Landlords and Tenants: Alert Level 1 and the New Eviction Rules

“Only in our dreams are we free. The rest of the time we need wages” (Terry Pratchett)

The flood of lockdown lay-offs and salary reductions has left many tenants struggling to find rent money, and their landlords wondering how to cover their bond repayments and other expenses.

Whether you are a landlord or a tenant (note that we are talking here only about residential leases) you need to be aware of the new Alert Level 1 Regulations applicable to evictions “for the duration of the national state of disaster”. 

In a nutshell (this is of necessity only a brief summary of some highlights from the full regulations so take professional advice specific to your circumstances) –

  • Evictions can take place but only with a court order.
  • Courts have the power to suspend eviction orders until after the “lapse or termination of the national state of disaster”. Expect courts generally to lean towards suspending eviction orders; in other words landlords will in all probability have their work cut out for them.
  • Landlords will in practice have to convince the court that it would be “not just or equitable” to suspend the order, taking into account a whole range of listed factors such as health considerations (public health as well as that of the parties), the tenant’s ability to immediately access another residence and basic services, the impact of the disaster on both parties (with the court balancing the prejudice to each of them from delaying eviction) and whether the landlord “has taken reasonable steps in good faith, to make alternative arrangements with all affected persons, including but not limited to payment arrangements that would preclude the need for any relocation during the national state of disaster”. 
  • The Rental Housing Tribunal has new powers to urgently restore occupation and/or services to tenants deprived of either by the landlord. This would be by way of an “ex parte spoliation order”, i.e. without the landlord having any right to be heard, although the landlord can ask for an urgent hearing on 24 hours’ notice.
  • “Unfair practice” is presumed where –
    • Services are terminated without reasonable notice, alternative payment arrangements have unreasonably not been made, or where “no provision has been made for the ongoing provision of basic services during the national state of disaster”’
    • Any penalty for late payment of rental (where the default is caused by the disaster) has been levied (only interest can be charged), 
    • Either the landlord or the tenant have failed “to engage reasonably and in good faith to make arrangements to cater for the exigencies of the disaster”,
    • “Any other conduct prejudicing the ongoing occupancy of a place of residence, prejudicing the health of any person or prejudicing the ability of any person to comply with the applicable restrictions on movement that is unreasonable or oppressive having regard to the prevailing circumstances.”
Notes for landlords and tenants

Keep a full record of everything in case your dispute ends up before the courts or the tribunal.

Both landlords and tenants will have to act fairly and reasonably towards each other here, taking into account your respective abilities to comply with the terms of the lease during the state of disaster. 

Where tenants are struggling to pay rent as a result of the lockdown, landlords should be open (to whatever extent possible) to any reasonable request for rental deferments or reductions. Tenants in turn should be fair and reasonable in asking for relief. Good faith negotiation is key if landlords can expect to have any chance of obtaining an immediately-enforceable eviction order.

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 your professional adviser for specific and detailed advice.

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Home Businesses – Is Yours Legal?

The sharp upsurge in businesses operating remotely as a result of the pandemic lockdowns means a lot more people working from home – most presumably in low-profile home offices, but inevitably some in the form of full-on business activities from home. What effect is that having on the property market?

Work-from-home and what’s hot in property market trends 

Let’s firstly have a look at what trends are emerging in the “hot property” market, driven by both the work-from-home phenomenon and by the general economic fallout from the pandemic and the lockdowns –

  • Increased interest in coastal and country properties from employees and businesses looking to work remotely away from congested highways and crowded cities.
  • Upsizing by stay-at-home workers looking for extra home office space and facilities.
  • Downsizing by financially-stretched homeowners reducing costs and looking to realise the value in large houses they no longer need (either by selling or by renting out).
  • Increased demand for rental properties in some sectors, driven presumably by owners selling homes to cut costs, perhaps also by sales in anticipation of emigration or semi-gration.
The law

The next question of course, regardless of whether you are selling, buying or staying put, is this – what does the law have to say about home businesses? As a small business are you clear to move your business into your house? As an employee is there anything in the law to stop you from setting up a home office? As a neighbour do you have any right to object?

Those are of course important questions to ask before you buy a “home-office-house” and before you open up a home business in your existing house. The last thing you want is to be shut down by unhappy neighbours or the local municipality.

The two questions to ask

The High Court has confirmed that there are essentially two questions to ask –

  1. Is the activity in question allowed by local zoning and land use laws?
  2. Is there any other legal block in place, for example are there any title deed restrictions or, if the residence is part of a community scheme like a Home Owners Association (HOA) or a Sectional Title complex, do the complex’s rules allow it?
Living in a complex – the hair salon allowed by zoning laws but closed down by the HOA
  • A homeowner had for many years run a hair salon business from her home in a complex, although both the HOA’s constitution and its conduct rules allowed only residential usage of houses except with authorisation via a special resolution. She was bound by the constitution and rules both by the terms of her purchase agreement and by her title deeds.
  • When she refused to cease business the HOA approached the High Court for an interdict. Her central argument was that her home business was permitted by the local zoning regulations in terms of which certain small scale non-residential activities were allowed in the area.  
  • Not relevant, held the Court in interdicting the homeowner from continuing her business.  She had agreed to a limitation of her rights, she had agreed to forfeit her right to use their land for anything but residential purposes and the HOA had not purported to change the zoning scheme and was “well within its rights to seek to preserve the residential character of the development”.

In other words, HOA and Body Corporate rules can in principle be more restrictive than local zoning laws and effectively override them in such a case. Bear in mind that each case will be decided on its facts, and in addition there has been some speculation recently that the National State of Disaster regulations and orders could be used to justify a departure from that principle. Much safer however to assume that you are bound by your complex’s rules (which may in any event allow you to work from home and/or to run a small business, although perhaps only with consent).

Must you apply for rezoning or municipal consent? 3 categories to consider

If you don’t live in a residential complex or if you do but are in compliance with the complex’s rules, you need to check that you aren’t going to be stopped from operating (perhaps even fined) by your local authority. 

Your local municipality will have its own land use and zoning regulations and bye-laws, but generally speaking your business activities will fall into one of three categories –

  1. Micro business: Depending on the zoning of your particular area, working alone from home in a home office is highly unlikely to cause any issues either legally or practically, and you are also likely to be allowed to conduct small scale business activities from home without consent where your business activities fall into your municipality’s “micro-business” or “home enterprise/undertaking” category (check with your local municipality on its rules in this regard).
  2. Municipal consent: As soon however as your activities go further (there are normally limits on things like the nature of the business, number of staff, percentage area of the house used for the business, parking availability, noise/nuisance factors and the like) you will probably have to apply for municipal consent or a permit to operate.
  3. Rezoning: In other cases you may need to go further and apply for complete rezoning of the property, possibly also for removal of title deed restrictions.

Take specific advice in any doubt!

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 your professional adviser for specific and detailed advice.

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Property: Don’t Pay Double Commission!

“… in certain circumstances the principal may be liable to pay commission to both agents where it is impossible to distinguish between the efforts of one agent and another in terms of causality or degrees of causation.” (Extract from judgment below)

With many property sellers allowing multiple estate agencies to market their properties in their attempts to sell during what is still (for the moment at least) a buyer’s market, now is perhaps a good time to remind both sellers and buyers of the double commission danger. 

Consider this scenario – you mandate an agent who introduces a potential buyer to your property, but no acceptable offer results. Later on you bring another agent in, and this time the same buyer makes an acceptable offer. Which agent must you pay commission to – the agent who originally introduced the buyer to the property, or the agent who eventually closed the deal?

In a nutshell, an agent must be the “effective cause” of the sale to be entitled to commission and our law reports are replete with disputes between sellers and agents over who is and who isn’t the effective cause of a particular sale. As the High Court put it a few years ago: “Our Courts have repeatedly acknowledged how difficult it is, when there are competing estate agents, to determine who the effective cause of the sale that eventuates is.”

The big danger for the seller of course is being held liable to pay full commission to two estate agents. The factual disputes that arose in the High Court case in question illustrate…

R1.6m commission claimed
  • A property seller engaged agency A to sell the property, and later signed a sole and exclusive mandate with agency B to sell the property by auction. 
  • One (unsuccessful) auction later, and after much negotiation and to-ing and fro-ing, the first agency (A) presented an offer from buyer C which the seller accepted.
  • Agency B claimed to have been the effective cause of the sale to C and sued the seller for R1.6m in auctioneer’s commission. The seller, at risk of paying (substantial) double commission, resisted vigorously.
  • Most of the relevant facts were in dispute, with A and B presenting the Court with substantially different versions of events in virtually every important respect. B’s application was dismissed by the Court on the ground that because of the critical disputes of fact it should have proceeded by way of “action” not “application” – a technical distinction of great interest to the legal fraternity but not relevant here.
  • What is highly relevant to sellers, buyers and agents is the ease with which the seller’s decision to engage the services of two agencies led to such bitter disputes of fact and law. 
Sellers, Buyers and Agents: How to protect yourself

Sellers: As always, agree to nothing without legal advice, and insist on formal agency mandates. If you give mandates to multiple agencies, ask them each for a list of the prospective buyers they have introduced, and insist on the buyer indemnifying you against multiple commission claims (necessary because you might not know if your buyer has dealt with more than one agency). You may be advised in some cases to have the various agents give you a similar indemnity.

Buyers: Again, agree to nothing without advice! When viewing a property tell the agent if you have viewed it before with another agent and in particular if the offer/sale agreement you are asked to sign contains any warranties/indemnities, make sure it is safe to agree to them. 

Agents: Don’t put your hard-earned commission at risk – avoid uncertainty and dispute with clear, properly-drawn mandates. Comply also with the EAAB’s Code of Conduct’s requirements on exposing a client to the risk of double commission.

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 your professional adviser for specific and detailed advice.

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Directors, Trustees: Can You Hold Your AGMs and General Meetings on Zoom?

“O Wonder! …O Brave New World” (Shakespeare)

Regrettably the pandemic still shows no sign of going away any time soon, and the social distancing it has brought to our “new normal” leaves companies with a dilemma. How can you comply – safely and lawfully – with the Companies Act’s stringent requirements for the holding of Annual General Meetings and (where needed) interim General Meetings?

The good news is that our South African legislation has for many years allowed the holding of company meetings via electronic communication.

The savings in cost, efficiency and convenience have now – courtesy of the lockdown – been experienced first-hand by many a company and its stakeholders, and a Google search reveals a multitude of AGMs held recently via Zoom or similar platforms (there are also several proprietary platforms specializing in shareholder meetings).

The benefits of meeting virtually are such that even after Covid-19 is no more than a bad memory many of us will continue doing so in place of the traditional “face-to-face all in one place” gatherings. 

Expect also an upsurge in hybrid physical/virtual meetings as things get safer.

The formal requirements
  1. Comply strictly with all the Companies Act’s requirements in regard to proper notice, conduct and minuting of meetings and decisions.  
  2. Observe all the legal requirements set out in ECTA (the Electronic Communications and Transactions Act) in regard to identification of originator, accessibility, storage, retrieval etc. 
  3. Shareholder meetings can be conducted entirely by electronic communication unless prohibited by your MOI (Memorandum of Incorporation) but if you want to avoid any uncertainty have your lawyer draw your MOI to clearly allow them.
  4. How you hold the virtual meeting is important, the requirement being that “The electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate reasonably effectively in the meeting.”
  5. Notice of the meeting – over and above the normal requirements for notice, “the notice of that meeting must inform shareholders of the availability of that form of participation, and provide any necessary information to enable shareholders or their proxies to access the available medium or means of electronic communication”.
  6. It’s then over to shareholders (or their proxies) to arrange their own access at their own expense, although good practice might be to assist with technical and perhaps even financial support where necessary. Any suggestion of an infringement of shareholder rights could come back to haunt you.
Board decisions generally 

Unless your MOI says otherwise, your board can make decisions electronically (without a virtual or physical meeting) if the decision is one “that could be voted on at a meeting of the board of that company”. Decisions can be “adopted by written consent of a majority of the directors” after “each director has received notice of the matter to be decided.” 

Shareholder decisions generally

Shareholders can also vote electronically on resolutions relating to any business not required by the Companies Act or by the MOI to be conducted at an AGM

Public companies

Meetings of public company shareholders “must be reasonably accessible within the Republic for electronic participation by shareholders … irrespective of whether the meeting is held in the Republic or elsewhere”.

Bodies Corporate and Home Owners Associations

Community schemes should take advice on whether in their particular circumstances they can/should postpone their AGMs and/or hold them remotely. Bodies Corporate will need to comply with their Rules and Home Owners Associations with their founding documents (either a Constitution or an MOI).

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 your professional adviser for specific and detailed advice.

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Buying a Business? Make Sure the Seller Publishes Notice of the Sale

“The purpose of the legislature in enacting s 34(1) is to protect creditors by preventing traders who are in financial difficulty from disposing of their business assets to third parties who are not liable for the debts of the business, without due advertisement to all the creditors of the business.” (Extract from judgement below)

With our economy in trouble and the ongoing pandemic and lockdown damaging more and more businesses by the day, sales by distressed companies and traders are likely to rocket. 

If you are a prospective buyer here, be aware of one particular danger lurking in the wings for you. 

Follow this rule to protect yourself – before you buy any business, its goodwill or assets forming part of the business, take legal advice as to whether or not the sale must first be advertised in terms of section 34 the Insolvency Act. You stand to lose both the business and the purchase price if section 34 requires the sale to be advertised and it isn’t.

Your risk is that if an unadvertised sale is challenged by a liquidator/trustee (or by a creditor if there is no liquidation/sequestration) within 6 months of the sale, it is likely to be declared void.  In that event, you will be lucky to get even a portion of your purchase price back – with the seller in financial difficulty your concurrent claim is probably worthless.

As a creditor…

The advertising requirement is designed to protect you as a creditor from having to claim from a debtor which suddenly becomes a worthless shell having quietly sold away its business and/or assets beyond your reach. 

Note that you only have protection if you have instituted proceedings against your debtor “for the purpose of enforcing [your] claim” before the transfer of the business – a good reason not to drag your heels when suing a recalcitrant debtor.

When advertisement isn’t necessary

The sale will only be valid without advertisement if –

  • The sale was made “in the ordinary course of business” (unlikely where the business subsequently fails), or 
  • It was made for “securing the payment of a debt” (unlikely to be under your control as buyer), or
  • The seller wasn’t a “trader”.  As “trader” is widely defined in the Act, and as the onus of proof here is squarely on the buyer, that’s not going to be easily proved. As we shall see below, you can be a “trader” in property as much as in any other commodity.

As a general rule therefore, it is safest to insist on the sale being properly advertised before you pay out the purchase price, but there are grey areas and pitfalls here so take specific advice. Note also that the Act’s requirements for the timing and manner of advertisement are strict and must be followed to the letter.  

As a recent High Court case shows, as a buyer (in this case of a property business) you could lose everything if you lose sight of this very real danger…

An R8m claim and a property transfer (and bond) set aside
  • A property owner bought and developed a property firstly into a shopping centre and later into a shopping centre with 11 sectional title units.
  • Whilst being sued by a creditor for R8m, the owner sold a section to a buyer and transferred it to him, and a bank registered a bond over the property.
  • The creditor obtained judgement against the owner only to find that it had been placed into liquidation. It asked the High Court to set aside the sale on the basis that the sale had not been advertised in terms of section 34 and was therefore void.
  • The buyer countered by denying that it was a “trader” as defined in the Insolvency Act. Its core business, it said, was to acquire and then rent out properties, “its business objective was not the buying and selling property per se as its stock in trade”.
  • Finding on the facts that the owner was indeed a “trader” when it sold the property to the buyer, the Court set aside the sale, the transfer to the buyer, and the bank’s mortgage bond.

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 your professional adviser for specific and detailed advice.

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Options to Renew Leases – Risks for Landlords and Tenants

“It is only where the enforcement of a contractual term would be so unfair, unreasonable or unjust so as to be contrary to public policy that a court may refuse to enforce it” (extract from first  judgment below)

Leases often give tenants an option to extend or renew at the end of the current term, and tenants who lose sight of the value and importance of such an option are flirting with disaster. 

Tenants 

In a nutshell, when the time comes to exercise your option do comply fully with the clause’s requirements. Make sure also that you understand and accept the exact wording of the renewal clause before you sign the lease. Drop the ball in either respect, and if your landlord wants you out for whatever reason, you will struggle to convince a court to come to your rescue by forcing an unwilling landlord to renew. 

Four recent court cases – one in the Constitutional Court, two in the Supreme Court of Appeal (SCA) and one in the High Court) illustrate, but before we get there here’s a quick note for landlords…

Landlords 

This is of course also highly relevant to you – the last thing you want is for a poorly-worded clause to lumber you with an unwanted tenant, or an unrealistically low rental, or even just with a bitter and expensive legal fight over what the clause actually means. Nor, as we shall see below, do you want to run the risk of a court holding the terms of your lease to be so unfair as to be unenforceable.

First case: Non-compliance v unfairness, Ubuntu and public policy
  • As part of a black empowerment initiative, a business hiring out tools and building equipment to builders had set up four of its ex-employees in a franchise operation. The business premises were let to them by the building owner, a trust linked to the hiring business.
  • The leases were for 5 years and contained options to renew for a further 5 years, on the giving of notice six months before termination, and subject to the rental for the renewal period being agreed. A mechanism for the agreement of rental was set out in each lease. The franchise agreements were for 10 years, presumably indicating an anticipation of renewal.
  • The tenants didn’t exercise their options on time, and when they did try to do so, it wasn’t in the terms required by the lease. 
  • When the landlord told two of the tenants to vacate (the others were offered a month to month temporary arrangement), they asked the High Court for an order allowing them to remain. They conceded that on the strict terms of the leases they would have no case but argued that on the basis of fairness and Ubuntu the leases should not be terminated.
  • After winning in the High Court but losing on appeal to the Supreme Court of Appeal, the tenants took their appeal to the Constitutional Court, explaining “that they were unsophisticated and not versed in the niceties of the law.” 
  • The Court dismissed the appeal, holding that although Constitutional values such as Ubuntu (which encompasses values of fairness, reasonableness and justice), “form important considerations in the balancing exercise required to determine whether a contractual term, or its enforcement, is contrary to public policy … It is only where the enforcement of a contractual term would be so unfair, unreasonable or unjust so as to be contrary to public policy that a court may refuse to enforce it.” 
  • In other words, the highest court in the land has held that if you want to avoid the strict terms of the lease you must show that they are against public policy. You can use constitutional values to do that because those values “underlie and inform the substantive law of contract” but the acid test remains – have you proved that enforcement of the lease’s terms would be contrary to public policy? The tenants in this case had, said the Court, failed to do so. They have 30 days to leave. 
Second case: Renewal clause void for vagueness

For ten years a tenant occupied premises in terms of an original lease and agreed renewals. When it gave notice of a further renewal, the parties were unable to agree on a rental, the renewal clause providing that … “the rental and costs shall be mutually agreed upon in writing between the Landlord and the Tenant when the right of renewal is exercised”.

The landlord applied for eviction and the SCA held that the term was unenforceable, being merely an agreement to agree rather than containing any “legally enforceable obligations”. The renewal clause was void for vagueness and the tenant was given 14 calendar days to vacate. 

Third case: No agreement on rental, too late to call in a third party

A tenant gave notice of renewal, the lease in this case providing that “the rental consideration will be determined by agreement between the parties based on the prevailing market rental’s applicable to the property”, and if they could not agree, a third party would determine it.

The lease, held the SCA, had terminated because the tenant had only tried to invoke the third party clause after the lease had lapsed. The rental must be fixed or agreed for the renewal to be valid.

Fourth case: No notice of renewal and no deadlock breaking mechanism

The tenant in this case failed to give notice of renewal on time, his attempts to negotiate an extension with the landlord failed, and the High Court ordered his eviction. The tenant’s argument that over the years it had become “customary” for the landlord just to remind him about an upcoming expiry and ask him if he wanted to renew was, said the Court, irrelevant because the clause itself was not “definite and complete”. 

The clause provided “that the parties agree in writing to the rental, conditions and provisions of the proposed lease” and even if the tenant had given proper notice of an intention to renew, the parties would still have had to negotiate terms, and there was no “deadlock breaking mechanism” in the lease.

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 your professional adviser for specific and detailed advice.

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Property: Green Shoots, Agent’s Commission and Fidelity Fund Certificates

“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate” (Andrew Carnegie, billionaire industrialist)

Dollar billionaire Andrew Carnegie said it a century ago, and it still rings true – wise property investment can be hard to beat when it comes to accumulating wealth. The exciting opportunity for buyers at the moment is of course the more attainable sale prices and the lower interest rates resulting from the pandemic and the lockdown. It is, by all accounts, still very much a buyer’s market.

On the other side of the coin, sellers and estate agents are no doubt heartened by recent signs that the first green shoots of a recovery are in the offing, and so the time is ripe for a reminder that, in terms of the Estate Agency Affairs Act (“the Act”) only agents with a valid and current Fidelity Fund Certificate (FFC) can operate and earn commission. 

The challenge for agents is that when it comes to the issue of FFCs, they are at the mercy of the Estate Agency Affairs Board (EAAB), which has reportedly struggled in the past to issue certificates efficiently and on time. This problem will presumably be exacerbated by the ongoing lockdown restrictions and the risk of precautionary office evacuations. 

However there is some good news for agents (not such good news perhaps for those sellers or landlords hoping to save on commission!) in a recent Supreme Court of Appeal (SCA) judgment…

No FFC, but not the agent’s fault 
  • Two estate agencies (“S” and “A”) jointly brokered a lease agreement, but when S asked for its 50% share A refused, partially on the basis that S had no valid FFC at the time the commission was earned.
  • In fact S had done everything necessary to apply for its annual FFC, which was issued by the EAAB on 1 January 2018 in the wrong name (S had converted from a close corporation to a company). The EAAB acknowledged its error and in May 2018 issued a correct FFC to S, backdated to 1 January. 
  • However the High Court dismissed S’s commission claim, holding that mere entitlement to an FFC is not enough – a valid FFC must have been actually issued at the time the commission was earned.
  • S appealed to the SCA, which reversed that finding and awarded S its 50%. The Court held that the Act’s strict and peremptory requirement for a FFC had to be interpreted in light of both Constitutional considerations and consistency “with what the Act seeks to achieve”.
  • On that basis, and commenting that “But for the error on the part of the Board, [S] was entitled to, and would have been issued with, a valid fidelity fund certificate for the period 1 January-31 December 2018” and that “the fault lies squarely and solely with the Board”, the Court concluded that “the estate agents were rightly considered to have been in possession of a certificate”. S is therefore entitled to its commission.
Agents – don’t lose your commission!

The Court was however at pains to point out that the particular facts of this case were “in a narrow compass” and it is clear that the general rule remains – hold a valid and current FFC or almost certainly forfeit your commission. Do not even try to rely on an EAAB mistake unless you have complied strictly with all the formalities for a certificate and can prove that you are entitled to one.

And as the Court put it, if something does go wrong with the issue of your FFC “…estate agents should not adopt a supine attitude in the face of the Board’s errors. They should do what is reasonably within their power to have the situation rectified. In the meantime their compliance with the requirements should be a primary factor in the determination of disputes that arise before the error is rectified” (emphasis supplied).

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 your professional adviser for specific and detailed advice.

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Property Subsidence: New Law, Strict Liability and Ubuntu

“…every landowner has a right to the lateral support and where subsidence or other destabilisation occurs, as a result of excavations on an adjacent property, the owner of the adjacent property will be liable in an action for damages irrespective of whether she was negligent or not.” (Extract from judgment below)

It’s every homeowner’s nightmare – your property starts subsiding and as the tell-tale cracks in the living room widen alarmingly, it begins to dawn on you that your whole house is at risk of collapse. 

The cause must, you decide, be your neighbour’s excavations for a new house/garage/swimming pool. You approach said neighbour for a friendly chat and a request to do something about it urgently. “Sorry” replies your neighbour, “not my fault, I am building exactly according to approved plans so it’s your problem.” 

So where do you stand legally?

A recent Supreme Court of Appeal (SCA) decision has broken new ground (weak pun intended!) in our law here, and all property buyers, sellers and owners would do well to take note.

A slope subsides and a neighbour sues
  • This long-running dispute between neighbours dates from 2008 and concerns the owners of two properties on a steeply sloping mountainside, one above the other.
  • The house on the upper property was built in 1994. Fourteen years later in 2008 the owner of the lower property started extensive excavations in preparation for construction of her new house.
  • The upper owner very soon noticed problems, with his garden and outside walls showing clear signs of subsidence. Eventually there was a major movement in the underlying ground and the entire slope subsided. The upper owner’s property moved laterally and downwards towards the excavation resulting in extensive structural damage to the property. It was clearly a major event, with another neighbour having to abandon his property entirely because of safety concerns.
  • The upper owner sued the lower owner for damages, and after a long fight through the courts the matter ended up with the SCA which upheld the damages claim by the upper owner.
The duty of “lateral support” 

The Court addressed several important questions, all of them vitally important to any property owner or prospective property owner –

  • Does the duty of support cover buildings, or just land “in its natural state”? Our law has long recognised a neighbour’s duty to provide physical lateral support for adjoining properties, but until now it has been unclear whether that applies only to land “in its natural state”, or whether it extends also to developed land with “artificial” structures on it. It’s an important question – few urban properties would be covered if the duty applies only to undeveloped land.

    The SCA’s final word – the duty of support applies to both land in its natural state and to “improved” and developed land (i.e. your house and other structures are covered).

    As an important side note here, the Court referred to both the fact that “in our neighbour law, fairness and equity are important considerations”, and to the fact that “in our constitutional context, the principle of lateral support must find expression in the constitutional value of Ubuntu, which ‘carries in it the ideas of humaneness, social justice and fairness’” (Emphasis supplied). Sticking to the ‘letter of the law’ may no longer be enough when dealing with your neighbours!

    Which leads us to another important thought – take legal advice immediately you realise your property is in danger. You may well be advised to urgently apply for an interdict to stop the excavations or other building work from continuing.
  • Did the excavations breach that duty? The Court was faced with competing evidence from two geo-technical experts who were agreed that there was a slope failure which caused ground movement on the affected properties, but differed on the cause and mechanism of the slope failure. In the end the Court held that “the exact mechanism which caused the removal of lateral support is unimportant” and that the claimant “succeeded in establishing that the slope mobilisation had resulted from a breach of the duty to provide lateral support due to the excavation on the first appellant’s property”.
  • Did the excavations cause the loss? On an analysis of the evidence the Court determined that the claimant had established both factual causation (“whether the relevant conduct caused or materially contributed to the harm giving rise to the claim”) and legal causation (“whether the conduct is linked to the harm sufficiently closely or directly for legal liability to ensue, or stated differently, whether the harm is too remote from the conduct.”).
  • Is negligence necessary? Normally to establish a damages claim you must prove that the person who caused your loss acted both wrongfully and negligently (or deliberately). Not so, said the Court, “the right of support is a natural right of ownership” and in subsidence cases “it is unnecessary to prove an unlawful act or negligence; the cause of action is simply damage following upon deprivation of lateral support.” 

That last finding of course means that landowners are “strictly liable” – something to bear in mind before you buy or develop any property where subsidence could possibly be an issue.

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 your professional adviser for specific and detailed advice.

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Electronic Signatures in Property and Other Transactions

“To sign a document means to authenticate that which stands for or is intended to represent the name of the person who is to authenticate” (quoted in the case below)

We all know that verbal agreements, although fully binding for most types of transaction, are a recipe for uncertainty and dispute. It’s not just a question of trust – even if no one is deliberately dishonest about what was agreed, innocent misunderstandings are common. We have a natural tendency to hear what we want to hear and to remember what we want to remember, and a properly-drawn written agreement avoids that.

So even when a written and signed document isn’t required it is always wise to insist on one. Note that the parties themselves can require a document to be in writing and signed. Or it could be required by law – the most common examples of the latter are property sale agreements, wills, suretyship agreements, ante-nuptial contracts, and credit agreements (there are other less common examples – take professional advice in doubt).

But that’s not always easy to achieve, and the COVID-19 lockdown in particular has highlighted the challenges of getting everyone together for an old-fashioned original “paper and ink” signing session. Even when social distancing is no longer required and ceases to be the norm in society, the convenience and benefits of being able to sign documents remotely (whether you and the other party/ies are in different houses, cities, countries or even different continents) are obvious.

Firstly, when is a digital agreement “in writing”; and can property sales and wills be electronic?

Fortunately our law, in the form of the ECTA (Electronic Communications and Transactions Act) recognises the general validity of digital documents. A “document or information” is “in writing” if it is –

  • “In the form of a data message; and
  • Accessible in a manner usable for subsequent reference.” 

As a result, perfectly valid and enforceable agreements are now often entered into online, by email, WhatsApp and the like. 

Note that there are some specific exceptions where a physical (“wet ink on paper”) as opposed to an electronic format is still required – most commonly property sale agreements, “long” (10 or more years) leases and wills (there are others – take advice in doubt).

Secondly, is “signature” always required?

Formal “signature” isn’t always essential as the ECTA provides that if the parties to an electronic transaction don’t specifically require an electronic signature, “an expression of intent or other statement is not without legal force and effect merely on the grounds that –

  • It is in the form of a data message; or
  • It is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred.”
Thirdly, how can you sign a document electronically?

Where “signature” is required, the ECTA recognises the concept of “electronic signatures” (defined as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. They are valid except in cases where either a law (like the laws relating to property sales etc mentioned above) or the parties themselves require actual physical signatures.

An electronic signature can take many forms. Where it is required by the parties but they haven’t agreed on a particular type of electronic signature to be used, it is valid if –

  • “A method is used to identify the person and to indicate the person’s approval of the information communicated; and 
  • Having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.”

That definition will often be wide enough to include names on email messages, scanned images of physical signatures and the like. But remember the parties can specify what formats are and aren’t allowed, plus our courts may well look at all the circumstances of a case and decide for example that an actual manuscript signature is required even when transmitted electronically (see for example the “R804k” judgment discussed below).

“Advanced” electronic signatures

This is a concept of authentication designed to make an electronic signature more reliable and it is used when a law requires signature for specified documents or transactions but doesn’t require another particular type of signature.  

For example the Deeds Registries Act requires documents like the Power of Attorney to Transfer Property to be signed, and that can be done either physically or electronically – but if electronically the electronic signature must be an advanced one. The Credit Agreements Act provides other good examples. 

Even when not specifically required, a big advantage of advanced electronic signatures is that they are presumed to be valid. That means anyone attacking one would have to prove its invalidity and not the other way round.

Security and fraud; with an R804k example

Cyber criminals are as always waiting to pounce so all the normal warnings in regard to electronic communication apply here, with the added need to ensure that electronic documents cannot be altered after completion/signature. 

A recent example of “forged electronic signatures” is an online fraud that went horribly wrong for a firm of financial advisers who were sued for R804,000 when their client’s Gmail account was hacked by fraudsters – 

  • Using the investor’s authentic email credentials, the fraudsters sent three emails to the financial advisers instructing them to transfer a total of R804,000 to the fraudster’s accounts. Two of the emails ended with the words: ‘Regards, Nick’ while the third ended with ‘Thanks, Nick’.
  • The financial advisers made the transfers and the investor sued them on the grounds that they had paid out contrary to the written mandate he had given them which stipulated that ‘All instructions must be sent by fax to [011 *** ****} or by email to [***@***.co.za] with client’s signature.’
  • The financial advisors argued that they had complied with the mandate in that the email endings “Regards, Nick” and “Thanks, Nick” were valid electronic signatures in terms of ECTA.
  • The SCA (Supreme Court of Appeal) however upheld the High Court’s ruling that the financial advisors were liable. They had not complied with the mandate which “requires a ‘signature’ which in every day and commercial context serves an authentication and verification purpose … The word ‘electronic’ is conspicuously absent from the mandate …  The court below cannot be faulted for concluding that what was required was a signature in the ordinary course, namely in manuscript form, even if transmitted electronically, for purposes of authentication and verification.”

Play it safe – have your lawyer draw and manage your agreements for you to minimise this sort of risk, and ask also about using an external service provider for secure, authenticated and verifiable electronic document signing and storage. If you do come to blows with the other party down the line, the integrity and evidential value of your electronic documents and signatures could be make-or-break.

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 your professional adviser for specific and detailed advice.

© LawDotNews

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Lockdown! Nuisance Neighbours and How to Handle Them

“You can be a good neighbour only if you have good neighbours” (Howard E. Koch)

It looks as if we will still be under “restricted movement” orders for a while – even when we finally get down to Alert Level 2 and who knows when that will be. 

Tensions between neighbours are no doubt at an all-time high, and whether you are working from home or just trying to stay sane until our “new normal” starts kicking in, you are no doubt noticing more than ever all those little irritants from next door that would normally fly below your radar or at least be tolerable. 

And of course remember it’s a vice-versa situation – your neighbour is in exactly the same position. That’s a recipe for dispute, and going to war with a neighbour is a classic lose-lose option, in court or out of it. Any short-term victory you may think you can achieve will pale against the ongoing trench warfare that will inevitably result. 

First prize: A negotiated win-win

Negotiation will always be your best path to a win-win outcome, and whether you open up dialogue with a friendly chat over WhatsApp or a socially-distanced masks-on discussion over your boundary wall, here is one bit of advice that will substantially increase your chances of a happy outcome for everyone: Understand your legal rights before you start negotiating! 

Should your negotiations come to naught, consider as your next step mediation, arbitration or official intervention (more on possible municipal or police intervention options below). Remember that if you live in a “community scheme” such as a sectional title development or a Homeowners’ Association community, the CSOS (Community Schemes Ombud Service) provides a dispute resolution service to assist with a wide range of community disputes.

Then – and this should normally be your last option only to be resorted to when all other avenues have failed – you have the legal route, normally in the form of an interdict application and/or damages claim. 

How can our law help you? It’s a balancing act…

The principles laid down by our courts in dealing with neighbour disputes over many years are firmly rooted in common sense. You are entitled to the use and enjoyment of your property – so long as you act lawfully – without unreasonable interference. “An interference” our courts have held, “will be unreasonable when it ceases to be a ‘to-be-expected-in-the-circumstances’ interference and is of a type which does not have to be tolerated under the principle of ‘give and take, live and let live’.”  

As the Supreme Court of Appeal (SCA) put it in 2016: “Nuisance involves the unreasonable use of property by one neighbour to the detriment of another.” It’s a balancing act between competing rights – yours and those of the other property owners around you. 

Peacocks, a cherry tree, and the court’s wide discretion

It is also difficult to set out too much in the way of hard and fast rules here, for as our courts have put it “modern conditions require the exercise of a wide discretion in the adjustment of neighbour relationships”. 

Thus the High Court, in a 2013 case involving nuisance peacocks, a “much loved” cherry tree on the boundary of two properties and in danger of being chopped down, and a partially-demolished boundary wall, both quoted and applied that principle with an order encapsulating a resolution of the neighbourly disputes in a detailed and pragmatic manner. The peacocks for example had made a major nuisance of themselves by being noisy, messy and destructive trespassers (they had damaged expensive vehicles by pecking at them when they saw themselves reflected in the rear-view mirrors and highly polished metal surfaces). The court order included both authority for them to be removed by either the municipality or by the SPCA (there being no municipal permit to keep them as required by the municipality’s bye-laws), and an admonition to find them “good and lawful homes”. The cherry tree on the other hand is now protected by an interdict against its removal, with detailed instructions in the court order as to the reconstruction of the boundary wall next to it.

Bear in mind therefore that what is said below is of necessity a simplified and brief summary only – every case will be different, our courts will take into account a whole range of factors in deciding a dispute, and in many instances technical questions of “wrongfulness”, “fault”, “moving to the nuisance” and so on may apply. If your dispute gravitates towards legal action, specific advice is essential!

What is a “nuisance”?

The range of potential disputes falling into the “neighbour law” and “nuisance” categories is wide. Some examples (from the SCA again – emphasis supplied) – “repulsive odours, smoke and gases drifting over the plaintiff’s property from the defendant’s land, water seeping onto the plaintiffs property, leaves from the defendant’s trees falling onto the plaintiff’s premises, slate being washed down-river onto a plaintiff’s land, causing a disturbing noise, causing a common wall to become unstable by piling soil up against it, overhanging branches and foliage, an electrified fence on top of a communal garden wall, blue wildebeest transmitting disease to cattle on neighbouring ground, and occupants of structures on neighbouring land allegedly causing a nuisance.” 

Two common areas of dispute – noise and trees

Let’s have a closer look at how those general principles have been applied to two of the more common areas of dispute –

  1. Noise: If barking dogs, power tools, loud music or the like are making your life a misery – keeping you awake at night perhaps, or (a common concern in this time of remote working) unable to concentrate on that business project or to participate in your daily Zoom “office” meeting – sooner or later you will need to take action.

    Particularly relevant here are the various national statutes and local bye-laws dealing with noise pollution. Contact your local municipality or the police for help if you need to. If you live in a complex, Body Corporate or Home Owners Association rules and regulations will probably come into play as well. SAPS should respond to serious violations of our anti-noise laws, and just a warning visit from a blue uniform might solve your problem once and for all. 

    If you end up in a legal fight, our courts will take into account factors such as “the type of noise, the degree of its persistence, the locality involved and the times when the noise is heard”. As we said above, every case will be different.  
  2. Trees: If your neighbour’s trees are damaging your property (common complaints relate to boundary walls, underground pipes, building foundations, driveways and the like), or are causing a nuisance in the form of falling leaves or branches, or are blocking your views/depriving you of light, you are once again left with no hard and fast rules. A court will look at what is “objectively reasonable” in all the circumstances. As a general rule, don’t count on much sympathy from a court if damage is minor and easily repaired, if the nuisance caused is controllable by you with regular maintenance (clearing leaves from gutters and so on) or if your only complaint is loss of your views. That last aspect is a whole separate debate with many twists and turns, but all based on the concept that you will have no automatic right to a view.   

    Where you are dealing with an “overhanging branches” issue, old common law principles will usually apply unless factors such as local bye-laws, heritage protection of older trees etc come into play. You will generally have a right to cut overhanging branches back to your property line if the neighbour refuses to do so and to keep or dispose of the branches if your neighbour declines to take them. 

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 your professional adviser for specific and detailed advice.

© LawDotNews