Evicting squatters and unlawful occupiers from property can be a difficult, costly and time-consuming process. If you want to sell a property with unlawful occupiers on it, the purchaser will require that the illegal occupiers first be evicted (the purchaser will insist on obtaining “vacant occupation”).
The Supreme Court of Appeal dealt with this problem in Cradle City v Lindley Farm (1212/2016) [2017] ZASCA 185. The facts were as follows:
In March 2009, the parties signed a purchase agreement (“the agreement”) in terms of which Lindley Farm (“the Seller”) sold a property to Cradle City (“the Purchaser”). Clause 4 of the agreement provided that the Seller must give vacant occupation of the property at transfer. At this stage, both parties were aware that there were squatters on the property. The purchase price of the property would be paid by means of a deposit at signature of the agreement; R52 million at transfer; and the rest would be paid in instalments over a period of 30 months.
As the date of transfer drew closer, the squatters were not yet evicted. The Seller wrote a letter (dated 4 May 2009) to the Purchaser in which it undertook, if there were still unlawful occupiers on the property at transfer, to remove such occupiers at the Seller’s cost within a reasonable time, but no later than 28 February 2010.
Transfer was on 7 May 2009. On the same date, the parties signed an Indemnity and Undertaking (“I&U”) which provided that the Seller would evict the unlawful occupiers by the end of August 2008 at the Seller’s cost and that the Seller will hold the Purchaser harmless against all claims that may arise from such eviction.
End of August came, but the squatters were not evicted. The Seller nevertheless claimed the balance of the purchase price from the Purchaser, which the Purchaser refused to pay.
This dispute brought the parties to court.
The Purchaser argued that the I&U was an integral part of the agreement. The Seller didn’t perform in terms of the agreement or the I&U (by not providing vacant occupation of the property) and, therefore, was not entitled to the balance of the purchase price.
The Seller, on the other hand, argued that the I&U amended clause 4 of the agreement in that the Seller was no longer required to provide vacant occupation. Its only obligation now was to take all steps and do all such things as required to lawfully evict the unlawful occupiers by no later than 31 August 2009. The Seller argued that it complied with this obligation.
The High Court (Gauteng Division) found that the Purchaser had to pay the Seller the outstanding balance of the Purchase Price as the agreement did not stipulate payment of the purchase price was conditional upon the purchaser obtaining vacant occupation.
The Purchaser appealed against this decision to the SCA.
The SCA considered the I&U in the context of the agreement and said that the purpose of the I&U was not to change the obligations in terms of the agreement but to confirm it. The Seller, therefore, still had the obligation to provide vacant occupation.
The essential question was, can the purchaser withhold payment of the balance of the purchase price? The SCA found that the principle of reciprocity applies to this agreement and that the agreement created bilateral obligations. This means both parties had to perform in terms of the agreement and that there was essentially to be an exchange of performances. The Seller had to perform by providing vacant occupation and the Purchaser had to perform by paying the purchase price. In this case, the Seller had to perform first.
Usually, in terms of the reciprocity principle, a party can withhold its performance if the other party did not perform, or its performance was inadequate. However, the SCA decided that in this case withholding the balance of the purchase price was not the appropriate remedy for the Seller’s lack of proper performance. The reason was that the Purchaser, when the Seller failed to perform properly, chose to not cancel the agreement but rather retain the inadequate performance and claim specific performance of the outstanding duty to evict the unlawful occupiers.
Accordingly, the SCA granted judgment in favour of the Seller (i.e. that the Purchaser had to pay the balance of the purchase price), but the SCA suspended the Seller’s right to obtain execution of the judgment until such time as the Seller had performed properly: As soon as the Seller evicted the unlawful occupiers, the judgment could be executed and the Seller could claim the balance of the purchase price from the Purchaser.
From this case it is evident that the obligation to provide vacant occupation of property should be clearly stipulated in agreements of sale. To avoid disputes and for adequate protection of purchasers, the agreement must also stipulate that the balance of the purchase price will only be paid once vacant occupation of the property has been provided.