A well-established common law principle enforced in our law is “pacta sunt servanda” –

agreements entered into must be honored. The rationale behind this is legal and commercial

certainty. A contractual party must have the reasonable expectation that the other party will

comply, otherwise contracts will have no value.

Is this principle absolute or can it be limited by other values, specifically public policy if the

enforcement is unfair, and to what extent?

Historically our courts followed a strict approach in applying this principle. Even if the contractual

terms were grossly unfair but the agreement was entered into voluntarily and consciously, the

courts enforced it.

In the Constitutional era our courts started to soften the unforgiving application of this doctrine and

applied principles of fairness, good faith, reasonableness, and equity to contracts. There were

however various conflicting judgements on this issue.

In June 2020 the Constitutional court (CC) got the opportunity in Beadica cc vs Oregon Trust to

give guidance if and how the common law doctrine of pacta sunt servanda must be balanced

against constitutional values when it is clear that public policy is breached in a contract.

The CC ruled that public policy imports values of fairness, reasonableness and justice as well as

other constitutional values, which amongst other the principle of Ubuntu encompasses. The CC

ruled that Ubuntu is now also recognized as a constitutional value enforceable by our courts in the

law of contract.

Is Ubuntu now a trump card that any party can rely on if they want to cancel a contract when there

is no other recourse in law? The CC ruled that pacta sunt servanda still stands as the adherence

to contracts in itself is public policy. A contractual party must prove in court that the principle of

Ubuntu (public policy) has been breached and outweighs the principle of pacta sunt servanda.

To what extent presiding officers will use or abuse the Ubuntu principle to assist a contractual

party who would otherwise be without legal recourse, is unsure.

The principles of Ubuntu involve how estate agents engage with clients, convey information and

manage their risks in documentation. There is a lot we can do to ensure that our purchasers and

sellers do not exploit the Ubuntu card.

This new concern created by the CC together with the statutorily enshrined principle of an estate

agent’s “duty of care” in the new Property Practitioners Act will bring many new challenges to the

industry.

In our new series of lectures at MCademy in February 2021 we will bring

you up to date on how to deal with these new challenges.

WITHHOLDING TAX On the 1st of September 2007, withholding tax was introduced. In the event that the seller of

an immovable property is a non-resident in South Africa, the purchaser of the property

(which has been disposed of in excess of R2 million) is obligated to withhold a percentage

from the purchase price payable and pay the tax to SARS. Withholding tax has been

incorporated to ensure that the seller who is in progress of immigrating’s tax affairs are in

order. The rate of withholding tax is as follows:

IF THE SELLER IS A:

1) Natural person – 7.5 % of the purchase price

2) Company – 10% of the purchase price

3) Trust – 15% of the purchase price

It is the duty of the conveyancer and purchaser to ensure payment of the withholding tax to

SARS. If the purchaser is a SA resident, they must pay it within 14 days from the date on

which the amount was so withheld (date of registration of the transaction), and if the buyer is

a non-resident, within 28 days.

The first persons who have a responsibility in a transaction involving a non-resident seller is

the estate agent or conveyancer, if either or both are involved in a transaction and are being

paid for performing this function. If they are, they BOTH have a duty to notify the purchaser

in writing that the seller is a non-resident, and that there may be a duty to withhold tax. If they

do not do so, and they knew or should reasonably have known that the seller is a non-

resident, they can be held jointly and severally liable for payment of the tax, up to the amount

of their respective fees from the transaction.

In order to determine if withholding tax is applicable, one must conduct the physical

presence test. Section 1(9) (ii) of the Income Tax Act 58 of 1962 provides the definition of

resident. The physical presence test requires that a person must be present in the Republic:

a) More than 91 days for the current financial tax year

b) More than 91 days in total for each of the past 5 years

c) More than 915 days in total for the past 5 years

If the above criteria is not met, the person will be a non-resident for purposes of the

transaction.

In order to prevent any frustrations or delays it is advisable that a non-resident seller obtains

a tax directive. The seller may apply to SARS for a directive to waive or reduce the

withholding tax payable, and, where SARS is satisfied that the seller

has sufficient other assets or security in SA, it may issue such a

directive. The seller must complete form NR03 and submit it

together with the offer to purchase, tax calculation and supporting

documents to nres@sars.gov.za. The directive application is

generally processed within 21 business days.

The Newsletter with a Difference

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A person (owner) who has an exclusive use right in respect of an area (which is part of the common property) does not have ownership of that exclusive use area, despite whether it

is registered in the deeds office or in terms of the rules of the body corporate. The owner only has an entitlement to exclusively use a specific area of the common property. This area

therefore remains part of the common property and is owned by all the owners in the scheme in undivided shares. The body corporate has the primary responsibility to organise the

maintenance of the common property that is subject to exclusive use areas, which includes requiring an owner entitled to make use of such exclusive use area, to pay levies for the

maintenance, costs of rates and taxes, water and electricity and insurance in respect of any of such part or parts of the exclusive use area, as stipulated in section 3(1)(c) of the

Sectional Titles Management Act. This is the legislative position, unless the scheme rules specifically state otherwise, meaning that if the scheme rules that confer the exclusive use

rights also provide that the owners are responsible for these costs, no levy will be collected and the owner will directly pay for all maintenance and repairs.

If an exclusive use area requires repairs or maintenance that go beyond keeping it clean and neat (which is the duty of the owner), the body corporate cannot

demand that the owner who holds rights to that area must carry out the work, unless it has been so specified in terms of the scheme rules. As with any other area of

common property, the body corporate is obliged to carry out the work in terms of section 3(1)(l) of the STSM Act, but when those works are on an exclusive use area,

the body corporate must recover the costs from the owner concerned in terms of the proviso to section 3(1)(c) of the STSM Act, or in terms of the rules.

You services have been unmatched. Even when I was unable to attend to every email

you were very supportive and kept me updated every step of the way. It has been an

absolute pleasure working with you. Thank you.

I wish to, kindly, compliment you, for your assistance, and patience with us, during this

transaction. Very professional approach which is unique, for us. Most commendable! Our

sincere compliments and appreciation to you.

Thanking you, again, for the admirable service we received!!

Baie dankie vir jul ongelooflike bekwame en professionele diens.

Ek het soveel vertroue in julle dat ek geensins gehuiwer het om julle te kies as my

oordragprokureurs nie.

Dankie dat julle my altyd op hoogte gehou het vd verloop van die transaksie.

Baie dankie vir julle hantering met die verkoop en oordrag van my huis. Dit was ‘n plekkie

wat my naby aan die hart lê maar met julle het alles glad verloop. Ek sal julle dienste

enige tyd aanbeveel. Weereens dankie.

At the end of this eventful and trying year all of us at M.C. van der Berg want to thank our cli-

ents and estate agents for their loyal support.

If this year has taught us one thing it is that we have to be grateful for blessings, big and small,

whether it is still having a job, quality time with family or friends or even just being able to have

a glass of wine after a trying day.

May you experience the true spirit of Christmas and the spirit of peace and joy in abundance.

SPLUMA, the Spatial Planning and Land Use Management Act, is a national law passed

in 2013. It acts as a guide and framework that governs:

Planning permissions and approvals;

Sets parameters for new developments; and

Provides for different land uses in South Africa.

SPLUMA provides clarity on how planning law interacts with other laws and policies. The

act is important because it repeals many of the previous era laws which has left our

planning laws fragmented, complicated and inconsistent. Thus, the purpose of the law is

to develop a ‘uniform, effective and comprehensive system’ of planning that ‘promotes

social and economic inclusion’.

SPLUMA also requires that each local municipality must adopt a Land Use Management

by-law to govern land use planning that is in line with the National Regulations and

Frameworks. Each municipality’s by-laws prescribe how land use applications and

appeals should be dealt with.

Should you have any questions regarding SPLUMA and land use legislation, send us an

email to helpme@icompli.biz or contact us at 086 006 1062.

Office: 086 006 1062 • Email: helpme@icompli.biz • Website: www.icompli.biz

When a property practitioner changes employment from one agency to another, Regulation 9

of the Estate Agency Affairs Act, no 112 of 1976 (“the Act”) is applicable and it provides as

follows:

In terms of Regulation 9 “The holder of a fidelity fund certificate shall inform the Board within

fourteen (14) days of any change in the information supplied to the Board at the time of

applying for the issue to him/her of such certificate and, if the information appearing on the

certificate is no longer applicable or has changed such certificate shall forthwith be forwarded

to the Board for the appropriate amendment thereof or for the issue of a new certificate in

substitution thereof.”

The current situation is thus that when a property practitioner leaves the employ of one

agency and intends joining another, either that property practitioner has to write to the EAAB

requesting the removal of his/her profile from their erstwhile agency or the principal could re-

quest removal of the property practitioner from their profile. The million-dollar question is, what

happens to the FFC that was already issued to the property practitioner during the period of

transition from their erstwhile agency to the new agency but before registration with the

EAAB? Can the resigned property practitioner still use the FFC issued in the former

employer’s name? In the Supreme Court of Appeal matter of Ronstan Investments vs

Littlewood 2001, the court found that a FFC, once issued, is valid

for the entire year of issue. Therefore, an agent can change

employment from one agency to another by giving notice to the

EAAB to update the agent’s details, and the FFC issued under the

name of the first agency will still be valid.

9 TRUST MONEY AND INTEREST

An Estate agent –

9.1 Shall not solicit or influence any person entitled to trust funds in the agent’s possession or

under his control to make over or pay to the estate agent directly or indirectly any

interest on moneys deposited or invested in terms of section 32(1) or 32(2)(a) of the Act;

9.2 Shall, before he receives any money in trust in respect of a contract of sale or lease,

disclose to the parties concerned that unless they agree in writing to whom interest earned

on such money must be paid, the interest shall, in terms of section 32(2)(c) of the Act, accrue

to the Estate Agents Fidelity Fund;

9.3 Shall, if any money is invested by him pursuant to section 32(2)(a) of the Act or pursuant to

an instruction by the party entitled to the interest on money held in trust by the estate agent –

9.3.1 invest such money at the best interest rate available in the circumstances at the bank

or building society where he normally keeps his trust ac-

count or accounts; and

9.3.2 pay the full amount of the interest which accrued on the

investment to the party entitled to such interest, or the board

(as the case may be), subject to any written agreement in

this regard between him and such party;

1

0 FREQUENTLY ASKED BOND QUESTIONS/

GEREELDE VERBAND VRAE

WHAT IS A GUARANTEE?

A guarantee is an undertaking given by a financial institution (usually a bank) to pay a certain

amount (the loan amount) to a specific beneficiary at an uncertain future date when specified

events take place. With reference to a property transaction, the specified events would be the

registration of the property into the name of the purchaser (transfer), registration of the

purchaser’s bond and cancellation of the seller’s bond (if applicable). Guarantees are issued

after the bond documentation has been signed by the purchaser and all the bond

requirements are adhered to. A bank may issue guarantees, but bond attorneys usually do

this on behalf of the bank. Once the guarantees have been issued, they are delivered to the

transferring attorney.

WAT IS ‘N WAARBORG?

‘n Waarborg is ‘n dokument waarin ‘n finansiële instansie (gewoonlik ‘n bank) onderneem om

‘n bepaalde bedrag geld (leningsbedrag) aan ‘n gespesifiseerde begunstigde op ‘n onsekere

toekomstige datum by die plaasvind van bepaalde gebeurtenisse te betaal. In ‘n

eiendomstransaksie verwys hierdie gebeurtenisse gewoonlik na die registrasie van die

eiendom in die naam van die koper (oordrag), die registrasie van die koper se verband en die

kansellasie van die verkoper se verband (indien van toepassing). Nadat die verband-

dokumentasie deur die koper onderteken is en al die verbandvoorwaardes nagekom is, word

waarborge uitgereik. Waarborge kan deur die bank uitgereik

word, maar word gewoonlik deur die verbandregistrasie-

prokureur namens die bank uitgereik. Na uitreiking van die

waarborge word dit aan die oodragprokureur gelewer.