exclude public holidays. Whilst an employee is on annual leave, and a public holiday falls on a day on which the employee would ordinarily work, then the employee is entitled to an extra day annual leave for each such public holiday.

·         For temporary employees, or fixed term employees, the parties may agree that annual leave may be calculated on the basis of 1 hour of annual leave on full remuneration for every 17 hours (alternatively 1 day annual leave on full remuneration for every 17 days) on which the employee worked or was entitled to be paid;

·         The employee is entitled to take whatever leave he has accumulated in an annual leave cycle, on consecutive days. If an employee does not take a portion of leave during an annual leave cycle, the leave is automatically carried over to the next annual leave cycle, unless the parties agree otherwise. An employee can demand to take the carried over leave if he or she has still not taken his annual leave from the previous cycle within six months of the new cycle, and the employer may not refuse such permission.

·         If an employee is on annual leave and falls ill during that period, if she produces a doctor’s certificate that she was unfit for work during that time, she is entitled to additional annual leave for each such day. What this means is that the employer must credit that employee’s annual leave with the number of days sick leave, and debit the employee's sick leave.

·         The employer may not force an employee to take annual leave during any period of notice, and the employee is prohibited from taking annual leave during any period of notice.

·         Absent an agreement between employer and employee as to when annual leave can be taken, it is taken at a time to suit the employer. Many employers have a shutdown period over December. If this is the case, the employer is entitled to stipulate that annual leave must be taken to coincide with the shutdown period. Should an employee utilize his annual leave at another time during the year, then the shutdown period will be treated as unpaid leave.

·         An employee can’t take cash in lieu of annual leave except upon termination of employment.

A servitude can affect the value of a property.

When you’re hunting for a property, it’s important to ask the right questions, and one of them should be: ‘is there a servitude?’ The presence of a servitude can affect the value of a property for both buyers and sellers, if a property owner is unable to fully exercise his or her ownership over the property.

What is a servitude?

A servitude is defined as a registered right that someone (called the servitude of servient holder) has over the immovable property owned by another person, that places limitations on the right of ownership, and constitutes a burden on the property in question; it must be registered against the title deeds of a property.

There are two types of servitudes, praedial or personal. Each depends on whether it benefits a particular piece of land or a particular person:

Praedial:

Here, the benefit favours land, and, regardless of the identity of the owner at any given point, successive owners will benefit from the interest in the servient land, in perpetuity. The servitude is registered against the title deeds of both pieces of property. There are two types of praedial servitudes, urban (where land is used for purposes of habitation, trade or industry) and rural (giving a farmer a right or way, a water or grazing servitude and a way of necessity). Thus, a person has a limited right of use of his neighbour’s land. For example, farmer A has the right to cross the property of farmer B, or drive his cattle over or allow them to graze on, Farmer B’s land. 

Two farmers may have a registered agreement regarding the maintenance of the servitude, e.g., farmer B maintains the road to his farm if farmer A contributes to the maintenance of the road, proportional to his use of the road. In this case, an interested buyer of the property should be alerted to this right.

Personal:

A personal servitude, on the other hand, favours one specific person and not successive owners, so it terminates when that person dies or moves on. An example would be the right of the owner of a hemmed-in property to use an access road on the neighbouring property, or to grow a vegetable garden on a tract of his neighbour’s land. It is only registered against the title deed of the servitude holder.

If you are looking to buy a home on a panhandle stand, it’s important to ensure that there is a registered servitude over the front property, to ensure unhindered access to your property.

Our courts require some flexibility. In the case of Linvestment CC vs Hammerlsey, the Supreme Court of Appeal had to decide if a property owner could vary the terms of a registered servitude without the consent of the holder of the servitude. The court found that although Roman and Roman Dutch authorities held that a registered servitude could not be changed without the mutual consent of both property owners, it was in the interests of justice and in line with international trends to follow a more flexible legal approach. It found that as the proposed change was reasonable then the Court could, and did modify the terms of a registered servitude without the consent of the property owner who enjoys the benefit of the servitude.

The effect of this judgment is that if there is a registered servitude that unreasonably prejudices a property owner, he may turn to the court for help.

A service provider, like a municipality or Eskom, may have a servitude on a piece of land, e.g., for the erection of power lines, which prevent or limit activities that may affect their operations, such as no tall buildings or trees within the servitude. This would also affect the selling price.

If you do not insist on seeing a copy of the title deeds and surveyor-general’s diagram when buying vacant land, your plans to build that dream home could become a nightmare.

Both documents will tell you if there is a servitude on the property. The presence of a servitude makes it impossible to build within its area.

The importance of keeping a personal file for your heirs

You may know where everything is, but on your death, will your family know where to look?

It’s important to store all your personal documents in a labelled box file, in a safe place, and let your family know where to find it.

Please go here to here - https://goo.gl/2GF1yA - to download a useful booklet chronicling a clear record of your funeral wishes, a source of important documents for legal and public records, and a permanent keepsake of your fondest memories to speak to future generations. Please complete this document and place it in safekeeping together with your will and other important documents. Notify your next-of-kin where these important documents are located. 

Important documents

These include: wills, living wills, trusts, powers of attorney, life insurance policies, health policies, car insurance policy, disability insurance, other insurance policies, safe deposit boxes, deeds, titles, income taxes from previous years, birth certificates, marriage certificate, divorce decrees, identity documents, passport, driver’s licence etc, title and registration of vehicles, and inventory of home furnishings.

Associate information

The include the name, number, and address attorney, executor, accountant, financial advisor, broker, insurance agent, trustees, doctor, tax advisor, and employer.

Family and friends

List immediate family members, distant relatives, pets, local friends, distant friends, and associates.

Personal information

Record driver’s license number, organisations, memberships, clubs, fees, secret hiding places, address book, organ donation wishes.

Assets (Location, Account Number, Types)

State sources of income, cars, boats, house, vacation or rental home, checking accounts, savings accounts, money market accounts, certificates of deposit (CDs), stocks, bonds, unit trusts, valuables, antiques, or jewellery, and precious metals.

Liabilities (Account, Balance, Payments)

List personal loans, bond, car loan, credit cards, business loans, clothing accounts, store accounts, other loans, routine bills, and debit orders.

Miscellaneous information

Provide passwords, security system codes, location of firearms and ammunition, and the place where spare keys are stored.

Funeral arrangements

State cremation or burial (casket), minister and pallbearers, location, indoor or outdoor services, speakers, flowers or donations to charity, name of mortuary or cemetery, burial plot – if pre-arranged, and obituaries.