Several different statutes may apply where eviction of an occupier from a residence is in issue, as discussed by the Supreme Court of Appeal in the case of Ndlovu v Ngcobo, Bekker and Another v Jika (1) (240/2001, 136/2002) [2002] ZASCA 87; [2002] 4 All SA 384 (SCA) (30 August 2002).

The statute with the most significant impact on “rural dwellers” is the Extension of Security of Tenure Act, 62 of 1997 (“ESTA”).  The scope of application of ESTA depends on various factors, such as the geographical status of the land, the personal attributes of the occupier (i.e., the occupier’s income and the nature of the use of the property), and the legal nature of the rights to occupation (for instance express or tacit consent or for example a right deriving from contract).

The question discussed here is the geographical status of land as a determining factor for the application of ESTA.

Section 2 of ESTA deals with “Application and implementation of Act”. Sub-sections 2(1) and (2) determine whether property falls within the scope of the Act:

(1)  Subject to the provisions of section 4, this Act shall apply to all land other than land in a township established, approved, proclaimed or otherwise recognised as such in terms of any law, or encircled by such a township or townships, but including –

A)Any land within such a township which has been designated for agricultural purposes in terms of any law; and

B)Any land within such a township which has been established, approved, proclaimed or otherwise recognised after 4 February 1997, in respect only of a person who was an occupier immediately prior to such establishment, approval, proclamation or recognition.

 (2)  Land in issue in any civil proceedings terms of this Act shall be presumed to fall within the scope of the ESTA Act unless the contrary is proved.

In many cases the question whether land falls within a township, as described in ESTA, could be a simple matter where the land clearly forms part of a township. But difficult issues can arise, as illustrated by the recent case of

Stellenbosch University v Retolla and Others (LCC63/2021) [2022] ZALCC 27 (16 August 2022) (“Retolla”), which involved a town founded in 1697 (Stellenbosch) and property on its urban edge. The applicant approached the Land Claims Court for a declarator order on the status of the property.

The problem was that ESTA does not contain a definition of what constitutes a “township”, other than to state that land will constitute a township if it is established, approved, proclaimed or otherwise recognised as such in terms of any law. The Act does not provide clarity on the “law” that could form the basis of the recognition of a township.

A further complication is that the procedure for the establishment of townships within the Republic differs from province to province. In most provinces townships are established by way of proclamation. In the Western Cape, townships are not established by way of proclamation, but by the process of subdivision of land. It follows that a township will not be established, approved or proclaimed in the Western Cape. In the Western Cape, the question to determine the application of ESTA will be whether a property falls within a township “otherwise recognised as such in terms of any law”.

In Retolla, the Land Claims Court issued a declarator order to the effect that the property in question was situated in the township of Stellenbosch, which, on the uncontested evidence before the court, was recognised in law as a township, at the latest in 1927, when the Townships Ordinance 13 of 1927 came into force. The property did therefore form part of a township recognised as such before and after 4 February 1997. The property in question was therefore excluded from the provisions of ESTA and the property owner could proceed with eviction proceedings in terms of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act, 19 of 1998.

Should you have any questions on eviction and the application of ESTA, please contact us at 021 808 5600.

Owners of non-residential properties in certain categories must obtain an Energy Performance Certificate (“EPC”) by no later than 7 December 2022 and display it at the entrance of their building.

Who must obtain the certificate

A Government Notice which was published in the Government Gazette in December 2020 will come into effect on 7 December 2022. In terms of this notice, owners of non-residential buildings that have a floor area of at least 2000 m2 and are used for any of the following purposes must obtain an EPC:

• Entertainment and public assembly (such as bars and restaurants)
• Theatre and indoor sport
• Places of instruction (which includes places of worship)
• Offices

The building must have been used as such for a period of 2 (two) years or longer and must not have been subject to major renovations within the past 2 (two) years of operation.

What the certificate entails

The EPC must reflect the “energy performance” of the building, expressed as the net energy consumed in kilowatt hours per square metre per year (kWh/m2/a).

Buildings will be rated on a scale from A to G, similar to the rating of household appliances such as fridges.

All major energy consuming systems such as ventilation, heating, cooling, lighting and hot water will be accounted for.  Energy consumed by garages, car parks, storage areas and outdoor services will be excluded.

The certificate will be valid for a period of maximum 5 (five) years from date of issue.

Where to obtain the certificate

The EPC must be obtained from an accredited body which is defined as “the body accredited by the South African National Accreditation System or by a member of the recognition arrangements of the International Laboratory Accreditation Cooperation or the International Accreditation Forum”.

A certified copy of the EPC must be delivered to the South African National Energy Development Institute within 3 (three) calendar months of the date of issue thereof.

As mentioned, the EPC must be displayed at the entrance of the building.

Why is it important

The new regulations for the mandatory display and submission of an EPC were enacted under the National Energy Act No. 34 of 1998 (“the Act”). Failure to adhere to the regulations is a contravention of the Act and an offence.

Owners of properties who are required to obtain an EPC, but fail to do so and/or do not publicly display it before 7 December 2022 can be fined up to R 5 000 000,00 (Five Million Rand), or be sentenced to imprisonment for a period not exceeding 5 (five) years, or both.

Compliance with the regulations will be monitored by the Department of Mineral Resources and Energy or an appointed representative.

Prospective purchasers will probably request an EPC when purchasing non-residential buildings to establish the building’s energy performance.  Many European countries already require an EPC for the sale or rental of properties as per the European Union’s legislative framework which includes the Energy Performance of Buildings Directive 2010/31/EU and the Energy Efficiency Directive 2012/27/EU.

Conclusion

It is important for property owners to ascertain for which buildings an EPC is required, what exactly it entails; and how to obtain it. This must be done before 7 December 2022, to avoid any penalties.

Rates payable by immovable property owners in South Africa are governed by the Local Government: Municipal Property Rates Act 6 of 2004 (“MPR Act”), a statute regulating the constitutional power of municipalities to value and rate immovable properties located within their boundaries.  Section 8 (1) of the MPR Act allows municipalities to levy different property rates for different categories of ratable property, which may include categories determined according to the use of the property, the permitted use of the property or the geographical area in which the property is situated.

As appears from the Zibi case, for the 2015/2016 financial year, the City of Johannesburg Metropolitan Municipality (“the municipality”) had determined twenty-three different categories for the purpose of property rates, including categories for residential use, business and commercial use, and illegal use.

Central to the Zibi case was the question whether the municipality was authorized to impose a penalty rate on residential property for illegal or unauthorized use, without first changing the property category on its valuation roll or supplementary roll, from “residential” to “illegal” or “unauthorized” use.

The respondents in this case, Mr. & Mrs. Zibi, were owners of a residential property since 2013. They lived there with their children, and also rented out two bedrooms to students and young professionals. By renting out rooms they made commercial use of the property, without any authorization from the municipality.

After various inspections and notices calling upon the respondents to terminate their unauthorised use of the property, the municipality from October 2015 imposed levy rates in the form of a penalty, for the illegal and unauthorised use of the property. The municipality levied the rates in accordance with the rate category for illegal or unauthorised use, while the zoning category of the property remained “residential” on the municipality’s valuation roll, from 2013 to 2018.

In October 2018, the municipality obtained an order in the Johannesburg High Court (“the High Court”), interdicting the respondents from using the property in contravention to its residential zoning, within 30 days of the date of the order. The respondents did not appeal this court order.  However, on 26 November 2018 the respondents launched an application challenging the municipality’s penalty tariff.

The High Court noted that the respondents were acting in contravention of the municipality’s land use scheme and that they were in contempt of the interdict granted to the municipality against them in October 2018.  However, the High Court found that the municipality was only authorised to levy rates on the property based on its zoning category, “Residential 1”, and was not permitted to impose a penalty rate without first re-classifying the category of the property as “Unauthorized”. To charge a punitive rate the Municipality was required to amend the valuation roll or issue a supplementary roll. In addition, the municipality also had to comply with the audi alteram principle, by first allowing the ratepayers to respond before imposing the penalty rate.

The municipality took the matter on appeal to the Supreme Court of Appeal (“SCA”).  The SCA found that the High Court had misdirected itself and decided that the imposition of a higher tariff for rates payable on residential property used for a purpose other than its authorized purpose does not require prior re-categorization. The penalty was validly imposed by the municipality for the duration of the illegal land use. The SCA reasoned that to require publication of a supplementary valuation roll for every unlawful use of property would place an unreasonable administrative burden on the municipality if.

This judgment is significant in the time of Covid-19, when working from home and the use of residential properties for commercial purposes has become widespread.

The effect of the judgment in the Zibi case is that if a residential property is used in contravention of the authorised use it is zoned for, the municipality can levy a penalty rate without first rezoning the property.

Readers are welcome to contact Cluver Markotter Inc for advice on land use and zoning.

The Property Practitioners Act (“PPA”) has come into effect on 1 February 2022. The PPA aims to ensure a healthy property market, to regulate property practitioners and to protect consumers. An important example of consumer protection is the compulsory inclusion of a property defects disclosure form (“disclosure form”) for both property sales and rentals. Regulatory changes focus on matters such as trust accounts, certification, who qualifies as a property practitioner and the Property Practitioner Fidelity Fund.

CHANGES

• • MANDATORY DISCLOSURE FORM

For both sales and leases a completed disclosure form (in a format prescribed by section 36 of the Property Practitioners Regulations, 2022) and signed by all the parties must now be attached to the agreement and forms an integral part of the agreement. It may be noted that this form only refers to “sellers” and it is therefore unclear which format is to be used for lease agreements.

Under the PPA from 1 February property practitioners may not accept a mandate from either a seller or landlord where there is no comprehensive disclosure form. The PPA is silent on whether companies are included in this. If they do accept the mandate, their actions may result in liability towards the affected consumer. If the disclosure form was not completed, signed or attached to the agreement, the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser. The disclosure form is not a substitute for any inspections or warranties, which means that the buyers or tenants can still insist on these in the agreement.

•        TRUST ACCOUNTS

Previously, all property practitioners needed to have a trust account, involving bank charges and an annual audit, even if they did not handle trust monies. Under the new PPA property practitioners only need a trust account if they actually handle trust monies. If not, they must have a valid exemption certificate (which involves bringing an application to the Authority explaining their reasoning for the application and the relevant supporting documents). If the property practitioner makes use of an intermediary (someone whose primary purpose is to attempt to

effect the conclusion of an agreement to sell and purchase, or hire and let) who has a trust account as required, the property practitioner will not be required to have a trust account. This will do away with annual audits and save on bank charges.

•         CERTIFICATION

Under the PPA any business which earns a commission or brokerage from the sale or lease of a property must have a valid Fidelity Fund Certificate (“FFC”).  They will also have to be in the possession of a valid tax clearance and a valid BEE certificate (section 50(a)(vii) & (x) of the PPA). Where the property practitioner is a company, every director must be in possession of an FFC. No property practitioner is allowed to receive remuneration without an FFC.

The administration of FFCs will now be handled by the Board of Authority, which replaces The Estate Agency Affairs Board.

A conveyancer may only pay remuneration or any other monies to a property practitioner once the latter has provided the conveyancer with a certified copy of a valid FFC which is “valid during the period or on the date of the transaction to which such payments relates, and on the date of such payment” (section 56(5) of the PPA).

•         PROPERTY PRACTITIONER

Who qualifies as a property practitioner? From 1 February, bond originators, companies selling time shares and commercial property brokers will also be property practitioners. The definition in the PPA casts the net very wide, referring to “any natural or juristic person who in any way acts or provides services as an intermediary or facilitator with the primary purpose to, or to attempt to effect the conclusion of an agreement to sell and purchase, or hire and let” (section 1, subsection (a) – (g)).

•             PROPERTY PRACTITIONERS FIDELITY FUND

The Estate Agents Fidelity Fund has been replaced by the Property Practitioners Fidelity Fund. The purpose of this Fund is to reimburse persons who suffer pecuniary loss because of theft of trust money or due to the failure of the property practitioner to comply with their duties relating to trust accounts.

• CONCLUSION

The PPA brings about important changes in the property industry, affecting property practitioners and consumers. Prominent among these are the new regulations on trust accounts and Fidelity Fund Certificates, and the prescribed defects disclosure form for transactions of sale and lease.

The Rental Housing Act 50 of 1999 (“RHA”) regulates all residential lease agreements and provides for provincial regulations regarding unfair practices. Section 15(1)(f) of the RHA states the following:

“The MEC may, after consultation with the relevant standing or portfolio committee of the Provincial Legislature responsible for housing matters in the province, by notice in the Gazette, make regulations relating to – . . .(f) unfair practices, which amongst other things may relate to– . . .”

Under section 1 of the RHA an “unfair practice” means:

“a practice prescribed as a practice unreasonably prejudicing the rights or interests of a tenant or a landlord”.

It is within the framework of these provincial regulations that penalty clauses are dealt with – the RHA itself does not deal with penalty clauses.  However, not all provinces have passed such regulations and in the absence of national regulations the enforceability of penalty clauses may be open to question and will depend on the geographical location of the rental property.

For example, the Western Cape Unfair Practice Regulations P.N 22/2002 (“WC Regulations”) do not prohibit penalties for late rental payments in agreements dealing with rental property situated in the Western Cape.  It appears therefore that penalty clauses are enforceable within the Western Cape.  For a rental property situated in Gauteng, on the other hand, the Gauteng Unfair Practice Regulations 2001 (“Gauteng Regulations”) expressly prohibit a landlord to charge a penalty for late rental payments.

Section 3(3)(a) of the Gauteng Unfair Practice Regulations states:

“A lease agreement must exclude any provision which –

• imposes a penalty for late payment of rent whether or not the penalty takes the form of administrative charge or any other form other than interest. . .”

Therefore, under the Gauteng Unfair Practice Regulations a residential lease agreement may not contain any provision imposing a penalty for late rental payment.  This includes instances where the penalty takes the form of an administrative charge or any other form, except interest, which may be charged on the late payment.  A penalty clause in a residential lease agreement in Gauteng will not only be unenforceable, but its inclusion would also be in contravention of the Gauteng Regulations.

Section 14(5) of the Gauteng Regulations states:

“Any person who commits and unfair practice is guilty of an offence and liable on conviction to a fine or imprisonment not exceeding two years or to both such fine and such imprisonment”.

Any landlord within Gauteng who contravenes section 3(3)(a) of the Gauteng Regulations would open themselves up to liability for a fine, imprisonment, or both.

In provinces where there are no regulations on penalty clauses, the penalty provision would still be subject to the Conventional Penalties Act 15 of 1962, which allows a contractual penalty to be enforced in any competent court, but also provides for reduction of the penalty to the extent that the court considers equitable in the circumstances, if the penalty is out of proportion to the prejudice suffered as a result of the act or omission for which the penalty was stipulated.  The application of the Conventional Penalties Act therefore requires court intervention, which will be an expensive remedy for the tenant subject to the penalty.

Rental Housing Amendment Act

The Rental Housing Amendment Act 35 of 2014 (“RHAA”), which is not yet in force, is likely to result in a national prohibition of penalty clauses for late rental payments.  The responsible minister is obliged, under section 15(1)(f) of the RHAA, to make national unfair practice regulations, which are likely to be similar to the Gauteng Regulations.  Section 3(c)(ii) of the Draft Procedural and Unfair Practice Regulations, 2008, published for public comment (“Draft Regulations”), include the following clause:

 “A lease agreement must not include any provision which –

Imposes a penalty for late payment of rent whether or not the penalty takes the form of administrative charge or any other form other than interest; . . .”

Section 14 of the Draft Regulations also provides for a fine or imprisonment in the event that the landlord contravenes section 3(c)(ii) of the Draft Regulations:

“Should the landlord or tenant fail to comply with any provision of the Act or the Regulation or a ruling of the Tribunal, and found guilty, a fine may be imposed or imprisonment not exceeding two years or to both such fine and such imprisonment”

Once the RHAA comes into force, the position is likely to be that penalties for late rental payments will be prohibited nationally.

Rental agreements for residential property should therefore be scrutinised carefully by landlords and tenants alike.

As a general rule foreigners who live outside South Africa are not prohibited from buying immovable property in the Republic.  However, foreigners physically present in the Republic at the time of the purchase must comply with visa requirements.  Purchases by non-compliant foreigners are illegal; and assisting with such purchases (“aiding and abetting”) is also illegal.

The Immigration Act 23 of 2002 (“the Immigration Act) governs dealings with foreigners, their residence in and their departure from the Republic of South Africa, and related matters.  The Act defines a foreigner as an individual who is not a South African citizen.  If a foreigner is outside of the Republic at the time of purchasing the immovable property, there is no limitation or restriction on their transactions.

Foreigners who purchase immovable property while physically present in the Republic at the time of concluding the agreement of sale must comply with the requirements of the Immigration Act.  This means they must either have a valid visa to remain in the country temporarily, or be in possession of a permanent residency permit.

Section 42(1)(a)(ix) of the Immigration Act prohibits anyone from aiding and abetting, assisting or enabling, or in any manner helping an illegal foreigner by letting or selling or in any manner making available immovable property to him or her.  An illegal foreigner is defined as an individual who is in the Republic in contravention of the Act, i.e., who does not hold a valid visa or permit.

Temporary visa

Foreigners can be in possession of any of twelve kinds of temporary visa, under sections 10 to 23 of the Immigration Act.  A visa is defined as the authority to temporarily sojourn in the Republic for purposes of:

• transit through the Republic;
• a visit;
• study;
• conducting activities in the Republic in terms of an international agreement to which the Republic is a party;
• establishing or investing in a business;
• working as a crew member of a conveyance in the Republic;
• obtaining medical treatment;
• staying with a relative;
• working;
• retirement;
• an exchange programme; or
• applying for asylum.

Permanent residence permit

There are two main categories of permanent residency permits for foreigners:  direct residency permits and residency-on-other-grounds permits.

Direct residency permit under section 26 of the Immigration Act

Direct residency permits are issued to foreigners who have been residing in South Africa either on the basis of their work permits for a minimum period of five years, or has been a spouse of a citizen or permanent resident for five years, or is a child of a citizen.

Residency-on-other-grounds permit under section 27 of the Immigration Act

Residency-on-other ground permits are issued to foreigners who:

• are in possession of a permanent work offer in South Africa, or
• have exceptional skills and qualifications;
• intend to establish a business in South Africa;
• qualify as Refugees in terms of Section 27(c) of the Refugees Act;
• qualify as retired persons;
• are financially independent;
• are relatives (biologically or judicially adopted) of a South African citizen/permanent residence permit holder.

Criminal offence

Under section 49(6) of the Immigration Act it is a criminal offence if anyone fails to comply with their duties or obligations under the Act.  This includes not to aid and abet, assist or enable, or in any manner to help an illegal foreigner by letting or selling or in any manner making available immovable property to him or her, in contravention of section 42(1)(a)(ix) of the Immigration Act.  The offence is punishable by a fine or imprisonment not exceeding five years.

It is important to note that ignorance is no defence in any criminal proceedings arising out of section 42 of the Immigration Act.  It is no defence for a seller, agent or conveyancer to plead ignorance of the status of a foreign purchaser of immovable property who is physically present in the Republic (i.e., whether he or she is an illegal foreigner), if it is proved that the accused ought reasonably to have known the status of the foreigner or that he or she is an illegal foreigner.

Sellers, agents and conveyancers involved with the purchase of immovable property in South Africa by a foreigner must therefore be aware that they have a duty to inquire into the status of the foreigner.  This means ascertaining whether the foreigner holds a valid temporary visa or permanent residence permit and is legally within the Republic when the agreement of sale is concluded.

For enquiries about purchasing of immovable property by foreigners, please contact the Cluver Markotter Property Department.

In a property transaction the seller is often required to furnish the purchaser with a valid Electrical Compliance Certificate (“Certificate”) before transfer.  The purpose is to provide a warranty to the purchaser that the electrical wiring and installations on the property are in order.  How long does the Certificate remain valid; and does it lapse when the property is transferred?

The Electrical Installation Regulations (“the Regulations”), promulgated under section 43 of the Occupational Health and Safety Act 85 of 1993, obliges every user or lessor of an electrical installation to have a valid certificate of compliance under regulation 7(1):

“Subject to the provisions of subregulation (3), every user or lessor of an electrical installation, as the case may be, shall have a valid certificate of compliance for that installation in the form of Annexure 1, which shall be accompanied by a test report in the format approved by the chief inspector, in respect of every such electrical installation.”

Under section 1 of the Regulations a “certificate of compliance” means:

“(a)  a certificate with a unique number obtainable from the chief inspector, or a person appointed by the chief inspector, in the form of Annexure 1, and issued by a registered person in respect of an electrical installation or part of an electrical installation; or

 (b)  a certificate of compliance issued under the Electrical Installation Regulations, 1992”

VALIDITY OF THE CERTIFICATE:

• WHAT HAPPENS WHEN THERE ARE ADDITIONS OR ALTERATIONS TO THE ELECTRICAL INSTALLATION?

Regulation 7(4) requires the following:

“Where any addition or alteration has been effected to an electrical installation for which a certificate of compliance was previously issued, the user or lessor of such electrical installation shall obtain a certificate of compliance for at least the addition or alteration”.

This means that a new Certificate is required for an addition or alteration to the electrical installation. The use of the phrase ‘at least’ implies that the previously issued Certificate remains valid for those parts of the installation that existed before the addition or alteration.

• DETECTION OF A FAULT OR DEFECT IN THE INSTALLATION:

Regulation 7(7) states the following:

“If an inspector, an approved inspection authority for electrical installations or supplier has carried out an inspection or test and has detected any fault or defect in any electrical installation, that inspector, approved inspection authority for electrical installations or supplier may require the user or lessor of that electrical installation to obtain a new certificate of compliance. . .”.

If a fault or defect is detected in the installation, the inspection authority “may” require the owner to obtain a new certificate. The word “may” instead of “must” implies that in circumstances where the installation is found to be defective, the issuing of a new certificate may not be required.  The Regulation does not state that an existing Certificate becomes invalid in cases of a fault or defect.  The implication is that if a new certificate is not required, the previously issued Certificate remains valid.

WHAT CAN WE GATHER FROM THE CONTENT OF THE CERTIFICATE OF COMPLIANCE REGARDING ITS VALIDITY?

The form of the Certificate is prescribed in Annexure 1 of the Regulations. Non-compliance with Annexure 1 will render the Certificate invalid in the following cases:

• The Certificate is not valid unless all the Regulations have been completed correctly and the test report in the format approved by the chief inspector is attached; and
• The Certificate will be invalid if any corrections have been made.

The Regulations do not provide for the expiry of a Certificate, with the implication that, if there is no addition or alteration to the installation and no fault or defect has been detected, the Certificate remains valid.  The mere passing of time does not render the Certificate invalid.

ARE THERE ANY EXCEPTIONS TO THIS?

CHANGE OF OWNERSHIP

Regulation 7(5) states the following:

“Subject to the provisions of Regulation 10(4) of the Act, the user or lessor may not allow a change of ownership if the certificate of compliance is older than two years”.

The implication of this regulation is that a change of ownership is not allowed if the current Certificate is older than two years. A property owner does not have to renew the Certificate every two years, but for the transfer of ownership of the property a new Certificate is required if, at the date of registration of transfer the current Certificate is more than two years old.

HOW DOES THIS APPLY TO LEASE AGREEMENTS?

Regulation 2(1) states the following:

“Subject to subregulation (3), the user or lessor of an electrical installation, as the case may be, shall be responsible for the safety, safe use and maintenance of the electrical installation he or she uses or leases”.

Subregulation 2(3) reads:

“Where there is a written undertaking between a user or lessor and a lessee whereby the responsibility for an electrical installation has been transferred to the lessee, the lessee shall be responsible for that installation as if he or she were the user or lessor”

It is clear from this wording that, in the absence of an agreement to the contrary, the responsibility to obtain a valid Certificate is on the lessor.

CONCLUSIONS

A Certificate remains valid from its date of issue and does not lapse by the mere passing of time.  However, if there has been an addition or alteration to the installation is, or a fault or defect has been detected in the installation, a new Certificate must be obtained in the circumstances as set out above.  In addition to this, change of ownership is not allowed if the current Certificate is older than two years, regardless of whether there has been any addition or alteration or whether a fault or defect has been detected.

Section 2(1) of the Alienation of Land Act, 68 of 1981 (“the Act”) provides as follows:

“No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force and effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.”

The Electronic Communications and Transactions Act, 25 Of 2002 (“ECTA”) regulates the use of electronic documents, commercial and general electronic contracts and electronic signatures.

ECTA defines an electronic signature as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature” and data is defined as “electronic representations of information in any form.”

Subsection 4(4) of ECTA provides that ECTA must not be construed as giving validity to any transaction mentioned in Schedule 2. Schedule 2 of ECTA lists the agreements that cannot validly be concluded in terms of ECTA and includes an agreement for alienation of immovable property as provided for in the Alienation of Land Act.

These two statutes clearly indicate that an agreement for the sale of immovable property must be physically signed by parties in “wet ink” and cannot be concluded by using electronic signatures and/or e-signatures.

However, the recent Eastern Cape High Court decision of Borcherds and Another v Duxbury and Others (1522/2020) [2020] ZAECPEHC 37) has however introduced uncertainty in this regard.

Borcherds (the applicant and “the First Purchaser”) signed and emailed an offer to purchase immovable property to Duxbury (the first and second respondents and “the Seller”) who received the offer on his cellphone. The Seller then imported the offer to purchase into software known as DocuSign which is an application used to apply electronic signatures. The Seller used DocuSign to sign and initial the offer to purchase, using his signature and initials saved on the DocuSign app.

After accepting the offer to purchase, the Seller received a competing offer to purchase for a higher purchase price. The Seller attempted to abandon the first offer to purchase so that he could sell the immovable property to the second purchaser.

The First Purchaser launched an urgent application to the High Court and interdicted the Seller from transferring the property to the second purchaser. The Seller alleged in reply that the offer to purchase was invalid as it had been signed by using an electronic signature (through the DocuSign app). He alleged that his signature did not comply with the Act or ECTA and therefore the agreement of sale was of no force and effect.

The court held that by affixing their signatures and initials to the offer to purchase, utilising DocuSign, the Seller signed the offer to purchase as envisaged in section 2(1) of the Act with the intention of being bound to the agreement.

The Seller was ordered to give effect to the offer to purchase concluded with the First Purchaser.

The court mentioned in passing that: “Had the agent … taken the trouble to present the offer to the first respondent personally and obtain his signature … this litigation could have been avoided or substantially reduced in its scope.” (own emphasis)

This judgment is open to criticism on the basis that the court did not refer to Schedule 2 of ECTA, which specifically excludes the application of ECTA to an agreement for the sale of immovable property. The judgment does not deal with these specific provisions of the Act and ECTA.

Therefore, despite the decision in the Borcherds case, it would be safe to conclude that the Act and ECTA require signatures to be made in “wet ink” by a physical hand or bodily movement when concluding agreements for the sale of immovable property. Agreements for the sale of immovable property should be physically signed by the parties.

Tenants who are “consumers” in terms of the Consumer Protection Act (“the CPA”) are entitled to early cancellation of a fixed-term lease.  Section 14(2)(b) of the CPA provides that if a consumer agreement is for a fixed term, despite any provision of the agreement to the contrary, the consumer may cancel that agreement at any time by giving the supplier (landlord) 20 business days’ notice in writing or in another recorded manner and form, subject to subsections 3(a) and (b).  This right to cancel cannot lawfully be ousted by a provision in the agreement to the effect that the lessee agrees that the lease agreement shall subsist for the fixed period “without the possibility of early termination”.  The parties cannot lawfully contract out of the right to early cancellation provided for in the CPA, but early cancellation may result in liability for a penalty.  It should be noted that section 14 of the CPA does not apply to transactions between juristic persons, regardless of their annual turnover or asset value.

Section 14(3)(a)-(b) of the CPA provides that upon cancellation of a fixed-term consumer agreement, the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation and the supplier may impose a reasonable cancellation penalty.  The supplier may not charge a penalty which would have the effect of negating the consumer’s right to cancel a fixed-term consumer agreement.

Regulation 5(3) under the CPA provides that the penalty or charge as contemplated in section 14 may not exceed a reasonable amount, taking into account the following factors:

1. the amount which the consumer is still liable for to the supplier up to the date of cancellation;
2. the value of the transaction up to cancellation;
3. the value of the goods which will remain in the possession of the consumer;
4. the value of the goods that are returned to the supplier;
5. the duration of the consumer agreement as initially agreed;
6. losses suffered or benefits accrued by the consumer as a result of the consumer entering into the consumer agreement;
7. the nature of the goods or services that were reserved or booked;
8. the length of notice of cancellation provided by the consumer;
9. the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; and
10. the general practice in the relevant industry.

These factors do not define a reasonable cancellation penalty, but provide guidelines for determining what would constitute a reasonable cancellation penalty on a case-by-case basis.

It appears to be general practice in residential lease agreements for landlords to make provision for the penalty that will be payable should the tenant exercise their right to cancel the agreement before the agreed expiry date, in apparent reliance on section 14(3)(b)(i).  Often the provision reads that an amount equalling two or more months’ rent will be payable as a penalty, usually because it is considered that two months is the time it will take the landlord to find a replacement tenant.  This penalty provision is often also subject to the proviso that if a replacement tenant is found before the expiry of two months, a pro- rata amount will be returned to the erstwhile tenant.  In some cases, the cancellation clause provides that the cancellation penalty will be determined at the time that the tenant exercises this right.

The cancellation penalty in terms of section 14 does not constitute damages for breach of contract:  early cancellation of a fixed-term agreement by the consumer is a right afforded by section 14(2)(b) of the CPA and the exercise of this right is not a breach of contract.  The penalty constitutes a charge for the anticipated losses suffered as a result of the early termination of the agreement.  This charge must be reasonable and may be challenged by the tenant if it does not comply with the guidelines set out in Regulation 5(3) referred to above.

The purpose of a cancellation penalty is to discourage consumers from cancelling an agreement prematurely and to allow the landlord to recoup a loss suffered as a result of early cancellation.  The right to charge a “reasonable penalty” as provided for in the CPA should not be confused with a claim for damages based on breach of contract:  the consumer is legally entitled to early cancellation of the agreement, subject only to the obligation to pay a reasonable penalty.

The amount of the penalty recoverable by the landlord is calculated with reference to the factors listed in Regulation 5(3), by assessing the relevant factual situation.  The assessment is factual and objective:  the supplier does not have a discretion to determine the impact of the factors relevant to what constitutes a reasonable cancellation penalty in terms of section 14(3)(b)(i).

Please contact the Cluver Markotter property department for enquiries about early cancellation of fixed-term contracts.

Property owners may object to the valuation by completing and submitting the objection form by 15 January 2021 at the Valuations Department of the Stellenbosch Municipality or electronically at valuations@stellenbosch.gov.za.

The following link provides more information and timelines for the implementation of the new valuation roll:

https://www.stellenbosch.gov.za/documents/finance/property-valuations/archive-9/z-archive/general-valuation-roll-2017-2021/10202-gv2021-info-pamphlet-1/file

The Stellenbosch Municipality recently published a notice regarding the Property Rates rebate available to Non-Profit Organisations, Senior Citizens and disabled property owners.

All applications for property rates rebates for the 2021/2022 financial year must be submitted by no later than 30 November 2020 at the Rates Section of the Municipality. The application forms and details of supplementary documentation can be accessed via the following link:

https://www.stellenbosch.gov.za/news/notices/notices/10198-financial-notices-oct2020/file

For assistance with the objection process or rebate application, please contact Marieke du Toit at info@cluvermarkotter.law