USUFRUCT, USUS AND HABITATIO: WHAT IS THE DIFFERENCE?

A4_bUsufruct, usus and habitatio are personal servitudes. These servitudes are sometimes considered as an estate planning tool to reduce estate duty, but testators don’t always realise what this entails and the burden it could place on the heirs.

What is a personal servitude?

A personal servitude is always constituted in favour of a particular individual on whom it confers the right to use and enjoy another’s property. This servitude is enforceable against the owner of the property that is burdened with it but cannot be transferred by the personal servitude holder. It may be constituted for a fixed term or be granted until the occurrence of a future event or for the lifetime of the beneficiary, but not beyond his death.

How is a personal servitude constituted?

It is usually constituted by a last will, but can also be created by agreement.

 USUFRUCT

 A usufruct is a right that entitles a person to have the use and enjoyment of another’s property and to take its fruits without impairing the substance. For instance, the object of a usufruct over a farm will normally extend not only to all buildings but presumably also to livestock, farming equipment and the furniture in the homestead.

 The general duties of the usufructuary

The usufructuary is only entitled to the use and enjoyment of the property; he does not acquire ownership of it. The usufructuary may not consume or destroy the property, but he is obliged to preserve its substance. The property must be used in the manner it was intended to be used. A new manner of exploitation is, however, permitted if it is considered to be the sensible thing to do under the circumstances.

 Right to fruits

The usufructuary may take, consume or alienate the fruits, whether they are natural, industrial or civil. This means that the usufructuary is entitled to all the products of the land and all profits and revenues derived from the property. The young of animals as well as all products derived from the animals, including milk, wool or eggs become the property of the usufructuary. The usufructuary acquires the ownership of natural and industrial fruits by gathering it or by someone else gathering them in the name of the usufructuary. Growing crops are regarded not as fruits but as part of the soil and must be gathered and separated from the soil first. Fruits not gathered at the expiry of the usufruct do not pass to the successors of the usufructuary. Civil fruits (for example rental income or interest) become the property of the usufructuary when due. On the expiry of the usufruct civil fruits are divided between the now former usufructuary and the owner of the property in proportion to the time for which the usufruct existed.

Repairs and expenses

 The usufructuary is bound to maintain the property and to defray the costs of all current repairs necessary to keep it in good order and condition, fair wear and tear excepted. He is also responsible for paying all rates and taxes. Payment of insurance premiums, costs of capital expenditure such as structural reinforcements necessary to prevent a building from falling into ruin and other similar costs, are excluded from his responsibilities.

 Improvements

 If the usufructuary makes improvements to the property he is not entitled to compensation, though the improvements made can be removed, provided the usufructuary makes good any damage that their removal may cause.

 Alienation

 A usufructuary may not alienate or encumber the property, but he may dispose of the right to the use and enjoyment of the property and its fruits whether by sale, lease or loan, provided that such arrangement does not exceed the period for which the usufruct has been granted.

 Termination

 A usufruct is usually created for the lifetime of the usufructuary, but sometimes for a fixed period, terminable on death.

 Juristic acts by the owner

 The owner may not do anything to prejudice the usufructuary’s rights. The owner may not prevent, hinder or diminish the right of use or enjoyment and may only burden the land held in usufruct with a predial servitude if the written consent of the usufructuary has been obtained. Any further actions by the owner regarding the property, for instance the sale of the property and the registration of a mortgage bond, require the consent of the usufructuary. The owner together with the usufructuary may mortgage the property, or the usufructuary can abandon his preference so that the mortgage is registered free from the usufruct. Most banks prefer the latter.

 USUS

A servitude of use or usus resembles a usufruct but the holder’s rights are far more restricted. If the property is movable he may possess and use the property and if the property is immovable he and his family may occupy it. The holder may take the fruits for his and his family’s daily needs. The holder may not sell any fruit, nor may he grant a lease of the property. There are a few exceptions, for example should the house be too large for the holder’s use, he may let a portion of it. The holder’s use must, however, be without detriment to the substance of the property.

 HABITATIO

The servitude of habitatio confers on its holder the right to dwell in the house of another, together with his family, without detriment to the substance of the property. The holder may grant a lease or sublease to others.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

THE NEW SOUTH AFRICAN IMMIGRATION REGULATIONS TIGHTENS SCREWS FOR FOREIGN SPOUSES.

A3_bThis article looks at the New South African Immigration Regulations that came into effect on 26 May 2014 and how it affects a spouse attempting to renew or obtain a spousal visa.

A Newlands family was torn apart after South Africa’s new regulations barred Louise Johnson from returning to South Africa after going on a family holiday in Namibia. Section 27 of the new regulations declared Louise Johnson, a Danish-born spouse of a South African, as an undesirable person. People who are travelling on an expired visa will be declared as undesirable people. This is very controversial because many foreigners, such as Louise, have applied well within the time limit, which is 60 days before the expiry thereof, and have still not received their renewed visa.

In order to apply for a spousal and life partner visa one must prove that the relationship has existed for two years before an application for this visa is made. One must also prove that the relationship still exists after two years. Further, if you are married to or in a life partnership with a South African citizen or a permanent resident holder, you have to be married for a continuous period of five years before an application for permanent residency can be launched.

Visa renewals often take months to process and in the past a receipt issued by the Department of Home Affairs, indicating that an application was pending would suffice. The new regulations bring this to an end. Foreigners who remain in South Africa for anywhere between one to thirty days after the expiry date of their valid visa will be deemed to be undesirable for a period of twelve months. A second transgression within a period of twenty-four months will render them “undesirable” for a period of two years and should they overstay for more than thirty days they will be classified as “undesirable” for five years.

For example Olivia Lock, a British National, who is married to a South African, was prohibited from returning to South Africa for 12 months in May, due to leaving South Africa on an expired visa whilst awaiting the outcome of a renewal of her visa. United States citizen, Shaima Herman, married to a South African, was also declared an “undesirable person”, after a two-year wait for the approval of her spousal visa. Her husband indicated that she had visited the Department of Home Affairs on 14 separate occasions and yet her visa remains delayed.

Haniff Hoosen from the Democratic Alliance stated that: “Media reports and public outcry suggest that in less than a month the new regulations have already ripped apart families, dissuaded investors, and led to the suspension and even cancellation of multimillion-rand film and tourism ventures”. He called for the regulations to be reviewed and debated by Parliament’s Home Affairs Portfolio Committee.

The Minister of Home Affairs, Malusi Gigaba, asserted that the new immigration regulations proposing to be in the best interests of South Africa’s security, is an insufficient excuse for inefficient policy. He further states that: “Omissions and lack of definitions and criteria raised serious concerns about the new regulations, which would be subject to “misappropriation and abuse” by the Department of Home Affairs and its officials.”

It is very likely that one can expect to see court cases challenging these regulations very soon but in the meantime one should not travel out of South Africa without a valid visa, or you will be declared an “undesirable person”.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

SUCCESSION PLANNING

A2_bOwning a business requires careful succession planning and is part of your estate planning as you have to determine who will succeed you, or who will purchase your shares, or who will be entitled to the income after your death. The future ownership of your business is at stake.

A Partnership automatically dissolves upon the death of a partner and the remaining partners will then have to dissolve it and divide the assets amongst them.

In the case of a Company the shareholders may agree that:

  1. The remaining shareholders have a right of first refusal to purchase the deceased shareholder’s shareholding, as opposed to dealing with it in a will.
  2. The future of ownership of shares can be regulated by a written agreement between shareholders that is referred to as “buy and sell” agreement and has an influence at the death of a partner or shareholder.
  3. The buy and sell agreement compels the executor of the deceased to offer the shares at a pre-determined price, and life policies between shareholders normally cover the purchase price.
  4. The remaining shareholders are the beneficiaries of the policy on the life of the deceased and use it to purchase the shares, normally pro rata to the shares they already own.
  5. Buy and sell policies fall outside the deceased estate and are not subject to estate duty provided that three requirements are met:
  • None of the premiums should have been paid by the deceased;
  • The shareholder relationship must have existed at the time of death;
  • A written agreement must exist.
  1. When the skill and knowledge of a partner is essential for the survival of the business, “key man insurance“ can be taken out on the life of such a partner or shareholder. The premiums are paid by the business and the benefit is paid to the business to prevent financial loss or to appoint and train a replacement.

In the case of a “sole proprietor”, succession planning is dealt with in the Last Will and Testament.

  1. All the value of the business vests in the deceased estate.
  2. Planning is essential as the business terminates at death, although the executor may sell it as a going concern.
  3. It is a good idea to grant a right of first refusal to an associate, who can purchase the business and intellectual capital at the time of the death.
  4. A life policy can provide for cover on the life of the owner, with the associate being the beneficiary, and the proceeds at time of the death utilised to purchase the business.
  5. It deserves no debate that planning increases the benefit for the estate as opposed to closing the business down, where the assets will be worth far less.

Continued succession planning must be part of your business strategy to ensure your hard work benefits the right people.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

HOW TO CHANGE YOUR MARITAL STATUS TO ANOTHER FORM OF MARRIAGE CONTRACT

A1_bSection 21(1) of the Matrimonial Property Act No 88 of 1984 provides that a husband and wife may apply jointly to court for leave to change the matrimonial property system which applies to their marriage.

Requirements

The decision in Lourens et Uxor 1986(2) SA 291 (C) sets out guidelines that the courts follow with regard to applications in terms of section 21(1) of the Matrimonial Property Act.

In order for the parties to change their matrimonial property system, the Act mentions the following requirements:

  • There must be sound reasons for the proposed change.

According to South African Law, the parties who wish to become married out of community of property must enter into an antenuptial contract prior to the marriage ceremony being concluded. If they fail to do so they are automatically married in community of property. Of course, many people are unaware of this provision and should be able to satisfy the court that it should change their matrimonial property system if it was their express intention that they intended to be married out of community of property.

  • Sufficient notice of the proposed change must be given to all creditors of the spouses.

The Act requires that notice of the parties’ intention to change their matrimonial property regime must be given to the Registrar of Deeds, must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard, and must be given by certified post to all the known creditors of the spouses. Moreover, the draft Notarial Contract that the parties propose to register must be annexed to their application.

  •  The court must be satisfied that no other person will be prejudiced by the proposed change.

The court must be satisfied that the rights of creditors of the parties must be preserved in the proposed contract. The application must therefore contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change, and whether or not any particular person will be prejudiced by such change. Once the court is satisfied that the requirements have been met it may order that the existing matrimonial property system may no longer apply to their marriage, and authorise the parties to enter into a Notarial Contract by which their future matrimonial property system is to be regulated on such conditions as the court may deem fit.

 It should also be stated whether or not either of the applicants has been sequestrated in the past and, if so, when, and under what circumstances. The case number of any rehabilitation application must be furnished.

 It further needs to be stated whether or not there are any pending legal proceedings in which any creditor is seeking to recover payment of any alleged debt due by the couple or either of them.

Care must be taken to fully motivate the proposed change in the existing matrimonial property system. Applicants must explain why no other person will be prejudiced by the proposed change. In any event, the order sought, and the contract which it is proposed to register, shall contain a provision which preserves the rights of pre-existing creditors.

The application must disclose where the parties are domiciled and, if they are not resident there when the application is made, where they are resident. If there has been a recent change in domicile or residence it should be disclosed so that the Court can consider whether the application has been brought in the appropriate forum and/or whether or not additional notice of the application should be given. Ordinarily the application should be brought in the Court in whose area of jurisdiction the parties are domiciled and ordinarily resident.

The negative side

Unfortunately, the application is expensive in that both spouses have to apply to the High Court on notice to the Registrar of Deeds and all known creditors, to be granted leave to sign a Notarial Contract having the effect of a postnuptial contract which, after registration, will regulate the new matrimonial property system.

It would thus be cheapest and best to approach an attorney or notary prior to the marriage ceremony being concluded to draft a proper ante-nuptial contract regulating the matrimonial property of the parties involved, without any confusion.

NOTE TO ATTORNEYS: See Lourens et Uxor 1986(2) SA 291 (C) ; as well as Section 21(1) of the Matrimonial Property Act No 88 of 1984.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)