Meter wars: A consumer strikes back

A1B“You can’t fight city hall” (old idiom decrying the futility of trying to fight a bureaucracy)

You challenge the accuracy of a services account from your local municipality, thus:  “Your meter must be wrong, no way was my consumption that high”.  The reply:  “We’ve tested the meter and it works fine. Pay up or face disconnection”.

Off to court you go.  Can you “fight city hall” and who has to prove what?

There’s good news here for consumers in a recent High Court decision dealing with just such a situation.

The R4.5m water claim and the disconnection

  • A municipality installed a new water meter at commercial premises
  • When read for the first time 18 months later, it showed a spike of 13 times the historic average consumption measured by the old meter
  • Alarmed, the consumer requested that the meter be tested.  The municipality duly removed it, tested it, reported that it functioned correctly, and then (for an undisclosed reason) disposed of it
  • A third meter was installed.  Although the consumer’s business had by then grown substantially, water consumption was shown at three times less than the quantities measured by the previous meter
  • The consumer had paid the water account according to its own calculations.  Nevertheless disconnection of supply followed, and then the municipality refused to issue a clearance certificate when the property was sold.  In all the consumer was forced to make two payments totalling R16.5m, which it did under protest and with reservation of rights
  • Sued by the municipality for just under R4,5m, the consumer defended the action and counterclaimed for R9.5m (the amount it claimed to have overpaid).

Who must prove what?

Finding in favour of the consumer, the Court held that, once the consumer had raised a bona fide (“in good faith”) dispute, the onus was clearly on the municipality to prove that the meter had measured the water supply correctly and accurately.

That, held the Court, it had failed to do – its expert evidence concerning the testing was found to be unsatisfactory and insufficient.

The end result is that the municipality has to repay the consumer R8m – a substantial victory.

Consumers – a critical factor

Note that a critical factor here was that when the consumer made the two disputed payments to the municipality it did so under protest, without waiver or abandonment of any rights and without admission of liability that the amount was due.  Without those provisions, the onus would probably have been on the other foot, i.e. on the consumer to prove that the readings were not accurate.  That’s often going to be a near-impossibility when only the municipality has the legal right to test its meters and when it has control of all consumption data.  So pay nothing on a contested account without legal advice.

Municipalities – what you must prove

Make sure you can prove that meter tests comply fully with all prescribed requirements. And (this of course should go without saying) don’t dispose of any contentious meters until litigation has been well and truly put to bed!

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)

Neighbours behaving badly: Nip illegal building in the bud!

A1BBad neighbours don’t just impinge on your enjoyment of your property; they can also cause serious harm to its value.  So if you notice illegal building activity next door, move quickly to nip the problem in the bud.

Your hand in this regard has just been strengthened.  An important new decision by the Supreme Court of Appeal (SCA) confirms that you aren’t limited to trying to compel the municipality to enforce its own building and zoning laws – you can apply for demolition directly.

Demolition ordered – despite a “supine” municipality

  • A new retail/office development exceeded the local Town Planning Scheme’s coverage limit of 60% (the actual coverage as constructed was 86.13%), and insufficient parking bays were provided
  • The developer claimed to have obtained municipal approval of its building plans but the “supine and uncooperative attitude of the municipality” made it difficult for the Court to determine any more than that, if the municipality had indeed given approval, it seemed later to have cancelled it
  • In any event, held the Court, any such purported approval of the plans had to be set aside and the developer was ordered to partially demolish its building so as to bring it into compliance with the law.

First prize, second prize

The SCA has cleared the way for neighbours themselves to apply for demolition orders.  That’s an important new weapon in the fight against illegal construction activity, but it’s still only second prize.

The problem is that where you (rather than the municipality) bring the demolition application, “private” or “neighbour” law applies and the court is not obliged to order demolition; it has a discretion whether or not to do so.  And, demolition being a draconian remedy, the court may rather decide to make an alternative order such as a damages award.  Indeed, had the developer in this particular case not incurred the court’s wrath by persisting in its illegal conduct after ignoring warnings of illegality, it might have escaped demolition altogether.

In contrast, where a municipality does its job properly and brings its own application for demolition, “public law” applies and our courts have previously held that they then have no discretion where unlawful buildings are concerned – they must order “total demolition”.

First prize it seems is still to force your municipality to fulfil its legal and moral duty to uphold the law by taking the offending builder to court itself.

Regardless, the most important thing is to act quickly – so get legal help as soon as you become aware of illegal construction!

© DotNews, 2005-2016. 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)

Rates up after a property revaluation? Object, but do it properly!

A3BYour local municipality is entitled to revalue your property (with reference to recent sales of similar properties in your area) at regular intervals.

Of course any upward valuation means more money out of your pocket every month because the rates you pay are arrived at by multiplying your property’s municipal valuation with the municipality’s current “rates factor” as set by it in its budgeting process.

Municipal valuers must, at least every four years, prepare a general valuation roll with particulars of each property as at the date of valuation, and you must be given notice that you can lodge an objection.

This is of course your chance to convince the municipality that its valuation is wrong; just be sure to lodge your objection within the specified time limit, in the specified format, and with sufficient detail.

A terse exchange; and a botched objection

A recent High Court case shows clearly the danger of neglecting the part about giving enough detail –

  • A property owner Trust’s objection to a revaluation gave as the reason for objection: “Subject property has been vacant for 18 months. Market has declined therefore the market value of my property should also be reduced.”
  • The municipality dismissed the objection and, when asked for reasons, replied in equally terse fashion: “The information submitted by the objector is insufficient to justify a change in valuation.”
  • The trust asked the Court to order the municipality to give “adequate reasons” for dismissing the objection.

Give full reasons or fail 

The Court held against the property owner, commenting that: “This was an objection in the tersest of terms in which no particular challenge was raised to the conduct of the valuation by the municipal valuer as is provided for in terms of the Rates Act……… No substantive information was submitted to challenge or dispute the valuation that had been undertaken”.

The message is clear – just lodging your objection isn’t enough to force the municipality to give detailed reasons for its valuation.  You need to word your objection properly and fully to achieve that.

For more advice and practical solutions you are welcome to contact our Conveyancing, Property and Real Estate (link) department.

© DotNews, 2005-2016. This newsletter 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 omission. (E&OE)

Property buyers: Must you pay the previous owner’s old debts?

A1BImagine this.  You buy your dream house.  You take transfer.  You book a date for your move with Fred’s Furniture Removals.  But when you apply for electricity and water accounts so you can actually move in, your local municipality refuses until you settle an old (and substantial) municipal debt which the original owner still owes.  “Pay up” says the municipality, “or we’ll sue.  You could lose the house”.

Can that possibly be correct?  A recent Supreme Court of Appeal (SCA) judgement says that indeed it can.

The case of the innocent buyer down R100k

  • A property was sold in execution, and the buyer paid all municipal debts for the preceding 2 years (in order to obtain a municipal clearance certificate, which you need to take transfer), thinking that that was the end of the matter.
  • The new owner on-sold the property to another buyer, who was refused municipal services until she paid a “historical debt” (over 2 years old and therefore not part of the clearance certificate) of R106,219-75.
  • The no-doubt horrified new buyer understandably declined to either pay a cent to the municipality or to take transfer until a court ruled on whether she could really be held liable for someone else’s old debts like that.
  • Initially the High Court found in her favour that old municipal debt cannot survive a sale in execution.  The SCA disagreed, holding that – per existing legislation and regardless of whether the sale was an execution sale or a normal private sale – the municipality’s claims for rates, taxes and services remained “a charge on the property”.  These old debts survived the change in ownership. Provided that it followed its own bye-laws (in this case requiring it to first try recovery from the original debtor, and disallowing action against an occupied property), the municipality could obtain court authority to “perfect its security” and sell the property.

Buyers:  Protect yourself!

There is talk of a constitutional challenge to this legislation, but in the meantime take legal advice immediately if you are ever on the receiving end of such a demand.  “Prescribed” (expired) debt cannot be claimed from you (prescription is 3 years for service accounts but 30 years for “rates and taxes”, which our courts have held includes sewer and refuse charges), and your lawyer will check whether all local bye-laws have been complied with.

Even more importantly, before signing the sale agreement ask your lawyer to check that it protects you as fully as possible.  For example the seller should prove payment of all municipal debts, old as well as new, and you should be indemnified against any other hidden claims crawling out of the woodwork after transfer.

Sellers: This is for you

Ensure a quick, clean transfer – ask your attorney (remember you choose the transferring attorney) to double-check that the municipality isn’t going to hassle you down the line for some old “forgotten” claim.

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)

Estate agents: How to secure your commission

A3BAre you an agency trading through a company or close corporation (CC)?  If so, this is for you – a recent High Court (Full Bench) case in which a close corporation lost its commission because its Fidelity Fund Certificate (FFC) was only in the sole member’s name and no separate FFC had been issued to the CC.

Coming short – a CC without its own FFC

  1. A close corporation estate agency successfully carried out its mandate to find a tenant for a landlord.
  2. Only the sole member of the CC held an FFC, which stated that it was issued to her in her ‘capacity’ as Principal (Sole Proprietor at Firm)’ of the CC, with the CC’s trading name also specified.
  3. The agency sued for its commission when the landlord refused to pay it.
  4. Holding that the FFC had clearly been issued to the member herself and not to her CC, and that this disentitled the CC to its commission, the Court dismissed its claim.

Protecting your commission

Don’t put your commission claims at risk.  Obtain separate FFCs for your trading entity/ies as well as for all directors/members/principals and agents.  The entity’s FFC is issued free of charge but you must display it “in a prominent position” on its premises.

Another risk – the “trading as” scenario

In another recent High Court case, a CC with a valid FFC had fulfilled its mandate to find a buyer for a property, but it did so not in the CC’s name but in its trading name.  The seller refused to pay the agency’s commission, arguing that it had never given a mandate to the CC, which was neither mentioned nor named in either the agency’s documentation or on its website.

The Court, finding on the facts that the CC and its trading name were effectively one and the same, awarded the agency its R78k commission.  But don’t risk having to go the litigation route – avoid uncertainty by disclosing both your legal entity’s name and its trading name/s on all documents, letterheads, website etc. Take full advice in any doubt.

© DotNews, 2005-2016. This newsletter 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 omission. (E&OE)

Could your property debts be cancelled?

 A1B“How, on these figures, an employee of the bank could conclude that the farming may prove to be successful, is beyond me. It seems that money was just being poured into a bottomless pit.” (Extract from judgment below)

If you are a bank (or other lender), or if you have borrowed money against your property and are facing financial difficulty, you need to know about a recent High Court decision declaring that a bank’s loans to a farming couple had been granted “recklessly”, setting aside the loans, and cancelling the mortgage bonds.

The pensioners who went farming; and the bank that funded them

  • A couple used their pension moneys to buy a smallholding and develop it into a small scale farming venture.  They then started borrowing from a bank to meet shortfalls in their cash flow.  The bank secured its loans with two mortgage bonds over the property for a total of R1,151m, and took a suretyship from the couple’s daughter.
  • From day one it seems the farming venture was in trouble and eventually the bank approached the courts for an order to allow it to sell the property in execution.  The couple (and presumably their daughter also) risked losing everything.
  • However it emerged that –
    • The couple had no fixed income other than an annuity of R647 per month,
    • They were relying on loans from family to make ends meet,
    • They were already retired when the loans were granted, and would have been 85 and 80 years old respectively by the end of the 20 year loan period,
    • The bank had incorrectly taken the daughter’s income into account in assessing the loan applications,
    • The farming venture’s prospects of success were never good.
  • The Court, commenting that the National Credit Act (NCA) obliges a credit grantor to assess the consumer’s means, prospects and obligations “reasonably” before granting credit, held that the bank had failed to do so but instead had acted “irrationally”.
  • In the circumstances the couple had, with the help of an expert witness, proved (it being up to a debtor to prove any allegations of reckless lending) that the loans fell to be set aside or suspended in terms of the NCA.  The extent of the bank’s recklessness, the fact that the couple were elderly, and the fact that the smallholding was their only home led the Court to set aside the loans altogether rather than just suspending them.

Reckless lending → Consumers off the hook, bank down R1,74m

The couple must pay the bond cancellation costs, but other than that they – and their daughter who stood surety for the loans – are off the hook altogether.  The bank on the other hand is down R1,74m plus interest and legal costs.

Banks (and other credit providers):  Revisit your credit granting procedures urgently!

© DotNews, 2005-2016. This newsletter 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 omission. (E&OE)

Why is the transfer of my property taking so long?

Click here for Afrikaans Article

NovB03_newAfter signing a deed of sale, the purchasers often want to move into the property with great excitement and as soon as possible. When they are informed of the process involved prior to the property being transferred this may place a damper on their excitement. Coupled with this there may even be delays in the transaction.

In order to avoid unnecessary frustration it is vital that parties to the transaction understand the processes involved and that delays are sometimes inevitable. Besides possible delays there are a number of processes that need to be followed before a house can be registered in a purchaser’s name.

At the outset, it must be determined if the deed of sale is valid and binding between the parties. If not, a valid and binding contract will first have to be concluded between the parties.

The deed of sale will normally be the starting point in a transaction for a conveyancer who has been instructed to attend to the transfer. This conveyancer is also known as the transferring attorney and is normally the main link between the other attorneys involved the transfer transaction. Other attorneys involved are normally a bond attorney and/or bond cancellation attorney.

A major role of the transferring attorney is informing any mortgagees, for example banks, about the transfer so that any notice periods for the cancellation of bonds can start running. The notice period is normally up to 90 days. If the bond is cancelled before then, there could be penalties payable. The transfer may therefore be delayed as a result of the notice period.

If the purchaser will be registering a new mortgage bond to finance the transaction, a bond attorney will be appointed. Since the transferring attorney will not normally be aware of whom the instructed bond attorney is, the bank will usually inform the bond attorney of who is attending to the transfer. The bond attorney will then first make contact with the transferring attorney.

Obtaining the various certificates, receipts and consents applicable to the transaction in question also takes time. Examples of these are rates clearance certificate, transfer duty receipt, homeowners association’s consent to the transfer, levy clearance certificate, electrical compliance certificate and plumbing certificate.

The transfer duty receipt is obtained from the Receiver of Revenue and should be lodged with all property transactions, even if no transfer duty is payable to the Receiver of Revenue. During 2013 it took approximately seven working days from the submission of the request, until the transfer duty receipt was issued.

The rates clearance certificate is obtained from the local municipality in the area where the property in question is located. The transferring attorney will first request the municipality to inform him of the amount they require in order to issue the certificate. After receipt thereof the amount can be paid and the transferring attorney will then await the issued certificate. The time this takes differs from municipality to municipality. In the City of Cape Town, during 2013, figures were mostly issued on the same day they were requested and the receipt was issued within approximately five working days after payment. This time frame is largely affected by whether or not the municipality works on an electronic system.

If the property is located in an area where a homeowners’ association is established, there will normally be a title deed condition in terms of which the consent of the homeowners’ association must be obtained prior to the transfer. The time it takes for obtaining this certificate differs from one homeowners’ association to the other.

After an inspection by a plumber or electrician it may be found that certain work needs to be carried out before the certificates will be issued. If the work that must be carried out is extensive this can cause major delays with the transaction.

If the property is being sold by an executor of a deceased estate, the consent of the Master of the High Court must first be obtained before the property can be transferred. Major delays can be experienced if the Master of the High Court refuses to give such consent until certain requirements have been met.

Once the transferring attorney is satisfied that all relevant documents are in place he will arrange simultaneous lodgement at the Deeds Office by all attorneys involved in the transaction. It is therefore vital that the bond attorney has by this time obtained the required approval to lodge from the mortgagee and that the bond cancellation attorney has the required consents in place to cancel the existing bond/s on the property.

Once all the documents are lodged at the Deeds Office, an internal process is followed, which has different time frames in the various Deeds Offices. This time frame can also vary in a particular Deeds Office. It is best to enquire from your conveyancer what the Deeds Office time frame is at any given stage.

The list of possible delays in a transaction varies from one transaction to the other and the possibilities are endless. It is advisable to contact your conveyancer for an explanation should you feel that the process is taking too long.

Aktebesorging, UNISA 2004, Department Private Law, Ramwell, Brink & West

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 omission excepted. (E&OE)

Usufruct, usus and habitatio: What is the difference?

Click here for Afrikaans Article

A2_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.

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.

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.

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.

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.

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.

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 omission excepted. (E&OE)

Estate agents commission

Click here for Afrikaans Article

A2_bSelling a home is one of the biggest financial decisions a person can make and an estate agent, to whom commission will be payable, is usually involved in this process.

A problem that frequently occurs in practice and which is not easy to solve is whether an agent was in fact instrumental in bringing about the sale of the property. It could happen that an agent introduces a prospective buyer, that negotiations for the sale do not succeed and that another agent succeeds in concluding the agreement. It is common practice for more than one agent to be instructed to find a purchaser. It could even happen that a seller is held responsible for paying commission to two agents.

An estate agent is not an agent in the strict sense of the word.  His “mandate” is normally to find a suitable purchaser for the seller’s property and not to sell on behalf of the seller. This is, however, not a contract in the usual sense where parties undertake reciprocal obligations. In fact, the agent is not obliged to perform his mandate. An estate agent will only be entitled to commission if he has a mandate from the seller; without the mandate he is not entitled to commission, even though he might have been the effective cause of the transaction.

An estate agent will be considered to be the effective cause of the transaction when:

  • he has introduced a willing and financially able buyer to the seller;
  • a binding contract has been concluded between the parties; and
  • the transaction takes place at the stipulated price or at a price acceptable to the seller.

When several estate agents are involved in introducing the buyer to the seller it might be difficult for the court to determine which agent was the effective cause. For instance, when estate agent A introduces the buyer to the seller but the buyer later purchases the property through estate agent B after B has persuaded the seller to drop the price. Or estate agent A may have a sole mandate, but estate agent B introduced a willing and able buyer. The seller could then be liable for both estate agents’ commission. A sole mandate usually stipulates that the agent is entitled to commission if the property is sold during the currency of the agreement, even if another agent introduced the buyer.

In another matter a prospective buyer was introduced and the house was inspected. The price was considered too high. A few months later the purchaser noticed that the house was still in the market. He then bought the property without intervention from the agent at a slightly lower price than the earlier rejected price. The estate agent was held to be entitled to his commission.

How much commission is an estate agent entitled to? The average commission ranges up to 7.5%, but there are no regulations as to how much commission an estate agent should be paid per sale. The commission should be discussed by the parties when negotiating the mandate.

Sole mandates that are given to estate agents are regulated by the Consumer Protection Act. The duration of the agreement may not exceed 24 months. The seller has the right to cancel the agreement by giving 20 business days’ notice in writing. If the mandate is not terminated by the seller on the expiry date it will automatically continue on a month-to-month basis.

Seller, be wary of these pitfalls when selling your property – they could be very costly.

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 omission excepted. (E&OE)

Informal “decisions” by Homeowners’ Association

Click here for Afrikaans Article

A3_bMany homeowners’ associations have strict requirements concerning the aesthetic appearance of buildings on the estate. These include fences and other smaller additions that are not always considered by the homeowner to be building projects in terms of the rules, the Memorandum of Association (MOA) or the Memorandum of Incorporation (MOI). The owners then fail to submit plans and/or drawings for formal approval by the trustees or directors of the association.

Some homeowners knowingly attempt to avoid the prescribed formal process and merely invite a trustee or director for an informal discussion, explaining with waving arms the envisaged building project, be it a fence or a pergola. The nod of approval by the trustee is then held by the homeowner to be “approval” of the planned project.

The courts have ruled as follows with regard to the “consent” granted by a trustee at an informal meeting with the homeowner, where the MOA or MOI of the homeowners’ association clearly dictates a procedure for approval of any building or improvement:

  1. In order for a trustee or director to sign off a plan in his official capacity, a trustee must properly inform himself of the issues which affect the complex as a whole and not simply have regard to his or her inter-personal relationship with the homeowner. In order to be properly informed, a trustee must ordinarily make a decision in committee with the benefit of debate. His decision must consciously have regard to the MOA or the MOI, whichever case it may be, and the long-term interests of the members. Failure by the trustee to do so will imply that the trustee has not applied his mind to all the relevant issues. It may be possible to impute acceptance by a person both in his individual and official capacity.
  1. The nature of the relationship established between homeowners under a MOA or MOI to which each subscribes, constitutes an agreement in terms of which each homeowner submits contractually to the decisions of a body of elected trustees to whom they have conferred the right and power to make binding decisions on matters that affect their relationship inter se, or which generally affect the estate.
  1. It is further important to take note of whether written consent has been granted by the trustee, as such an action by the trustee would be an additional consideration to establish whether a formal decision will be deemed to have been made.

See specifically Hoosen & Others NNO v Deedat 1999 (4) SA 425 (SCA) and Khyber Rock Estate East Home Owners Association v 09 of Erf 823 Woodmead Ext 13 CC, a judgement by his honourable acting justice Spilg in the Witwatersrand Local Division in case number 7689/2006.

An informal discussion regarding the building plans of the homeowner can thus not be deemed as a formal decision made by the trustees of the homeowners’ association, if the homeowner failed to follow the prescribed procedure.

In the event that a homeowner indeed deems the informal consent as a “decision” made by the trustees of the homeowners’ association, the courts will not interfere with the decision made by a homeowners’ body save under recognised grounds of judicial review as applied to a voluntary association whose members have bound themselves to its rules, which include the conferring of decision-making functions on an elected body of trustees. (Turner v Jockey Club of South Africa 1974 (3) SA, SA Medical & Dental Council v McLoughlin 1948 (2) SA 355 (AD) and Marlin v Durban Turf Club & Others 1942 AD 112).

Trustees and directors should therefore take care when having informal discussions with homeowners and insist on the due process, in terms of the rules, the MOA or the MOI, to be followed to the letter. Rather avoid commenting or voicing an opinion except at the appropriate forum – the formal meeting of the trustees or directors where the item is noted on the agenda in compliance with the association’s prescribed formal requirements.

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.