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

A poorly worded or vague contingency clause in your sales contract could end up costing you your dream home – or a lot of money.

That's the warning from Mike Bester, CEO of Realty 1 International Property Group, who says that vague contingencies, particularly those relating to the buyer obtaining financing, are invariably behind the collapse of contracts and very often result in unpleasant and costly disputes between buyer and seller.

A unique feature found predominantly in real estate contracts, contingencies are written clauses that allow buyers to back out of contracts without penalty should they be unable to fulfill certain conditions, says Bester. "For example, a purchaser who wants to buy another property prior to selling his existing home should ensure that this sale is contingent on the successful sale of his own property. If this contingency isn't included in his contract, he could find himself being responsible for two lots of bond installments every month," cautions Bester.

Other common contingencies include being able to secure suitable financing, having the property pass an inspection, or having a boundary survey done, he adds. "Contingencies are intended to protect buyers in the event that they are unable to deliver on their intention of buying the property. Canceling a contract that has no built-in conditions and contingencies could end up with the prospective buyer losing his deposit or being sued for damages".

Bester adds : "The pre-printed contracts used by most professional estate agencies invariably comply wit legal requirements and include the most common contingencies. It's therefore better in most cases to use this documentation rather than create your own contingencies, unless you're working with an experienced estate agent or real estate attorney".

Strongly recommending that both parties refrain from signing until they have read the contract thoroughly and understand every point, Bester encourages question asking. "There are no stupid questions when it comes to committing to a debt that will take the average person 20 years to pay off. And if you don’t ask questions before signing, it will be too late to change anything afterwards".

Rodney Hayter website

Roy Cokayne

Pretoria - Sixty percent of residential property sellers in the major metropolitan areas failed to realise their asking price in the first quarter of this year compared with just 29 percent a year ago.

This is despite an upward shift in the overall level of confidence in the property market, largely due to the amendments to transfer duties announced in the budget in February this year, according to the latest FNB residential property barometer released yesterday.

Ed Grondel, the chief executive of FNB HomeLoans, said unrealistic price expectations by sellers and the fact that buyers had more choice were the main reasons why sellers failed to realise their asking price.

However, Grondel said only 10 percent of sellers in the townships failed to realise their asking price, which could be attributed to more realistic property prices being asked in this market coupled with high demand.

FNB's residential property barometer is a forward-looking indicator of the residential property market based on a quarterly analysis of the perceptions of estate agents.

Grondel said the overall activity level in the market had increased to 6.3 percent from 5.8 percent in the fourth quarter of last year.

The active and very active sentiment had increased from 36 percent in the fourth quarter of last year to 49 percent in the first quarter of this year.

"About 72 percent of agents operating in the privately owned market report that this activity level is higher than it was a year ago. This high level and optimistic outlook is attributed to high levels of demand," Grondel said.

Another headline trend revealed by the property barometer was the period a property remained on the market nationally.

Properties now remained on the market for an average of eight weeks, compared with seven in the fourth quarter of last year.

Other trends were that property bought for letting had reached its lowest level of 16 percent in the first quarter of this year from a high of 28 percent in the first quarter of 2004, and the outlook for the second quarter of this year remained "exceptionally upbeat" due to the favourable announcements made in the budget.

Grondel said overall the property market remained buoyant and showed a 14.5 percent growth in house prices but investors entering the buy-to-let market had declined because of unsatisfactory yields.

Business Report website

Angelo Coppola : editor@fanews.co.za

The residential property market is being buoyed by the lowered transfer duties for those properties that are still under R500k, and consumer confidence is at a 24 year record high.

This is according to the latest FNB residential property barometer for the first quarter of 2006, and property professionals are still extremely positive about the year ahead.

In terms of market activity it appears that middle to lower market is growing faster than the upper market, as that market sector is more affected by the reduced transfer duties announced by the finance minister in February.

Perhaps more importantly one in four buyers are first time buyers, while there is an increasing percentage of properties being sold at less than the asking price now at 60%. Thats the highest its ever been, and a continual trend, and the buyer is calling the shots. The buyer has more options, and developments have come through and there is more available stock.

Buyers are not prepared to pay unrealistic asking prices, while the average property remains on the market for about eight weeks slightly up on the last quarter, and it appears that buyers may have waited for the start date of the reduced transfer duties. The last three quarters have been fairly consistent. The average is in the region of eight weeks.

It also appears that the buy to let market is weakening, with this sector showing the lowest activity levels, mainly due to the fact that investors are not making the yields they were expecting.

The estate agents have reported that there is less activity in this sector. The upper end of the market is showing the greatest reduction in activity, while the lower end of the market is clinging onto its activity levels.

The letting agents are also reporting lower rental yields, and rentals are up by only 5% in the last six months, while property prices for that period have increased by 15%.

According to FNB, investors are getting out of this market and this may well drive the yields up as less stock is then available. FNB maintains that there is still a rental market, but at more realistic prices. Pretoria and the greater KZN area are showing the best gross yields.

And the perception of the property professionals is a positive one for residential property, for the three months, based generally on the transfer duty fees, pricing and stock issues. Its also about the youngness and quality of the stock that the professionals hold.

FA News website

Nick Wilson

The huge property and land portfolio owned by government could be a key factor in encouraging foreign direct investment in SA, as well as boosting black economic empowerment, says Property Partners CEO Stuart Chait.

He says that if government decided to make large scale sales of its property and land holdings to the global market it could turn SA into a global player recognised by international property investors.

Chait, whose Property Partners acquired the mixed use development of Melrose Arch in December 2004, says that increasing the size of the commercial property market is a key factor needed to turn SA into a global property player.

The listed property sector has property worth about R55bn and SA institutions collectively control another R50bn worth of properties.

Government and parastatals control property and land worth about R300bn-R500bn, says Chait.

"Why are we one of the only countries in the world where the government owns its own properties? The properties should be sold and the money spent on infrastructure, social housing, health, welfare and education," he says.

Although government has made it clear it intends selling off large chunks of its property assets, Chait questions whether government has the ability to obtain the highest value for its properties by offering these to the local market.

If government sells its properties globally, it will stimulate the economy and encourage foreign direct investment.

These foreign direct investors could also be made to take broad-based black empowerment players as partners.

"As a result, there would be a massive transfer of international skills which would effectively make the South African property market a global player."

Chait says government needs to put together a task force and create a streamlined, fast-tracked sale of assets.

He says foreign investors want an on-the-ground partner who understands the local property market.

Chait believes the entire commercial property sector could be 10 times its present size within five years.

Marc Wainer, MD of property asset manager Madison, says there is some merit to Chait's argument but he says that, in the South African context, government regarded certain of its property assets as strategic. He says a task force consisting of the national public works department and private enterprises was formed about five years ago.

It talked about "privatisation" of government properties, but "this now seems to have gone on hold."

He says the jury is still out on whether government should own its properties or lease them.

"The real question is, is it cheaper for government to hold the asset or sell it and pay rent? Does government today have a need for money. If yes, is it more effective to sell?"

Norbert Sasse, CEO of Growthpoint, the largest property fund on the JSE, says he is not entirely sure whether there is a need for foreign investors to be the catalyst for the growth of the commercial property sector in SA.

"I think there is enough capacity in the local market. If government wanted to increase the size of the commercial property sector it could tap into the local market."

Sasse says that there is enough money in the South African commercial property investment market, but there is a shortage of skills on the physical development side of the market.

Attempts to obtain comment from the public works department were unsuccessful.

allAfrica website

Handing more agricultural land to black South Africans is not enough to cure the country of widespread poverty, especially in underdeveloped rural areas, a report by the Organisation for Economic Co-operation and Development (OECD) said today.

The land reform programme has been highlighted as a key means of reducing poverty, especially in rural areas, as it tries to reverse unequal land distribution created by apartheid and colonial laws.

But the Paris-based OECD said given its limited resources of water and arable land, SA should focus more on improving social services and infrastructure in impoverished rural areas.

"Rural economic infrastructure, such as rural transport, telecommunication and information technologies, is crucial for the development of economic activities in rural areas, including commercially sustainable farming," the OECD said.

"Equally important are the provision of social services and investments in infrastructure that will provide a knowledgeable, skilled, healthy, economically active society in rural areas," it said in a first report on the agricultural sector.

Government wants to put 30% of farm land in black hands by 2014 in a bid to return blacks to land forcibly taken from them under white minority rule.

So far, it has reached just under four percent of its target.

The report echoed frequent criticism that lack of official skills and support for new farmers had hampered transformation in agriculture and resulted in a number of black farmers failing. It also pinpointed a lack of funding.

Some agriculture officials have acknowledged the government’s shortcomings and said they hoped to enlist the expertise of established white farmers, asking them to help fund projects.

The 185-page report said the agricultural sector contributed under four percent to gross domestic product (GDP) in 2001/02 versus around 6% in the 1980s.

But despite its declining economic significance, the industry remains resilient.

It attributed this to market reforms that followed democracy in 1994, when the government did away with apartheid-era policies like production quotas and limits on the number of processors and traders that created monopolies.

Farmers have complained that they are being battered by the reforms - which have resulted in price fluctuations in the market for the food staple maize in particular - and called on government to step in to assist them.

But the OECD said farmers had adapted well to the changes, tripling exports and resulting in a positive agricultural trade balance of around $1bn per year since 2000.

"Within the last 10 years, SA's commercial agricultural sector has adapted well to the policy reforms which liberalised markets and reduced support to commercial farming," it said.

"In general, commercial producers tend to be highly competitive, market oriented, and profit focused, responding to local, regional and market opportunities."

Business Day website

Releasing its first study of agricultural policies in South Africa, the Paris-based OECD - consisting of the world's 30 most industrialised countries - warned that land reform was one of the country's most important challenges.

According to the report, assistance is required to ensure land reform results in the emergence of viable farms.

"Development of the necessary technical and social infrastructure as well as an effective service sector are critical measures."

OECD food and agriculture director Stefan Tangerman released the study in Pretoria.

It took the form of a comparative study of the developing countries China, Brazil, India and South Africa - and OECD countries.

In the study, South Africa was praised for holding the correct position on agriculture in the Doha round of negotiations at the World Trade organisations negations. South Africa had to continue asking the rest of the world to lower its subsidies for farmers and farming products.

"South Africa's level of subsidisation and support is rather low at five percent of revenue compared to that of 30 percent for countries in the OECD areas," Tangerman said.

South African farmers were much more market-orientated than OECD countries including the United States, France, Japan and the United Kingdom, he said.

He hoped the report would make it "even clearer" to OECD countries that they need to move forward on the WTO trade talks.

Earlier in the day, Agriculture and Land Affairs Minister Thoko Didiza said South Africa would stick to its position. "We are keen to open markets for our products and are willing to make tariff cuts, but not in cases where products are subsidised," she said.

Sapa

South Africa website

The government says it is seeking to improve its screening methods as it expropriates land. South Africa needs more land redistribution to tackle rural poverty. This is according to the report released by the Organisation for Economic Co-operation and Development on Wednesday.

The government is considering expropriating 355 farms to speed up the process of restitution. Masiphula Mbongwa, the director-general in the department of agriculture, says those wanting land should be interested in developing it.

"A process then has got to be put in place to ensure that we could put those that have the interest in farming. What that touches on is that we should improve our screening methods as well as put in more support for those that would be on the land, where interest exists."

SABC News website

Tozi Gwanya, the national land claims commissioner, says there are only 8 000 land claims left unsettled countrywide and that they have the resources and money to settle them by the new deadline of 2008. All the country’s land claims commissioners met at Magoebaskloof Hotel in Limpopo today to take stock and discuss the way forward.

Gwanya said 80 000 claims were lodged by the 1998 deadline, but that they first had to be researched to establish their validity. Claims that are being gazetted now are not new claims but only ones that took a long time to research.

About one million hectares of land has now been transferred under the land restitution processes, but together with the land tenure program and with the land redistribution program, it comes to four million hectares. This includes many commercial farms that collapsed afterwards.

SABC News website

Carli Lourens

The world's largest glossy paper maker, Sappi, has sold a quarter of its forestry land in SA to empowerment group Lereko Property Consortium in a move that it also hoped would help it resolve 43 land claims against it.

Virtually no progress was being made with the claims, which affected 40000ha of Sappi's 360 000ha of forestry land, said André Wagenaar, CEO of the group’s southern African business yesterday.

"One of the objectives of the deal is to help resolve the claims," he said.

Only two or three of the 43 claims were being investigated by government at the moment, Wagenaar said.

The number of claims against the paper maker, which is one of the largest land owners in SA, had increased from 17 at the end of 2004. Wagenaar said the current number was not expected to increase substantially.

Lereko, which will pay R224m for the land, is led by African National Congress heavyweights - former tourism and environmental affairs minister Valli Moosa and former North West premier Popo Molefe.

Sappi said the value of the empowerment deal was derived from the approximate R900m market value of Sappi's land holdings, excluding the value of standing timber.

The group said the Lereko consortium, which incorporated Sappi staff, would investigate property development opportunities, such as tourism or retail on parts of Sappi's underutilised land. Sappi’s land is mainly in Mpumalanga and KwaZulu- Natal.

The development of under-used land could be of financial benefit to Sappi, the group said.

It said Lereko had the management experience and skills base to unlock the potential value. Lereko had expertise in urban and rural development in particular.

Lereko Investments, which also holds interests in Imperial Group and Sun International, owns 46% of the Lereko Property Consortium.

Sappi Worker’s Trust owns 30%. Nonprofit women's group Malibongwe and financial services company AMB Capital own 10% and 14% respectively.

The empowerment deal was likely to position Sappi well against the backdrop of a forest sector empowerment charter. A draft of the charter was published a year ago.

Water Affairs and Forestry Minister Buyelwa Sonjica welcomed the deal yesterday but said such deals "need to happen across the value chain and not only on the upstream side".

Wagenaar said Sappi was not considering an empowerment equity deal at group level, as it was a global business with extensive operations in Europe and the US.

Meanwhile, Global Credit Rating said yesterday that it had placed Sappi on a ratings watch but reaffirmed its long-term domestic ZAR currency rating of A and short-term rating of A1.

The agency said global paper market conditions led to a deteriorating trend in Sappi’s profitability and cash flows since 2001 and that this had led to successive declines in key credit protection ratios.

Note was also taken of that fact that the group was subject to a high level of debt financing, given its involvement in the capital intensive paper industry, the agency said.

It also said, however, that the industry cycle appeared to start turning, with capacity in the US having reduced 10% last year, while a number of major European producers recently announced permanent plant closures.

Sappi gained 2,3% on the JSE yesterday to close at R89 a share.

Business Day website

See also

Sappi in BEE deal - 19 April
Sappi is one of South Africa’s largest private land owners - with over 360 000 hectares in commercial forestry operations. Classic Business Day gets Dinga Mncube from Sappi on the line about the Sappi BEE transaction with Lereko Property Consortium (LPC). - Business Day website

Over 750 Zimbabwean families that invaded the Gonarezhou National Park, an important component of the tri-nation Trans-Limpopo peace park initiative, will finally vacate the intensive conservation zone, a government newspaper has reported.

According to The Herald, the families agreed to move following an agreement on relocation with provincial government officials.

The paper, which did not give details of the agreement, added that the families had for long resisted eviction efforts by the government's Department of National Parks and Wildlife.

They reportedly contented that the game park was part of their ancestral lands, from which they were unfairly evicted by the colonial regime.

The tri-nation frontier park will link South Africa's Kruger National Park, Gaza National Park in Mozambique and the Gonarezhou in Zimbabwe. But the invasion of Gonarezhou has slowed the project down, with the government dithering on when the invaders would be ordered to leave.

The DPNW has always insisted on the removal of the invaders to make way for the development of the park, but the government has consistently refused to act firmly against them because they are all supporters of President Mugabe's ruling ZANU PF party.

The Herald quoted the governor of the south-eastern province of Masvingo as saying the invading families would leave by the end of August. The presence of human populations in the game sanctuary led to a sharp increase in indiscriminate poaching in which all sorts of weapons- ranging from crude wire snares to automatic rifles - were used to kill game.

Because of the invasion of the game sanctuary, the lauch of the Trans-Limpopo frontier park has been delayed several times. While Mozambique and South Africa have proceeded with the opening of an elephant corridor from Kruger into Mozambique's Gaza Park, Zimbabwe may still be a long way from joining because of the dilapidated state of Gonarezhou.

The invaders are also reported to have destroyed the perimeter fence, raising the cost of rehablitation beyond the financial capabilities of the Zimbabwe government.

AND website