Many South Africans have seen their dreams of owning their own home dashed over the last few years due to the difficulty in obtaining a home loan and the cost thereof. But, says Meyer de Waal of Oosthuizen & Co Meyer de Waal Attorneys, South Africans should not abandon their dreams of owning a home, but should rather look for solutions to the challenges they are facing.

A major challenge is that banks are declining almost half of all home loan applications, and those who are self-employed have very little chance of obtaining finance. The availability of finance for buying a home is likely to become even more constrained if the government's proposed credit amnesty comes into effect, which will make the banks even more stringent in their credit criteria as they will be unable to assess consumers' full credit histories. 

It is also expensive to get a home loan, because the banks are no longer lending at the prime rate, which now stands at 9%, but apply prime plus rates, which impact the monthly repayments significantly. This often makes the repayments unaffordable in light of consumers' already tight budgets, given the skyrocketing costs of living, as well as the high level of South Africans' debt-to-income ratio. The recent surprise interest rate hike may well signal the upturn in the interest rate cycle, with higher interest rates coming sooner than expected, and this will further increase monthly home loan repayments. 

 In addition, prospective buyers must have substantial savings, because the banks are demanding deposits as high as 15%, and buyers must also cover the significant costs involved in buying a property, such as transfer duty and bond costs.

 However, says de Waal, there are a number of ways in which South Africans can overcome these challenges. "The first is to manage your money prudently, ensuring that you can save a little every month after paying all your expenses and build a solid credit track record. This will significantly improve your chances of getting a home loan approved. The second is to look for alternatives, such as the Rent-to-Buy approach and instalment sales." 

 The Rent-to-Buy (R2B) concept allows home buyers to secure and occupy the home they want now, even though they cannot obtain a home loan. Essentially, the home buyer rents the property at a higher than average rental for a year or two, with the option to buy the property at the end of the rental period, but at a purchase price fixed at the beginning of the rental period. Over the rental period, the potential homeowner builds up a solid track record of paying a monthly rental amount equivalent to monthly bond instalments, which will provide the banks proof that the buyer can afford the bond repayments. In addition, the monthly amount paid above the market-related rental can be used to build up a deposit. In this way, buyers can secure and occupy their dream home now, while building up a payment track record and saving up a deposit which will greatly improve their chances of obtaining a home loan at the end of the rental contract.

Another option is an instalment sale, in which the buyer offers to pay the seller monthly instalments over five years to settle the purchase price. Often, 
the buyer will simply take over the seller's current bond repayments, with a commitment to settle the full outstanding bond amount within five years, either by paying additional amounts into the bond over the five-year period, or by obtaining a loan to settle the much-reduced balance before the end of the five-year period. 

 This approach is made possible through the Alienation of Land Act, which provides solid protection for both the seller and the buyer through a specialised contract between the parties. The benefit to the buyer is that he/she does not have to obtain a home loan, while the benefit for the seller is that the property can be sold immediately, which is often the most important consideration for many distressed sellers who can simply no longer afford the property, need to relocate urgently for work purposes or want to vacate the premises as soon as possible following a death or divorce. 

De Waal suggests that South Africans who are serious about owning a home and cannot obtain home loan finance should seek expert help to make their homeownership dreams come true. "Don’t simply abandon your dreams of owning a home. There are alternative approaches beyond getting a bond application approved, and with the right expertise and assistance, you can make your dream a reality."

Prospective homeowners who want to improve their chances of obtaining a home loan can join the MyBudgetFitness (MBF) Club at www.budgetfitness.co.za, which includes rehabilitating credit records, setting up and maintaining a monthly budget through a mobile app (Mobile2Budget.co.za) and online resources, as well as benefiting from the guidance and assistance of a personal MBF trainer. 

If you are interested in the Rent-to-Buy concept, visit www.irent2buy.co.za, where you can download a brochure on how to get started and view properties already available on this basis. For more information about instalment sales contracts, please visit www.oostco.co.za.

Often the perception is that once you have “signed on the dotted line” the contract can be stored and need only be consulted when trouble arises. This is revealing of how contract management is still not recognised as an important management tool for most businesses. It is seen generally as a discipline belonging only to the largest of companies and of small relevance to other businesses. Accordingly, most businesses have limited capacity to manage the ever-burgeoning volume of contracts being concluded by them. This in turn implies that organisations struggle to understand the legal implications of their contracts and improve the risks being assumed by them therein, posing significant risks for organisations only able to manage contractual issues reactively.

Poor contract management further leads to a lack of awareness of the contingent obligations being assumed by your business, a lack of understanding of contractor performance and in general an inability to evaluate the effectiveness of contracts concluded. Management decisions are unsupported by data which allows comparison, often resulting in weak contracting positions, monetary losses or even reputational damage.

But what can a business do to start managing its contracts more effectively?

The first step is to recognise that a contract is not done once it’s signed. In reality, that is only the start of the management process in what is often termed the life-cycle of a contract. This inevitably includes signing, implementation, monitoring, amendment, renewal and termination. Each step is important and a business must know at what phase of the life-cycle each of its contracts are in order to manage the different risks relating to each phase.

The second step is to ensure that certain core tasks are executed in respect of each contract. These tasks are:

• Identify your important/high risk contracts and ensure that these are managed and reported on to management.
• Assign responsibility for these contracts to a person(s).
• Identify the most important or high risk items in each contract and focus on managing those.
• Identify important dates or milestones arising from a contract and diarize them.
• Look at the key performance requirements (yours or those of the other party) and monitor them through feedback from staff or other performance assessment tools.
• Be careful of contracts automatically expiring or renewing. Manage these important dates by timeously reviewing the contracts before they terminate or renew.
• Record changes or amendments to contracts in writing and ensure that these changes are properly negotiated.
• Review your standard contracts periodically to determine whether they are still appropriate and up to date with legislation.

How can I ensure that my contract management remains effective?

In order to ensure that a contract is managed effectively and that the core tasks are performed a system must be put in place. In most organisations, contract management tends to be paper based with contracts organised into hard copy files and with important details frequently living only in the memory of an individual or saved on a personal spread sheet. Loss of the person usually means loss of this knowledge, with potentially disastrous consequences for an organisation.

With the development of IT technology more and more businesses are realising the benefits of having at least a central storage depository for their contracts or for the more advanced, exploring the use of automated contract management systems which can be used to store important contract data. If used correctly these systems can add great value to an organisation and can bring order to the ‘chaos’ which often surrounds a paper based system. These systems also allow executives to gain an overview of all of their contractual obligations and commitments, enabling more effective planning and risk assessment.

One of the main advantages of an automated contract management system is the assistance it can provide with the administration of the contract. These systems can be used to store all the documentation necessary in order to create a clear audit trail throughout the life-cycle of the contract. They can also store a copy of the contract which can then be accessed by multiple parties authorised to do so and required to be involved in the management of the contract. These systems can also keep track of important dates and milestones and remind parties of upcoming deadlines.

In summary:

Whether or not your organisation is using an IT tool or merely using your own paper based system to manage contracts, the critical element to contract management remains the allocation of responsibility to individuals. Each contract must have an ‘owner’ who assumes responsibility and keeps management informed of events relating to the contract. Without this assignment of responsibility, even the best contract management system will eventually lead to failure.

So, whether your procedure is sophisticated or rudimentary, make sure that the core tasks mentioned above are implemented and ensure that the importance of managing your contracts receives the necessary appreciation within the organisation. Discuss with your attorney or contract specialist ways of refining your current system and implementing management protocols and systems that will allow you to remain on top of your contracts.

Die munisipaliteit het aan Westside Konstruksie (Edms) Beperk (die “Kontrakteur”) ‘n tender toegestaan vir die oprig van lae-koste behuising. Die omvang van die projek is van so aard dat die Kontrakteur uiteraard sub-kontrakteurs moet gebruik om die werk uit te voer. Een van die sub-kontrakteurs wat benodig word, is ‘n loodgieter en Pypies Loodgieters (Edms) Beperk (die “Sub-kontrakteur”) word aangestel om die Kontrakteur by te staan met dit nodige loodgieterswerk vir die projek.

Die Kontrakteur het die ooreenkoms met die munisipaliteit gesluit en is deurentyd verantwoordelik vir die nakoming van alle verpligtinge soos vervat in die hoof-kontrak. Om die reëlings rondom die loodgieterswerk kontraktueel vas te maak, sluit die Kontrakteur en Sub-kontrakteur ‘n verdere ooreenkoms (“Sub-kontrak”) waarin die onderlinge regte en verpligtinge rondom die uitvoer van die loodgieterswerk deur die Sub-kontrakteur gereël word.

‘n Paar maande na die aanvang van die projek het die Sub-kontrakteur reeds die meeste van sy verpligtinge in terme van die Sub-kontrak nagekom maar slegs gedeeltelike betaling van die Kontrakteur ontvang vir die werk verrig. Die Kontrakteur het egter begin agter raak met sy verpligtinge in terme van die hoof-kontrak met die munisipaliteit en nou weerhou die munisipaliteit betaling van die Kontrakteur. Dit veroorsaak ‘n kontantvloei probleem by die Kontrakteur en kan hy nie sy sub-kontrakteurs betaal nie. Die Sub-kontrakteur wil egter sy verpligtinge voltooi om na sy volgende geskeduleerde projek te beweeg, maar is huiwerig om verdere kostes aan te gaan waarvoor hy geen betaling mag ontvang nie.

Die natuurlikste reaksie van enige sub-kontrakteur is om sy dienste te staak en geen verdere werk te verrig totdat betaling vir die werk reeds gelewer ontvang is nie. Maar is dit die oplossing? Deur net nie op te daag vir werk nie loop die Sub-kontrakteur die risiko dat hy die Sub-kontrak verbreek en homself skuldig maak aan kontrakbreuk. Dit is dus belangrik dat die Sub-kontrakteur streng volgens die bepalings van die Sub-kontrak optree ten einde sy regte af te dwing.

Enige behoorlik opgestelde ooreenkoms sal bepalings bevat wat uiteensit wat moet gebeur in die geval van pligte wat nie nagekom word nie. Daar is ook heelwat standaard ooreenkomste soos die JBCC kontrakte wat gebruik kan word vir die reël van sub-kontrakteur verhoudings. Dikwels vereis die ooreenkomste skriftelike kennis aan die ander party waarin vereis word dat die verpligtinge binne ‘n sekere tyd vervul moet word. Sodanige kennis deur die Sub-kontrakteur sal dan ook moet aantoon dat hy sy dienste gaan staak vir die tydperk wat die Kontrakteur versuim het om sy verpligtinge teenoor die Sub-kontrakteur na te kom.

Die Sub-kontrakteur sal vandat kennis gegee is geregtig wees om van die terrein af weg te bly en verder om nie die gedeelte van die projek waarvoor hy aangestel is te voltooi binne die voorgeskrewe tydperk nie. Deur die Kontrakteur kennis te gee in terme van die Sub-kontrak, verseker die Sub-kontrakteur ook dat hy sy regte behou wat hy in terme van die Sub-kontrak het wat belangrik mag wees in die geval waar moontlike toekomstige regstappe teen die Kontrakteur geneem word.

Dit is natuurlik om bekommerd te wees oor wanbetaling of ander gebreke in ‘n kontrakteur se optrede maar dit bly van wesenlike belang dat jy hou by die letter van die kontrak en die remedies uitoefen soos deur die kontrak voorgeskryf. Dit mag ook belangrik wees om regsadvies in te win voordat enige kennis gegee word om te verseker dat aspekte soos moontlike retensieregte ens. nie verlore gaan indien jy van die terrein af wegbly nie.

Waar daar geen kontrak is nie of die kontrak in gebreke is rondom die hantering van sulke situasies moet regsadvies ingewin word oor die korrekte prosedure wat gevolg moet word. Deur die reg in eie hand te neem kan jy vir jou meer skade berokken as wat jy deur jou optrede kan wen. Wat ook verder belangrik is, is die waarde van ‘n goeie kontrak. Oorweeg dit sterk om ‘n ordentlike ooreenkoms te laat opstel of ‘n gepaste standaard ooreenkoms te gebruik wat die regte, verpligtinge en remedies van partye behoorlik uiteensit en sodoende kan bydra tot die korrekte hantering van probleme wat mag onstaan gedurende die uitvoer van die kontrak.

For the purposes of concluding contracts electronically and the growth of e-commerce, the Electronic Communications and Transactions Act, 25 of 2002 (‘ECTA’) that came into force on 30 August 2002, is of major significance.

ECTA makes provision for the recognition and regulation of electronic commerce and its provisions deal specifically with how, when and where an agreement concluded electronically, comes into existence. In so doing, ECTA made electronic signatures legal in 2002 already.

This is not to say that electronic agreements did not exist before the promulgation of ECTA. Many people were doing business electronically before 2002 and used electronic documents and data messages (which includes data generated, sent, received or stored by electronic means) instead of written records. It is therefore not surprising that the first reported South African case involving the admissibility of electronic evidence (Narlis v South African Bank of Athens, 1976) was heard some 25 years prior to government passing ECTA!

Many South African users of electronic communications (such as e-mails and SMSs) may believe that such electronic records and communications have the same legal weight as hardcopy records and communications. Whilst ECTA generally allows for agreements to be concluded electronically, signed with the use of an electronic signature, this is not necessarily the case in all instances, as

• section 4 of ECTA excludes some important transactions from its operation; and
• in certain circumstances advanced electronic signatures are required, as opposed to ‘ordinary’ electronic signatures.

Types of electronic signatures

ECTA provides for two categories of electronic signatures:

1. The first is an ‘ordinary’ electronic signature which is defined to include “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature.” These may include any digital or scanned signature and are often referred to as non-secure signatures. An ‘ordinary’ electronic signature suffices where a signature is required by parties to an electronic transaction and they do not specify the type of electronic signature to be used. ECTA provides that the electronic signature will be deemed to be valid where:
   1.1 a method is used to identify the sender and to indicate the sender’s approval of the information communicated; and
   1.2 having regard to all the relevant circumstances at the time, the method was reliable and appropriate for the purposes for which the communication was intended. For most purposes, these ‘ordinary’electronic signatures suffice.
2. For certain types of agreements, the second type of electronic signature is required, this being the so-called advanced electronic signature (‘AES ’). This is defined in ECTA as “an electronic signature which results from a process which has been accredited by the Authority as provided for” in terms of the ECTA. The authority referred to is the Department of Communication.

When is an AES re quired ?

An AES is required for agreements and documents that our law stipulates must be in writing and signed. These will be valid if they are concluded electronically or are in electronic format, provided they:

• are accessible “in a manner usable for subsequent reference”; and
• were signed with an EAS.

An example is a suretyship or signing as Commissioner of Oaths. (The Commissioner can sign an electronic copy of an original paper document with his or her AES and create a certified electronic copy of the original.)

EXCEPTIONS

ECTA excludes the following from being concluded electronically, whether or not an AES was used by the parties to sign:

• Agreements for the sale of immovable property
  The Alienation of land Act requires that agreements for the sale of land must be in writing and signed. But ECTA makes it clear that its provisions (allowing the use of data messages and electronic signatures where a law requires writing and signature) do not apply to agreements concluded in terms of the Alienation of Land Act

• Long-term leases of land exceeding 20 years
  This is a bit of a misnomer in that long-term leases of land in our law is understood to refer to those leases described in the Formalities in Respect of Leases of Land Act, where a long-term lease is a lease of 10 years and longer. However, as ECTA currently reads, no 20 years lease of land (or longer) can validly be concluded via electronic means.

• Signing of a will
  The Wills Act requires a will to be in writing, signed and witnessed. ECTA stipulates that its provisions do not apply to the execution, retention and presentation of a will. In other words, signing a will by electronic means, even if it is an advanced electronic signature, does not constitute compliance with the Wills Act.

• Bills of exchange
  The Bills of Exchange Act deals with bills of exchange, cheques and promissory notes (referred to as negotiable instruments). This Act requires that these negotiable instruments be in writing and signed and ECTA specifi cally provides that it does not apply to these instruments.

MORE ABOUT AN AES

ECTA requires that AESs be issued by an accredited service provider. This only occurred earlier this year when the Department of Communications appointed Law Trust as the accredited authentication services provider. It is now possible - for the first time since the inception of the Act – for consumers to apply for an AES and use it as signature to agreements. (Note that AESs were in use and recognised before, but no service provider was authorised to issue AESs, and for legally binding documents requiring a written document and signature it was still necessary to record it in a written document and sign it in ink.)