Residential property court battles: what property practitioners need to know

Residential property court battles: what property practitioners need to know

Private Property South Africa
Kerry Dimmer

Chloe Merrington, Director Norton Rose Fulbright SA Inc, associate Tholakele Mrubata and candidate attorney Luthando Dlamini provide insights into the value of outcomes from court cases relative to residential properties.

Interview insights

On average, how many residential property cases do you handle annually, and what percentage actually go to court/or get settled through negotiation?

As real estate lawyers and conveyancers, our work is non-litigious and (in relation to residential property transfers) covers the facilitation of the conveyancing process, from the signature of an agreement until the registration of transfer. Sometimes disputes arise from the contractual obligations between parties or from disputes linked to a common interest that parties may have in a property (e.g. servitude registrations, residential developments etc).

Most sale agreements have a clause stipulating that should a dispute arise between parties; alternative dispute resolution is the first step. This can be mediation or arbitration, and thereafter, should there be no resolution, a dispute can be taken to court.

In our practice, we prefer and attempt to mitigate disputes before they become litigious by engaging with all parties involved and finding a way to have the transaction finalised for the interest of those involved and in accordance with the terms of the agreement concluded. We do not advise parties to proceed with litigation in respect of residential property as court proceedings can take some years to finalise, which may prevent the seller from finding a new buyer in some cases, and/or prevent either party from mitigating its damages.

Our firm handles approximately 300 - 500 transfers a year. Less than 15% require mediation (by ourselves) or alternative dispute resolution, with the majority settled for progression to registration.

Is SA's residential property law sufficient and/or on par with global law?

South African law is sufficient in as far as regulating residential properties and covering disputes that emanate from such transactions. The legislative scheme is also comprehensive in that we have the necessary laws and regulatory bodies to deal with disputes. This is not to say such bodies are perfect. However, guidance is provided.

South African residential property law provides protection and guides the relationship between parties in these transactions; for instance, where deprivations of property are concerned, our law ensures due process and regulates such processes through various instruments such as the Prevention of Illegal Eviction and Unlawful Occupation of Land Act,19 of 1998 (the PIE Act), which deals with evictions, sets out procedures for eviction of unlawful occupants, and prohibits unlawful evictions, protecting both occupiers and landowners.

The South African lawmakers introduced the Property Practitioners Act, 22 of 2019 (the PPA), the purpose of which was to establish the Property Practitioner Regulatory Authority (replacing the Estate Agency Affairs Board) for the regulation of the affairs of all property practitioners, to allow for transformation in the property sector and to provide for consumer protection. The PPA also seeks to achieve its objective by making it mandatory for sellers to disclose all defects they are aware of in their property.

Certain residential property transactions also attract the protection of the Consumer Protection Act 68 of 2008 (the CPA), such as where the seller is a property developer or an investor who buys, renovates and sells houses as a business. The CPA also recognises estate agents as suppliers of goods and services in the ordinary course of their business to the sellers and purchasers of residential property.

The Rental Housing Act 50 of 1999 deals with landlords and tenants and regulates their relationship, contractual rights, and obligations. It makes provision for the Rental Housing Tribunal that handles disputes between landlords and tenants through mediation and arbitration, which are fast and cost-effective methods for resolving disputes. The tribunal can rule on most disputes between landlord and tenant, with the exception of ejectments/evictions.

The Community Schemes Ombud Service Act 9 of 2011 (the CSOS Act) and the Sectional Titles Schemes Management Act 8 of 2011(the STSMA) regulate the conduct of people in living arrangements where there is shared use of land or buildings such as sectional title schemes, residential estates, retirement housing schemes, share block companies, and housing cooperatives. The CSOS Act makes provision for the CSOS Adjudicator to deal with disputes between parties. The STSMA makes provisions for the establishment of a Sectional Titles Schemes Management Advisory Council, whose role includes keeping the implementation of the Act and the regulations under regular review and making recommendations to the Minister of Human Settlements regarding any amendments thereof or other action which may be advisable.

What are the types of residential property cases that SA courts generally contend with?

The vast number of cases before the courts relate to mortgage foreclosure. The courts have much oversight over the public auction of mortgaged residential properties following foreclosure by the bank. The courts have also progressed the law over time and set out numerous facts to be taken into account when faced with decisions, such as whether to allow a creditor (bank or otherwise) to sell a person’s home in execution at a sheriff’s auction.

Other cases that come before the court are:

  1. Appeals from the CSOS Adjudicator, including those involving corrections of unreasonable contributions and other financial issues pertaining to the scheme;

  2. Removal of pets and behavioural issues of pets;

  3. Problems relating to scheme governance;

  4. Disputes relating to meetings and resolutions completed therein;

  5. Appointment of management agents, repairs and maintenance;

  6. General issues, such as access to information.

The provisions of the CSOS Act are likened to those of the Promotion of Administrative Justice Act, 3 of 2000, which make it mandatory for a party to a dispute to seek relief from the specialised structure (in this case, the CSOS) before going to a court. The jurisdiction of the CSOS Adjudicator itself is triggered when all internal remedies have been exhausted. In addition, the processes of the CSOS must be exhausted before a High Court can be approached.

The Rental Housing Tribunal, whose decisions are considered to have equal status to orders of a magistrate’s court made in terms of the Magistrates Court Act 32 of 1944, deals with cases involving failure to maintain the rental property, unlawful repossession of the rental property and unlawful evictions, failure to accept notice and to vacate the premises, unlawful notices to vacate, unilateral changes to lease agreements, failure to provide monthly statements or issue receipts, unlawful seizure of possessions and failure to provide municipal services.

Court cases which involve zoning are also common. It is important that purchasers and owners visit their local district planning office to review the zoning map for the municipal area to know the exact zoning category the property falls into and which usage and development permissions are applicable.

Eviction disputes are the sole domain of the courts in terms of the PIE Act. Where an unlawful occupier refuses to vacate a property, an eviction is only enforceable pursuant to a court order authorising the eviction.

There is no right to the preservation of views in South African common law or legislation. Litigation regarding renovations that block views could only result from the renovations being in breach of a registered servitude of height restriction, zoning regulations dealing with height restrictions, or height restrictions set out in constitutions or rules of a body corporate, homeowners associations or other housing bodies or institutions applicable to the property concerned.

What do we learn from the outcomes of residential property cases?

Different role players can learn a number of things from property cases. As mentioned, SA's legislation is well-developed; however, court judgements can clarify ambiguity, misunderstandings, or incorrect application of the legislation and may even further develop the law on certain topics.

A recent example of a case which gave finality to a contentious (and worrying) issue was Jordaan v Others, 2017, wherein the Constitutional Court held that section 118(3) of the Local Government: Municipal Systems Act 32 of 2000, which creates a charge against a property for historical municipal debts, only applies to property while it is owned by the person who incurred those debts. This means a municipality could only interdict a property transfer to a purchaser where the seller is overdue on debts older than two years if the seller incurred these debts.

Mortgagors, borrowers or guarantors need to understand the nature of the transactions they are entering into and the implications thereof. As mentioned, the vast number of cases before the courts are mortgage foreclosure cases. One could say that this is a result of the current economic climate in South Africa, where the housing market remains fragile amidst a weak economy, surging inflation, as well as rising interest rates. However, one could also attribute this to one’s understanding of the nature of mortgage loans and their financial implications when obligations are not met by relevant parties.

Due process has to be adhered to in all transactions, with the knowledge that there can be no corner-cutting within the South African residential property space. The South African Deeds Registries Office takes the registration of property transactions very seriously (old as it may be) and is very stringent. Failure to comply will lead to expensive and unwanted litigious circumstances.

Every party involved in a transaction must act in accordance with the relevant legislation, agreements, and/or rules governing a transaction and/or residential scheme, understanding that there are regulatory bodies such as CSOS and the Rental Housing Tribunal that can hold parties accountable where there is a breach of legislation, agreement, or rules.

Why is it important for property practitioners to follow these court cases?

Largely to protect their interests and those of the transacting parties and to ensure that all actions and assurances given to a prospective purchaser about the value of a property, its developmental potential, zoning and general condition are factually correct and within the ambit of the law. The purchaser may make a purchase decision (whether to purchase at all or at a certain price) based on this information.

If, after the fact, a purchaser finds these assurances were not accurate or true, the purchaser might have legal recourse against the agent. It is thus important for estate agents [sic] to follow these court cases and general developments in the law to mitigate the risk of being sued. As has been mentioned, the CPA recognises the estate agent as a supplier of services to the purchaser (the consumer), and the estate agent may be liable where the purchaser is not satisfied with the service delivered (in terms of the CPA).

Estate agents, in the scope of their duties, must adhere to their obligations to purchasers and sellers alike. The property practitioner acts for the seller and is the intermediary between the seller and the purchaser. Their role is to ensure that the interests of all parties involved in transactions are protected. It is stressed that estate agents must correctly advertise and represent the conditions of the properties as well as the various uses of such properties.

Property practitioners should be careful not to make misrepresentations in the course of selling properties. It is important that the purchaser is aware of the applicable municipal zoning laws and that the purchaser does not, for instance, operate a business from the premises, which might be prudent because of the tax implications but be in contravention of zoning laws.

Writer: Kerry Dimmer

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