Words and Deeds
Current news in the field of property law
An Information Service supplied by the KwaZulu-Natal Law Society

8 June 2005  

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Contents
In the News
Didiza to rule on foreign sales
Feelings run high as MPs debate land expropriation
Govt wants land, not money
Angry voices from a forgotten land
In county made rich by golf, some enclaves are left behind [US]
Beware the interest-only mortgage
Labrador Inuit land-claims deal reaches final stage with Commons bill [Canada]
Weblog - http://knowgozone.blogspot.com
In the News
Didiza to rule on foreign sales - 7 June

Gert Coetsee

Land Affairs Minister Thoko Didiza now has carte blanche to institute a moratorium on land sales to foreigners after parliament's acceptance on Tuesday of a report making the recommendation.

In December last year, after a public session on the tempo of land reform, the portfolio committee on agriculture and land affairs decided to recommend such a moratorium until a ministerial team had completed its investigation into land use and ownership by foreigners.

The team is headed by Professor Shadrack Gutto.

On Tuesday, the report was accepted during a debate in the national assembly on the tempo of land reform.

At the time of the debate, Democratic Alliance member Maans Nel said the recommendation, before the completion of the team's work, was premature.

Nel said: "It appears as if the ANC already has decided to put an end to land sales to foreigners." The DA did not support the recommendation.

Investigating extent and tendencies

Didiza had appointed the team in August 2004, with Gutto, a land-rights expert, as chairperson and Joe Mathews, a former deputy minister of safety and security, as his deputy.

Their brief was to investigate foreigners' land ownership and land use in South Africa.

The team must investigate the nature, extent, tendencies and influence of the use and acquisition of land by foreigners as well as foreign land investments.

They must determine to what degree existing policy in this regard meets or fails to meet constitutional requirements.

In February, Didiza said in parliament it was necessary to establish land buyers' nationality to determine how possible limitations on foreign land ownership in South Africa should be set off against foreign investments in the country.

Regarding the establishment of nationality, the government will be guided by the team's recommendations on legislation or regulations. Didiza is awaiting the team's report.

Nana Zenanai, Didiza's spokesperson, referred an enquiry about when the team's report would be available to Gutto. He was not available.

Finance24 website


Feelings run high as MPs debate land expropriation - 8 June

Lynda Loxton

Feelings ran high in the national assembly yesterday amid signs that the government was considering the outright expropriation of land in the face of drawn-out willing buyer/willing seller price wrangles.

During a debate on recent public hearings by the portfolio committee on agriculture and land affairs on the pace of land reform, ANC MPs also came out strongly against spending billions of rands compensating farm workers when the government and farmers could not agree on land prices.

"Financial compensation as a form of redress should be discouraged," they claimed, saying it often led to family disputes and fraud.

Opposition MPs agreed that land remained "a very emotional issue" in South Africa but warned that legislators should "tread lightly in this minefield".

They particularly objected to a recommendation by the committee that land owners should continue to be classified by race and that the government should prevent foreigners from buying land in South Africa.

Blessing Mphela, the land claims commissioner in Gauteng and North West, was in the house for the debate, which he said was "long overdue", but he added that it had not covered any fundamentally new issues not covered in previous policy papers by the department of agriculture and land affairs.

He said one case of expropriation in North West now appeared likely, while others were still being negotiated.

The land involved would be valued at market-related prices according to an agreed formula but this form of dealing with land restitution would only be adopted "under extreme circumstances", Mphela said.

This was usually when no price could be agreed on the land earmarked for restitution in terms of an amendment to the Restitution of Land Rights Act passed last year.

Business Report website


Govt wants land, not money - 7 June
Cape Town - The government wants to discourage financial compensation for land lost under apartheid in favour of actual property, a committee chair told parliament on Tuesday.

"Financial compensation should be discouraged as it does not offer lasting solutions to poverty," said the chair of the portfolio committee on land And agricultural affairs, Elizabeth Ngaleka, during a debate in the national assembly.

She said not only did financial compensation often lead to family strife and corruption, but it did nothing to change the distribution of land ownership.

"This [compensation] is not land redistribution," she said, adding: "We want it [land ownership] to reflect the people of South Africa".

When the Commission on Restitution of Land Rights' annual reports were presented to the committee on Tuesday it was suggested that an increasing number of people wanted the Restitution Act amended to allow for more land claims to lodged.

The cut-off date was in 1998.

The report recorded that the department of land affairs had settled 59 304 claims between March 1999 and March 2005.

Of the 100 million hectares of farm land in South Africa, an estimated 82 million was owned by white farmers.

The government has set itself the target of delivering 30% of commercial agricultural land to black owners by 2014.

The report said 887 093ha had been restored to claimants in the 2004/05 financial year.

In the debate, Democratic Alliance MP Maans Nel said the DA would not support the report because the committee was recommending a moratorium on land purchases by foreigners, and that it recommended the race of land owner's be indicated on title deeds.

"This government by word of the minister gave notice that it will give effect to this recommendation.

"It is almost unbelievable that an ANC government, whose members fought against racism all their lives [wanted race recorded on title deeds]," said Maans.

Edited by Elmarie Jack

News24 website


Angry voices from a forgotten land - 7 June

Matt Morrison

Mantombi Khondlo is tired of waiting for the government to provide her with a house. "All we want is a roof over our heads. I don't know why the government is ignoring us," she says.

Khondlo, a single mother of two children from Gugulethu, has been unemployed for five years. She is but one of hundreds of township residents who took part in recent protests in Gugulethu, Nyanga and Khayelitsha over the government's "lack of service delivery".

Though housing is often cited as the cause of the protests, residents say their grievances go beyond "electricity, toilets and phones", and include concerns over a lack of employment, healthcare, social grant-availability, adequate emergency services and protection from crime.

One common sentiment among a number of Cape Town's township residents seems to be that the government has failed to deliver on its 11-year-old promise of "A better life for all".

President Thabo Mbeki has noted the achievements of the new government after a decade in power: two million housing subsidies, 1.6 million houses built for the poor, 70% of houses given electricity, 10 million more with access to potable water, and increases in education and social wage spending.

But some living in and around townships say it is not enough.

In "Los Angeles", an informal settlement near Khayelitsha, residents say they strongly support the protests and are in need of help.

"You call an ambulance at 8am and it shows up in the afternoon. And the phones to call them are 15 minutes away in Drift Sands!" says Los Angeles resident Simphiwe Batala.

"Two or three people in the town have electricity, none has phones or drainage, and there are 25 people for one toilet - people end up going in the bushes".

Margaret Rini, 64, lives in a one-room shack with 12 relatives spanning four generations - two daughters, their eight children and her great-grandchild.

Rini says it is difficult for her to get grants to keep her family afloat.

Los Angeles resident Joe Mauwers, 62, says the city council ignores the residents when they ask for help.

"The councillors just walk through, make promises and leave. We are looked down upon because we live here".

Mauwers says he has been unemployed for "a long time" and lives with his wife off her salary of R60 per day. He says democracy has not changed his life.

"Change is far from us. We hear about it on TV - the ministers are in luxury. I want to show Mbeki where I live. I used to canvass door to door for the ANC. I was in the struggle. We expected better from the ANC, because they lived with us in the bush".

Another prominent issue among settlement residents is the influx of Eastern Cape migrants, said to be at a rate of 135 a day. Some residents see the migrants as competition for jobs and housing.

"Why does the government give them preference when we grew up here? It's impossible to get a house as it is," says Khondlo.

Acknowledging the wave of protests, President Thabo Mbeki recently admitted that the interaction between the government and its citizens had not been as effective as it should have been.

The residents have made it clear that as they turn from disappointment towards action, the government will have to begin to deliver on its promises, or will risk losing its electoral support.

Cape Times website


In county made rich by golf, some enclaves are left behind [US] - 7 June

Shaila Dewan

Pinehurst, NC, June 2- Golf has made Moore County rich. There are spas, country clubs and new $2 million homes. The United States Open, to be held later this month on the most famous of the county's 43 golf courses, is expected to bring $124 million to the state.

But as developers rush to provide "resort quality" amenities in the newest subdivisions, some neighborhoods have been left behind - without sewers, police service, garbage pickup or even, in some cases, piped water.

These enclaves, Jackson Hamlet, Midway and Waynor Road, are virtually all black. They butt up against, or are even completely surrounded by, affluent towns that are mostly white: Pinehurst, Aberdeen and Southern Pines.

The 500 residents of these unincorporated enclaves are close enough to point out sewer lines that run past their properties en route to new developments, or to watch garbage trucks trundle past without stopping.

Though the towns have not annexed these hamlets about 60 miles southwest of Raleigh, and their residents cannot vote in municipal elections, they are subject to the towns' land use and zoning rules under what is called extraterritorial jurisdiction.

When asked about extending basic services, the towns' officials say they must take care of those within their existing boundaries before taking on new neighborhoods. The county, on the other hand, says that many of its rural constituents do not have the services the enclaves are requesting, and that the problems of these more densely populated areas can be better addressed by towns.

Excluding heavily minority areas from town boundaries is a common but little examined practice, particularly in small towns in the South, civil rights advocates and geographers say. With the US Open beginning on June 16 on the Pinehurst No.2 golf course, residents of the three black neighborhoods and their advocates are making a concerted effort for the first time to win more services, holding news conferences and giving tours.

Historically, they are the very people who provided much of the labor that built the hotels in the Sandhills, as the area is known, tended the greens at the golf courses or worked on the all-black crew of caddies, long since replaced by electric carts.

Ida Mae Murchison lives in Jackson Hamlet, a shady neighborhood of dirt roads hemmed in by Aberdeen and Pinehurst but claimed by neither. On one corner, a new apartment complex juts in; it was annexed by Pinehurst, which often expands to include areas where a developer has already paid for the infrastructure. At the rear, a place once called Buckety Ford, where Jackson Hamlet children fetched water, has been dammed to create a 200-acre lake surrounded by houses, also part of Pinehurst.

"I get the feeling that we're just forgotten, put on the shelf or the back burner or something," Ms Murchison said. "But like I say, I don't want to offend anyone. I don't want to cause trouble."

Ms Murchison was the first black chambermaid at the Carolina Inn, the gracious centerpiece of the 110-year-old Pinehurst resort, where she worked for nearly 50 years. Now 84 and retired, she lives alone, worrying because there are no police officers for her to call in case of trouble. Despite two nearby municipal police forces, her neighborhood is the responsibility of the county sheriff - whose deputies, she says, take at least 10 minutes to appear.

In Midway, a black community almost surrounded by Aberdeen, the yards are teeming with flowers, grapevines, statues and birdbaths. But the languid perfume of honeysuckle is punctuated by an equally heavy stench of raw sewage.

Randy Thomas, a food service manager at the Department of Corrections who has just adopted four young children, said he had to haul in sand every two months to cover the septic system leaks that trickle down his driveway.

Mr Thomas's neighbor James McDougal said his mother had to move out of her house down the street when she got too old to use the outhouse. The county will not allow a septic tank because the lot is too small, Mr McDougal said.

County Commissioner Michael Holden says the residents' request for services puts the county in a "delicate situation," in part because of competing demands for resources.

"I will admit Moore County waited way too long and should have been doing this stuff 20, 25 years ago," Mr Holden said, pointing out that in the past 10 years the county has used grant money to extend water or sewer service to some minority communities. But, he added, "It's a matter of biting it off little by little, and doing chunks of it and moving forward".

In 2000, the state allotted a federal development grant to pay for water and sewer lines for a black enclave called Monroe Town. Every well there was substandard; county officials found a dead possum in one. But Monroe Town, which lies inside the subdivision that surrounds the Pinehurst No.6 golf course, remains unincorporated and lacks other services, like garbage pickup.

Without a grant, the county is disinclined to pay for infrastructure for the enclaves. Those seeking services are quick to point out that the county ranks 18th out of 100 in the state in median income, even though it has no major urban center, and that its tax burden is low, with a rate in the bottom 10 percent. In the past 10 years, the county's property tax revenue has more than doubled, and it ended the 2004 fiscal year with a $9.3 million surplus.

Asked if the county could just pay outright for the pipes and other necessities (one estimate is that it would cost $1.5 million to $1.75 million to establish sewer services for Jackson Hamlet), Mr Holden said, "Then where do you stop?"

Officials also say that these enclaves have been wary of annexation in the past, fearful of the higher taxes that come with being part of a municipality or of the potential destruction of their communities by developers.

"Some of the ones who are really pushing all this don't have everybody on board like they would like you to think," said Bill Zell, the town manager of Aberdeen.

Once services are established, the costs seem modest. A family in Jackson Hamlet that pays $270.96 a year in property taxes now, on a $50,000 home, would pay $382.56 if annexed by Pinehurst and $452.64 if annexed by Aberdeen. According to figures provided by the University of North Carolina Center for Civil Rights, which is helping the black communities, the actual cost to these families could decrease because they would no longer pay for septic tank maintenance, private garbage pickup and other expenses that their municipal taxes would cover.

Andy Wilkison, the town manager of Pinehurst, said Jackson Hamlet and Monroe Town declined to consider being annexed in 1990 and 1991, respectively, in part to avoid higher taxes. "I know what the maps look like and stuff," Mr Wilkison said, "but the annexations have largely been places where people have come to us wanting to be annexed".

Waynor Road, which has neither sewer nor water service, is seeking annexation by Southern Pines, and the town is studying the economics of such a move. To officials, town boundaries are not a matter of race but money. Parcels are annexed after a developer pays for sewer and water hookups or if the area's tax base is likely to generate enough revenue to pay for itself.

When Frank Quis, the mayor of Southern Pines, was asked about racial exclusion, he said: "Are you telling me everyone on Waynor Road is of a certain race? I mean, that's kind of odd".

But Anita S Earls, a lawyer with the University of North Carolina Center for Civil Rights, said that even if officials were not motivated by racism, historic racial inequities were part of the equation. "We have not found a densely populated, small lot size, poor white community on the edge of a town," Ms Earls said.

The exclusion of minority neighborhoods, sometimes called municipal underbounding, occurs across the country. In Modesto, Calif, Hispanics have exchanged visits with the Moore County residents and are suing for services. In 2003, a black community outside Zanesville, Ohio, got tap water after filing a civil rights complaint. But civil rights advocates say it is most prevalent in small towns across the South.

"I don't think it happens even in larger cities in North Carolina because the political dynamics are so different," said Allan Parnell, the vice president of the Cedar Grove Institute for Sustainable Communities in Mebane, NC, which did a study of racial exclusion by North Carolina towns. "In larger towns there may be a larger black population that has some say in running the community".

Underbounding denies blacks political power while putting them at the mercy of politicians who do not represent them, Ms Earls said. All of the Moore County Commissioners, elected at large, are white, and black officials, elected or appointed, are scarce in the three towns.

Several elected officials said the lack of diversity in government was not an issue because they treated their constituents equally.

"Honey, I work with blacks and I love to work with the blacks," said Virginia Saunders, in her 10th year as a county commissioner. "I wish you could talk to some of the black people that I have helped".

But Maurice B Holland Sr., who lives in Midway and is the only black member of the Aberdeen planning board, had a different view.

"There's no one in power to address the issues of the black community," Mr Holland said. "The attitude seems to be, 'We know what's good for you' ".

New York Times website


Beware the interest-only mortgage [US] - 6 June

Liz Moyer

New York - There's an ever-growing danger lurking in the already-overheated real estate market: the interest-only mortgage. The problem is, even the banks don't know how dangerous their exposure is.

During the second half of last year, 63% of home loans were adjustable-rate mortgages with those so-called interest-only features, according to the Mortgage Bankers Association.

When something gets this hot, the smart money should know that's when the trend is over. But while, for a long time, the parlor game where bankers gather may have been guessing when the home-price bubble might burst (see "Real Estate Vulnerability Index"), now the worry has shifted to the role of interest-only mortgages. These give borrowers lower upfront payments for a few years, then balloon into far bigger installments when principal payments kick in.

Overall, there were $2.7 trillion of mortgages and refinancing last year, down from the record $3.8 trillion in 2003. This year, there are still expected to be $2.4 trillion of mortgages underwritten. Sixty percent of that would mean $1.4 trillion of interest-only mortgages.

The mortgage market is dominated by a handful of national lenders, led by Countrywide Financial, followed by Wells Fargo, Washington Mutual, JPMorgan Chase and General Motors Acceptance Corp., the financing arm of General Motors, according to SNL Financial.

Interest-only mortgages have been around for years, popular with private banks that want to offer their wealthy clients an option beyond traditional fixed-rate jumbo mortgages. But with housing prices soaring, interest-only mortgages, with their lower initial monthly payments, have become a common--and in some cases necessary--way for home buyers with modest means to stretch for a bigger home that they might not be able to afford otherwise.

Interest-only mortgages are also getting popular with families buying vacation homes or real estate for an investment--and that's raising red flags for those who are concerned about the risks to the financial sector.

"Apparently there is not sufficient data for any institutions to know how much they have," said Charles McMillon, the president and chief economist at MBG Information Services, an economic analysis group in Washington, D.C. "It's very widespread. The percentage of interest-only loans as a share of all loans has really exploded, but we don't know what the concentrations are in each institution. We only know enough to be worried".

Pam Martin, a spokeswoman for RMA, a Philadelphia-based association of bank and thrift risk managers, says it is clearly an issue the regulators are watching. In May, the Federal Reserve, the Office of the Comptroller of the Currency and other financial institution regulators released joint guidelines for home equity lenders, warning them to be careful about underwriting standards for interest-only products.

"Portfolio management is especially important for financial institutions that project or have already experienced significant growth or concentrations in higher-risk products," the May 16 guidelines said. A similar statement for first mortgages is expected to be issued by the agencies later this year.

Some lenders have started to acknowledge the growing trend and investor concern. But few offer specifics about their own portfolios.

During a presentation last month, JPMorgan President James Dimon outlined his company's exposure to interest-only mortgage loans. Last year, 4% of the first home loans it originated were interest-only, he said, and that is expected to escalate this year. And, indeed, the first quarter saw interest-only products making up 14% of originations.

But Dimon insisted credit quality was sound. Average credit scores were in the mid-700s and the loan-to-value ratio was around 70%. "We have interest-only limits in place, and continuously monitor the portfolio and market trends," he said in his presentation.

Banks manage the risk by selling bundles of mortgages into the loan market, which has exploded in the last decade, fueled by demand from institutional investors such as other banks or hedge funds. In securitizations, mortgage risks are parsed and doled out to multiple investors, each of which is hedging the possibility of loss with gains elsewhere.

Still, it is this vibrant "secondary" market that not only helps spread the risk, but feeds the mortgage beast. The growth of interest-only products is driven partly "because they can be securitized," Martin says.

Banks are holding more adjustable-rate loans on their balance sheets, rather than selling them into the loan market, analysts say, and that could pose risks in the event of widespread defaults.

Matt Vedder, an analyst who follows mortgage companies at Citigroup's Smith Barney, says it will be a couple of years before the true test comes. Most adjustable-rate mortgages with interest-only features have a three-year period before the payments jump, and since the market didn't really start to boom until 2004, the first signs of any cracks in the system won't come until 2007.

"The question is, Can the consumer really handle that?" Vedder says. "It's pretty easy to see markets where it's a problem".

Moreover, these are products that aren't going away, says Pete Taglia, a market commentator at FTN Midwest Capital Markets.

Forbes website


Labrador Inuit land-claims deal reaches final stage with Commons bill [Canada] - 6 June
Ottawa (CP) - A major land-claims agreement that would give Inuit control of a big chunk of northern Labrador is a step closer to becoming law.

The federal government introduced the Labrador Inuit Land Claims Agreement Act on Monday, which would enact a deal signed between Ottawa and the Labrador Inuit Association in January. The pact was the culmination of 30 years of negotiation, and the Commons bill marks the final step to it becoming reality.

The agreement sets out details of land ownership, resource sharing and self-government.

It establishes a Labrador Inuit Settlement Area of about 72 500 square kilometres. The Inuit will own 15,800 square kilometres of land outright and will have limited resource and management rights in the rest.

The settlement area includes an Ocean Zone of 48 690 square kilometres and 9 600 square kilometres for the creation of Torngat Mountains National Park Reserve.

The deal also calls on the government to pay the Inuit $140 million, plus another $156 million to implement the agreement.

Indian Affairs Minister Andy Scott hailed the pact as the "first modern-day treaty negotiated in Atlantic Canada."

He said it will open up opportunities for the region and ensure Inuit play a key role in decision-making.

William Andersen, president of the Labrador Inuit Association, said the deal "closes the circle of Inuit negotiations."

"Labrador Inuit look forward now to shaping our own destiny and participating in the business of building this country."

The land-claims agreement was ratified by 76 per cent of Inuit voters in May 2004.

The Newfoundland and Labrador legislature passed the agreement in December.

The pact was reached despite protests from Metis in the region. The Labrador Metis Nation says the agreement could extinguish the rights of 6 000 people of Inuit ancestry outside the region.

The Labrador Metis Nation land claim, covering all but the northernmost regions of Labrador, has been rejected by the federal government. The rights of non-status aboriginals in Canada have not been clearly established by legislation or the courts.

Unlike some aboriginal groups, Canada's Inuit did not sign treaties with the Crown.

Beginning in the 1970's, Inuit across northern Canada have laid claim to the lands and resources of their traditional territories.

The 5 000-member Labrador Inuit Association is the last Inuit group in Canada to negotiate a land-claims settlement.

The Nunavik Inuit of northern Quebec were the first, settling their claim in 1975 ahead of a massive Hydro-Quebec development in the region.

In 1984, the Inuvialuit of the Northwest Territories signed a deal with the federal government.

But by far the largest land-claims agreement in Canadian history was signed in 1993 between Ottawa and the Inuit Tapirisat, then still part of the Northwest Territories.

The deal saw the creation of Nunavut six years later, a territory four times the size of France where Inuit comprise 85 per cent of the population of 28,000.

Macleans website


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