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.)

A ‘rouwkoop’ clause included in a sale agreement provides for the purchaser to pay a deposit to the seller, which deposit may be retained by the seller should the purchaser decide to withdraw from the agreement. This does not constitute breach of the agreement, but is a mechanism whereby the purchaser legally buys his way out of the agreement.

Most sale agreements providing for the payment of a deposit, also contain a provision that this deposit will be forfeited should the purchaser breach the agreement. The Conventional Penalties Act of 1962 does however provide the purchaser with a remedy if the penalty exceeds the damages, as a Court may be approached for a refund of the difference between the penalty amount and the amount of the actual damages suffered.

The inclusion of either a penalty clause or a ‘rouwkoop’ clause in the sale agreement are effective methods for the seller to ensure that he is dealing with a serious purchaser.

The Department of Trade and Industry have just gazetted the Property Sector Code, addressing the broad-based black economic empowerment ('B-BBEE') charter for the property industry, comprising both commercial and residential sectors. Businesses in this industry must now follow this code as from the date it was published, i.e. 1 June 2012.

Let’s have a look at what this entails.

The aim of the sector code is to promote economic transformation in the property sector, ensuring a more meaningful participation by black people (specifically including black women, youth and those with disabilities) in this sector. It is also aimed at promoting property development and investment in under-resourced areas, which enhances basic infrastructure, encourages investment and supports micro and small enterprises.

Commercial activities in the residential property industry are involved, including:

• Houses
• Community schemes
• Land zoned for development

It also applies to the commercial property industry, including:

• Office property
• Industrial property
• Leisure property
• Retail property
• Land zoned for development
• Other property services
• Property ownership
• Property letting
• Property management
• Property sales
• Property valuation

2. Limitation on application of the sector code

EMEs (exempt micro enterprises) are not required to obtain B-BBEE verification codes and will automatically be awarded a B-BBEE recognition level of 4. For purposes of the charter, EMEs are defined as businesses with a turnover of less than R5 million, but for estate agencies and brokers this is R2,5 million. For property asset owning businesses it uses an asset threshold of less than R30 million for EMEs.

QSEs (qualifying small enterprises) can choose which 4 of the 8 elements of the charter (see paragraph 3 below) may be used to measure their compliance.

QSEs are defined as those enterprises with a turnover threshold between R5 million and R35 million. For estate agencies and brokers this is R2,5 million to R35 million and for asset owning businesses the QSE threshold is between R30 million and R280 million.

3. Measurement categories for B-BBEE certification

The categories in terms of which enterprises will be measured are the following: Ownership, Management Control, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development, Socio-Economic Development, Economic Development.

The latter category (economic development) is novel in the sphere of sector codes. It consists of two elements, namely:

• a commitment by entities dealing in property development to dedicate at least 10% of their annual property development investments to under-resourced areas;

And

• a commitment by entities engaged in property disposal to dedicate 35% of assets earmarked for disposal to black-owned enterprises with B-BBEE status 1 to 3.

4. How will this be monitored?

Rating agencies will be established whereby companies will be measured in terms of their compliance with the code. Companies will in addition be required to submit an annual certificate showing its level of compliance.

For more details, read the full sector code here (File Size: 5213.4KB), as published in theGazette.Gazette 35400 dated 01 June 2012 

The Rental Housing Act 50 of 1999 (“the Act”) came into effect on 1 August 2000.  The aims of the Act are to regulate the relationship between tenants and landlords by laying down general requirements relating to leases, making provision for the establishment of Rental Housing Tribunals in each province, and establishing principles to govern conflict resolution in the rental housing sector. The Act furthermore defines a “landlord” as the owner of a dwelling or his/her authorised agent. 

Two crucial provisions contained in this Act are discussed below. The first is that the Act provides that a lease does not have to be in writing, but a landlord must reduce it to writing if a tenant requests him/her to do so. In addition, certain provisions are deemed to be included in the agreement. In other words, the provisions form part of the agreement whether or not the parties actually agreed thereon or included it in their written or verbal agreement.

These deemed provisions include:

• That the landlord must furnish the tenant with written receipts for all payments received.
• That deposits paid by the tenant to the landlord/agent must be invested by the landlord/agent in an interest-bearing account with a financial institution and the landlord/agent must pay the tenant interest at the rate applicable to a savings account with a financial institution. The tenant may request the landlord/agent to provide him/her with written proof in respect of the interest accrued on the deposit, and the landlord/agent must provide this on request.
• That the tenant and landlord/agent jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain whether or not there are any defects or damage to the dwelling. If there are any defects or damage, it must be recorded in writing and attached as an annexure to the lease.
• That, at the expiration of the lease, the landlord/agent and tenant must arrange a joint inspection of the dwelling to take place within a period of three days prior to the expiration of the lease. This is necessary, amongst other things, to determine whether the tenant caused any damage to the premises during the period of the lease.
• That, on the expiration of the lease, the landlord/agent may apply the deposit and interest towards the payment of all amounts for which the tenant remains liable under the lease, including the reasonable cost of repairing damage to the dwelling during the lease period. The balance of the deposit and interest, if any, must then be refunded to the tenant by the landlord/agent not later than 14 days after the tenant has vacated the dwelling.
• That the receipts which indicate the costs which the landlord/agent incurred in repairing any damage to the dwelling must be made available to the tenant for inspection as proof of the costs incurred.
• That, should no amounts be due and owing to the landlord/agent in terms of the lease, the deposit, together with the accrued interest, must be refunded by the landlord/agent to the tenant, without any deduction or set-off, within seven days of expiration of the lease.
• That, failure by the landlord/agent to inspect the dwelling in the presence of the tenant upon the expiry of the lease, is deemed to be an acknowledgement by the landlord/agent that the dwelling is in a good state of repair. The landlord/agent will then have no further claim against the tenant and must then refund the full deposit plus interest to the tenant.

It is important to note that these standard provisions listed above are enforceable in court and may not be waived by the tenant or the landlord.

The second important provision relates to the establishment of Rental Housing Tribunals (“Tribunals”) in each province. Complaints may be lodged by mail or facsimile or delivered in person to the office of a Tribunal. Any dispute that arose as a result of an unfair practice (as defined the Act) must be determined by a Tribunal unless proceedings have already been instituted in another court. However, a person retains the right to approach an ordinary court to institute proceedings for the recovery of arrear rental or for eviction in the absence of a dispute regarding an unfair practice. A ruling by the Tribunal is deemed to be an order of the magistrate’s court in terms of the Magistrate’s Court Act, 1944 and the proceedings of a Tribunal may be brought under review before the High Court within its area of jurisdiction. 

Contact details for the Rental Housing Tribunals:

Western Cape Housing Tribunal:
27 Wale Street, Ground Floor, Cape Town
Call centre: 0860 106 166Fax: 021 483 2060

Gauteng Rental Housing Tribunal:
Ten Sixty Six building, 14th FloorNo. 35 Pritchard Streets (Cnr Harrison and Pritchard Str)Johannesburg
Tel: 011 630 5035Fax: 011 630 5057

In February of 2011 the City of Cape Town municipality passed a new water by-law which requires that, with effect from 18 February 2011 onwards, all sellers of properties within its jurisdiction must furnish a Plumbing Certificate to the municipality before transfer.

In order to facilitate future compliance with this requirement on the side of the Purchaser, sale agreements usually include a provision that the Seller furnishes a copy of the Plumbing Certificate to the Purchaser, before transfer.

The certificate serves to confirm that –

• the water installation conforms to the national building regulations;
• the property’s water meter is registering;
• there are no defects that can cause water to run to waste; and
• no rainwater leaks into the sewerage system.

The intention of the by-law is to manage our scarce water resources responsibly. The City loses approximately 79 000 million litres of potable water in the distribution system annually and this by-law strives to control water wastage from private homes.

The by-law also provides the City with an opportunity to gradually eliminate the increasing number of storm water connections into sewers, which puts capacity pressure on our sewerage network and treatment capacity. These are typically illegal connections that people make after the approval of the plans and inspection of the completed buildings. There is also a health and safety aspect to prohibiting cross connections between storm water systems and sewers. One of the greatest contributions to health in the last 100 years has been the introduction and management of closed sewer systems to limit and control the spread of disease.

What is the procedure?

1. The Seller must acquire the Certificate of Compliance (COC) forms from the City of Cape Town.
2. The Seller should select an accredited plumber, i.e. one who has the requisite qualifications in terms of the South African Qualification Authority. If in doubt, contact the City for confirmation. Only accredited plumbers may work on premises or issue a COC.
3. The Seller will be liable to pay the COC fee to the plumber.
4. The Seller may be assisted by an estate agent for all of the above.
5. The conveyancer will request the original COC.
6. The conveyancer can now proceed with registration as the Deeds Office does not require a copy of the COC.

What is a plumber expected to check?

• The Hot Water Cylinder installation complies with SANS 10252 and SANS10254.
• The water meter registers when a tap is open and stops completely when no water is drawn. (The alternative would indicate a defect somewhere on the property.)
• None of the terminal water fittings leak and they are correctly fixed in position.
• No storm water is discharged into the sewerage system.
• There is no cross connection between the potable supply and any grey water or groundwater system which may be installed.
• The water pipes in the plumbing installation are properly saddled.

Who bears the cost of repair?

The by-law requires that remedial work and repair be executed prior to registration and in order to obtain the COC. The COC must be issued before transfer and thus the owner (the Seller) must pay for the expenses of repair.  

What about older houses with older systems?

Any plumbing installation constructed at any particular time should only conform to what the relevant water services by-law for that particular period required. For example, the City cannot now call for older installations to conform to “10 litre shower heads” or “6 litre basin taps”. Also, galvanized mild steel piping, which was ‘outlawed’ about a decade ago, would have been allowed during the construction of older houses. An exception is automatic flushing cisterns fitted to urinals, for which the period of grace has now expired.

However, be advised that the City of Cape Town will not allow wastage of water, or risk of injury or threat to health. The current by-law gives the Director of Water and Sanitation the authority to serve notice on the owners of homes with older installations constructed under previously promulgated by-laws where such installations have developed defects causing water to run to waste due to defective materials or poor plumbing practices and fittings.

Could the need for a Plumbing Certificate cause a delay in registering the Transfer of a property?

There is no need for the Seller to wait until he has a confirmed buyer before arranging for the inspection or repairs. The Seller will be reminded of this requirement by the estate agent and the inspection can be arranged within a matter of days. Should there be no defects, the certificate would be issued immediately.
The Municipality will not delay the issue of rates and taxes clearances if the water COC has not yet been complied with.

The transfer can be delayed however if the owner does not complete all necessary repairs.

How will the by-law apply to sectional title units?

Most sectional title units have one main meter on common property with sub-meters for each unit. Only the main meter is of importance to the municipal authority. The vast majority of piping is also on common property. In this case, the certification would include the operation of the sub-meter, if applicable, any leaks in the system, and the geyser installation.

Why is it necessary to have the same property re-certified every time the property is sold?

The by-law provides that a certificate is required for every sale being registered as there is no guarantee that a purchaser has not made changes to the water installation before he/she resells the property.

In the recent judgment of Riverspray Lifestyle Estate (Pty) Ltd v Auby, the Court held that the agreement of sale between the parties was void because the bond was not obtained within the period stipulated in the agreement. However, of specific interest was the reminder that where parties to an agreement include a provision that the seller may extend the bond due date at his own volition, for any period of time, without notice or permission from the purchaser, such provision was void: allowing one party only to exclusively determine whether an obligation was complied with renders the term void for vagueness. 

The facts were briefly that Auby entered into an agreement with Riverspray Lifestyle Estates in terms of which he bought a unit in a sectional title scheme which would be known as Riverspray.  The scheme was still to be erected. The purchase price was R675 000 and a deposit of R15 000 was payable within three days of signature of the agreement by the purchaser.

The agreement provided, amongst other things, that: “This agreement is subject to the purchaser obtaining mortgage bond finance from a financial institution in the amount of R735 000… Such bond to be approved in principle within 21 … days of signature of this agreement by the purchaser, or in any extended period which the seller at its absolute discretion may allow without permission of the purchaser”. A further clause provided that: “Should an amount be inserted at clause … regarding the obtainment of a mortgage bond, then the agreement shall be subject to a mortgage bond of the said amount being granted to the purchaser on normal terms and conditions as laid down by a commercial bank on security of the property or any other acceptable security”.

Auby did not get a bond within the 21 day period as stipulated. When he was advised by the bank that his bond application was unsuccessful, Riverspray’s consultants managed to secure a bond in the amount of R607 500. Because this amount was less than the bond amount in the agreement, Auby signed an addendum which acknowledged the shortfall and in which he undertook to deliver a guarantee or submit a cash payment to make up the shortfall.

Sometime later Auby resiled from the agreement, claiming that it was invalid. Riverspray thereupon approached the Court for an order directing Auby to comply with his obligations in terms of the agreement and to do the necessary to take transfer of the property in his name.

The Court found in favour of Auby, holding that:

• It was clear that the suspensive condition was not fulfilled because Auby did not manage to get a bond for R735 000 in the stipulated period and the agreement had to fail.
• In addition, the Court noted that the clauses that purported to allow the seller to extend the bond due date indefinitely and without notice to the purchaser, were void. The reason was that it was a “general principle of our law of obligations that, when it depends entirely on the will of a party to an alleged contract to determine the extent of the prestation of either party, the purported contract is void for vagueness.”

As such, no valid agreement of sale ever came into existence. Sellers and purchasers - therefore do not include any provision in an agreement that allows the other party the exclusive right to determine whether there was compliance with the provisions of the agreement, as such an agreement could be considered void.

No, never!

Only one of the two taxes will be payable in a transaction. VAT takes preference over transfer duty.

The VAT payable is taken from the seller’s perspective. If the seller is registered for VAT and the property forms part of that seller’s (vendor’s) taxable supply, then VAT is payable and not transfer duty. However, if the seller is not registered for VAT or the property does not form part of that seller’s (vendor’s) taxable supply, then transfer duty will be payable.

When you register a bond over property and the Title Deed has a condition prohibiting alienation of the property without the written consent of the relevant Homeowners Association, a document containing consent to register the bond and waiving the Title Deed condition, must be obtained from the Homeowners Association and lodged at the Deeds Office.

Should this consent not be obtained and lodged with your bond at the Deeds Office, the Registrar of Deeds will not allow for registration to be effected.

Children owning land?

If land is donated or bequethed to children born or to be born of any person or from any marriage, or is acquired on behalf of such children, transfer of the land can be effected on behalf of such children. In such a case, the land may be registered in the name of a person to hold it in trust on behalf of the children.

Once the identities of the children have been established after their birth the Deeds Office will, upon application, endorse the title deed with their names and the title deed will thereupon be deemed to be in favour of such children, as if the transfer had originally been passed to them in person.

Can a sectional title owner act against the managing agent.

What can a registered owner of a unit in a sectional title scheme do, should he be of the opinion that the scheme is mismanaged or that the Body Corporate has suffered damages but failed to do anything about it?

In terms of Section 41 of the Sectional Titles Act, the owner must serve written notice on the Body Corporate calling on it to institute proceedings within 1 month of such notice. If the Body Corporate fails to do so, the owner can then bring an application to Court for an order appointing a curator ad litem for the Body Corporate. The curator will then institute and conduct proceedings on behalf of the Body Corporate.