HOW CAN I LAWFULLY EVICT MY TENANT?

You’ve discovered that the tenant renting your apartment has damaged several appliances, including the floor tiles due to irresponsible behaviour. Therefore, you have decided to terminate the lease contract and evict the tenant. Are you allowed to do that and how do you get started?

Firstly, there has to be valid reasons to evict a tenant, such as the example above. Even if you do have a valid reason to pursue eviction, a legal process has to be followed if you want to stay within the law. The first step is to cancel the lease contract with the tenant and let the tenant know that it’s cancelled and the reasons why. After the contract is terminated, the tenant would be occupying the premises illegally. You can then go to a court with an eviction application or “ejectment order”. When you do this you will be required to prove that the contract with the tenant was properly terminated and that the reasons for doing so were valid

It’s important to make sure the reasons you want to evict the tenant are valid. This is because tenants are protected by the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act, No. 19 of 1998. You cannot just evict a tenant because you don’t like them.

Other grounds for an eviction

Besides a tenant causing serious damage to a property there are two other grounds for an eviction. The obvious one is the tenant not paying his/her rent after having been told to do so. Another reason is the tenant using the property for anything other than was agreed upon in the contract. A tenant who opens a business in the apartment they are renting would be in breach of their contract if it was agreed to be rented for residential purposes only.

What happens at the court?

The eviction application can be taken to the Magistrate’s Court or the High Court. Court proceedings will follow, which the tenant should be notified about. It’s very likely that the tenant will deny any wrongdoing and say the eviction doesn’t have good grounds. If this is the case, they can inform the court. A dispute and court case may ensue, the outcome of which would depend on the evidence of what happened. Therefore, if you are considering evicting a tenant, make sure your reasons are clear and that there is evidence for the eviction. If the tenant broke property on your premises because of being irresponsible, then that could be solid evidence.

Dealing with the tenant

The tenant may agree that they have done something wrong or simply decided not to oppose the eviction, in which case the court would issue an ejectment order. The ejectment order will force the tenant to leave the property, which will be carried out by the Sheriff of the Court. It’s important to remember that the landlord is not allowed to personally remove tenants from their premises. Leave that to the authorities. Furthermore, the court may order the tenant to pay the legal costs of the landlord.

Reference:

Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

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 LINK BETWEEN CGT AND INCOME TAX

A3_bThe name “Capital Gains Tax” (CGT) can create the impression that CGT stands on its own as a separate tax from the rest of the taxes but this is not the case. CGT forms part of the Income Tax system and capital gains and capital losses must be declared in the annual Income Tax return of a taxpayer.

If a taxpayer is not registered for Income Tax

If a natural person is not registered for Income Tax and his/her taxable income consists only of a taxable capital gain or a deductible capital loss, the amount of which is more than R30 000, the person will have to register as a taxpayer with SARS. In addition, the new taxpayer will have to submit an Income Tax return for that tax year.

If a taxpayer is already registered for Income Tax, they don’t have to register for CGT separately as CGT forms part of Income Tax.

Tax treatment of capital gains in three steps

The first step is to calculate the capital gain according to the provisions of the Income Tax Act, 58 of 1962. A discussion of the formulas to calculate the amount of capital gains and capital losses fall outside the scope of this article.

The second step is to reduce the capital gain with any exclusions which might be applicable. Please contact your tax advisor to find out if you qualify for any CGT exclusions.

Step three will be to include the taxable amount of the capital gain in the taxable income of the taxpayer. There are different inclusion rates for the following categories of taxpayers:

  • For natural persons, deceased or insolvent estates, and special trusts the taxable inclusion rate is 33,3%. In other words, 33,3% of the aggregate capital gain will be added to the taxable income of the taxpayer and the taxpayer will have to pay more income tax.
  • Companies, close corporations and trusts (excluding special trusts) have a taxable inclusion rate of 66,6%. This means that 66,6% of the aggregate capital gain will be added to the taxable income and taxed at the normal income tax rate of the taxpayer.

As a taxable capital gain will be added to the taxable income of a taxpayer, it will have an effect on certain deductions in the income tax calculation while other deductions will not be affected.

The following tax deductions for individual taxpayers will not be affected by the inclusion of a taxable capital gain in the taxable income of the taxpayer:

  • Pension fund contributions
  • Retirement annuity fund contributions

Tax deductions that will be affected by the inclusion of a taxable capital gain in an income tax calculation are the following:

  • Medical expenses (only applicable to individual taxpayers)

If a taxpayer’s medical deduction is subject to the 7,5% of taxable income-limitation, the deductible amount for medical expenses will become smaller if a taxable capital gain is included in the taxable income.

  • Section 18A donations

A taxpayer can include the taxable capital gain in taxable income before calculating the 10%-limit for the tax deduction of Section 18A donations. The allowable tax deduction of these donations will then increase by 10% of the amount of the taxable capital gain.

Tax treatment of capital losses

Capital losses may not be deducted from taxable income but must be set off against current or future capital gains. If there are insufficient capital gains to offset the full capital loss in the current tax year, the unclaimed balance of the capital loss is carried forward to the next tax year(s) until it has been fully offset against future capital gains.

As a capital gain/loss can have a material effect on a taxpayer’s liability for Income Tax, it is crucial to calculate these amounts accurately and take advantage of all the exclusions that might be applicable to the taxpayer. For further assistance regarding any aspect of capital gains/losses, please contact your tax advisor.

Reference List:
www.sars.gov.za

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)

SOME POINTERS FOR PLANNING YOUR ESTATE

The main aim of planning your estate is to ensure that as much of the accumulated wealth is utilised for your own benefit and for the maximum utilisation of dependents on your death.

“Estate planning” has been defined as the process of creating and managing a programme that is designed to:

  1. Preserve, increase and protect your assets during your lifetime;
  1. Ensure the most effective and beneficial distribution thereof to succeeding generations.

It is a common misconception that it revolves solely around the making of a Last Will and Testament, or the structuring of affairs so as to reduce estate duty.

Each person’s estate is unique and should be structured according to his/her own unique set of circumstances, goals and objectives.

The lack of liquidity on the date of death may cause for the deceased’s family members and dependents to suffer hardship, as certain assets might be sold by the executor to generate the cash needed.

Liquidity means that there should be enough cash funds to provide for:

  1. Paying estate duty;
  1. Settling estate liabilities and administration costs;
  1. Providing for other taxation liabilities that may arise at death, such as capital gains tax.

Technically the estate is frozen until such time as the Master of the High Court has issued Letters of Executorship.

Dying without executing a valid Last Will and Testament, your estate will be dealt with as an intestate estate, and the laws relating to intestate succession will apply. The Intestate Succession Act determines that the surviving spouse will inherit the greater of R250 000 or a child’s share. A child’s share is determined by dividing the total value of the estate by the number of the children and the surviving spouse. If the spouses were married in community of property, one-half of the estate goes to the surviving spouse as a consequence of the marriage, and the other half devolves according to the rules of intestate succession. If there is no surviving spouse or dependents, the estate is divided between the parents and/or siblings. In the absence of parents or siblings, the estate is divided between the nearest blood relatives.

An executor is entitled to the following remuneration:

  1. Remuneration fixed by the deceased in the Last Will and Testament; or
  1. 3.5% of gross assets plus 6% of income accrued and collected from date of death.

Executor’s remuneration is subject to VAT where the executor is registered as a vendor.

Where the value of the estate exceeds R3.5 million, estate duty will become payable on the balance in excess of R3.5 million, with the exception of the property bequeathed to a surviving spouse, which are exempt from estate duty and/or capital gains tax.

Section 3 of the Subdivision of Agricultural Land Act prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name is subject to Ministerial approval.

A minor child is a person under the age of 18 years of age, and any funds bequeathed to a minor child will be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible, and are usually invested at below market interest rates. It is thus advisable to provide for minors by means of a trust.

The Close Corporations Act provides that, subject to the association agreement, where an heir is to inherit a member’s interest (in terms of the deceased’s Will), the consent of the remaining members (if any) must be obtained. If no consent is given within 28 days after it was requested by the executor, then the executor is forced to sell the members interest.

Section 3(3)(d) of Estate Duty Act determines that where an asset is transferred to a trust during an estate planner’s lifetime, yet the estate planner, as trustee of the trust retains such power as would allow him to dispose of the trust asset(s) unilaterally for his own or his beneficiaries; benefit during his lifetime, then such asset(s) may be deemed to be property of the estate planner and included in his estate for estate duty purposes.

Where the parties are married in community of property, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate). Only half of any assets can be bequeathed.

The proceeds from life insurance policies can be used to:

  1. Generate income to maintain dependents while the estate is dealt with;
  1. Pay estate expenses: funeral, income tax, estate administration, estate duty.

All proceeds of South African “domestic” policies taken out on the estate planner’s life, where there is no beneficiary nominated on the policy, will fall into his estate on his death.

Where a beneficiary is nominated on the policy, the proceeds will be deemed property for estate duty purposes, even and although they are paid directly to the beneficiary (subject to partial exemptions based on policy premiums).

Policies which are exempted from inclusion for estate duty purposes are buy and sell, key man policies, and those policies ceded to a spouse or child in terms of an antenuptial contract.

Certain assets in a deceased estate are excluded from Capital Gains Tax:

  1. Assets for personal use (with certain exceptions);
  2. Assets that accrue to the surviving spouse;
  3. Assets bequeathed to approved public benefit organisations;
  4. The first R2 million in respect of a primary residence;
  5. Up to R1.8 million in respect of small business assets;
  6. Currency, excluding gold and platinum coins.

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)

ACCEPTANCE OF ELECTRONIC FUNDS TRANSFER PAYMENT SPECIFICALLY IN SALE OF VEHICLES AND TRANSFER OF REGISTRATION ON ENATIS

Payments, better known as EFTs, have become a popular payment method in South Africa, accepted by many in lieu of cash or cheque payments.

Many accept the printed electronic funds transfer document as “proof” of a cash payment into the bank account, especially in the selling and purchasing of motor vehicles. They insist on the transfer to be made immediately there and then upon which the vehicle is transferred and registered to the buyer on the same day.

The abuse of Electronic Funds Transfers made to the seller’s bank account, especially between different financial entities, is yet another devious manner in which the original Natis documentation or registration of ownership of a motor vehicle can be obtained with no intention to honour the actual payment.

EFTs are governed inter alia by agreements between the various financial entities. Depending on the agreement, such an EFT transaction can take up to two days to actually reflect as a deposit on the statement of the seller. The risk of accepting proof of an EFT as “proof” of actual payment as if it was a cash deposit, puts the seller at a real risk of being defrauded.

Most ordinary citizens do not know that an electronic transfer can be reversed within a few hours after it has been made, depending on the individual financial institute at which the account is held.

Devious fraudsters who are au fait with the mechanics of the law and the financial systems in South Africa, use this knowledge to the detriment of others.

In the sale of any motor vehicle, or any other object of which ownership is registered on the eNatis system, the Natis registration document is a very useful instrument to secure and verify payment prior to the transfer of registered ownership.

The easiest safeguard against any such risk of loss because of non-payment, is the current, valid and original Natis document, reflecting the registered owner and titleholder of such a vehicle.

For as long as the seller of the vehicle retains the possession of the original Natis document reflecting the seller as the registered owner, no fraudster or any other person can obtain registered ownership of the vehicle, unless the seller physically enables them to do so. Once payment actually reflects on the bank statement the necessary documentation should be handed over to effect transfer of registration to the purchaser or his nominee.

Should a seller hand the original Natis registration documents over prior to actual confirmation of payment, the vehicle can be traded and registered to any innocent third party, whilst the seller himself still awaits payment.

As no party to an agreement can transfer more rights than he is legally entitled to at that time, the seller will be able to claim the motor vehicle from any person who has such motor vehicle in his or her possession, even if the possessor at that stage has “purchased and paid” the vehicle. As long as the motor vehicle has not been transferred and registered to a purchaser who has not paid for same, the seller can safeguard himself in such a fraudulent transaction.

In the event of the payment then not forthcoming, your rights as seller can be enforced by means of a very simple but highly effective application to any court, which can be done ex parte with an interim relief order to return the vehicle by sheriff to the registered owner of the motor vehicle at a date on which service is to be effected on the purchaser, where after the normal motion procedure is followed.

It is also recommended to issue summons for the cancellation of the agreement, return of the vehicle, cost and interest simultaneously.

For as long as the seller retains and holds on to the original Natis documents on which he/she is reflected as the registered owner of the motor vehicle, the seller will have a prima facie right to and be the entitled possessor of such motor vehicle.

A seller who has already caused registration of the vehicle to be transferred to the purchaser prior to have payment secured, is left in a precarious position. The seller has very little hope of success against such a purchaser with the intention to defraud. The litigation can be prolonged and costly with no guarantee of recovery of the loss.

For further reading, see Unitrans Automotive (Pty) Ltd vs Trustees of the Rally Motors Trust 2011 (4) SA 35, just one of the transactions during a shopping spree of fraudulent transactions using EFTs by a fraudulent purchaser, and other matters referred to in the judgement.

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)