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LEGAL UPDATE REPORT TO SAPOA MEMBERS


The information contained in this document is for information purposes and outlines some of the processes, interventions and projects that are being or have been done by the Legal Services Department of SAPOA. SAPOA cannot guarantee the accuracy, reliability and completeness thereof, and it is of general application and does not take into account the particular circumstances or needs of any person or company or organisation or entity whose employees, agents, directors or shareholders may read it. Such persons or entities are encouraged to seek independent professional advice from suitably qualified professionals prior to making any decision in reliance on the contents of this document. SAPOA is not liable and accepts no responsibility for any claim, loss or damage of whatever nature suffered by any person, entity or corporation who relies or seeks to rely on any information, advice or opinion contained in this document or otherwise given by the author, whether or not such person or entity is a member of SAPOA.


INDEX

ITEM

PAGE

1. 2. 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. 2.10. 2.11. 2.12. 2.13. 2.14. 2.15. 2.16. 2.17. 2.18. 2.19. 2.20. 2.21. 2.22. 2.23. 2.24.

EXECUTIVE SUMMARY 5 LEGAL ADVOCACY 7 Spatial Planning Land Use Management Bill, 2011 8 Expropriation Bill, 2013 12 Infrastructure Development Bill, 2013 16 Gauteng Planning and Development Bill, 2013 19 Mpumalanga Planning and Development Bill, 2013 22 Western Province Spatial Planning Land Use Management Bill, 2013 23 Property Practitioners Bill 25 The Sub-Division of Agricultural Land Act 28 Consumer Protection Act No. 68 of 2008 33 Ethekwini Development Surcharge Policy 36 Ethekwini Transport Development Levy Policy 37 Green Paper on Rural and Land Reform 38 Property Valuations Bill, 2013 39 The Housing Consumers Protection Measures Amendment Bill 41 The Deeds Registries Amendment Bill 44 The Property Sector Transformation Charter 45 Special Economic Zones Bill 46 The Municipal Systems Act, 2000 47 Tobacco Products Control Act No. 83 of 1993 48 SANS 1-1: 2012 Standard for Standards Part 1 51 Environmental Impact Assessment Regulations 52 City of Johannesburg Valuation Roll 53 Nelson Mandela Metropolitan Municipality Public System 54 Carbon Tax Policy 56

3. 3.1. 3.2.

LITIGATION 59 SAPOA versus Johannesburg Metropolitan Municipality (Rates Increase) 60 Johannesburg Consolidated Town Planning Scheme (Appeal) 62

4. 4.1. 4.2. 4.3. 4.4.

LEGAL ADVISORY Exclusivity Agreements Mergers & Acquisitions Right of Landlord to Terminate Electricity Proposed Property Transactions: New Thresholds

5. 5.1. 5.2. 5.3. 5.4.

STRATEGIC COLLABORATIVE RELATIONS 73 South African Cities Network 74 Chamber of Commerce and Industry – Johannesburg 75 Polokwane Municipality 76 Tax Court: Recommendation of a Member of SAPOA 77

6. 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. 6.7.

MISCELLANEOUS 78 Comparative Study of Costs of Municipal Services 78 The Impact of the Property Sector on the Economy of South Africa 78 Standard Sale and Lease Agreements 78 Financial Intelligence Centre Guidelines 78 Memorandum of Incorporation: Registration 78 Registration of New Board Members 78 Submission of the Annual Return 78

65 66 67 68 69

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EXECUTIVE SUMMARY The Legal Services Department supports the vision and mandate of SAPOA by ensuring that legal risks that are prevalent in the commercial property industry are mitigated for the protection of the mutual interests of SAPOA members. SAPOA is cognisant of the vibrant and evolving nature of the property market which, to a larger extent, is regulated through various pieces of legislation. The Department is responsible for legal advocacy, which is fundamental in ensuring that SAPOA actively participates in policy formulation and enactment of laws affecting the property sector in South  Africa. Monitoring, analysing and submitting of formal comments on published relevant and pertinent Acts of Parliament, Green and White Papers, Municipal Ordinances and Policies having an impact on the property industry is one of the strategic focuses. Strategic and collaborative relationships are initiated and/or cemented, where relevant and pragmatic, with other stakeholders in the property industry, which includes engagement with government departments, state-owned entities, organs of the state and municipalities. Litigation remains the ultimate and last legal mechanism that is being used for the mutual protection of members, and SAPOA values the constitutionally and legally sound processes and fundamentals of the South African Judiciary system. SAPOA resorts to litigation as an alternative strategic objective that is supported by the rules and provisions regulating SAPOA’s Legal Advocacy Fund. Research is a fundamental tool that SAPOA recognises and utilises to investigate a multitude of issues with the intention of increasing the institutional and sectoral knowledge relating to the industry, formulating and determining best practice and guidelines for the use of the members, and also as a negotiating tool to be used in positively influencing and changing the commercial property landscape, practices and direction thereof for the attainment of global best practice. Our researches are cognisant of the need for ensuring the growth, sustainability and profitability of the commercial property sector within a less protracted public sector environment. Legal Advisory services are provided to internal departments and further to members of SAPOA. Compliance remains key in ensuring SAPOA complies with the legal prescripts of various legislation.

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Legal advocacy

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LEGAL ADVOCACY BILL

APPLICABLE TO

1. SPATIAL PLANNING LAND USE MANAGEMENT BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM SUBMISSION DATE OF SAPOA COMMENTS BACKGROUND 1. The Spatial Planning Land Use Management Bill is a Bill provided for by the provisions of section 76 of the Constitution in that it is one that affects provinces such as those dealing with welfare services, childcare facilities or trade etc. 2. SAPOA submitted formal comments on the Bill on 8 August 2013. 3. The Bill is meant: • to provide a framework for spatial planning and land use management in the Republic; • to specify the relationship between the spatial planning and the land use management system and other kinds of planning; • to provide for the inclusive, developmental, equitable and efficient spatial planning at the different spheres of government; • to provide a framework for the monitoring, coordination and review of the spatial planning and land use management system; • to provide a framework for policies, principles, norms and standards for spatial development planning and land use management; • to address past spatial and regulatory imbalances; • to promote greater consistency and uniformity in the application procedures and decisionmaking by authorities responsible for land use decisions and development applications; • to provide for the establishment, functions and operations of Municipal Planning Tribunals; • to provide for the facilitation and enforcement of land use and development measures. 4. Parliament issued a Notice in July 2012 inviting comments in respect of the Spatial Planning Land Use Management Bill, with the closing date being 10 August 2012. SAPOA duly submitted its formal comments on 8 August 2012 and requested to be invited to the parliamentary hearings scheduled for 21 and 22 August 2012. Advocate Matsane attended on behalf of SAPOA. 5. The following is the record of all organisations or entities that attended the aforesaid Parliamentary Hearings, i.e.:

a. b. c. d. e. f.

Gauteng Provincial Department of Economic Development South African Property Owners Association City of Tshwane City of Johannesburg South African Local Government Association Ethekwini Municipality

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LEGAL ADVOCACY

g. Saldanha Bay Municipality h. Chamber of Mines of South Africa i. Cogta Free State j. Crosby AGRI-SA k. Western Cape Government – WCGEADP l. KZN Cogta m. Community Law Centre n. South African Geomatics Institute o. Eskom p. South African Council of Planners q. Isandla Institute r. Planact s. Socio-Economic Rights of South Africa t. AFESIS u. Royal Bafokeng Nation v. Cogta Mpumalanga w. Legal Resource Centre x. Deon Barry Poortmann

A.

SUMMARY OF COMMENTS SUBMITTED IN PARLIAMENT

The following are the overall but summarised formal comments made in respect of the SPLUMB, i.e.: 1.

The Municipal Planning Tribunal is given the power to approve the subdivision of land in clause 41(2) (b) of SPLUMB. This is a power that currently rests with the Department of Agriculture, Forestry and Fisheries. It was submitted that it is in the national interest not to subdivide prime or unique agricultural land, without the considered and knowledgeable input of the officials of the Department of Agriculture, Forestry and Fisheries, who have the required scientific background to properly evaluate such applications.

2.

The impact on the providers of bulk “engineering services”, such as Eskom, as defined in the SPLUMB must be considered and clarified. It is not clear whether such providers would, in addition to all other approvals to be obtained, and bearing in mind that it is already a regulated entity by NERSA in terms of prevailing energy legislation, be required to make further application to a Municipal Planning Tribunal. In addition, Eskom’s electrification plan is carried out in areas approved by the Department of Energy, and it was recommended that before the Bill can be enacted, there has to be consultation with that department, and also with the Department of Public Enterprises.

3.

Within government there is no programme that specifically makes reference to the concept of land being made available prior to need and allowing people to develop this land in an incremental manner. The Upgrading of Informal Settlements Programme within the Department of Human Settlements comes close but it tends to emphasise the upgrading of areas where people already are living in an in-situ manner. It was proposed that SPLUMB makes specific reference to both

SAPOA LEGAL UPDATE – report to members 9


LEGAL ADVOCACY the upgrading of informal settlements programme (to cover upgrading from an in-situ base), as well as Managed Land Settlement (to cover upgrading from a Greenfield base). 4.

The municipality should be the centre of land use planning; however, intergovernmental cooperation and support (including capacity building at this level) is important. All land use planning should be integrated at the municipal level to focus on settlement planning in relation to transport, communication, infrastructure needs, livelihoods/job opportunities at a strategic level. But the development of SDFs and IDPs as indicated needs to be better linked to ensure effective alignment of plans. It was submitted that it was important to bear in mind and effectively manage the potential risks related to municipal centrality, particularly in light of the perverse incentive of increasing revenue through private sector development approvals that work against the goals of a developmental pro-poor agenda. Meaningful community participation at more localised levels (through improved community-based planning approaches) should be considered, including the development of SDFs and prioritisation at this level to be negotiated in relation to broader municipal and provincial area needs through the development of integrated, coordinated plans at these levels.

5.

SPLUMB insists on five-year review cycles for Provincial Spatial Development Frameworks, Municipal Spatial Development Frameworks and land use schemes. The time period was found to be too short, with 10 years being recommended.

6.

Mineral operations should be expressly recognised as being in the national interest so as to render all land developments subject to referral to the Minister of Rural Development and Land Reform.

7.

There is a need for SPLUMB to formally acknowledge all downstream plans sitting below the SDF but before the detailed land use management plans or Schemes (i.e. Spatial Development Plans, Local Area Plans, Precinct Plans, etc). These are policy plans, which form closer interpretations of the SDF while still not assigning specific development rights.

8.

It was clear that the composition of the appeal tribunal was a matter of concern for most in that external parties should not consider appeals made against decisions made by municipalities as that will defeat the purpose of the DFA Con Court ruling, which was clear in that municipal planning and land use was the prerogative of municipalities.

STATUS AND WAY FORWARD 1.

SAPOA submitted formal comments to the Bill and had extensive engagement with the National Department of Rural Department and Land Reform in respect thereof. Presently provinces are relying on provincial legislation or ordinances in as far as planning and development of properties are concerned.

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LEGAL ADVOCACY 2.

The Bill was sent in February 2013 to National Council of Provinces Committee (NCOP), which received a briefing on the Bill so that the NCOP members could advise their respective provincial legislatures about the Bill. It was then considered by each of the nine provincial legislatures, and the NCOP members will go back to their provinces.

3.

Each provincial legislature was expected to refer the Bill to a Committee for consideration thereof and further for the holding of provincial public hearings on the Bill.

4.

In June 2013, the NCOP Committee considered the Bill and negotiation took place among the nine provincial delegations.

5.

The Committee received final mandates from eight provinces on the Spatial Planning and Land Use Management Bill. The Eastern Cape Provincial Legislature failed to submit its mandate. The Bill was approved as seven provinces supported it, with the Western Cape Provincial Legislature being the only exception which voted against it.

6.

The Bill was assented into law by the President on 5 August 2013.

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LEGAL ADVOCACY BILL

APPLICABLE TO

2. EXPROPRIATION BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS NATIONAL DEPARTMENT OF PUBLIC WORKS BACKGROUND 1. The Bill was released for public comment in March 2013. 2.

SAPOA submitted comments on the Bill on 30 April 2013.

3.

The Bill provides for expropriation of property for a public purpose or in the public interest subject to compensation that is just and equitable, and reflects an equitable balance between the public interest and the interests of those affected; and in respect of the rights of everyone, including the rights to equality and to administrative action that is lawful, reasonable and procedurally fair.

4.

The Bill is founded around the provisions of section 25 of the Constitution of South Africa which provides that no-one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property. It provides that a property may be expropriated only in terms of law of general application for a public purpose or in the public interest; and subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

5.

There has been a debate around the issue of the abandonment of the “willing buyer willing seller” principle which, it was stated, is not referred to in the Constitution but has for years been inferred as a result of the provision that states that the amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including: a. the current use of the property; b.

the history of the acquisition and use of the property;

c.

the market value of the property;

d.

the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

e.

the purpose of the expropriation.

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LEGAL ADVOCACY 6.

It is important to note that the Bill introduces, among other important provisions, the term “in the public interests” as envisioned by the Constitution. “Public interests” is defined as including the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources and other related reforms in order to redress the results of past racial discriminatory laws or practices.

7.

The Expropriation Act and Bill currently only refer to “public purpose”.

SOME LEGAL CONSIDERATIONS “Expropriation before determination of Compensation” 1.

The Constitutional Court has already been dealing with the issue of interpretation of certain critical clauses relating to expropriation, and Haffejee No and Others versus Ethekwini Metropolitan Municipality CCT 110/10 (2011) ZACC 28 is a case in point. The matter raised the question when compensation for expropriation of property in terms of section 25(2) of the Constitution is to be determined. In terms of section 25(2)(b) property may only be expropriated “subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected, or decided or approved by a court”.

2.

The Constitutional Court in this matter stated that the starting point for constitutional analysis, when considering any challenge under section 25 for the infringement of property rights, must be section 25(1) in that: a.

The interpretation of the section must promote the values that underlie an open and democratic society based on human dignity, equality and freedom.

b.

International law must be considered and foreign law may be considered.

c.

Pre-constitutional expropriation law must be approached circumspectly.

d.

Protection for the holding of property is implicit in section 25. Section 25(1) must be construed in the context of the other provisions of section 25 and in the context of the Constitution as a whole.

e.

Sections 25(4) to (9) underline the need for redress and transformation of the legacy of grossly unequal distribution of land in this country. The historical context in which the property clause came into existence should be remembered. These provisions emphasise that under the Constitution the protection of property as an individual right is not absolute but subject to societal considerations.

f.

The purpose of section 25 is to protect existing private property rights and to serve the public interest, mainly in the sphere of land reform but not limited thereto. Its purpose is also to strike “a proportionate balance between these two functions”.

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LEGAL ADVOCACY g.

3.

The text of section 25 does not exclude an interpretation that compensation must precede expropriation. The language of the clause is compatible with compensation being a condition precedent to a valid expropriation, but the opposite is equally plausible.

The Court accordingly found that section 25(2)(b) of the Constitution does not require that the amount of compensation and the time and manner of its payment must always be determined before expropriation. Determination of compensation before expropriation will generally be just and equitable, but in those cases where it must be determined after expropriation, it must be done as soon as is reasonably possible. Eviction following expropriation may not take place unless agreed upon by the parties or, in the absence of agreement, under court supervision. In disputed cases of eviction the courts must ensure just and equitable outcomes in accordance with the property clause and section 26 of the Constitution, which protects the right of access to housing.

Definition of “Property” 1.

Other than the above-mentioned ConCourt matter, the difficulty with the present Bill is the definition given to property. The Bill defines “Property” as follows: “property is not limited to land and includes a right in or to such property”.

2.

This is an alarming deviation from the definition that is presently contained in the Expropriation Act No. 63 of 1975. The Act defines “property” as meaning both movable and immovable property.

3.

The Constitution states that property is not limited to land. It seems that the drafters of the Expropriation Bill preferred to give “property” a wider interpretation than the one intended by the framers of the Constitution.

CURRENT STATUS AND WAY FORWARD 1.

SAPOA submitted comments in respect of the Bill. The public participation period closed. The Bill is currently being debated before NEDLAC, where SAPOA is represented through its BUSA representation and through having a representative on the BUSA Expropriation Task Team.

2.

The Bill, which has incorporated some of the public comments, was distributed through NEDLAC on 11 July 2013 and with the intention that agreement thereon would have been reached by September 2013.

3.

Government, duly represented thereon by the Deputy Minister of Public Works and his team, has made it clear that every effort should be made to ensure that the Bill is law before the end of the year or, alternatively stated, prior to next year’s elections.

4.

Annexure A shows indications of the proposed dates and schedule relating to the Bill through the NEDLAC processes.

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LEGAL ADVOCACY 5.

The BUSA Expropriation Team will meet to discuss and deliberate on the new version of the Bill.

6.

SAPOA did not appoint an attorney in this regard to make comments relating to Bill due to the legal avenue available to influence the format and content of submissions on behalf of business within the BUSA and NEDLAC structures.

7.

Comments from various associations or organisations are always read and considered to ensure informed, considered contributions within the BUSA and NEDLAC structures.

8.

SAPOA is represented by Advocate Matsane both on the BUSA and the NEDLAC Structures.

NATIONAL ECONOMIC DEVELOPMENT AND LABOUR COUNCIL PO BOX 1775, SAXONWOLD 2132 – 14A JELLICOE AVENUE, ROSEBANK 2196 TELEPHONE +27(0) 11 328 4200 FAX +27 (0) 11 447 6053/2089

_________________________________________________________

ANNEXURE A: DRAFT SCHEDULE OF DATES FOR THE EXPROPRIATION BILL TASK TEAM

EXPROPRIATION BILL TASK TEAM MEETINGS Meeting 1

10:00 – 13:00, Friday, 19 July 2013

Meeting 2

10:00 – 13:00, Friday, 2 August 2013

Meeting 3

10:00 – 13:00, Friday, 16 August 2013

Meeting 4

10:00 – 13:00, Friday, 30 August 2013

Note: The above draft schedule of dates had been drawn up with the following envisaged dates of sign-off in mind: • • • •

Sign-off on the NEDLAC Report by the Development Chamber: 4 September 2013; Sign-off on the NEDLAC Report by the Trade & Industry Chamber: 5 September 2013; Sign-off on the NEDLAC Report by the Overall Conveners: 18 September 2013; and/or Sign-off on the NEDLAC Report by MANCO on 26 September 2013. SAPOA LEGAL UPDATE – report to members 15


LEGAL ADVOCACY BILL

APPLICABLE TO

3. INFRASTRUCTURE DEVELOPMENT BILL NO. 99 OF 2013

PROPERTY OWNERS AND PROPERTY DEVELOPERS

NATIONAL DEPARTMENT OF ECONOMIC DEVELOPMENT BACKGROUND 1.

The Bill was published for public comment in March 2013.

2.

SAPOA did not submit formal comments to the National Department of Economic Development.

3.

The Bill seeks to: a. b. c. d.

e. f. g.

Provide for facilitation and coordination of infrastructure development, which is of significant economic impact or social importance to the Republic; Ensure that infrastructure development in the Republic is given priority in planning, approval and implementation; and Ensure the development goals of the State are promoted through the development of the infrastructure. The Draft Bill empowers the Commission to determine and develop infrastructure priorities, designate strategic infrastructure projects (SIPs) and ensure that infrastructure development in respect of any SIPs is given priority in planning, approval and implementation. Once a project qualifies as a SIP, the Minister designates the project as such by publishing a notice in the government gazette. It is the duty of the Commission to determine whether the project should be implemented by an organ of state or whether the project must be put out to tender. The Bill provides that where a SIP has been designated for implementation or where such project is provided for in any national infrastructure development plan, any stateowned entity or other organs of state must ensure that its planning or implementation of infrastructure or its spatial planning and land use are not in conflict with any SIP implemented in terms of the Bill. Any conflict should be resolved through the Intergovernmental Relations Framework.

4.

The Bill further confirms the continued existence of Commissions, which consist of the President, Deputy President, Ministers designated by the President, Premiers of Provinces, and the Chairperson of SALGA.

5.

SAPOA did not make formal submissions to the Bill as an association but attended a meeting at BUSA for discussion of the Bill.

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LEGAL ADVOCACY POLICY CONSIDERATIONS 1.

According to a presentation that was done on the SIPs, and according to the spatial analysis of the country needs, 17 SIPs have been identified.

2.

The SIPs cover a range of economic and social infrastructure. All nine provinces are covered, with emphasis on poorer provinces. The work is now being aligned with human settlement planning and skills development as key cross-cutting areas.

3.

In order to implement the SIPs, the Commission (PICC) reviewed critical enablers for the infrastructure programme. This included assessing the supply lines for construction inputs such as wood, cement, steel and bitumen as well as carefully reviewing issues that impact the cost of infrastructure, such as port charges and water pricing. In the case of transport, the expansion of rail lines has now been accompanied by an increased number of trains to fully utilise the infrastructure. In the health sector, the PICC supported the establishment of a pharmaceutical manufacturing plant to complement the expansion of clinic and hospital infrastructure.

4.

In addition to assessing key constraints, issues such as delayed access to land, skills constraints in the country and the affordability of the cost of the SIPs were reportedly reviewed.

5.

The initial costing of all 17 SIPSs has been done – these are being reviewed, stress-tested and refined.

6.

The Commission reports that funding strategies will take account of: a. Off-balance-sheet mechanisms to attract private sector equity, debt and participation; b. The assessment of the capacity of domestic and international financial markets to fund the amount required; c. The assessment of the capacity of Government to provide the guarantees, loans or equity in support of infrastructure build where tariff income is insufficient to support the SOEs balance sheets; d. The consideration of the ability of SA and SOEs to attract foreign debt and equity funding (country limits, return versus risk, country risk).

THE CURRENT SIPs 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

SIP 1: Unlocking the Northern Mineral Belt with Waterberg as the catalyst; SIP 2: Durban-Free State-Gauteng Logistics and Industrial Corridor; SIP 3: South Eastern node and corridor development; SIP 4: Unlocking the economic opportunities in North West Province; SIP 5: Saldanha-Northern Cape Development Corridor; SIP 6: Integrated Municipal Infrastructure Project; SIP 7: Integrated Urban Space and Public Transport Programme; SIP 8: Green Energy in support of the South African economy; SIP 9: Electricity Generation to support socioeconomic development; SIP 10: Electricity Transmission and Distribution for all;

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LEGAL ADVOCACY 11. 12. 13. 14. 15. 16. 17.

SIP 11: Agri-logistics and rural infrastructure; SIP 12: Revitalisation of public hospitals and other health facilities; SIP 13: National school build programme; SIP 14: Higher Education Infrastructure; SIP 15: Expanding access to communication technology; SIP 16: SKA and Meerkat; and SIP 17: Regional Integration for African cooperation and development.

CURRENT STATUS AND WAY FORWARD 1. 2.

SAPOA makes contribution to drafts presented by BUSA for comments. SAPOA, represented by Advocate Matsane, attended the meeting organised by BUSA in respect of the Bill. SAPOA will monitor developments relating to the Bill.

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LEGAL ADVOCACY BILL

APPLICABLE TO

4. GAUTENG PLANNING AND DEVELOPMENT MOSTLY PROPERTY OWNERS AND PROPERTY DEVELOPERS BACKGROUND 1.

The Gauteng Planning and Development was published again for public comment.

2.

SAPOA submitted formal comments on 1 April 2013.

3.

The following are the broad legislative objectives of the Bill, i.e.: • to provide for the planning and development of land use in the Province; • to provide for provincial planning and the coordination of national, provincial and municipal land use and development policies; • to provide for the land use planning functions of the Province and the process of provincial planning; • to provide for land use schemes in the management of land use by municipalities; • to provide for the regulation of municipal land use and the establishment of a municipal appeal tribunal; • to provide for the process of land development, and to facilitate and expedite development procedures including the upgrading and formalisation of settlements; • to provide for appeals and the procedures of the appeal tribunal; • to provide for the provision of engineering services in land development; • to provide for the control and enforcement of land use; and • to provide for related matters.

SAPOA COMMENTS (Extract) 1.

SAPOA duly submitted comments to the draft Bill and the following is only an extract of some of the pertinent issues that SAPOA raised. a.

As a general comment, the Bill should be of benefit to the property industry, provided adequate regulations are passed and the municipalities continue to implement their existing development frameworks and do not start afresh with the process. No regulations have yet been proposed for the Bill and many items in the Bill are left open for items to be prescribed by regulation. Those regulations will provide the detail to the operation of the Bill.

b.

The Bill will replace a number of pieces of legislation, in particular the whole of the Town Planning and Townships Ordinance 15 of 1986, which regulated town planning within the old Transvaal. Members of SAPOA will be used to having operated within the framework of that ordinance, and it is regretted that new terms and definitions are used in the Bill.

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LEGAL ADVOCACY c.

The definition of “parastatal body” is broad and not easy to apply, to the extent that it excludes bodies which are organs of state. The definition of organ of state, contained in section 239 of the Constitution, provides, inter alia, that “organ of state means any functionary or institution exercising a public power or performing a public function in terms of any legislation.” A parastatal body is defined in the Bill as “an organisation, other than an organ of state, established by law to perform a function or provide a service on behalf of national, provincial or municipal government.” A body contemplated in the definition of “parastatal body” (namely, a body established by law to perform a function on behalf of government), would appear to fall squarely within the constitutional definition of “organ of state”. In this respect of the definition is ambiguous and should be clarified.

d.

The Bill presents provincial spatial development frameworks (“SDFs”) as guidelines and not as binding documents. This entails that, in the event of inconsistency between a provincial and a municipal SDF, the municipal SDF prevails (in guiding and informing decisions of the municipality). This may give rise to uncertainty and inconsistency in the manner in which municipalities determine applications, and it would be preferable if the two spheres of government were instead under an obligation to ensure that their SDFs are aligned, or at least not inconsistent.

e.

In terms of clause 20(1), municipalities are required to review the provisions of their land use schemes every five years. It is questionable whether the municipalities may practically comply with this limitation, and a longer period should be considered.

f.

The continual review of the land use scheme and the ability of the municipal council to amend the scheme will create great uncertainty for the property industry. The scheme should remain unless amended by way of application from land owners. Any change by the municipal council must only be done if it is in the interest of the general public and harmonious development of the area.

g.

The Constitution confers some planning powers on all spheres of government, by allocating legislative authority for “regional planning and development” and “urban and rural development” concurrently to the national and provincial spheres; legislative and executive authority for “provincial planning” exclusively to the provincial sphere; and executive authority over “municipal planning” exclusively to the municipal sphere. For purposes of working out where each sphere of government’s authority starts and ends, it is self-evidently important to be able to delineate the parameters of each of those concepts (regional planning and development; urban and rural development; provincial planning; municipal planning).

h.

The national government has the power to make and execute laws on the functional areas listed in Part  A of Schedule 4. This includes “regional planning and development” and “urban and rural development”. Legislative authority over matters listed in Part B of Schedule 5 (which includes “provincial planning”) vests in the provincial sphere exclusively.

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LEGAL ADVOCACY The national government is also empowered to regulate the exercise of municipal powers and the administration of municipal affairs, subject to section 44 of the Constitution. The national sphere cannot, by legislation, give itself the power to exercise executive municipal or provincial executive powers, or the right to administer municipal or provincial affairs. i.

A difficult issue arising in relation to the limitations of national and provincial versus municipal executive responsibility, is in respect of land use decisions that may overlap with matters within the executive authority of the national or provincial spheres, such as housing, agriculture and the environment. These are all functional areas, listed in Part A of Schedule 4 to the Constitution, that are relevant to land use planning and that would ordinarily require decision-making in respect of land areas that fall within the area of jurisdiction of a particular municipality. National or provincial government (depending on the allocation of responsibility between them in terms of national legislation) has full authority over these matters, and may legislate, implement and administer in these functional areas without the limitations that apply to provincial involvement in matters set out in Part B of Schedules 4 and 5. It is inevitable that the exercise of those powers by national or provincial government will limit municipalities’ power over land use, and it is important for rational distinctions to be drawn between categories of decisions that should be made by national or provincial government, and those that should be made by municipal government.

j.

As far as we are aware, there is no useful case law in which the concepts of “regional planning and development” and “urban and rural development” have been given meaning by courts, relative to concepts of provincial and municipal planning.

CURRENT STATUS AND WAY FORWARD The final approved Bill is being waited.

SAPOA LEGAL UPDATE – report to members 21


LEGAL ADVOCACY BILL

APPLICABLE TO

5. MPUMALANGA PLANNING AND DEVELOPMENT BILL PROPERTY OWNERS AND PROPERTY DEVELOPERS

BACKGROUND The Mpumalanga Planning and Development Bill was published for public comment during April 2013. Its legislative objective mirrors the objectives of the Gauteng Planning and Development Bill, which must all be aligned to the SPLUMB. SAPOA COMMENTS (extracts) 1.

SAPOA submitted its comments on 11 May 2013, and the following is only an extract of the material comments that were made. a.

In our view, the Act fails to delineate circumstances in which the Mpumalanga Provincial Government (the “Province”) would be required to decide on development and land use applications, in accordance with its constitutional mandate. In particular, the Act fails to make provision for categories of land use applications that may affect an entire extra-municipal region, and as such require the involvement of the Province.

b.

Moreover, the Act fails to deal with the necessity for the intervention of the Province in relation to land use and development applications which impact upon those functional areas listed in Part A of Schedule 4 to the Constitution, that are relevant to land use planning and that fall within the exclusive competence of the Province (such as housing, agriculture, tourism and the environment).

c.

Thus, the manner in which the Act regulates the provincial planning function is inadequate, in that it fails to establish a framework for cooperative governance in instances where land use applications fall outside of the municipal planning function (based on, inter alia, the size and scale of a development); and in instances where land use applications materially impact upon an exclusive Provincial function.

STATUS AND WAY FORWARD SAPOA requested an invitation to Parliament when hearings are held in that respect.

22 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY BILL

APPLICABLE TO

6. WESTERN CAPE LAND USE PLANNING BILL PROPERTY BROKERS, PROPERTY FACILITIES MANAGERS AND PROPERTY MANAGERS BACKGROUND 1.

SAPOA submitted formal comments on the Bill on 18 March 2013.

2.

The Bill intends to establish a system for provincial spatial planning and development management in the Western Cape Province, and further to consolidate legislation in the Province pertaining to provincial planning, regional planning and development, and urban and rural development.

3. The Bill further intends to establish and enforce legal measures essential to orderly coordinated spatial planning and development management while also promoting integrated social and economic development. 4. Key also is for the Bill to provide for binding spatial development frameworks in the Province. 5.

The drafters of the Bill opted to be more detailed by stating that the Bill must provide for implementation of provincial environmental, housing, nature conservation, tourism, agricultural, transport and economic development policy and measures.

SAPOA COMMENTS (extract) 1.

The Bill is quite complex and it appears to attempt to address some issues but not others which are considered to be addressed in other legislation, e.g. public participation in the Municipal Systems Act. While this may be correct in law, it is, of course, very unhelpful for practitioners who have to refer to multiple pieces of legislation when preparing a single application. It is also limited by the fact that it is a provincial law interceding in aspects of planning that are considered to fall under the provincial sphere of government while other aspects are covered by national legislation.

2. The national legal issue is further complicated in that the Municipal Systems Act is administered by Cooperative Governance and Traditional Affairs, and the Spatial Planning Land Use Management Bill will be administered by the Department of Rural Development and Land Reform. The Land Use Planning Act (LUPA) is trying to fill in the gaps and insert provincial concerns between and under both of them. There are also other Acts that influence this terrain, including National Environment Management Act (NEMA), administered by the Department of Environmental Affairs, while Heritage is administered by the Department of Arts and Culture via the SA National Heritage Resource Agency.

SAPOA LEGAL UPDATE – report to members 23


LEGAL ADVOCACY 3. There are sensitive issues in that DEADP is trying to carve out areas of provincial competency, such as provincial and regional planning (projects/applications that cross municipal boundaries/rezoning of agricultural land), but municipalities are able to do their own spatial planning and get it approved via the national legislation with Province only being a commenting authority whose recommendations the local municipality has the powers to ignore. 4.

LUPA’s admirable proposal is to try to make Removal of Restrictions decisions a municipal rather than provincial competency and, on the other hand, to make consolidation of properties a planning as well as land surveying process. While this is logical with regards to the need for a process to assess the implications of such an action, it will lead to more bureaucracy.

STATUS AND WAY FORWARD The industry waits for the enacted Bill.

24 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY BILL

APPLICABLE TO

7. PROPERTY PRACTITIONERS BILL PROPERTY BROKERS, PROPERTY FACILITIES MANAGERS AND PROPERTY MANAGERS NATIONAL DEPARTMENT OF HUMAN SETTLEMENTS BACKGROUND 1.

This Bill is not yet published for public comments but has been provided to SAPOA, at SAPOA’s request, to ensure that it can be studied internally and initial comments provided to the Department. The Legal Task Team of SAPOA is responsible for such comments and no submission timelines have been given to SAPOA.

2.

The objectives of this Bill are to: a. Assist in providing a just and equitable legal framework for the marketing, managing, financing, letting, renting, sale and purchase of property; b. Ensure fairness and efficiency in the property market; c. Assist in protecting and promoting the interests of consumers; d. Provide a framework for the licensing of property practitioners; e. Regulate the conduct of persons involved in the financing, marketing, managing, letting, hiring, sale and purchase of property not regulated in other law; f. Regulate the education, training and development of property practitioners; g. Assist in providing mechanisms to settle disputes in respect of the financing, marketing, managing, letting, hiring, sale and purchase of property; h. Promote meaningful participation of historically disadvantaged individuals and small, micro and medium enterprises in the property sector; i. Assist in the transformation of the property sector; and j. Assist in building functioning communities and responding to national dynamics and challenges.

3.

The Estate Agency Affairs Act of 1976 is the current legal framework for estate agents, and the industry is being regulated. The Act, which is under the Minister of National Department of Human Settlements, is in the process of being reviewed or repealed.

4.

On 7 May 2013, SAPOA attended the EAAB Stakeholders Imbizo where an announcement was made that the repeal Bill was ready and would be published in due course for public comment. Subsequent to the meeting, SAPOA addressed a written request to the National Department of Human Settlements that SAPOA, as an important and relevant stakeholder, be provided with the draft Bill prior to the formal public comment period, for our perusal, consideration and comments. The Bill has been made available to SAPOA.

SAPOA LEGAL UPDATE – report to members 25


LEGAL ADVOCACY 5.

In preparation of such comments to the Bill, SAPOA organised a workshop for its members for the purposes of determining the relevance of the commercial property sector to still be under the regulatory authority of the Estate Agency Affairs Board (EAAB). The workshop was duly held on 25 June 2013 in Sandton, at the SAPOA offices.

WORKSHOP DELIBERATIONS 1.

The present mandate of the EAAB is on the regulation of the conduct of estate agents and the creation of a Fidelity Fund.

2.

There was an understanding that a change in policy and the law is driven by factors such as: a. b. c. d. e. f. g. h. i. j. k.

economic and industrial development; public needs and aspirations; party political dynamics; views of interest and pressure groups; research and investigations by commissions and committees; personal views of public officials and political role players; circumstances, which include the total environment, as determined by time and place; technological developments; population increase and effect of urbanisation; natural disasters; and International relations and trends, as well as the effects of globalisation.

3.

It was agreed that there is a definite need for the establishment a new Board that would specifically accommodate the functions of the commercial property sector. It was found that the Act was, in fact, intended for an estate agent in the residential property sector and therefore a gap exists that makes the regulation of the commercial agents in accordance with the Act irrelevant.

4.

It was agreed that the property industry has matured since the Act was passed in 1976 and that the increase of value of commercial property is phenomenally different from that of the residential space.

5.

It was indicated that the Fidelity Fund does not have sufficient funds to meet a commercial claim, should one arise.

6.

Furthermore, a residential transaction involves fewer key players, namely a seller, a buyer and an agent, while a commercial transaction involves a buyer, a property manager, a seller, an agent and property developers. The transaction is more involved and would require a different set of skills.

26 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY 7.

A residential property sector transaction is most likely to have protection under the Consumer Protection Act No. 68 of 2008 (CPA) as the transaction would qualify the buyer and seller as consumers. Most transactions in the commercial sector involve juristic persons who are above the threshold of R2-million provided by the CPA.

8.

It would be very important to look at what the focus of the regulatory protection should be and the statistics over the years in terms of how many commercial transaction claims have been lodged against the EAAB Fidelity Fund in order to determine the need for regulation.

STATUS AND WAY FORWARD The outcomes of the workshop are to be finalised with the Legal Committee prior to recommendations being given to the Board. This will have factored also the provisions of the current Bill.

SAPOA LEGAL UPDATE – report to members 27


LEGAL ADVOCACY ACT

APPLICABLE TO

8. THE SUBDIVISION OF AGRICULTURAL LAND AMENDMENT REPEAL ACT

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF AGRICULTURE BACKGROUND 1.

The Subdivision of Agricultural Land Act (SALA), 1970 (Act No. 70 of 1970) was introduced in Parliament for repeal and not for amendment under the Subdivision of Agricultural Land Act Repeal Bill, 1997. The Bill was later passed as law under the Subdivision of Agricultural Land Act Repeal Act, 1997 (Act No. 64 of 1997).

2.

The original aim of Act No. 70 of 1970 was to prevent the subdivision of agricultural land to the extent where the new portions created are so small that farming will no longer be economically viable. As a legislative measure to determine and maintain farm size, Act 70 of 1970 was no longer deemed appropriate. It was no longer necessary to control the subdivision of agricultural land or for Government to determine what constitutes an appropriate land size. It was recommended that land users and the market should be determinant of the land size. It was further recommended that appropriate zoning measures are considered sufficient for the protection of high-potential agricultural land. Alternative land protection measures are also possible under the Conversation of Agricultural Resources Act, 1983 (Act No. 67 of 1995) and local government legislation.

STATUS AND WAY FORWARD The Act was assented to by the Acting President in 1998 but it appears not to have been proclaimed for implementation by the President in the government gazette. In that case, Act No. 70 of 1970 is still applicable and in force. In the interim, Government has published the Preservation and Development of Agricultural Land Policy. PRESERVATION AND DEVELOPMENT OF AGRICULTURAL LAND POLICY 1.

Government in this policy reports that South Africa consists of 122-million hectares of land, of which only approximately 13% is potentially arable (land capability classes I, II and III). Approximately 100-million hectares (82,3% of land in South Africa) is classified as “farm land”, with around 12,75-million hectares currently being used for arable agricultural purposes. The following table gives an overview of the distribution of agricultural land capability classes I – VIII in South Africa. Studies have indicated that since 1900, South Africa has lost 25% of its top soil. The ratio of agricultural land to person has decreased from 0,86 hectares in 1970 to 0,5 hectares in 1980. It is estimated that this will further decrease to 0,2 hectares by 2020.

2.

Further, historical data on the number of farms in South Africa reveal that, in 1930, there were 96 640 farms, which increased to 116 848 in 1950, and decreased to 64 810 in 1986.

28 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY Act No. 64 of 1997 repealed the following laws: Number and year of law

Short title

Extent of repeal

Act No. 70 of 1970

Subdivision of Agricultural Land Act, 1970

The whole

Act No. 55 of 1972

Subdivision of Agricultural Land Amendment Act, 1972

The whole

Act No. 19 of 1974

Subdivision of Agricultural Land Amendment Act, 1974

The whole

Act No. 18 of 1977

Subdivision of Agricultural Land Amendment Act, 1977

The whole

Act No. 12 of 1979

Subdivision of Agricultural Land Amendment Act, 1979

The whole

Act No. 18 of 1981

Subdivision of Agricultural Land Amendment Act, 1981

The whole

Act No. 33 of 1984

Subdivision of Agricultural Land Amendment Act, 1984

The whole

Proclamation No. 116 of 1994

The whole

Act No. 49 of 1996

The Schedule insofar as it amends sections 1, 2, 4 and 13 of the Subdivision of Agricultural Land Act, 1970, and repeals section 14 of the Subdivision of Agricultural Land Act, 1970

General Law Amendment Act, 1996

2.

The three major drivers for the decrease in the number of farms were the enactment of the Subdivision of Agricultural Land Act (Act No. 70 of 1970), which prevented the further fragmentation of farms into non-viable units, changes in land use from agriculture to other purposes (mainly urban and commercial) and economic pressures.

3.

In addition, the policy states that there has been a decline in the overall contribution of the agricultural sector to the GDP (7,1% in 1965 to three percent in 2009), as well as the overall area under food production (a 30% decline in the period between 1994/95 and 2008/09). According to a report by the Institute for Poverty, Land and Agrarian Studies, it is estimated that six-million people in South Africa depend on agriculture for their livelihoods.

4.

Critically, the policy states that the fragmentation (subdivision) of agricultural land into unsustainable and non-economical units (including the fragmentation of ownership tenure [i.e. registration of long-term leases, sectional titles, undivided shares or share block schemes, etc.]) results in the reduced production and potential productivity from agricultural land, with many small farming units not being economically viable and production not sustainable. Subdivision of rural lots may lead to the loss of high-value agricultural opportunities and the SAPOA LEGAL UPDATE – report to members 29


LEGAL ADVOCACY “economies of scale” that sustain some forms of agricultural production (e.g. sugar cane). In addition, agricultural land lost to residential and the majority of other non-agricultural developments cannot be restored. 5.

As a result, the policy states that the land reform process, in its current form, is dividing many large farms into smaller, less viable and less efficient units to meet land claims, and thus reduces agricultural output and poses a challenge to the availability of food. It also reduces the significance of the emerging agricultural sector, which is then characterised by low productivity and a lack of access to markets due to inadequate infrastructure. In addition, the failure of a number of land reform projects due to insufficient knowledge, mentorship and support or without the aptitude to farm, is leading to increased land degradation and continued food insecurity and poverty and, as such, there is a need to ensure that land reform land is agriculturally sustainable and viable. New owners (land reform beneficiaries) of agricultural land need to be aware of the regulations and limitations regarding such land, and the role of agriculture in conserving agricultural land and water, as well as biodiversity, must be highlighted.

Internationally, land consolidation and other readjustment approaches are recommended.

6.

Agenda 21, adopted in 1992, calls on governments to develop multisectoral plans, programmes and policies to enhance sustainable food production and food security. Within this framework it advocates the implementation of policies that recognise ecosystem and enterprise-based minimum sizes of land holdings required to maintain and increase food production, and to limit further fragmentation.

POLICY PROBLEMS WITH THE SUBDIVISION OF AGRICULTURAL LAND ACT Government reports that SALA is not a suitable mechanism to effectively protect agricultural land from other forms of development and/or fragmentation as a result of the following: a. SALA does not provide for the allocation of legislative and executive powers between national and provincial government; b. It does not address intergovernmental relations or cooperative government principles; c. SALA is only applicable to private land, and not to national, provincial or local state land,; irrespective of whether the said land is used for agricultural purposes; d. Any organ of state (including state departments and public enterprises) that acquires agricultural land can subdivide the land and/or change the land use without consent; e. The areas of the former homelands and TBVC States are excluded from SALA’s mandate; f. Certain other legislative instruments override SALA (e.g. the Development Facilitation Act 67 of 1995); g. Certain government departments are of the opinion that they are not bound by the

30 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY provisions of SALA, to such an extent that this has now become administrative practice (e.g. the Department of Mineral Resources); i. Municipalities increasingly consent to development on and subdivision of agricultural land without approval at national government level; and j. The effectiveness of SALA is limited by recent policies and legislation related to land reform, land use. AIMS OF THE DRAFT POLICY a. Ensure sustained long-term national and household food security (in terms of both production and access); Ensure the sustainable development of the agricultural sector; b. c. Maintain and increase rural employment and income; d. Ensure a reduction in poverty levels and a sustained improvement in quality of life; e. Increase agricultural production and the contribution of agriculture to the GDP; f. Promote the potential of affected areas for further development (and ensure the economic development potential of these areas); g. Ensure that agricultural land remains available for agricultural production and development; Ensure that agricultural land is actively used to its optimal potential for long-term food security; h. i. Promote and encourage the maintenance of the economic value of agricultural land so as to ensure the sustainable and continued agricultural production and/or utilisation of land parcels; and j. Promote and ensure the maintenance, upgrading and development of agricultural infrastructure and services POLICY BRIEFING: SAPOA’S ATTENDANCE 1.

SAPOA and a representative of one of its members (Tongaat Developments), represented by Advocate Matsane and Mr Wilkinson respectively, attended the briefing session on 1 November 2012. Hereunder are comments that Tongaat Developments made in respect of the policy. a.

While the agricultural sector is not directly included in the property industry, SAPOA recognises its fundamental role in the country and the importance to ensure its sustainability and the creation and facilitation of successful rural communities.

b.

The existing lack of an integrated agricultural policy in the country is acknowledged, and SAPOA therefore supports the need for the replacement of the affected existing pieces of legislation and the introduction of a new holistic, integrated policy.

c.

It is however submitted that the proposed new framework is inappropriate and untenable and will result in dire consequences for the economy and functioning of the country.

d.

The draft discussion paper is focused totally and solely on agriculture, to the total exclusion of all else. This is unrealistic and unworkable. There has to be a

SAPOA LEGAL UPDATE – report to members 31


LEGAL ADVOCACY balanced approach to this strategic issue, one that recognises the actual objectives of the government. Government’s objectives are focused around poverty alleviation, employment creation and reducing inequality. e.

Agriculture and rural development is certainly a part of this and can fulfil a significant need in rural areas of the country. However, in order to enable the country to continue to grow and to be able to provide for the needs of its residents, there has to be appropriate and adequate provision for the urban development and economic growth that comes with such development.

f.

The discussion document totally ignores the reality of urbanisation – not only in South Africa, but globally. It therefore fails to recognise the fact that cities are becoming increasingly important in terms of having to provide for housing, jobs, and economic and social infrastructure and facilities.

g.

A new policy framework must therefore enable and provide for the managed growth and development of cities – especially the large and metropolitan cities in the country, as these will be South Africa’s solution to the triple scourge of poverty, unemployment and inequality.

h.

Where these growth and development areas are must be identified upfront in municipal spatial frameworks in accordance with provincial planning policies. It is critical that there be an element of certainty provided in order to create an appropriate environment that will attract and facilitate new investment and development. These areas must however, clearly be within the primary growth and development corridors of the province – i.e. the areas to which investment will be naturally attracted given factors such as infrastructure, accessibility, land availability, etc.

i.

The net effect of the above identification would be confirmation of the “rural” areas where agriculture should be supported and promoted. This does, of course, ignore the issue of mining, which also requires proactive and upfront identification and provision given that this is a national competitive advantage.

j.

Three further issues that the discussion document totally ignores are: i. the fact that feeding the poor is actually more to do with access to food and the cost of food rather than how much land is under agriculture; ii. the fact that increasing productivity alone can do a great deal; and iii. the fact that increasing volumes of food are being produced in more intensive ways, including in green/glasshouses, which can be developed on any land.

STATUS AND WAY FORWARD SAPOA awaits the outcome of the consultation process on the policy.

32 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY ACT

APPLICABLE TO

9. THE CONSUMER PROTECTION ACT, 2008 PROPERTY DEVELOPERS, PROPERTY MANAGERS, BROKERS, PROFESSIONALS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Consumer Protection Act No. 68 of 2008 seeks to protect consumers of goods and services from unscrupulous service providers and unfair market practices. The Act has posed significant challenges for the property industry in respect of its unintended consequences of some of its statutory provisions. As a point of reference and example, Section 14 requires that fixed term agreements should not be longer than 24 months unless a benefit can be demonstrated in favour of the consumers.

2.

Presently, the Estate Agents Affairs Act, 1977 does not have any provisions providing for the policy imperatives within the Consumer Protection Act (CPA). The property industry would want to see such incorporated within the Property Practitioners Bill and for exclusion or conditions to be provided for the commercial property sector within the Bill bearing in mind the following issues: a. The provisions of section 14 of CPA state that the section does not apply to transactions between juristic persons regardless of their annual turnover or asset value. b.

The reason that leases are deemed by SAPOA not to be protected under the Consumer Protection Act is that “services” is defined to include a right of occupancy of any land or other immovable property “other than in terms of a rental”. A “rental” means an agreement “in terms of which the temporary possession of any premises or other property is delivered to the consumer for consideration”. That exactly describes a lease of property, including immovable property.

c.

SAPOA submits that the exclusion is rational. South Africa cannot have a letting market in which consumers of housing and business premises can sign an agreement for a period of 24 months or more and then cancel such in the first month, as that will lead to chaos in the banking and property market.

d.

SAPOA also acknowledges further reports contained in the aforesaid report that the property sector includes numerous activities such as the construction of buildings, capital spending by property-related sectors, spending on salaries and wages on people employed in the sector, operational spending on maintenance and upgrading, and the financing, buying and selling, marketing, registration, transfer and leasing or renting of properties.

SAPOA LEGAL UPDATE – report to members 33


LEGAL ADVOCACY e.

SAPOA submits that application of the CPA to leasing of commercial property will badly affect commercial leases, where shop fitting and other costs are incurred before the tenant moves in. The loan funding to build premises is dependent on the cash flows generated by stable and long-term leases. The ability to raise and secure funds from the banking sector to build residential and commercial premises would be severally prejudiced if the CPA applies to leases of immovable properties.

f.

In addition, landlords will be encouraged to let premises on a month-to-month basis, which gives no security of tenure for a business or the security of tenancy for the tenants. SAPOA members cannot establish new or sustain existing businesses without some security of tenure.

3.

Consultations were held in 2011 with key stakeholders on the matter. Meetings between the Banking Association of SA and SAPOA have taken place. A questionnaire was finalised and circulated in 2011 to SAPOA members in order to determine the extent to which Sections 5 and 14 are applicable to them. The responses that were received indicated that members of SAPOA transacted mostly with legal entities.

4.

In October 2011 a meeting was initiated by SAPOA with the EAAB, which resulted in an agreement that a workshop be held with key stakeholders in respect of the CPA for the purpose of identifying issues to be submitted to the Honourable Minister of Human Settlements for exemption purposes. A workshop with stakeholders was held on 24 November 2011 to prepare for the application to honourable Minister Rob Davies.

5.

The recommendations from the workshop were that a submission be made to the Board of the EAAB at its meeting held on 5 December 2011 that an exemption application in respect of certain sections of the CPA be made or alternatively, that an application for accreditation of property industry codes be made. SAPOA was advised that the Board of the EAAB approved that property industry codes be formulated and that an application be made to the Minister of Trade and Industry.

6.

Patrick Bracher, an attorney from Norton Rose Inc, was instructed on 6 February 2012 that he would have to advise SAPOA in respect of the two alternatives, i.e. exemption and industry codes.

7.

SAPOA in collaboration with the EAAB organised and held a meeting with representative bodies of property stakeholders. The meeting was held on 14 February 2014. The options are exemption (Property Transaction Bill), practice notes or industry codes.

8.

It was agreed that all organisation should identify sections in the CPA that are problematic for their subsector in the property industry. The issues should have been received by the EAAB by 29 February 2012.

34 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY 9.

On 23 February 2012, SAPOA consulted with Rosalind Lake, a director at Norton Rose Inc, for further clarification and advice in respect of the three options, i.e. exemption, industry codes and practice notes.

10.

Correspondence was sent to the EAAB early in April 2012 requesting that a follow-up stakeholder meeting be arranged. No response has been received. SAPOA proceeded with instructions to Norton Rose Inc to have a draft Industry Code formulated. The first draft was received from Norton Rose Inc in March 2013 for discussion and deliberation.

11.

In May 2013 the Property Practitioner Bill was announced by the EAAB.

STATUS AND WAY FORWARD 1.

SAPOA hosted a workshop on 25 June 2013 with its members to discuss the practical challenges and concerns that the industry might have in respect of the present applicable Estate Agency Affairs Act to the extent that they may influence policy change. The workshop was also held to determine whether the commercial property sector should be under the regulatory mandate of the EAAB.

2.

The National Department of Human Settlements has further provided SAPOA with a copy of the Bill for comments prior to the publication of the White Paper. The Bill is, however, not yet up for discussion with members of SAPOA but will be considered internally only for formal comments to the Department.

3.

The commercial property would prefer to be excluded from the ambit of any legislation under the Estate Agency Affairs Act as reported. If no exclusion is allowed in terms of policy, then an option is to ensure that there are provisions, in view of the provisions of the CPA that would deal, within the Bill, with what the industry codes intend to correct or regulate. If exclusion is allowed, then the industry codes will be submitted to the DTI. The project relating to the industry codes will await the enactment of the Bill once all pertinent submissions have been received and considered by the Department.

SAPOA LEGAL UPDATE – report to members 35


LEGAL ADVOCACY POLICY

APPLICABLE TO

10. THE ETHEKWINI DEVELOPMENT SURCHARGE POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

ETHEKWINI METROPOLITAN MUNICIPALITY BACKGROUND 1.

In the 2010/2011 Table of Tariffs, the Ethekwini Municipality imposed what it termed the “development surcharge” on multiple unit residential developments at the rate of R12 000 per unit. In the proposed 2011/2012 Table of Tariffs, effective 1 July 2011, there was a “development surcharge” to commercial developments, at the rate of R16 500 per 100m² of net lettable area (“NLA”). The tariff on multi-unit developments was increased to R14 227 per unit. The purpose of the surcharge, which was stated in the previous tariff to be for “required infrastructure”, was then stated to be “for impact on infrastructure”.

2.

SAPOA objected formally to the Municipality and through media statements that it was extremely concerned that the existing charge was having a significant negative impact on the cost of development and, additionally, that the proposed new development charges would create even more of an investor-unfriendly environment in Durban.

3.

A legal opinion was then sourced by SAPOA as to whether the levy was surcharge, and if not, whether the Municipality was entitled to charge it. The Municipal Fiscal Powers and Functions Act, 2007 is intended to regulate the manner in which municipalities can develop and apply a comprehensive revenue system in accordance with the provisions of Section 229 of the Constitution.

4.

That Act defines a municipal surcharge as a charge in excess of the municipal base tariff that a municipality may impose on fees for a municipal service provided by or on behalf of a municipality in terms of section 229(1)(a) of the Constitution. It groups the taxes, levies and duties mentioned in s 229(1)(b) of the Constitution as municipal taxes. It defines municipal base tariff as the fees necessary to cover the actual cost associated with rendering a municipal service, and includes bulk purchasing costs in respect of water and electricity reticulation services and other municipal services, overhead, operation and maintenance costs, capital costs and a reasonable rate of return, if authorised by a regulator of, or the Minister responsible for that municipal service.

5.

It defines a municipal service as all of the matters falling under Parts B of Schedules 4 and 5 of the Constitution, and matters assigned to municipalities under Sections 9 and 10 of the Municipal Systems Act.

STATUS AND WAY FORWARD The Policy was withdrawn and it was not introduced again in the 2012/2013 or 2013/2014 budgets. 36 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY POLICY

APPLICABLE TO

11. THE ETHEKWINI TRANSPORT DEVELOPMENT POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

ETHEKWINI METROPOLITAN MUNICIPALITY BACKGROUND 1.

SAPOA was advised that the city has, in May 2012, effective from 1 July 2012, imposed a transportation development levy/tariff for any development that generates vehicle traffic demand on the transport system. There had been no consultation or formal public notification that could be found or provided. This “tariff” was not included in the Tariff of Fees for 2012/13. The amount is the same as was proposed in the Development Levy process, i.e. R43 673,96/ peak hour passenger car, which adds the following costs to a new development.

2.

In terms of section 74(1) of the Municipal Systems Act No. 32 of 2000, a municipal council must adopt and implement a tariff policy on the levying of fees for municipal services provided by the municipality itself or by way of service-delivery agreements, and which complies with the provisions of the Act and with any applicable legislation.

3.

In terms of section 74(3) thereof, tariff policy may differentiate between different categories of users, debtors, service providers, services, service standards, geographical areas and other matters as long as the differentiation does not amount to unfair discrimination.

4.

Paragraph 2.2 of the Ethekwini Municipality’s tariff and surcharge policy deals with surcharges and developments. It will be important to determine whether the transport mobility systems charges, when advertised, conform to the provisions of paragraph 2.2 of the policy.

5.

The amendment of Section 75 through Section 75A of the Act refers to general power to levy and recover fess, charges and tariffs. It states that: “A municipality may levy and recover fess, charges or tariffs in respect of any function or service of the municipality and recover collection charges and interest on any outstanding amount. The fees, charges or tariffs referred to in Subsection (1) are levied by a municipality by resolution passed by the municipal council with a supporting vote or a majority of its members. After a resolution has been passed, the municipal manager must, without delay, conspicuously display a copy of the resolution for a period of at least 30 days at the main administrative office of the municipality and at such other places within the municipality to which the public has access as the municipal manager may determine.”

STATUS AND WAY FORWARD The Policy was only an internal document of the municipality. SAPOA intends to challenge the policy once it is published or implemented. We were advised that the Municipality has since withdrawn the policy. We shall however continue to monitor any decision that the Municipality may take in this regard. SAPOA LEGAL UPDATE – report to members 37


LEGAL ADVOCACY POLICY

APPLICABLE TO

12. GREEN PAPER ON RURAL AND LAND REFORM POLICY

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM BACKGROUND 1.

The Green Paper on Land Reform was published in 2011 for public comments and it stated the following as its vision: a. A reconfigured single, coherent four-tier system of land tenure, which ensures that all South Africans, particularly rural blacks, have a reasonable access to land with secure rights, in order to fulfil their basic needs for housing and productive livelihoods. b. Clearly defined property rights, sustained by a fair, equitable and accountable land administration system within an effective judicial and “governance” system. c. Secure forms of long-term land tenure for resident non-citizens engaged in appropriate investments that enhance food sovereignty and livelihood security, and improved agro-industrial development. d. Effective land use planning and regulatory systems that promote optimal land utilisation in all areas and sectors; and e. Effectively administered rural and urban lands, and sustainable rural production systems.

2.  SAPOA issued a media statement in respect of the Green Paper on Rural and Land Reform. Draft comments were done in respect of the Green Paper with the focus being on constitutional law, private law, administrative law and the independence of the judiciary. A formal submission was made to the Department before 30 November 2011. STATUS AND WAY FORWARD 1.

In May 2013, the Minister of Rural Development and Land Reforms published the Restitution of Land Rights Amendment Bill, 2013 which, among other things, intends to amend the cutoff date for lodging a claim for restitution and to further regulate the appointment, tenure of office, remuneration and the terms and conditions of service of judges of the Land Claims Court. The Amendment Bill was found not to be prejudicial to the property sector as it increased the lodgement date for claims from 2008 to 2018.

2.

In May 2013, the Minister for Rural Development and Land Reform published the Property Valuation Bill. The objectives thereof are, among others, to give effect to the provisions of the Constitution which provide for land reform and the facilitation of land reform through the valuation of property in order to determine the purchase price for, or payment in respect of, property; to provide for the establishment of the Office of the Valuer General; and to provide a valuation service to departments, organs of state and municipalities.

38 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY BILL

APPLICABLE TO

13. PROPERTY VALUATIONS BILL PROPERTY DEVELOPERS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF PUBLIC WORKS BACKGROUND The Property Valuations Bill is one of the Bills that emanates from the Green Paper on Land Rural Development and Land Reform. Accompanying it, in its policy endeavours, is the Restitution of Land Rights Amendment Bill, 2013. The Property Valuation Bill seeks to achieve the following objectives: a.

b. c. d. 14.

to give effect to the provisions of the Constitution which provide for land reform and the facilitation of land reform through the valuation of property in order to determine the purchase price for, or payment in respect of, property; to provide for the establishment of the Office of the Valuer General; to provide a valuation service to departments, organs of state and municipalities; to provide for a review mechanism.

SAPOA submitted formal comments on 23 June 2013.

SAPOA COMMENTS (Extract) 1.

The Office of the Valuer General is one that has been greatly emphasised in the Property Valuation Bill (the “Bill”). The Valuer General is given great responsibility in accordance with the Bill. He is ultimately responsible for the valuation of the department and is accountable directly to the Minister. According to Section 4(1)(a), the Office of the Valuer General is the only institution responsible for the valuation of property where a department, a municipality or an organ of state is a party or has an interest, including cases of expropriation or acquisition of property for the purposes of land reform. This role is clearly one that needs a great amount of competence and cannot be taken lightly.

2.

The Valuer General has extensive duties under the Act which require him/her to value property identified for purposes of land reform or expropriation, which must reflect an equitable balance between the public interest and those affected by the acquisition.

3.

The Valuer General may further, in accordance with Section 10(1) of the Bill, authorise one or more persons to conduct or to assist in the performance of a valuation in Section 12. The aforementioned people include a Professional Valuer or Professional Associated Valuer, in terms of the Property Valuers Profession Act, with extensive experience in the valuation of property; a Candidate Valuer in terms of the Property Valuers Profession Act; and a Private Practitioner who is registered as a professional Valuer in terms of the Property SAPOA LEGAL UPDATE – report to members 39


LEGAL ADVOCACY Valuers Profession Act to assist in the conduct of a valuation by a person with non-valuation qualifications, experience and competence. 4.

Section 8(2) states that the Deputy Valuer General must be registered in terms of the Property Valuers Profession Act. The Bill does not state that the Valuer General must be registered in terms of the Property Valuers Profession Act but states that his deputy and staff must be registered. Given the fact that the Bill does not exclude the Deputy Valuer General from stepping into the shoes of the Valuer General in the case of absenteeism or when the Valuer General is unable to perform his duties should be a matter for consideration. There must be a set standard with regards to professional formal recognition by a regulating authority. There must be no doubt in South African citizens’ minds with regards to the “recognition” of the Valuer General as this could then lead to administrative chaos, with people objecting to valuation reports as a result of a lack of faith in the Valuer General and a lack of uniformity in his office.

STATUS AND WAY FORWARD The Bill will follow the legislative process and, if invited to attend parliamentary hearings, SAPOA will do so.

40 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY BILL

APPLICABLE TO

14. THE HOUSING CONSUMERS PROTECTION MEASURES AMENDMENT BILL

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NATIONAL DEPARTMENT OF HUMAN SETTLEMENTS BACKGROUND 1.

The proposed Draft Bill of the Housing Consumers Protection Measures Act No. 95 of 1998 was finalised by the National Home Builders Registration Council (NHBRC) in August 2011 and was due for the Ministerial legislative process with the National Department of Human Settlements. A copy of the first draft was provided to SAPOA members who represented SAPOA on the NHBRC’s Industry Advisory Committee. We requested a meeting with the NHBRC in view thereof, and of other issues of concern that some of the SAPOA members have with regards to the service and operation of the NHBRC to property developers.

2.

Two meetings were held on 19 September and 1 November 2011 at the NHBRC offices and it was agreed that a stakeholder workshop would be held on 21 and 22 November 2011. SAPOA made a formal submission to the draft Bill.

SAPOA SUBMISSION (extract) 1.

Enrolment of new homes SAPOA recognises the need for homes to be enrolled in terms of Section 14 of the Housing Consumers Protection Measures Act, 1998 (Act No. 95 of 1998) hereinafter referred to as the “Act”. SAPOA submits that, with the presence of a regulatory authority such as the NHBRC for a period of more than 10 years in the home building industry, there must be some differentiation in the policy imperatives founding the Act.

2.

The protection of housing consumers’ rights has over recent years been broadened through various legal instruments of the law, such as the Consumers Protection Act, 2008 (Act No. 68 of 2008), hereinafter referred to as “CPA”. SAPOA recognises that the inability of a housing consumer to understand and comprehend the technicalities involved in the construction of what is recognised as a “home” in terms of the Act may be prejudicial to him/her.

3.

SAPOA supports the statutory objectives of the CPA but furthermore embraces the recognition by the honourable Minister of Trade and Industry and the National Department of Trade and Industry that consumers cannot all be treated in the same way, as this depends on the “economic” maturity of a certain class of consumers. This is pertinently clear in respect of the threshold that the CPA introduces in terms of Section 5 and exclusions found in sections such as Section 14.

4.

Section 5 of the CPA excludes from application of the Act, among others, consumers who are juristic persons whose annual turnover or net asset value at the time of the transaction SAPOA LEGAL UPDATE – report to members 41


LEGAL ADVOCACY is equal to or more than R2-million. Section 14 of the CPA further excludes from the application of Section 14 transactions concluded between juristic persons. SAPOA thus applauds the legal drafters and subsequent approval by the honourable President for the recognition that certain consumers within a certain threshold, provided that they are juristic persons, would have the professional expertise, whether it be their own or that of procured professionals, required to conclude and comprehend the material consequences of transactions or agreements. 5.

Being cognisant of and being fully supportive of the fair and legal discriminatory differentiation that is expressly provided for by the CPA, SAPOA respectfully submits that enrolment of homes must not be compulsory in all instances where homes are to be constructed, or alternatively, where in view of the “developmental” state in which South Africa as a country still finds itself, that a fair nominal enrolment fee be charged for certain homes.

6.

In view of the above, SAPOA respectfully recommends that where a professional team is involved, such as an architect and an engineer, that such home be excluded from payment of an enrolment fee. It is deemed fit that the NHBRC, against a payment of a nominal administration fee, should keep a record of the details of the construction of such home/s and the names and details of the professional team. It is SAPOA’s submission that in those instances, the performance guarantees, professional indemnity insurances and contractual terms and conditions should adequately protect an actual or potential consumer or housing consumer.

7.

SAPOA further recommends to the NHBRC that thresholds be created in line or similar to the ingenuity found within the provisions of the CPA. It is recommended that homes above a “threshold”, still to be determined by the honourable Minister of Human Settlements, be excluded from the application of the Act. Whether or not such exclusions should follow that of the CPA, which applies only between juristic persons, is a principle to be debated between the NHBRC and all key stakeholders.

8.

SAPOA respectfully recommends that if thresholds are created, that a nominal payable fee must still be prescribed to ensure that the NHBRC keeps a record of such homes and can, on an annual basis, report to the honourable Minister of Human Settlements of such details that would inform him/her of trends and concerns in respect of such category/categories of homes.

9.

SAPOA further recommends that a nominal administrative fee be paid and that a normal enrolment fee be excluded where a building with more than three floor levels is to be constructed as a professional team of technical experts will be involved.

1.

Commencement of warranty cover SAPOA is concerned that, while an enrolment fee is payable prior to construction, warranty cover only commences after completion and occupation of a home. SAPOA submits that the NHBRC has a statutory duty to ensure that it inspects homes to ensure that home builders meet and achieve satisfactory technical standards in the home-building industry.

42 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY 2.

SAPOA submits that the NHBRC’s primary duty is to offer warranty cover against failure by the home builder to achieve satisfactory technical standards in the home-building industry that leads or is likely to lead to a major structural defect within a period of five years from date of occupation of such home by a housing consumer.

3.

SAPOA submits that while it is aware of the prescript of the provisions relating to warranty cover within the Act, it recommends that the Act be amended to provide cover from date of commencement of issuing of an enrolment certificate and not from date of occupation. It is recommended that the implications of the recommendation be fully debated with industry players prior to rejection by the NHBRC.

1.

Bank financial guarantee SAPOA understands the deterrent principle informing the bank financial guarantee is required as a punitive and deterrent measure for late enrolment of homes by home builders. However, SAPOA finds the value of such bank financial guarantee as being exorbitant in this recessed housing market and in general; especially as it is being held for a period of the warranty cover.

2.

SAPOA is most concerned that there seems to be a blanket implementation of the bank financial guarantee regulatory provisions without the NHBRC consulting with the engineer on site; examining the designs to determine compliance and further without examining the construction records.

3.

SAPOA recommends that the bank financial guarantee model be reviewed after due consultation with the industry.

STATUS AND WAY FORWARD The industry will wait for the publication of the White Paper, which will afford SAPOA an opportunity to review and make comments.

SAPOA LEGAL UPDATE – report to members 43


LEGAL ADVOCACY BILL

APPLICABLE TO

15. THE DEEDS REGISTRIES AMENDMENT BILL, 2013 PROPERTY DEVELOPERS AND PROPERTY OWNERS NATIONAL DEPARTMENT OF RURAL DEVELOPMENT AND LAND REFORM BACKGROUND 1.

The Deeds Registries Amendment Bill is meant to provide for Promotion of Administrative Justice Act (PAJA) principles.

2.

PAJA recognises an act or failure to act by an organ of state as an administrative action. It further requires that any administrative action taken must be transparent, reasonable, just and equitable.

3.

The Bill provides that rectification of title is required in respect of any one piece of land in consequence of a survey or re-survey of such land or of the correction of any error in the diagram thereof under the Land Survey Act, [1927] 1997, the registrar may, on written application by the owner of the land accompanied by the title deed and the new or the corrected diagram thereof, any bond thereon and any registered deed of lease or other registered deed whereby any real right therein is held by any other person and the written consent of the holder of such bond, lease or right, endorse on the aforesaid deed a description of the land according to the new or corrected diagram, which description shall supersede the description already appearing in the aforesaid deeds.

STATUS AND WAY FORWARD The Deeds Registries Amendment Bill was published on 15 May 2013 for public comment. It provides for discretion in respect of the rectification of errors in the name of a person or the description of property mentioned in the deeds and other documents. The Bill was studied and none of the provisions were found to be objectionable. Consequently, no formal comments were necessary.

44 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY CHARTER

APPLICABLE TO

16. THE PROPERTY SECTOR TRANSFORMATION CHARTER

PROPERTY DEVELOPERS, BROKERS, PROPERTY MANAGERS AND PROPERTY OWNERS

DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Property Sector Transformation Charter was gazetted on 1 June 2012 under Government Gazette No. 35400. Its objectives are to constitute a framework and establish the principles upon which B-BBEE will be implemented in the property sector. It further establishes targets and qualitative undertakings in respect of each element of the B-BBEE.

2.

The sector code applies to all privately owned and public enterprises within the property sector. It is further binding to all organs of state and public entities, organised labour and communities involved with or interested in the property sector. The code is applicable but not limited to commercial activities of the industries in respect of community schemes, land zoned for development, commercial property industry which includes office property industry, industrial property industry, leisure property industry, and retail property industry. It is further applicable to property ownership, property letting, property management, property sales and property valuations.

STATUS AND WAY FORWARD SAPOA is represented on BUSA Committee by board member Mr Musa Ngcobo.

SAPOA LEGAL UPDATE – report to members 45


LEGAL ADVOCACY BILL

APPLICABLE TO

17. THE SPECIAL ECONOMIC ZONES PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF TRADE AND INDUSTRY BACKGROUND 1.

The Special Economic Zones Bill is an improvement on the industrial development zone (IDZ) programme, initiated in 2000. Four IDZs were established to boost investment, growth, employment and skills development. Each needed access to an international port or airport and the potential for export-orientated production. They were in Coega in Port Elizabeth, East London, Richards Bay and OR Tambo International Airport. The benefits of the establishment were quality infrastructure, expedited customs procedures and duty-free operations.

2.

The zones reportedly attracted 40 investors bringing R11,8-billion and creating more than 33 000 jobs. They reportedly offered tax incentives that beat most comparable initiatives in Africa and recorded a number of successes. But with a budget of R4,8-billion allocated to the programme in the eight years to 2011, the Department of Trade and Industry thought more should have been achieved.

3.

A review highlighted its limits and offered changes implemented in the new Bill. The qualifying criteria excluded other potential growth areas and the government had focused support narrowly on the provision of infrastructure. Poor planning, lack of coordination among different levels of Government and financing uncertainty sacrificed the quality of long-term planning and investment targets. The department was advised to provide incentives outside quality infrastructure and open the opportunities up to other areas of comparable advantage.

4.

The Department of Trade and Industry then issued Policy Notice No. 34968 under Government Gazette No. 10505, which relates to Special Economic Zones intended to continue to foster Government’s efforts to create employment and economic growth by establishing a strong industrial base in South Africa. Special Economic Zone (SEZ) is defined as “geographically designated areas of a country set aside for specifically targeted economic activities, which are then supported through special arrangements (which may include laws) and support systems promote industrial development.

5.

The Policy further recognises SEZ’s programme as a critical instrument that can be used to advance Government’s strategic objectives of industrialisation, regional development and job creation. The programme further aims to assist in improving the attractiveness of South Africa as a destination for foreign direct investments and export of value-added commodities.

STATUS AND WAY FORWARD The Policy is before the National Assembly Committee. SAPOA submitted its comments through BUSA on 29 August 2012. 46 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY ACT

APPLICABLE TO

18. THE MUNICIPAL SYSTEMS ACT, 2000 PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS BACKGROUND 1.

In terms of Section 118 of the Municipal Systems Act, 2000, prior to transferring a property the outstanding rates and taxes have to be paid. However section 118(2) allows for a property to be transferred provided the preceding 24 months’ arrears rates and taxes have been paid. This concession is increasingly proving to be problematic for mortgagees and new property owners alike as there are numerous and widespread examples where:

2.

Municipalities allow a property owner’s account to be in arrears for periods longer than two years. When conveyancers approach municipalities in order to determine the arrears rates and taxes, they are not provided with the full extent of the arrears, but merely the arrears for the preceding 24 months. Once these arrears have been settled, municipalities provide the conveyancer with a Rates Clearance Certificate and the property is then transferred into the purchaser’s name.

3.

A practice has however started to develop whereby municipalities demand that the new owner repay the balance of the outstanding rates and taxes. It therefore comes as a shock to the new owner that there is still a substantive rates and taxes arrears account that the municipality is demanding to have settled, failing which they will proceed with legal action against the new owner; or

4.

Mortgagees are increasingly receiving unsubstantiated demands to settle arrears rates and taxes that were not disclosed at the time they were forced to purchase a property at a sale in execution; or

5.

Municipalities are demanding that potential sellers repay outstanding rates and taxes owned by a previous owner (arrears rates and taxes that were outstanding at the time of transfer into the seller’s name), failing which they are not prepared to provide the seller with a Rates Clearance Certificate.

STATUS AND WAY FORWARD All the involved stakeholders are waiting to see whether the Department will initiate amendments to Section 118.

SAPOA LEGAL UPDATE – report to members 47


LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

19. THE TOBACCO PRODUCTS CONTROL ACT, 1993 – REGULATIONS

PROPERTY DEVELOPERS, PROPERTY MANAGERS AND PROPERTY OWNERS

DEPARTMENT OF HEALTH BACKGROUND 1.

The Minister of Health issued the regulations on 30 March 2012 and called for public comment. The regulations were made in terms of Sections 2 and (4) of the Tobacco Products Control Act No. 83 of 1993.

2.

The Preamble of the Tobacco Products Control Act acknowledges that tobacco use is extremely injurious to the health of smokers and non-smokers, and considers that the extent of the harmful effects of the use of tobacco products on health calls for strong action to deter people from using tobacco products, and to protect non-smokers from exposure to tobacco smoke and to encourage existing users of tobacco products to quit. Further, it resolves to align the health system with democratic values of the Constitution and the World Health Organization’s Framework Convention on Tobacco Control (Convention), to which South Africa is a party and a signatory.

3.

The principles of the Convention dictate that effective measures should be applied to provide protection from exposure to tobacco smoke as there is no safe level of exposure. All people should be protected from exposure, all indoor workplaces and indoor public places should be smoke-free, and legislation is necessary to protect people from exposure to tobacco smoke. It states further that no objections are justified on the basis of health or law arguments and that there is no trade-off between health and economics.

SAPOA COMMENTS (extract) 1.

A definition for “indoor” or “enclosed”, as proposed in the guidelines to Article 8 of the Convention, should be inserted and may be defined to include “any space covered by a roof or enclosed by one or more walls or sides, regardless of the type of material used for the roof, walls or sides, and regardless of whether the structure is permanent or temporary”.

2.

The definition of workplace in the Act is noted, however. Vehicles used in the course of work are workplaces and should be specifically identified as such, and the regulations should perhaps allow for this inclusion by extending the definition of workplace.

3.

Consideration must also be given to individual homes or dwelling places that are also used as workplaces, and it should accordingly be specified by extending the definition of workplace as well through the Regulations.

48 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY 4.

Regulation 2(1) stipulates that no person may smoke in any public place. The definition of “public place” is noted in the Act and is restricted to indoor, enclosed and partially enclosed areas. Regulation 2(2) provides a list of outdoor public places in which smoking is prohibited. It is not readily decipherable if smoking on streets and sidewalks is permitted, as it does not appear under this list and neither is it included in the definition of public places. However, it may generally be considered as a public place. It is included under the definition of “outdoor eating and drinking areas” but is restricted to streets and sidewalks where the consumption of food occurs. If there was no intention to completely prohibit smoking on streets and sidewalks then this comment may be ignored. If, in fact, there was an intention do so, then in order to give effect to the creation of simple and clear legislation as recommended by the Convention guidelines, it is recommended that streets and sidewalks should be included in the list under Regulation 2(2) or that it should specifically and expressly be stated that smoking in such places is not prohibited.

5.

No person may smoke any tobacco product within a 10-metre distance of a window of, ventilation inlet of, doorway to or entrance into a public place. This prohibition does not apply to a person who is temporarily within the area while actively passing by. Caution must be taken that this provision is not relied upon and used by offenders wrongfully in order to escape liability. Offenders once caught smoking in a prohibited area could easily claim to have been passing by in circumstances where this may not have actually been the case.

6.

The owner of, or a person in control of, a public place, or employer in respect of a workplace shall ensure that no person smokes in violation of the provisions of these regulations. According to the guidelines on Article 8 of the FCTC, legislation should clearly identify the actions required to be taken by the owner, manager or person in charge of the premises. This provision imposes a legal duty on the relevant person to ensure compliance; however, it is silent in respect of the action to be taken by the person in the event of non-compliance. It should stipulate steps that should be taken by the person.

7.

It is recommended that a paragraph 3. (1)(a) be inserted and read along the lines of: “In the event of the owner of or a person in control of a public place, or employer in respect of a workplace becoming aware of non-compliance with the provisions of these regulations, he may take one or more of the following steps: • ask the offender not to smoke; • discontinue service; • ask the person to leave the premises; and • contact a law-enforcement agency or authority.”

8.

Further, there is no provision regarding any penalty that the persons responsible for ensuring compliance may face, should they not carry out this responsibility placed on themselves. In accordance with the guidelines, legislation should also provide for larger monetary penalties that apply to business establishments. It is recommended that a paragraph 3. (1)(b) be inserted and read along the lines of:

SAPOA LEGAL UPDATE – report to members 49


LEGAL ADVOCACY

“In the event of the owner of, or a person in control of, a public place, or employer in respect of a workplace becoming aware of non-compliance with the provisions of these regulations, and failing to act in terms of the responsibility placed upon him in Regulation 3(1), he shall be liable to a fine.”

STATUS AND WAY FORWARD The Policy is before the National Assembly Committee. SAPOA submitted comments in 2012.

50 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

20. THE SANS STANDARDS PROPERTY DEVELOPERS AND PROPERTY OWNERS DEPARTMENT OF PUBLIC WORKS BACKGROUND 1.

SANS 1-1:2012 Standard for Standards Part 1: The development of South African national standards and other normative documents, with form AZ96.10, had been published for comments from 22 May 2012 until 29 July 2012. The South African Bureau of Standards (SABS) is responsible for the development, maintenance and promotion of standards in South Africa. SANS 1-1:2012 Standard for Standards Part 1 is the norm that has been developed by the SABS in order to set out the process for the development and amendment of South African national standards.

2.

The Standards are of a technical nature hence we requested the NHBRC to assist in training SAPOA members.

STATUS AND WAY FORWARD Training on the SANS 204 and 10400XA will be provided this year.

SAPOA LEGAL UPDATE – report to members 51


LEGAL ADVOCACY REGULATIONS

APPLICABLE TO

21. THE ENVIRONMENTAL IMPACT ASSESSMENT REGULATIONS

PROPERTY DEVELOPERS AND PROPERTY OWNERS

DEPARTMENT OF ENVIRONMENTAL AFFAIRS AND TOURISM BACKGROUND 1.

A notice was issued in May 2013 for comments to be submitted on the efficacy of South Africa’s environmental impact assessment regime as a call for responses to Government’s legislative and policy framework to strengthen environmental governance and the sustainability of our development growth path.

2.

SAPOA submitted comments during May 2013.

SAPOA COMMENTS (extract) SAPOA recommends that the Department must: 1. Develop faster, more rational and more cost-effective processes for achieving the goals of the EIA process; 2. Remove as many unnecessary types of EIA from the process (e.g. petrol stations). This is bipartisan: environmental groups at the meetings are also wanting lesser EIAs for small developments; 3. Remove EIAs from situations where standards can replace EIAs when the risks and mitigating procedures are well known; 4. Make the process less burdensome in cases where EIA are needed but the environmental risks are relatively minor; 5. Identify spatial zones where previous EIAs or possibly SEAs and EMFs have revealed that the environmental risks are small or large and require EIAs, partial EIAs or no EIAs based on this information; and 6. Devote the resources of the Department to the smaller number of cases where the risks are significant. STATUS AND WAY FORWARD SAPOA submitted its comments and we attended the parliamentary hearings on 31 July 2013.

52 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY POLICY

APPLICABLE TO

22. THE CITY OF JOHANNESBURG – SUPPLEMENTARY VALUATION ROLL

PROPERTY DEVELOPERS AND PROPERTY OWNERS

JOHANNESBURG METROPOLITAN MUNICIPALITY BACKGROUND The City of Johannesburg published on its website the supplementary valuation roll of properties within its jurisdiction. Property owners are allowed to object to the valuation values of their properties and such objections must be sent to the City of Johannesburg on or before 29 July 2012. SAPOA members were advised to lodge their objections with the City where they did not agree with a valuation. The Local Government Municipal Property Rates Act No. 6 of 2004 gives a duty on a municipality to regularly, at least once a year; update its valuation roll by causing a supplementary valuation roll to be prepared. It is, however, only bound to undertake a supplementary valuation of a rateable property: a. b. c. d. e. f. g.

Incorrectly omitted from the valuation roll; Included in a municipality after the last general valuation; Subdivided or consolidated after the last general valuation; Of which the market value has substantially increased or decreased for any reason after the last general valuation; Substantially incorrectly valued during the last general valuation. That must be re-valued for any other exceptional reason; or Of which the category has changed.

STATUS AND WAY FORWARD The process was finalised last year and members of SAPOA were given an opportunity to attend a workshop for the purpose of understanding the valuation process. The City has undertaken the General Valuation Roll, which will be published during the first week of April 2013 for public comment. A workshop relating thereto has been organised to further inform members of SAPOA in respect of procedural and material objections that can validly be made.

SAPOA LEGAL UPDATE – report to members 53


LEGAL ADVOCACY ACT

APPLICABLE TO

23. THE NELSON MANDELA METROPOLITAN TRANSPORT SYSTEM

PROPERTY DEVELOPERS AND PROPERTY OWNERS

NELSON MANDELA METROPOLITAN MUNICIPALITY BACKGROUND 1.

The long-term development proposals for the public transport system for the Nelson Mandela Metropolitan Municipality (NMB) are based on the results from an analysis of several possible scenarios. The conclusions from the scenario analysis are that an integrated public transport system with scheduled services, based on trunk bus routes with complementary feeder and main route systems will, in the next 10 years, best serve the communities of NMB. The public transport system will have the Khulani Corridor (Motherwell-Njoli-Korsten-CBD) as the backbone onto which the other services will be built. An expanded railway system will not attract enough passengers in the next 10 years to justify the large investments required.

2.

The long-term public transport system will be characterised by some important qualities. The system will consist of integrated and regulated public transport, which will be modern and attractive, offering seamless travelling with an integrated and scheduled service. The operators will be contracted and through ticketing will enable true integration. The public transport corridors will encourage high-density development through quality, high frequency and scheduled public transport services, which in turn will attract more people to use the public transport system.

3.

A trunk bus network will be developed in the defined public transport corridors. Certain of these routes will have dedicated bus lanes and will ultimately be operated on Bus Rapid Transit (BRT) principles with new modern and possibly articulated buses. These will cater for people with special needs, such as persons in wheelchairs, and the system will aid general mobility by incorporating the concept of universal accessibility. The trunk routes will be supplemented by express, main, feeder and special services with an extensive network operated by normal buses, midibuses and minibuses. It is also intended that a number of these vehicles will be adapted to provide facilities for special-needs passengers.

4.

The trunk bus and feeder operations will intersect at attractive interchanges where passenger transfers can be made in a safe and secure environment. The interchanges will also be important nodes of commercial attraction and will be located close to suburban business activities and in the city centre. These interchanges will stimulate further economic development in their immediate surrounds.

5.

The IPTS’s 1 July 2012 pilot phase start was delayed to September 2012. This delay is the latest in a series of setbacks that have bedevilled the system from the start and caused major frustration and inconvenience to business and commuters. SAPOA is a member of a

54 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY

6.

7.

task team that has as one its members the Business Chamber, which aims to liaise with the municipality to ensure an effective IPTS. While there is certainty that the city needs an improved public transport system that is safe, efficient and affordable, the task team is deeply concerned at the delays in implementation and the negative impact on the city as a whole. We have persisted in our efforts to represent the interests of our members and the broader business community.

STATUS AND WAY FORWARD The Regional Council of SAPOA in Nelson Mandela is dealing with the matter in conjunction with the municipality.

SAPOA LEGAL UPDATE – report to members 55


LEGAL ADVOCACY ACT

APPLICABLE TO

24. CARBON TAX POLICY PROPERTY DEVELOPERS AND PROPERTY OWNERS BACKGROUND 1.

According to the Carbon Tax Policy, the primary objective of implementing carbon taxes is to change future behaviour, rather than to raise revenue. It therefore starts with a relatively low carbon price, and then progressively rises significantly after five to 10 years and beyond. This approach reportedly provides industry and other major emitters sufficient time to innovate and invest in greener technologies for the future. There are at least three ways in which a carbon tax will work to drive changes in producer and consumer behaviour and therefore address climate change: a. First, carbon pricing will encourage a shift in production and consumption patterns towards low carbon and more energy-efficient technologies by altering the relative prices of goods and services based on their emissions intensity, and encouraging the uptake of cost-effective, low-carbon alternatives. Pricing carbon emissions addresses the problem of negative externalities, as polluters should pay for their emissions. b. Second, carbon-intensive factors of production, products and services are likely to be replaced with low-carbon-emitting alternatives. To achieve the extent of emission reductions committed to in Copenhagen, the production technologies will need to become less carbon-intensive and/or the consumption of certain carbon-intensive products such as cement, steel and aluminium will need to be reduced. Given that these industries are important with respect to the country’s proposed infrastructure build programme, appropriate policies are required to ensure mitigation and adaptation strategies are taken into account in investment decisions that have long term lock-in effects. c. Third, a carbon price will create dynamic incentives for research, development and technology innovation in low-carbon alternatives. It will help to reduce the price gap between conventional carbon-intensive technologies and new low-carbon ones.

THE TAX BASE The carbon tax will be based on emissions derived from emission factors linked to the fuel inputs used. It will cover emissions from all stationary sources, including process emissions. THE KEY DESIGN FEATURES The key design features of the carbon tax are: a. A phased approach to the implementation of the carbon tax. The first phase (introductory) will be for five years, effective from 1 January 2015 to 31 December 2019, followed by Phase 2 of another five years, from 2020 to 2025. Follow-up phases can be explored later. 56 SAPOA LEGAL UPDATE – report to members


LEGAL ADVOCACY b. An across-the-board basic 60% tax-free threshold of actual emissions below which the tax will not be payable. c. Additional 10% relief for certain sectors to allow for technical or structural limitations to reduce emissions (process emissions). d. Up to an additional 10% relief for emissions intensive and trade intensive sectors, e.g. iron and steel, cement, glass, etc. to take into account the risk of carbon leakage and competitiveness concerns. e. Offsets could be used by firms to reduce their carbon tax liability up to limits of five or 10%, depending on the sector. f. Emissions from the agricultural and waste sectors will be exempt during the first phase. This complete exemption will be reviewed during the second phase. g. The electricity sector will qualify for a tax-free threshold of up to 70%, and some sectors will be able to qualify for a tax-free threshold of up to 90% during the first phase. THE TAX RATE A carbon tax rate of R120 per ton of CO² emissions increasing at 10% per annum will be implemented during the first phase. When the tax-free threshold and additional relief are taken into account, the effective tax rate will range between R12 and R48 per ton of CO² emissions (and zero for Agriculture and Waste). STATUS AND WAY FORWARD The Policy was circulated to members of SAPOA for comment and it was discussed at the SAPOA Sustainability Committee meeting scheduled for 17 July 2013. A request was made for an extension date for submission of comments to 30 August 2013, which was duly granted. SAPOA, in anticipation of its comments, requested a presentation on the Carbon Tax Policy by a representative of the office of National Treasury for the purpose of clarification of its intentions and implications. The meeting was scheduled for 15 August 2013.

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Litigation

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LITIGATION 1. SAPOA V CITY OF JOHANNESBURG & OTHERS (SUPREME COURT OF APPEAL) BACKGROUND 1.

The appeal concerned with the levying of property rates of 1,54 cents in the rand in terms of the Local Government: Municipal Property Rates Act No. 6 of 2004 (the “Rates Act”) on business, commercial and industrial properties (collectively referred to as “business properties”) by the Council of the City of Johannesburg Metropolitan Municipality (the “Council”) for the 2009/2010 financial year.

2.

At the heart of the dispute is the Council’s decision, on 21 May 2009, to increase the property rates on business properties by an additional 18% (after it had resolved, on 26 March 2009, to increase the rates generally by 10% and advertised these rates with the proposed budget for public comment) so that, instead of increasing from 1,20 cents in the rand to 1,32 cents in the rand, the rates increased from 1,20 to 1,54 cents in the rand.

3.

SAPOA applied to the South Gauteng High Court to review and set aside or, alternatively, declare null and void, the City of Johannesburg Metropolitan Municipality’s (the “City”) budget for 2009/2010 or, alternatively, the rate of 1,54 cents in the rand on business properties.

4.

SAPOA sought this relief on these grounds: a. First, that the levying of the rate contravened section 19(1)(b) of the Rates Act because the ratio of the rate levied on business properties (1,54 cents in the rand) to the rate levied on residential properties (0,44 cents in the rand) exceeded the ratio which is permissible under section 19(1)(b) of the Rates Act read with the regulations; b. Second, that the levying of property rates is an integral part of the budget process in terms of the Rates Act, the Local Government: Municipal Finance Management Act No. 56 of 2003 (the “Finance Act”) and the Local Government: Municipal Systems Act No. 32 of 2000 (the “Systems Act”), and the decision to increase the rates on business properties by an additional 18% required community participation, which did not occur; and, c. Third, the rates imposed on business properties contravened the Rates Act because they unfairly discriminated against the owners of such properties.

5.

On 8 November 2012 the Supreme Court of Appeal ruled in SAPOA’s favour. SAPOA’s appeal against the City of Johannesburg in respect of the additional 18% commercial property rate was upheld with costs.

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LITIGATION 6.

SAPOA released a statement to members about the implications of the judgment in respect of their rights to claim a refund relating to the additional commercial property rates already paid to the City. Few enquiries were subsequently received by SAPOA in respect thereof.

7.

In November 2012, judgement was passed in favour of SAPOA and SAPOA was further awarded a cost order in the Supreme Court of Appeal matter against the Johannesburg Metropolitan Municipality. The cost order was a party and party cost order.

STATUS AND WAY FORWARD 1. The draft Bill of Costs was drawn, signed, served and filed with the Taxation Master of the High Court. 2. The amount on the draft Bill of Cost is R997Â 039,41. 3. We await finalisation of the taxation of the Bill.

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LITIGATION 2. APPEAL: THE JOHANNESBURG CONSOLIDATED TOWN PLANNING SCHEME, 2011 BACKGROUND 1.

In 2011, the City of Johannesburg published the draft Consolidated Town Planning Scheme for public comment.

2.

The draft Town Planning Scheme intends to apply in substitution of the following Town Planning Schemes previously in operation in the areas below, insofar as it relates to the area of jurisdiction of the City of Johannesburg, i.e.: a. Johannesburg Town Planning Scheme, 1979; b. Halfway House and Clayville Town Planning Scheme, 1976; c. Sandton Town Planning Scheme, 1980; d. Roodepoort Town Planning Scheme, 1987; e. Randburg Town Planning Scheme, 1976; f. Lenasia South East Town Planning Scheme, 1998; g. Modderfontein Town Planning Scheme, 1994; h. Peri-urban Areas Town Planning Scheme, 1975; i. Southern Johannesburg Region Town Planning Scheme, 1979; j. Walkerville Town Planning Scheme, 1994; k. Lethabong Town Planning Scheme, 1998; l. Westonaria Town Planning Scheme; and m. Alberton Town Planning Scheme.

3.

Some of the objects of the draft Scheme are stated as follows: a. Management of land use, in order to enable and facilitate efficient, effective and compatible urban development that is desirable and also accommodates the identified socioeconomic needs of the City; b. The coordination of urban growth, which includes land use change, new development and subdivisions, with the availability of infrastructure and social amenities; c. An accessible, responsive environment that is integrated with the transportation network and promotes public transportation; and d. The upgrading and rejuvenation of certain areas in the City through innovative developmental scenarios.

4.

SAPOA and other 3 (three) parties separately lodged an appeal against the draft scheme in December 2011, which have not been heard as there has not been appointment of the Appeal Tribunal Members.

5.

SAPOA’s main appeal was, among other objections, in respect of consent use rights provisions that are stated as follows in the draft, i.e.:

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LITIGATION “Any consent granted or approved in terms of a Town Planning Scheme in force or other applicable land use legislation for the erection/use of buildings or for the use of land or any rights legally exercised in terms of such scheme or legislation prior to the commencement of this scheme, shall be deemed to be a consent or approval of this scheme: provided that any such consent or approval shall lapse unless exercised within 24 months from the date that such consent was granted or approved.” STATUS AND WAY FORWARD 1.

Various meetings were held with the City of Johannesburg over the period of approximately 18 months since the appeals were lodged. The most recent one was on 3 July 2013, in an effort to come to a mutual understanding and concessions relating to the grounds of appeal.

2.

It is SAPOA’s considered view that the period of 24 months should be negotiated to a period of between three to five years, which will result in the appeal, in the interests of the overall objectives of the draft scheme, being withdrawn. We await a formal response thereto.

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Legal advisory

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LEGAL ADVISORY 1. LEGAL OPINION: EXCLUSIVITY AGREEMENTS 1.

The Legal Opinion is to determine whether an exclusive letting arrangement between landlord and a tenant falls foul of the Competition Act of 1998.

2.

The thrust of the exclusivity clause is that, for as long as the lease between the landlord and the anchor tenant endures, the landlord may not enter into a lease with another supermarket or an entity that sells some of the classes of goods that the supermarket tenant sells.

3.

The competition principle is that the competitor who delivers the best performance must be the victor in the competition. If one competitor undermines another in an unfair manner, the competition principle is breached and the breach may be actionable. It is a fundamental principle of common law of contract that every person is free to decide with whom he or she wants to enter into economic relationships.

4.

The type of arrangement in this legal opinion is what is referred to as the “solus” agreement or an exclusive dealing agreement. This creates purely contractual right between the parties thereto and is not binding to would-be competitors.

5.

Solus agreements are generally considered to be enforceable agreements in restraint of trade and the supermarket can enforce an exclusive letting agreement against the landlord. The question, though, is whether the Competition Act affects the legality of a solus agreement – and if does, whether the agreement may not be enforceable at the insistence of the supermarket against the landlord.

6.

There is a distinguishing feature in this agreement that is less likely to be susceptible to a finding of anti-competitive consequence: i.e. the lessor, as an independent entity, is fully entitled not to enter into an agreement of lease with anyone, and therefore there can be no obligation on a lessor to assist a competitor in setting up shop. There may be circumstances where it may have such a consequence. Then the rule of reason must be to determine whether there is justification for the anti-competitive conduct.

7.

Landlords are not precluded by common law or the Competition Act to enter into solus agreements with anchor tenants. They will be anti-competitive where it can be shown that the motive of the parties is not to protect their own goodwill or to have power to attract customers but merely to prejudice the attractive power of another concerned.

8.

The Legal Opinion is still being studied internally for other legal implication prior to a decision being made of advising property managers and asset managers accordingly.

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LEGAL ADVISORY 2. LEGAL OPINION: MERGERS & ACQUISITIONS 1. The prima facie view is that the disposal by a property fund of properties falling within its portfolio does in fact constitute a “merger” in terms of the definition contained in the Act. Specifically, it falls within the ambit of the definition of “....part of the business”. 2.

The opinion is that property transactions where letting enterprises are an issue in businesses for purposes of the Competition Act, are reportable.

3.

Senior Counsel is, however, of the view that, despite falling within the definitions of a “merger”, such transactions can still not be seen to be anti-competitive. He has not found a single instance where the Competition Commission has refused its consent to a property transaction. He is further of the view that the property industry should challenge the thresholds prescribed in the Act as they are completely unrealistic.

4.

Small mergers are notifiable.

5.

The question is why should transfer of what is, in essence, only stock in trade or an asset in overall property letting business be dealt with as though it is a merger. Taking into account that property sale transactions that are notified are invariably approved and that the only consequence of notification is the payment of a filing fee and that this amounts to taxation, Counsel is of the opinion that a strong case could be made that the thresholds set by the Minister constitute irrational administrative action, and that these could be reviewable; or that due to nature of the property letting industry, a case could be made that the whole industry should be exempt from the Act.

6.

Senior Counsel further contends that the thresholds for property notifications in a rational legislative scheme should be higher so that routine transactions do not have to be notified, i.e. they should be regarded as small mergers.

7.

The Legal Committee Task Team of SAPOA recommended that SAPOA should apply for the increase of the thresholds. A submission to that effect was made.

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LEGAL ADVISORY 3. LEGAL OPINION: RIGHT OF THE LANDLORD TO TERMINATE ELECTRICITY 1.

The legal opinion is whether a landlord could sever the electricity supply to a defaulting tenant.

2.

A lease consists of various sets of rights and obligations, and deals with a variety of ancillary topics, including the supply of electricity. Difficult questions arise where these rights intersect. Landlords who have severed the electricity supply to their tenants have been met with spoliation applications.

3.

It is dogmatically unsound and legally incorrect to conclude that electricity can be possessed, and therefore a spoliation order should not be made merely to restore electricity flow where it has been cut.

4.

Distinguishable contractual obligations burdening a landlord (e.g. to provide possession of leased premises and to provide electricity) should be kept apart.

5.

Lease agreements provide for occupation of the property and right to access to and supply of utilities (water, electricity, ablution services). Payment of rental gives a tenant the right to lawful and undisturbed occupation of the property, while payment for utilities grants a tenant the right to receive the supply of such services.

6.

Where the landlord cuts the electricity supply because of non-payment of electricity and not to informally evict the tenant, the mandament van spolie principle (putting a person in the position that he was in prior to dispossession in spite of the fact that the person was in lawful or unlawful occupation of the property) cannot be applied.

7.

The landlord in an electricity case simply refuses to carry on providing electricity because the tenant did not pay for previous electricity supplied by the landlord. If the purpose is not to evict but to stop the supply of a commodity because of non-payment, the tenant cannot claim dispossession because he/she in fact remains in possession of the property.

8.

It is Senior Counsel’s view that landlords adopting a unified position in respect of breaches of contract cannot be seen as being anti-competitive, more particularly as this does not reduce competition.

9.

It must be abundantly clear that non-payment of electricity is a clear breach of contract where the landlord supplies it. As is the case with any breach of contract, it is actionable by cancellation of the contract by following due legal process of commencing eviction proceedings.

10.

An article in respect of this legal opinion was placed in the May issue of the Property Review, advising members on the implications of the legal opinion.

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LEGAL ADVISORY 4. PROPOSED PROPERTY TRANSACTIONS – NEW THRESHOLDS BACKGROUND 1.

a)

In terms of the Competition Act, the current designated financial thresholds are as follows: 1.1.

Small merger – Combined annual turnover or assets (acquiring firm and target firm) are below R560-million, and target firm’s turnover or assets are below R80-million;

1.2.

Intermediate merger – Combined annual turnover or assets (acquiring firm and target firm) are at or above R560-million but below R6,6-billion, and the target firm’s turnover or assets are at or above R80-million but less than R190-million; and

1.3.

Large merger – Combined annual turnover or assets (acquiring firm and target firm) are at or above R6,6-billion, and the target firm’s turnover or assets are at or above R190-million. (Referred to collectively as the “current designated thresholds”.)

PROPOSAL TO AMEND THRESHOLDS

Based on the adverse impact that designated thresholds have on the letting business, it is recommended that the thresholds be amended as follows: a.

Intermediate merger – Combined annual turnover or assets (acquiring firm and target firm) will increase from R560-million to R800-million, and the target firm’s value of assets or turnover will increase from R80-million to R300-million; and

b.

Large merger – Combined annual turnover or assets (acquiring firm and target firm) will increase from R6,6-billion to R15-billion, and the target firm’s value of assets or turnover will increase from R190-million to R600-million.

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LEGAL ADVISORY

b)

CONCERNS BY MEMBERS OF SAPOA

a.

SAPOA respectfully submits that there are various concerns that arise out of the current designated thresholds. Concerns experienced by participants in the property industry include, but are not limited to, the following issues listed below: i. In reality, property transactions do not have an anti-competitive effect on the market. Tenants in the property industry exercise very strong countervailing and bargaining power, which constrains the ability of competitors to increase prices beyond market-related prices. Due to the abundance of space available in all sectors of rentable commercial space, any attempt to unduly increase prices or engage in any other form of abuse of dominance by a competitor can very quickly be disciplined by a tenant switching to an alternative provider. It must also be noted that commercial rentable property is not a finite resource. Thus in the event that competitors seek higher rentals than market parameters allow for, developers would simply produce more commercial rentable property for occupation on market-related terms. Accordingly, the property sector must and should be differentiated from other sectors of the economy. Therefore sector-specific thresholds must be introduced for the property industry insofar as merger notification is concerned. ii. Currently every property transaction, whether it involves the sale of an entire property portfolio or a single property is subject to notification if the current designated thresholds are met. Since the current designated thresholds are already very low, the majority of transactions engaged in by competitors are notifiable on the basis of such financial thresholds being triggered. In effect, the purchase of a single property letting enterprise results in the entire ambit of the competition legislation applying to the parties. The provisions of Section 12 of the Competition Act are designed to apply to conventional mergers in order to assess the effect on concentration in the market, and 99% of property transactions notified have no effect on competition. Based on the current designated thresholds of a target firm, a sale of commercial property of approximately R80-million (which, by property standards, comprises a very low value) can hardly ever be said to

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LEGAL ADVISORY be anti-competitive, irrespective of location or any other factor utilised in competition analysis. It is seldom that listed entities buy or sell properties of low value resulting in anti-competitive behaviour, and hence a transaction below R100-million would almost never constitute any more than a “small” transaction by property standards. iii. Since the Competition Act does not permit pre-implementation of a transaction prior to unconditional merger clearance by the Competition Authorities, the time periods applicable to a property merger are often very disruptive and have high cost implications. Such costs include the statutory filing fees and legal costs, which can sometimes deter parties from transacting on a deal due to the high overall transaction costs. Since the current designated thresholds (and the Proposal to Amend Thresholds) are low, this additional regulatory hurdle does not contribute to an environment where commercial property deals can be expediently concluded. iv. SAPOA strongly proposes that the determination of financial thresholds should take into account the type of transaction being notified. In the property sector, a higher financial threshold should be set than that set out in DTI’s Proposal to Amend Thresholds. It must be borne in mind that the parties to a property transaction are property firms, which usually have disproportionately large assets relative to many other industries. Having the same financial standard applying to all transactions, as long as they fall within the ambit of Section 12 of the Competition Act, places property firms at a disadvantage. The effect of a “one size fits all” approach in applying the same thresholds to all transactions creates a distortion and places an unnecessarily high burden on property firms. STATUS AND WAY FORWARD A submission for the increase of the property transaction was made.

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Strategic collaborative relations

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STRATEGIC COLLABORATIVE RELATIONS 1. SOUTH AFRICAN CITIES NETWORK (SACN) BACKGROUND In the first quarter of 2013, SAPOA signed a Memorandum of Understanding between the two entities for the purpose of collaboration in ensuring successful cities and municipalities by focusing on transport, transport corridors, infrastructure, climate change, human settlements and joint researches. SAPOA was invited to the Tshwane Strategic Conversation session, held in March 2013, which focused on the increasing and unstoppable process of global urbanisation. It was reported that there were trends within the BRICS countries and other developing countries that suggested that urbanisation was generating significant opportunities for growth, poverty alleviation and environmental sustainability. Furthermore, it was highlighted that urban development is often misconstrued as an alternative to rural development, without realising that strong urban economic growth and effective urban poverty reduction generate and release the public resources that fund rural development programmes. STATUS AND WAY FORWARD 1.

SACN has been instrumental in organising, at their cost, a workshop that was held on 30 April 2013, with representatives of 18 municipalities that are part of the research study into the cost of municipal cost services. SAPOA was represented by Past President Dr Sedise Moseneke, chairperson of the Property Developers Forum Mr Lionel Kirsten and Advocate Portia Matsane.

2.

A meeting was held on 10 July 2013 to ensure that there is materialisation of some of the objectives of the MOU.

3.

It has been agreed that, in principle, a concept document be developed for all collaborative areas other than research, which is an easily attainable objective.

4.

There was an understanding in principle that, while the research of municipal services will be indicative of which municipality has the lowest or affordable municipal services costs, what should be determined in an effort to support the municipalities and to assist the commercial property sector to grow and be sustainable is the municipalities whose economies are growing, the industries supporting such, and the key projects that can be of benefit for the commercial business sector within such municipalities.

5.

It was agreed that what is important for business is the determination of incentives and costs within the municipalities. SACN will draft concept documents in support of the other objectives to ensure that private-public partnerships become a reality.

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STRATEGIC COLLABORATIVE RELATIONS 2. CHAMBER OF COMMERCE AND INDUSTRY: JOHANNESBURG BACKGROUND SAPOA is represented by Advocate Portia Matsane on the Chamber of Commerce and Industry: Johannesburg. On 8 July 2013, the JCCI breakfast showcased a presentation by the CEO of the Johannesburg Development Agency, and the following points were highlighted: 1. In 2007, the Inner City Regeneration Charter was signed by stakeholders in the inner city as a joint commitment to a shared vision of a productive and equitable inner city. 2. The City of Johannesburg made a commitment to a five-year public environment upgrade programme that prioritised certain inner city areas for investment over the five years of the Charter. 3. From 2007 to 2012, the City of Johannesburg spent R1,86-billion on public environment upgrading, Rea Vaya BRT busways and stations, and other aspects of precinct development, including the refurbishment of municipal properties (to provide social facilities such as libraries, community centres and museums), and the construction of transitional and social housing stock. 4. The budget framework for a 10-year implementation period is expected to include stable annual allocations. In the budget planning for the 2013/14 MTEF, the inner city was identified as a priority implementation programme and is expected to receive a capital investment of R450-million from the City of Johannesburg in 2013/14. Almost R90-million of this is for precinct developments. STATUS AND WAY FORWARD The Johannesburg Development Agency calls on business to invest in the regeneration of the inner city.

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STRATEGIC COLLABORATIVE RELATIONS 3. POLOKWANE MUNICIPALITY: ILLEGAL LAND USE BACKGROUND 1.

SAPOA lodged with the municipality of Polokwane about “illegal land use” within the city. The matter was first reported to the city early last year and when no response was received by SAPOA, it was then reported to the local office of the Public Protector.

2.

This resulted in the investigation by the Public Protector’s office that forwarded the complaint to the municipality still in 2011. While there was really no progress or any intervention on the city’s part in respect of the incidences reported in the complaint, SAPOA opted this year to escalate the matter to the office of Advocate Thuli Madonsela at the National Office.

3.

However, in view of cementing good corporate relations with the city, SAPOA opted to first contact the office of the Mayor of Polokwane, as a courtesy that SAPOA deemed it fit that the matter be addressed by his office and his municipality prior to the escalation of the complaint. SAPOA is glad that the Mayor prioritised the matter by arranging to meet with SAPOA on 28 June 2013.

4.

In the interim, the office of the Public Protector forwarded us an e-mail from the office of the Chief Planner, details of which are self-explanatory and are most welcomed by SAPOA. We have attached a copy of the court order that will be used to ensure that the City deals with some of the issues addressed in the court order and also in our letter of complaint.

STATUS AND WAY FORWARD 1.

On 28 July 2013, representatives of SAPOA met with the Municipal Manager (MM) of City of Polokwane and her executive team. The outcome was as follows:

1.1.

SAPOA will be part of targeted strategic meetings being convened by the City in an effort to ensure greater understanding and identification of solutions to deal with challenges facing the City and property development. SAPOA, the Municipality, the South African Police Service and the other relevant Government departments will be part of the cleaning up campaign that will be driven by the city to ensure that SAPOA’s complaint is attended to. Education awareness programmes and campaigns will be embarked upon to ensure that the informal traders and the public understand the bylaws of the City. The Mall of the North is one of the top 10 projects that the Municipal Manager is personally responsible, ensuring that services are not interfered with at the retail centre. The chairperson of SAPOA’s Limpopo Regional Council, who was present at the meeting, has been assured of a more open, closer relationship with the MM’s office to ensure service delivery at the mall. SAPOA has been advised to register as a stakeholder with the municipality. On 10 July 2013, the MM contacted SAPOA’s head office, advising that an advertisement calling for registration as a stakeholder with the municipality would be issued on 11 July 2013.

1.2.

1.3. 1.4.

1.5.

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STRATEGIC COLLABORATIVE RELATIONS 4. TAX COURT: RECOMMENDATION OF A MEMBER OF SAPOA BACKGROUND 1.

Section 83(4) of the Income Tax Act, 1962, provides that a Tax Court consists of a Judge, an accountant and a representative of the commercial community, who must be of good standing and have appropriate experience. Depending on the nature of the appeal to be heard, the commercial member may, if the president of the Tax Court, the commissioner or the appellant so desires, be a qualified mining engineer or a person who is carrying on business as a sworn appraiser, where the appeal relates to mining or the valuation of property, as the case may be.

2.

The members of the Tax Court are appointed by the President. The terms of the members of the Tax Court are prescribed at five years from the date of a proclamation with a provision for re-appointment for such period or periods as the President may see fit.

3.

The Tax Court has its sittings in the ordinary High Courts of South Africa, which are currently in Pretoria, Johannesburg, Cape Town, Port Elizabeth, Durban, Bloemfontein and Kimberley.

4.

On 21 May 2013, SAPOA was requested by the office of the Registrar, Tax Court of South Africa, to make a nomination of a person for appointment to serve in the Tax Court.

5.

It was requested that a meeting be organised between the recommended candidate and the Chief Registrar Marisa McKenzie for further discussion of the responsibilities and expectations.

STATUS AND WAY FORWARD 1. 2. 3.

Mr Erwin Rode, a property valuer based in Cape Town and a member of SAPOA, was recommended by the CEO of SAPOA. Mr Rode accepted the nomination and the meeting with the Chief Registrar occurred. We await being advised whether Mr Rode was appointed.

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MISCELLANEOUS RESEARCH AND COMPLIANCE 1.1. Comparative study of costs of municipal services

Research is to be released with data for 2012/2013 but updated also with data for 2013/2014. SACN will obtain the data from the municipalities.

1.2. The impact of the property sector on the economy of South Africa

Research is ongoing. A meeting was scheduled for August 2013 for a progress report.

1.3. Standard sale and lease agreements

The Standards Contracts are ready. SAPOA awaits understanding with Contracts on Demand, a supplier preferred by industries such as PROCSA, as to how e-sale can be done.

1.4. Financial intelligence centre guidelines

First draft of the FIC guidelines is ready.

1.5. Memorandum of incorporation: Registration

MOI has been submitted to CIPC – awaiting registration.

1.6. Registration of new board members

Registration of two new board members has been submitted to CIPC – awaiting confirmation.

1.7. Submission of the annual return

Annual return was submitted but was returned by the CIPC – their system has been changed to accept such against the anniversary date of first (September) incorporation of the entity.

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SAPOA legal supplement  

SAPOA is the official voice of the South African Property Owners Association, this supplement is a bi-annual report to SAPOA's members

SAPOA legal supplement  

SAPOA is the official voice of the South African Property Owners Association, this supplement is a bi-annual report to SAPOA's members

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