IURI 414

LAND AND REGISTRATION

CHAPTER 1
1.1 Introduction
The word ‘conveyancing’ is used to describe the administrative and legal procedures
necessary to transfer ownership (and other rights) in immovable property from one
person to another. (This is a very simple definition of a rather involved topic, and we will
expand on it later in the chapter.)
In terms of the law in South Africa immovable property (empty land, houses, flats,
farms, buildings) can be privately owned. Thousands of property transactions take place
in our country every day. People buy land to live on, to produce crops on, to conduct
business on, or simply to keep as an investment.
All dealings with ownership of land in South Africa are recorded in a public office known
as the ‘deeds office’. The deeds office keeps information about the individual pieces of
land in our country. The computer records of the deeds office will show, for example,
who the owner of a particular property is, when he or she acquired it and (if it was
purchased) how much was paid for it (see Precedents P1–P5: ‘deeds office print-out’).

1.2 When property is transferred, a ‘deed of transfer’ is registered

Every time a property changes hands (for example when it is sold, or when the owner
dies and the heirs take over) a special document called a ‘deed of transfer’ must be
drawn up and lodged (given to, filed) in the deeds office. The deed of transfer contains
important information about the property and the transaction relating to it. For example,
it identifies the property that is about to be transferred, the reason for the transfer, the
name of the existing owner and a description of the new owner.

1.3 Picture this: example of a property transaction

Imagine that your phone rings. The caller is Mr H B Smith, an attorney from Durban. He
tells you that your late Aunt Ada has named you as the only heir in her estate and you
have inherited R850 000.
You decide to buy a flat in Cape Town and make an offer of R900 000. After some
negotiations, the estate agent informs you that the seller has accepted your offer. She
says that attorneys Jones, Tshabalala and Associates will do the conveyancing and that
they will be in touch.
A few days later the attorneys call and you make an appointment with them for the
signing of transfer documents. You sign the documents and they hand you a statement
of account for R23 037. The conveyancer explains to you that R4 500 is the transfer duty
(a tax payable to the government) and that R14 700 is for their fees. The balance of the
account is for the deeds office fees and other specified cost items.
You budget as follows:

Purchase price R900 000,00*

Transfer duty Nil

Fees and costs R23 931,00*

Costs of painting, packing, moving, furniture etc R30 000,00*

Total R953 931,00*

To be financed as follows:

Inheritance money R850 000,00*

Loan from the bank (leaving spare cash) R150 000,00*

Total R1 000 000,00*

(*Rates as at December 2020, inclusive of conveyancing tariff fee plus VAT, postage and petties plus
VAT, deeds office registration fee, and other costs.)

You intend to repay the loan to the bank in monthly instalments of roughly R1 600
(depending on interest rates) over 20 years. Because you no longer need to rent a flat
and because you earn a decent salary you can afford the monthly instalment to the
bank.
The bank stipulates a condition for the loan: the registration of a mortgage bond over
the property. The bond gives the bank the right to sell the property and recover the debt
from the proceeds if you fail to repay the loan.
Five weeks after you signed the offer to purchase, Jones Tshabalala and Associates sms
you to say that the transfer documents have now been lodged in the Cape Town deeds
office. Two weeks later they phone again to confirm that transfer of the property has
been registered in your name. You collect the keys from the estate agent, and a week
later move into your new home.

1.4 Explaining the term ‘transfer’

To transfer a property means to shift the ownership in a particular property from one
person to another. Ownership is a right and, unlike the property itself, is not visible. One
cannot see the ownership being transferred, but one can see the physical evidence of the
transfer, namely a registered deed of transfer.
To make things simpler we often say that the property has been transferred rather than
using the longer (but technically more correct) phrase, namely that ownership in the
property has been transferred.

This is our definition of a transfer: A ‘transfer’ of land is the process (involving law
and administration) whereby ownership in a particular property is transferred from
one person (called ‘the transferor’) to another person (called ‘the transferee’) by
means of registration of a deed of transfer in a deeds office.

The process of transfer begins when a conveyancer (an attorney specially trained in
conveyancing and property law) is instructed to attend to the transaction and ends when
the transfer is registered in the deeds office.
Various phrases are used to describe the process. One can say ‘transfer’, ‘property
transfer’ or ‘transfer of immovable property’; these terms all mean the same thing. It is
also said sometimes that the attorneys ‘passed transfer of the property’, or that the
property was ‘conveyed’ to the new owner. Just remember that strictly speaking it is not
the property that is transferred, but the ownership in the property.
A transfer of immovable property has to be registered in a deeds office to be valid.
Generally speaking, if the documents have not been registered in a deeds office, no
transfer of ownership has taken place. In other words, the mere fact that a property has
been bequeathed or donated to you, does not make you the owner of the property.
Registration of transfer of ownership must first occur.

1.5 Do the terms ‘transfer’ and ‘conveyancing’ mean the same thing?
Yes and no.
In the narrow sense, ‘conveyancing’ and ‘transfer’ do mean the same thing. They both
refer to the process required to transfer ownership in property from one person to
another. Someone may ask, for example: ‘Which firm of attorneys is going to register
your transfer?’ or: ‘Which firm is attending to your conveyancing?’ and mean the same
thing.
In a broader sense, however, conveyancing is about more than just transfers of
ownership in property. A transfer is just one example of a conveyancing process; many
other conveyancing processes exist. Some of these processes relate to ownership, but do
not involve transfer of the ownership. For example, correcting an error in the description
of property in a deed involves a conveyancing procedure, but does not result in any
transfer of rights.
Some other conveyancing processes relate not to ownership in property, but to other
rights in property. Registering a mortgage bond in favour of a bank creates certain rights
for the bondholder (the bank), although the right conferred on the bank is not
ownership; it is a different type of right.
This is our definition of conveyancing in its broader sense: Conveyancing involves
the law, practice and procedures concerned with creating, maintaining and
transferring real rights (that is, ownership and certain lesser rights) in immovable
property.

1.6 Examples of conveyancing procedures

The following are examples of conveyancing processes that often occur in real life:
• transfers of ownership in land (When A sells his house to B, the change of
ownership is recorded in the deeds office by means of the registration of a deed of
transfer);
• registration of mortgage bonds (In order to buy A’s house, B obtains a loan
from the bank. As security for repayment of the loan, the bank registers a bond over the
house);
• cancellation of mortgage bonds (Before A’s house can be transferred to B, the
bond which A’s bank had previously registered over the property must be cancelled);
• creating townships (A’s house is in Roseville. Roseville was originally a portion of
a farm, which a developer developed by cutting the land up into smaller stands, building
roads and providing street lights, water and electricity connections and so on);
• creating sectional title schemes (townhouse complexes);
• subdividing property (For example when a big stand is cut up into two pieces
and one is sold off);
• creations of servitudes (A grants B the right to use a road on A’s property in
order to reach his own (B’s) property).

1.7 Reasons for the transfer of property

Transfers of land do not happen by accident — they take place deliberately and for a
reason. In conveyancing we refer to the reason for a particular transfer as the ‘causa’ of
that transfer (causa is the Latin word for cause or reason).
Transfers resulting from property sales are the most obvious causa that conveyancers
work with. But many other causae (reasons) exist. For example:
• inheritance: X dies and bequeaths his property to his daughter;
• donation: A member of a church donates his property to the church, to be used as
a shelter for homeless persons;
• divorce settlement: A and B were married; they consented in the divorce
settlement that A would keep the furniture and B would get the house.

1.8 What is a mortgage bond?

Registrations of transfers and bonds and cancellation of bonds are the three
conveyancing procedures that probably occur most often in deeds offices around the
country. By now you know what a transfer is, but what is a mortgage bond?
This is our definition of a mortgage bond: A mortgage bond is a document which
states that the owner of a certain property owes a debt to the lender (usually, but
not necessarily, a bank) and that the property is given as security for the debt.

The owner (who is borrowing the money) is called the ‘mortgagor’ in the bond and the
lender is called the ‘mortgagee’ or the ‘bondholder’. Although its correct description is a
mortgage bond (so as to distinguish it from other types of bonds, such as notarial
bonds), we often refer to this document merely as a ‘bond’.
The bond is a form of security (something that safeguards the lender against loss) and is
registered in a deeds office over the particular property. A rubber stamp (endorsement)
is imprinted on the title deed of the property by the deeds office describing the bond and
the amount of the debt, so that anyone enquiring about the property will know that it is
mortgaged. (See the mortgage bond endorsement on page 1 of Precedent P81.)
Registration of a bond has certain consequences:
• the mortgagor (the owner of the property) cannot transfer the property to someone
else unless the bond is cancelled, and for this she needs the consent of the mortgagee
(the bondholder);
• the deeds office will under normal circumstances only cancel a bond if the
bondholder consents in writing thereto (and usually the bondholder will consent only
once the full outstanding amount owed has been paid). See Precedent P103 for a
Consent to Cancellation and ch 42;
• if the mortgagor fails to repay the loan, the bondholder may attach the property
(following a certain legal procedure), sell it by public auction and use the proceeds to
pay the outstanding loan;
• if the mortgagor goes insolvent, the bondholder has a secured claim. This means
that from whatever money is available from the sale of the property by the trustee of
the insolvent estate of the debtor, the bond debt will be discharged first and only if there
is money left after that, will ordinary creditors be paid.
Registering a bond does not make the bondholder the owner of the property, it merely
gives the bondholder the right (under certain circumstances) to sell the property and to
retain the proceeds, in order to discharge the debt of the owner.
Think of a mortgage bond as a piece of string and a property as a parcel (a package) in
the hands of its owner. One end of the string is wrapped around and tied to the parcel,
while the bondholder holds the other. If the owner fails to pay the mortgagee (the
bondholder), the bondholder may pull the string (the mortgage bond) to remove the
parcel (the property) from the owner’s hand.
Chapter 2
Understanding the concepts immovable property,
ownership and real rights

2.1 Introduction
Conveyancing concerns legal and administrative processes relating to the transfer of
ownership (and other rights) in immovable property. In the previous chapter we
examined the concepts ‘conveyancing’, ‘transfers’ and ‘mortgage bonds’ in more detail.
In this chapter you will learn more about the concepts ‘immovable property’ and
‘ownership’.

2.2 Meaning of ‘immovable property’

The terms ‘land’, ‘property’, ‘fixed property’, ‘immovable property’ and ‘real estate’ are
words used to describe the same thing: the earth under our feet; we walk on it, grow
food on it, sleep on it and live on it. It is called ‘immovable’ for obvious reasons.

2.3 Improved and unimproved land

A piece of land can be ‘unimproved’ (meaning it is vacant — there are no buildings on it)
or ‘improved’ (there are buildings on it, such as houses, a block of flats, offices, and so
on). Whether land is improved or unimproved is not important for conveyancing
purposes. The property description in a deed of transfer makes no mention of

2.4 Buildings are one with the land: superficies solo cedit
If there are buildings on a piece of land, the buildings are in terms of our law regarded
as forming part of the land. This legal ‘maxim’ (a legal rule) has a name: it is called the
superficies solo cedit rule. Roughly translated, this Latin phrase states ‘once (the
building) becomes fixed (to the land) it ceases to exist as a separate entity’.
Because of the superficies solo cedit rule, buildings can generally not be separately
owned from the land. The person who owns the land automatically owns the buildings on
it. If your neighbour builds a house, thinking he is building on his land but actually
building it on yours, you are the owner of the building. At best he will have the right to
be compensated for his costs.
If a property owner wants to sell his property (there is a house on it) he will sell both the
land and the house on it. It is not possible for him to sell the land and retain the house,
or to sell the house and retain the land, as the law does not permit buildings to be
owned separately from the land on which they are situated.
There is one exception to the rule that buildings cannot be separately owned from the
land on which they are built. The rule was relaxed somewhat by the legislator (our
country’s parliament) when it passed the first Sectional Titles Act (STA) in 1971. That Act
has since been replaced by an improved version, the Sectional Titles Act 95 of 1986.
Because of the STA, it is now possible for someone to own a section (a building or part of
a building), in a sectional title scheme separately from other owners of sections in that
scheme, and for all the owners of sections in the scheme to jointly own the land in the
scheme.
If a property developer/owner wants to qualify for this relaxation of the superficies solo
cedit rule, he or she needs to apply for the opening of a sectional title register in respect
of the land and building/buildings in question. You will hear more about sectional titles in
chapters 4 and 5. (See also para 10.4.4.)

2.5 Property descriptions in title deeds: four possibilities

Only four possible descriptions of property are found in title deeds. A property will either
be described as an erf, a farm, a sectional title unit or an agricultural holding.
(Agricultural holdings are mostly found in certain regions that used to be part of the old
Transvaal province. More will be said about these in chapters to follow.) For examples of
different property descriptions, see para 3.5.

2.6 Various physical forms of property

Immovable property exists in different physical forms. Here are examples:
• a house on a stand, or a vacant stand, in a city or town (an erf);
• a farm with a house, stores and various other outbuildings (a farm);
• a high-rise block of offices (an erf);
• a house in a golf estate (an erf);
• a holiday cottage by the seaside (an erf);
• a shopping centre (an erf);
• a flat or apartment in a building (a sectional title unit);
• a free standing house in a sectional title scheme (a sectional title unit).
In conveyancing we use the word 'erf' rather than 'stand' because this is the term used
in title deeds and other official documents dealing with stands. Farmland is also known
as 'agricultural land' in conveyancing circles. Flats and buildings that have been
developed in terms of the STA are known as 'sectional title units'. All of the buildings and
land in such a development are referred to as a 'sectional title scheme'.

2.7 Land use, land development and town planning

Land is used for a variety of purposes. Flats and houses are examples of residential use
while office blocks and shopping centres indicate commercial use. Factories and plants
are zoned (declared, marked) for industrial use while churches and mosques are zoned
for religious purposes, and schools for educational purposes.
As our population expands and the need for goods and services increases, more and
more land is developed. 'Property development' is the term used to describe the process
whereby a property investor builds on and improves land (usually with a view to selling
and making a profit) for a specific purpose. Examples of property development:
• developing a new township, for example, buying a large tract of land at the
seaside and dividing it into 30 stands to sell to the public;
• building a new high-rise building on a demolished site in the city centre to rent
out as offices;
• building a shopping centre, parking and general facilities;
• developing a retirement village in a large town;
• setting up a golf estate with luxury housing units, sports facilities and golf
courses.
Town-planning and environmental laws exist to ensure orderly and responsible
development of land. Property developers appoint specialists called town planners and
environmental experts to help them to comply with the rules and to apply to the
town-planning authorities for approval of their developments.
The authorities in the various regions of South Africa have very specific rules about land
use and development of land in their areas. One cannot, for example, turn a house
(zoned for residential purposes) into a factory (industrial use) or even use it to run a
business from (commercial use) without the necessary permission. The law makes
provision for 'town-planning schemes' (an overall 'business plan' or blueprint for land use
and development in the area) for all urban (as opposed to rural) areas.
'Ordinary' conveyancing practices that involve the registration of transfers, bonds and
bond cancellations have little to do with town planners and town-planning issues.
Paralegals generally do not have to concern themselves with this topic. On the other
hand, conveyancers who are involved in property developments (such as opening of
township registers, sectional title schemes and large commercial property developments)
need to know a lot about town planning and land use management.

2.8 Understanding the concept 'ownership'

Conveyancing is about the transfer of 'ownership' (and other rights) in immovable
property from one person to another. What is ownership? Differently stated, what does it
mean to 'own' something?

2.8.1 Persons and the law of things

To own something (whether a house, a car, clothes or a teddy bear) is different from
borrowing it, renting it or looking after it on behalf of its owner. Ownership means that
the object in question belongs to you. It is yours. As the owner, you have the right to do
certain things with that object that others may not do with it.
In terms of the South African law of things, there are persons (legal subjects) and there
are things (legal objects). The persons have rights and obligations in relation to each
other and they have rights and obligations in relation to things.
Things can be movable, for example a diamond ring, a chair, a car or a piano, or
immovable, namely land.

2.8.2 Real rights, personal rights and constitutional rights

A 'right' is a legally recognised and valid claim by a person in relation to a certain object
and/or in relation to another person (or group of persons). There are different types of
rights namely real rights, personal rights and constitutional rights.
The theory of law relating to the distinction between the various types of rights is rather
involved and not relevant to our purposes. A simple summary of the important points is
provided here.
'Real rights' are strong rights in relation to things and can generally be enforced against
the whole world as opposed to just one or two individuals. Examples of real rights are
ownership of a thing (movable or immovable), the rights of a bondholder under a
mortgage bond and rights to a registered servitude (for example the right to use a road
on someone's farm, or the right to draw water from someone's dam).
‘Personal rights’ are rights against other persons (the right may or may not relate to a
particular thing) that obliges that person to do something or permit something to be
done. Examples of personal rights are the right in terms of a contract to rent someone
else’s property, a cell phone contract that allows you access to the cellular network at a
price, or the right to claim your monthly salary from your employer.
‘Constitutional rights’ are rights granted to the citizens of our country in terms of the
Constitution. These include the right not to be unfairly discriminated against, the rights
to basic education, housing, health care services, and so forth.
Real rights in immovable property must generally be registered in a deeds office to be
valid against all persons. Personal rights, with a few exceptions, may not be registered in
a deeds office. In conveyancing, therefore, we work mostly with real rights, of which
ownership is the strongest and most comprehensive right. For this reason you will find
that transfers of ownership in immovable property have to be registered in the deeds
office to be valid, but leases (rental contracts) of land (with certain exceptions) may not
be registered.
Some more examples of the different types of rights:
• the right to rent a thing or to use a thing (personal right, created in a contract);
• the right to receive a salary from your employer (personal right, created in a
contract);
• the right not to be unfairly dismissed by your employer (personal right, created in
terms of our labour laws);
• the right to be compensated if someone unlawfully and negligently damages your
car in an accident (personal right, created in terms of the law of delict);
• the right to a fair trial, if you are arrested and held on a criminal charge
(constitutional right, created in terms of our Constitution as supplemented by other
legislation).
There is no need to register personal rights anywhere. The mere words spoken and
agreed by people or written down and signed, make these personal rights valid and
enforceable. On the other hand, when real rights relate to immovable property, they
must be registered in a deeds office to be valid and enforceable.

2.8.3 Ownership: a bundle of rights

The owner of a thing (whether movable or immovable) has the right to:
• use and enjoy the thing;
• control and keep it;
• retrieve it if it is stolen or lost;
• sell it;
• give it away;
• lend or rent it out;
• encumber it (burden it, for example, by registering a servitude or bond over it);
• change it;
• break or destroy it;
• improve it;
• use any fruits that the thing may produce (for example the offspring of an animal,
rental income from a property or the interest generated by a deposit in the bank);
• refuse the use of it to others.
Generally speaking the owner of a thing may do with it whatever he or she likes and
other people do not have the right to interfere with an owner’s use of the object. As we
can see from the above list, the right of ownership is really a bundle (combination) of a
number of smaller, or lesser, rights. When all these rights are put together it gives the
strong right we call ownership.

This is our definition of ownership:

Ownership can be described as a legal relationship that exists between an owner
and a thing in terms of which the owner has certain entitlements (a bundle of
various, lesser rights) towards that thing, and a relationship also exists between
the owner and other persons in terms of which the owner can require other persons
to respect his or her entitlements regarding the object. 1

Ownership (a real right) is stronger and more extensive than, say, the rights given to a
person who rents a thing. A person who rents a thing, namely the lessee (tenant),
generally only has the right to use it (a personal right) and certainly does not have the
right to sell or break it.

2.8.4 Limitations on the right of ownership

Because ownership is regarded as such a strong right it is sometimes called an ‘absolute’
right, meaning other people are not permitted to interfere with that right. But to protect
public interest our law increasingly places limitations on the absolute nature of
ownership, particularly when it comes to immovable property.
Here are a few examples that show how the right of ownership of immovable property is
limited by law:
• an owner of a building that has recognised historical importance may not without
permission break down or even improve the property;
• farm labourers living on farms who have met certain requirements have the right
to live on the farm, and the farm owner is by law forced to accept this interference in
reduction of the right of ownership;
• town-planning schemes restrict property owners in what they may build on their
stands and what they may use their properties for: A person may not build three houses
on a stand intended for one, may not build a ten-storey block of flats on a stand zoned
for a single storey residence and may not keep a herd of cows on a stand in an urban
(built-up area, town, city) area.
Chapter 3
The different faces of property ownership: Freehold,
leasehold, sectional titles, and others.

3.1 Introduction
The previous chapter informed us about the meaning of the terms ‘ownership’ and
‘immovable property’. It explained that the legal right called ownership is a specific type
of right, namely a real right, with a specific content. We learned that ownership is really
a bundle of rights which, grouped together, gives the owner a wide range of powers in
relation to the thing that he or she owns and in relation to other persons.
We also learned that immovable property comes in various shapes and sizes, for
example vacant stands, houses, flats, farms and so on.
In this chapter we will examine the concepts ownership and immovable property more
closely. Perhaps we could say that we will learn to recognise the different faces of
ownership of immovable property.
As conveyancing paralegals you will come across three possible categories of property in
title deeds: Freehold, sectional titles and (to a far lesser extent) leasehold property.
These concepts are explored in this and the following chapter.

3.2 The history of ownership of South African land in a nutshell

When the government first started to grant land rights to private individuals from 1652
onwards it wasn’t necessarily ownership that they offered those who hoped to make a
living here. 1
During the rule of the Dutch East India Company (and also in the early years of the
British occupation) farms were granted to applicants on a system of ‘loan place’. This
was essentially a rental arrangement at a very small fee. The farmer could not alienate
(sell or otherwise dispose of) the land, and neither could the land be inherited.
In about 1813 the ‘loan place’ system was abolished and a ‘quitrent’ system was
established. Now the land had to be surveyed and a yearly quitrent fee (much higher
than the ‘loan place’) was payable to the authorities. On the positive side, the occupier
of the land now had the right to alienate it.
In 1843 the government issued a notice that quitrent property could be converted to
‘freehold’ property, on payment of a fixed sum of money. People could now effectively
buy their land and become the outright owners. This was the beginning of true private
ownership of land in South Africa. Between 1934 and 1937 the quitrent system was
abolished totally. Generally speaking, private ownership of ‘freehold’ property became
the norm at that time, and most properties owned today are ‘freehold’ properties. There
is no more ‘loan place’ or ‘quitrent’ in our country.
We do not have a graded system of ownership. There is no such thing as ‘Mr X has a
first-class ownership of his property and Mrs Y owns her property on a basis of
second-class ownership’. True ownership is ownership, and it is fair to say that there is
only one ‘strength’ of ownership in our country. Property owners all have the same
bundle of rights regarding their properties.
It is true, though, that not all rights in land amount to ownership; there are lesser rights
in property. Examples include leasehold (similar to ownership but qualified in that it lasts
for a limited period, usually 99 years), usufructs and other servitudes, rights under a
long-term lease agreement, and so on. These rights must not, however, be confused
with ownership of property.
Ownership of South African property manifests in one of two forms: freehold or sectional
title. Because leasehold rights (less than ownership) continues to play an important role,
this concept is also explained and discussed here.

3.3 Freehold property

If it is said that a property is freehold, it means that it is capable of being privately
owned, that the owner owns the land (as opposed to having lesser rights) and is free to
deal with it as the law of ownership allows and as he or she (within reason) pleases.
Any person who owns an erf (a stand) or a farm (agricultural land) or an agricultural
holding (smallholding) in South Africa is said to own a freehold property. The term
freehold is used today to indicate true ownership of that erf or farm or agricultural
holding.
The term freehold is also used in relation to transfers or property to distinguish them
from leasehold and sectional title transfers. Freehold property is sometimes also called
‘conventional’ property. Someone may ask, for example: Is this a conventional (or
freehold) transfer or is it a leasehold transfer?

3.4 Freehold versus leasehold

A freehold property is one in respect of which the owner has full ownership. ‘Leasehold
property’ implies a lesser right, something like qualified ownership. One ‘owns’ the land,
but only for a limited duration, for example 99 years. After that period of time expires,
the land reverts to the owner, usually the authorities such as a municipality or the state.
Conveyancing paralegals are not likely to deal with leasehold properties unless the firm
they work for has a specific interest in transactions of this type. Do not confuse
leasehold rights (qualified ownership, and held by virtue of the title deed of the land)
with a lease (a rental agreement between the land owner and a tenant).
Leasehold rights owe their existence to the former apartheid government. In areas
previously known as ‘black townships’ occupiers of land were not granted unqualified
ownership of land. It was possible for black people to ‘own’ land; leasehold owners had
the same rights as an owner of property (including the right to mortgage it, for example)
but the rights would only last 99 years from date of issue of the relevant title deed. At
least, when the owner transferred his leasehold rights to a new owner, the 99-year
period would re-commence from year nil.
Properties held by means of leasehold rights are still registered in the deeds office
alongside freehold property today and a new deed of transfer for a leasehold property is
issued along the same lines and principles as that for a freehold property. The major
difference between the two title deeds is the property description. A freehold property is
described as ‘Erf 123...’ while the leasehold property is described as ‘all right, title and
interest in the leasehold in respect of Erf 123...’.
Today leasehold rights are being converted into freehold rights at a steady pace. It is not
a fast process, however, because in most of the areas where these rights were granted,
land was initially not surveyed and no diagrams or proper general plans exist for the
individual stands. Before the rights for the properties in a particular township can be
converted into freehold rights, the areas must be surveyed and general plans must be
drawn up and approved. This requires time and money, and it will probably still be some
time before the last of the leasehold stands are converted.
It is in theory still possible for any developer (not necessarily a local authority) to decide
that he or she does not wish to transfer full ownership rights to purchasers, and to
therefore sell only leasehold rights, in a particular development. Currently there seems
to be a renewed interest on the part of developers in the commercial viability of
leasehold schemes.
Over the years the South African legislator has created, in addition to leasehold rights,
certain other statutory rights which give occupiers of land something more than mere
occupation rights. These rights (often created by Proclamation) are sometimes referred
to as ‘lesser’ rights and must not be confused with ownership or even leasehold rights.

3.5 Freehold versus sectional title property

An inspection of a title deed will reveal whether the property held by that deed is a
freehold property or a sectional title property. Although conventional and sectional deeds
look similar, the property description will clearly indicate the difference.
A freehold property will either be described as ‘Erf so-and-so’ or as ‘The Farm so-and-so’
while a sectional title unit will be described as ‘A unit consisting of a) section no... as
shown and more fully described on sectional plan... and b) an undivided share in the
common property...’.
For example, this is what a property description will look like in a conventional deed of
transfer (and see also the property description in P81):

Erf 456 Bellville

In the City of Cape Town

Division Cape

Western Cape Province

In a sectional title deed of transfer, the property description will look like this (and see
also the property description in P45):
A Unit consisting of—

(a) Section No 34 as shown and more fully described on Sectional Plan No SS

64/1980 in the scheme known as DUNROBIN in respect of the land and buildings
situate at SEA POINT, in the City of Cape Town, Cape Division, Western Cape
Province, of which section the floor area, according to the said sectional plan, is 93
(ninety three) square metres in extent, and

(b) An undivided share in the common property in the scheme apportioned to

the said section in accordance with the participation quota as endorsed on the said
sectional plan.

It is easy to spot the difference in title deed descriptions, but understanding the legal
differences between the two concepts ‘sectional titles’ and ‘freehold’ requires some
thinking.
Chapter 4 explains in more detail what sectional titles are all about. In this chapter, it is
sufficient to say that sectional title ownership involves ownership of a building or part of
a building, separate from the land on which it is situated. For example, if someone owns
one flat on the third floor of a building, he or she owns a ‘section’ in a sectional title
scheme. This is an exception to the superficies solo cedit rule which was explained in ch
2.4.
The title deed of the property will describe the property clearly as a section, as opposed
to a freehold property such as an erf or a farm. The procedures in sectional title
transfers are similar to those in conventional (freehold) transfers and many
conveyancing firms will say that about 30% of the transfers and bonds they register are
sectional titles and the rest are freehold transfers. Some firms specialise in sectional title
developments and their ratio of transfers may be the other way round.

3.6 Shareblock schemes

A ‘shareblock scheme’ is a scheme in terms of which ownership of a share in a company
grants to the shareholder a right to immovable property owned or leased by that
company.
Owning shares in a shareblock company does not mean that one owns immovable
property. It is therefore not technically correct to say that shareblocks are a form of
property ownership. Many conveyancers and other role-players in conveyancing describe
it as such, but we caution you to remember that this is not accurate.
Owning shares in a shareblock company means that one owns a share in a special type
of company. Actually, one owns a number of shares in the company; these shares are
grouped together (share number 1 to share number 10, for instance) and these are then
simply called a ‘block of shares’ or a ‘shareblock’.
The company granting the shares either owns the property or has the right to lease or
use the property. (It is therefore not the individual that owns the property — he or she
merely owns the shares in the shareblock company.) In addition to owning a block of
shares in the company, the holder of the shares also has a written agreement with the
company (this agreement is called a ‘use agreement’) that grants him/her the right to
exclusive use of a specific part of the property (such as flat no 13 in a block of flats).
Before the Sectional Titles Act (STA) came into existence, shareblocking was the closest
thing to ownership available to occupiers of parts of buildings. Now that sectional title
legislation makes it possible to own a flat outright, it is no longer necessary for property
developers to opt for shareblock schemes in order to make money from property
development. The STA makes it possible for existing shareblock schemes to be converted
into sectional titles, and many property owners opt for this route.
The decision to convert to sectional title will require the property owner to consider
various factors. On the one hand, shareblock investments are perceived to have many
inherent risks. For one, the holder of a share in a shareblock company does not directly
own the property — if the company goes bankrupt, the property will be transferred to
creditors and the owner of the shares will be left with just the share certificate, now a
worthless piece of paper. There is also the risk of bad management of the company and
the company property and there is little, if anything, individual holders of shares can do
to stop the abuse.
On the other hand, shareblock companies with proven track records and sound
management have certain advantages that direct property ownership cannot offer.
Because this is a technical topic, however, it is not dealt with in depth here.
Amendments in 2011 to the Transfer Duty Act grant a transfer duty exemption when a
shareblock holding is converted to sectional title ownership after 1 January 2013. This
financial benefit re-opened many shareblock holders’ deliberations as to whether
conversion is the route to go. A brief comparison between the rights conferred in each
instance, will help one to come to a decision.
Shareblock ownership means that:
• The entire building is owned by the shareblock company (or the shareblock
company can be the lessor). The holder of a block of shares in the company (a
shareblock), obtains the right to use a specific portion of the building by entering into a
use and occupation agreement with the company at the time of acquiring the shares.
What the purchaser owns, therefore, is a shareblock and he has the right to use part of
the building — but he does not own that part of the building.
• A share certificate is issued to the ‘owner’; he owns shares.
• The shareblock company is managed by the company’s Board of Directors. The
Board imposes levies to fund the management and maintenance of the building. The
shareholders’ interests in the scheme are therefore in the hands of the Board.
• The management of the shareblock company and conduct of the Board of Directors
must comply with the provisions of the Share Blocks Control Act and the Companies Act.
• Financing options for the purchase of a shareblock in such a company are limited,
as the shares cannot be used as security for a mortgage. A potential purchaser must
therefore generally come up with the cash himself, which makes a shareblock hard to
sell.
Sectional title ownership means that:
• The owner owns the physical property and will receive a separate title deed thereto.
• An owner can mortgage his property as security for a loan, in the same way as with
freehold property.
• Management of the scheme is in the hands of trustees who are appointed by the
body corporate that is, in turn, made up of all the owners in the scheme. This structure
renders the management of sectional title schemes representative of all the owners’
interests.
• Management of the scheme and the conduct and duties of trustees and managing
agents are prescribed in the Sectional Titles Schemes Management Act.
• Levies are raised by the trustees and are payable by all owners. It is used for the
management of the scheme. All schemes have Management and Conduct Rules with
which all owners and occupiers must comply.
• Owners elect and appoint trustees to act on their behalf in the management and
administration of the scheme.
(Sectional title schemes are dealt with in detail in chapters 4 and 5.)
As the above comparison demonstrates, it will often be advisable to convert to sectional
title as the latter grants the purchaser so much more. However, where a Board of
Directors are skilled business men, there are advantages to the shareholder to remain
just that.
To this day, many shareblock schemes exist where the owners do not want to convert to
sectional titles. New shareblock schemes are also still created from time to time.

3.7 Time-share
According to LAWSA, 2 the expression ‘time-sharing’ had its origins in the 1960s with
regard to expensive equipment used in businesses. To make productive use of a
computer in those days, for example, it had to be used continuously. It was too
expensive for just one business to buy, so a group of business persons bought it and
‘shared time’ on it.
In a property context, the idea behind a time-share scheme accommodates the
arrangement that different people will ‘own’ the same property at different times. This
can obviously not serve as a structure for ownership of a home, but is a useful method
of property ‘ownership’ for holiday accommodation.
A time-share scheme is one in which a number of people (a minimum of two) acquire
the right to occupy a particular property for a specific or determinable period of time.

Example:

You ‘buy’ one week per year in a holiday flat on the coast during peak holiday season, and I ‘buy’ three
weeks per year in the same flat during the off-peak season, for the same price. Our time-share right
lasts for 15 years. (The developer could sell it for any period, say three years or 100 years, depending
on circumstances.)

Time-sharing in property is a popular concept, as it can generate more profit for the
developer than a sale of the property to one investor, and the purchaser (who would not
necessarily want to own the whole property or who can perhaps not afford to do so)
benefits in that he or she obtains an asset, in the form of a right of some sort (not
necessarily ownership, though) in property.
The term ‘time-share’ as used in a property context gives no indication of the underlying
legal nature of the rights acquired. There are many possibilities, but the two main
options open to a developer are to grant the purchaser (1) some form of ownership of
property or (2) merely the right to use the property.
The most popular structures used in time-share developments today are:

(1) Granting some form of ownership

• Sectional title schemes
If the developer chooses to base the time-share scheme on sectional title ownership, he
will sell to the purchaser a share in the property (the deed of transfer will, for example,
reflect that a 1/52 share in the property is transferred) coupled with a right to use the
property for a particular period each year, for example, one week.
Or the transfer of a 5/365 share in a sectional title unit will, for example, indicate that
the purchaser may use the property for five days each year, while a 1/12 share may
mean he or she is entitled to occupy the property for a month every year.
The description of the transferee in the deed of transfer will then read as follows:
John Jacobs
Identity Number ...
Unmarried
(as to 1/12th share)
• Shareblock schemes
In the case of time-share based on a shareblock scheme, one will purchase a share block
in the company owning the property and the accompanying use agreement will specify
the period during which the property may be used by the owner of the share- block.

(2) Granting a (mere) right to use

• A points or a club system
The club system requires ‘purchasers’ to become members of a club. The members pay
an entrance fee or membership or club fee (the ‘purchase price’), as well as a monthly or
annual subscription fee (the levies).
The points system requires the purchase of a number of points, and the number of
points allocated determines the amount of time available.
• Lease
The right to use the property for a certain period can also be based on a lease
agreement in which the parties set out the periods in which the lessee may occupy the
property, together with other details.
As you can see from the above, time-share does not necessarily grant to the purchaser
a form of ownership in the property. Although he or she acquires ownership of a share in
the property if the scheme is based on sectional title legislation, in other cases the
purchaser acquires merely the right to use the property. Investing in time-share
schemes can be risky, and the industry has had to battle negative perceptions from
potential investors for a number of years. However, some schemes have been
functioning soundly for many years and investors who do their homework will end up
with a worthwhile product.

3.8 Fractional ownership

The term ‘fractional ownership’ is generally associated with luxury holiday homes, for
example large freehold residences situated on golf estates in upmarket coastal resort
areas or on game farms.
Although the phrase ‘fractional ownership’ only became popular in our country in 2006,
the underlying concept is nothing new.
Fractional ownership usually means that a developer registers a particular property in
the name of an entity (such as a company) and offers shares in that entity for sale to a
number of buyers, for example ten or twelve. There will be an underlying agreement
stipulating how the shareholders will share the use of the property. For example, it could
be based on a shareblock scheme: the buyer buys a shareblock and enters into a use
agreement with the company which grants him the right to use the property for, say, one
month per year (shareblock). Or the buyer buys a ½th share in the property and enters
into an agreement with the other holders of ½th shares in terms of which they agree
when each may use the property (ownership).
Fractional ownership is therefore just a time-share scheme based on a shareblock legal
structuring (a points system or club system can also be employed), but because the
Share Blocks Control Act 59 of 1980 imposes onerous obligations, fractional ownership is
structured in a manner aimed at simplifying legal compliance.
In summary: fractional ownership concerning a particular property is an up-market
time-share scheme in which a small number of investors participate, based on indirect
property ‘ownership’ via an entity. The distinguishing features are that it has a more
exclusive approach (only ten to fifteen ‘owners per property’) and that it permits
‘owners’ more rights (eg say in management) and longer periods of occupation than
does traditional time share schemes.

3.9 Life rights

When dealing with housing schemes for retired persons, one will often encounter the
concept of ‘life rights’. To understand what the content of a ‘life right’ is, it is necessary
to look at the Housing Development Schemes for Retired Persons Act 65 of 1988 (the
HRP Act), an Act which aims to afford a minimum level of protection to retired buyers of
housing rights in retirement schemes.

3.9.1 The HRP Act

The HRP Act applies when:
• a ‘housing interest’;
• in a housing development scheme;
• is sold to a retired person (defined as someone who is older than 50 years of age).
The Act applies to all instances where housing interests are sold to retired persons,
whether or not the scheme is described as a retirement village, lifestyle scheme or the
like.
’Housing interest’ is defined to include any right to claim transfer of the land to which the
retirement scheme relates (which denotes outright ownership of the property); as well
as the right to use or occupy land on which the retirement scheme is operated (which
denotes some form of lesser right than ownership in the property). Practically this
means that the Act acknowledges that a retired person can acquire rights of ownership
or some other, lesser form of a right to occupy or use property.
This distinction manifests as follows in practice. A retired person can:
• purchase ‘housing interests’ in the form of ownership of a particular housing unit.
This could relate to the purchase of a unit in a sectional title scheme or of a house
standing on freehold land (although the latter is not typically found in retirement
schemes); or
• purchase rights to occupy or use property, also considered to be ‘housing interests’,
that amount to something less than ownership. The underlying legal structure for the
right to occupy or use a property may be based on a shareblock scheme, long-lease
agreements and the like; typically though it is manifested in the granting of ‘life rights’.

3.9.2 Content of a ‘life right’

If the purchaser acquired life rights, it means that he or she has the right to occupy a
particular housing unit for the remainder of his or her life (or as otherwise agreed), but
ownership of the property is not acquired. What happens upon death of the holder of the
life right, is dealt with in the contract of sale that was concluded between the scheme
developer and the purchaser. In many instances the arrangement is as follows: the
purchaser makes a lump sum, interest free loan to the developer (the ‘purchase price’).
This loan is made as consideration for the right which the developer grants to the retired
person, for the duration of the latter’s life, to use and occupy the housing unit. The use
rights will also include the right to use and enjoy the common property in the retirement
scheme and to participate in management of the scheme. The parties also agree that the
capital sum of the loan will be repaid to the purchaser’s estate upon his death or, if the
agreement provides for this, when the life right is sold to another person.
The HRP Act determines that the holder of a life right has, for all purposes, the same
rights as those conferred upon a lessee in terms of a registered long lease. Practically
this means that the holder of a life right has a real right (see chapter 2.8.2) to occupy
the property for the full term of the right. Therefore, should the developer sell the land,
the holder of a life right may remain in occupation for the duration of his housing
interest.
To further bolster the rights of retired persons who hold life rights in retirement
schemes, the HRP Act determines that the real right of the ‘life right’-holder will rank in
priority over any other right, whether or not this life right is registered against the title
deed of the property. It is also irrelevant whether the life right (if it was registered
against the title) was registered before or after any other real right registered against
the property. In other words, the Act says that the right of the holder of the ‘life interest’
will rank above that of a mortgage bond holder, holder of a servitude and so forth,
despite the former rights having been registered earlier in time.
The purchaser of the housing interest need not be a retired person; anyone, regardless
his or her age, may invest in a retirement scheme. In terms of s 7 of the Act, however,
no person other than a retired person or his spouse (except with the written consent of
all other holders of housing interests in the scheme) may reside in a retirement scheme.

3.9.3 From a conveyancing perspective

If the retirement scheme offers ownership (freehold or sectional title), th en the usual
conveyancing procedures for transfers of such properties are involved. If life rights are
sold, however, it is not regarded as a transfer of ownership and no conveyancing process
is involved.

Table 3.1: Comparison of the various forms of direct and indirect ownership of
immovable property in South Africa

Nature of right Proof of Nature of What can the Can the

owner/holder’s property owner sell, and owner/holder’s
rights to the how are the rights be
property rights mortgaged?
transferred?

Freehold Owner owns the Title deed Erf, farm, Owner sells the Yes, existence of
property; registered in deeds agricultural property; mortgage bond is
ownership office holding transferred by endorsed against
comprises the means of deed title deed of the
full ‘bundle of transfer property
rights’ registered in
associated with deeds office
the term
ownership

Sectional Title Owner owns the Title deed Unit in sectional Owner sells the Yes, existence of
property; real registered in deeds title scheme unit and share in mortgage bond is
and full office common endorsed against
ownership; property (also title deed of
comprises the exclusive use property
full ‘bundle of areas, if
rights’ applicable);
associated with transferred by
the term means of deed of
‘ownership’ transfer
registered in
deeds office

Leasehold Leasehold, Title deed Erf, farm, Owner sells the Yes, existence of
owner ‘owns’ registered in deeds agricultural leasehold rights mortgage bond is
the property but office holding (in in the property; endorsed against
for limited theory possible transferred by title deed of
duration, for to hold means of deed of property
example 99 leasehold rights transfer
years. While it to sectional title registered in
lasts, the unit too) deeds office
leasehold rights
comprise the
full ‘bundle of
rights’
associated with
ownership
Shareblock The holder of Share certificate Erf, farm, Owner sells No, the holder of
the shareblock and use agreement agricultural share and use the shares and use
does not own holding. If a agreement; agreement cannot
the property, sectional title rights are mortgage them —
the shareblock scheme is transferred by only immovable
company does. opened for the means of cession property can be
The holder owns land the share of share and loan mortgaged. The
the block of block scheme account and company may
shares may be cession of rights mortgage the
‘converted’ into in terms of use property
sectional titles agreement

Time-share Whether or not Depends on Erf, farm, Depends on Depends on

the holder of time underlying legal agricultural underlying legal underlying legal
share rights owns structure ie holding or structure structure — if
a share in the membership of sectional title based on sectional
property depends club, certificate unit title, the share in
on the underlying proving points, property can be
legal structure of share certificate, mortgaged
the scheme. If and use
based on sectional agreement, or title
titles, the owner deed and use
owns an undivided agreement, plus
share in the constitution of
property (for scheme
example a 1/52nd
share)

Fractional Same as time Depends on Erf, farm, Depends on Depends on

ownership share, usually a underlying legal agricultural underlying legal underlying legal
company or CC structure (see holding or structure structure, if based
owns the property 'time share') sectional title on direct
unit ownership
(sectional title or
freehold), the
share in property
can be mortgaged
Life Rights Can be: (i) Title deed Erf or sectional (i) Owner sells (i) Yes,
registered in a title unit the property or existence of
(i) Ownership
deeds office unit; transferred mortgage bond is
of an erf or a unit
by means of a endorsed against
in a sectional title (ii) No title
deed of transfer title deed
scheme; or deed
registered in a
(ii) Contract
(ii) Some form deeds office
must advise
of a right of
(ii) Owner 'sells' purchaser if the
occupation (a
rights to occupy land is mortgaged.
'lesser right'),
or use land in a 'Life rights' cannot
often in the form
contract that has be mortgaged
of a so-called life
to comply with
right
the HRP Act
 Chapter 4

Introduction to sectional titles

4.1 What sectional titles are about

South Africa inherited Roman-Dutch law (Roman law as more fully developed by the
Dutch), and today many of the legal principles that apply in our country still have their
roots in this ancient legal system. One of these rules is the superficies solo cedit rule
(see para 2.4) which in practice has the implication that ‘whosoever owns the land also
owns the buildings on that land’.
This rule has not kept up with the demands of modern times. People increasingly felt the
need to own a part of a building (such as a flat) or one building situated with other
buildings on the same piece of land (such as a ‘townhouse’). As a result of urbanisation
(more people moving into cities) and population growth, the last 40 years have seen an
ever-increasing demand for living and working space in cities and large towns.
In 1971 the legislator adopted our first Sectional Titles Act. The Sectional Titles Act 95 of
1986 (‘STA’) eventually replaced this Act and is still in operation today. The STA allows
for an exception to the superficies solo cedit rule and makes it possible (if the
developer/owner complies with certain rules) for a person to own one building out of
many buildings on one piece of land or to own a part of a building. All the owners of
buildings or parts of buildings in the scheme then jointly owns the land.
There is nothing that says only residential developments can be structured as sectional
title schemes. An increasing number of commercial and industrial properties are being
sectionalised.
In operation for close to 40 years, sectional title legislation has added a positive and
much-needed dimension to property development and property ownership in South
Africa.
The registration of sectional title schemes is a specialist conveyancing function and
although we briefly explain how sectional title schemes come into existence, the process
is not described in detail in this book.
A sectional title development can be built from scratch or an existing building (or group
of buildings) may be ‘sectionalised.’ This is how it works:

4.2 Developing a new sectional title scheme

A property developer bought a large stand in a prestigious part of town. She decided to
develop it by building 10 housing units on the stand and selling the individual units, or
sections.
The stand is too small to be subdivided into ten separate stands (usually because of
municipal zoning laws stating that subdivision is only allowed if subdivided portions have
a determined size), so she is not able to sell the individual houses as freehold properties.
The alternative is to develop a sectional title scheme.
4.2.1 Planning and preparation
After considering various building plans and possibilities, the developer chose a site
layout plan drafted by her architect, which showed ten three-bedroomed houses (some
to be only on ground level and some duplex) all with double garages. (See Precedent P8:
site plan, for an example of site plan).
The developer decided that the units should be arranged around a small park, a central
communal pool and a recreational hall. The houses will be freestanding (not sharing
walls) and each will have a small garden. (In real life the developer could also have
decided to build the houses so that they share walls with each other or she could even
have opted for one multi-storey building with flats; the physical layout of the scheme will
depend on the layout of the site, cost considerations, personal preference, market
requirements and town-planning limitations.)

4.2.2 Drafting the sectional plan

Once the site plan is finalised, the building plans approved and the building of sections
has begun, the developer instructs a land surveyor to draft a ‘sectional plan’. Sectional
plans show the dimensions of each section (length, width and height) and indicate which
buildings will be sections and which will be for common use by all the residents. (See
Precedent P10: sectional plan for an example.)
The terms ‘section’ and ‘unit’ can be used interchangeably when referring to sectional
title schemes. There is a legal-technical difference between the two terms that will be
discussed later on (see para 5.2), however, in practice it generally does not matter
whether one says ‘section’ or ‘unit’; for practical purposes they mean the same thing.
The sectional plan must not be confused with a building plan. A building plan (see
Precedent P9: building plan) contains detailed instructions to a builder how to built the
section. The sectional plan fulfils more or less the same function in relation to a sectional
title scheme as a diagram (see ch 6) does in relation to a freehold property. In other
words, the sectional plan defines the boundaries of the sections in the scheme. But
because buildings are three-dimensional (a piece of land is two-dimensional) it also has
to indicate a number of other things. Some of these are:
• the extent and boundaries of each section and the location of the sections in
relation to each other;
• the areas that are common property; (Any part of the scheme that is not part of
a section is common property, meaning that all the owners in the scheme will jointly
own it);
• parts of the common property that will be reserved for the exclusive use of the
owner of a particular section (for example, the garden around each section).

4.2.3 The SG approves the sectional plan

The next step in the process of sectional title development is for the land surveyor to
sign the draft sectional plan and to submit it to the Surveyor-General (‘SG’) for approval.
See para 7.3 for a discussion on the SG’s role and function. The SG examines the plan to
ensure that it complies in all respects with the law relating to the surveying of land and
buildings. The STA and the regulations to the STA contain extensive instructions in this
regard. Once satisfied that the plan complies with all relevant legal requirements, the SG
approves the sectional plan.
4.2.4 Lodgment and registration in the deeds office
While waiting for approval of the sectional plan, the conveyancer prepares the
application to be submitted to the deeds office, and the supplementary documents. This
application (see Precedent P11: application for the opening of a sectional title register)
requests two things: opening of the sectional title register and registration of the
sectional plan. A schedule of conditions in terms of s 11(3)(b) is lodged in addition (see
Precedent P12).
As soon as the sectional plan is approved by the SG and handed to the conveyancer, the
documents may be lodged in the deeds office.
Once the deeds office has opened the sectional title register and registered the sectional
plan, the individual sections may be transferred to the new owners (see Precedent P45:
deed of transfer of a sectional title unit from the developer to a purchaser).

4.2.5 The selling and transferring of units

The developer can sell the proposed sections long before the sectional plans have been
drafted and even before the sections have been built.
In fact, many developers insert a condition in the agreement of sale in terms of which
they acquire the land, that they will only buy the land if at least 65% or so of the
proposed units are sold within a certain period. In these cases the marketing and selling
of units take place even before the developer owns the land on which the scheme will be
developed.
In practice, then, sales in new sectional title developments often take place ‘off- plan’,
meaning that purchasers will choose the sections they want to purchase by consulting
artists’ impressions in brochures, aided by the site plan and basic proposed building plan
sketches.
By law, however, any deposits the purchasers pay in regard to the buying of units must
be held in trust (with an attorney or agent) and the earliest that the developer may use
these funds is when the sectional title register has been opened in the deeds office. The
sectional title register can only be opened once the SG has approved the sectional plan.
The sectional plan must be drafted based on actual measurements which in practice
means that a sectional title scheme can only be registered once the actual sections have
been built.

4.2.6 The development involves other processes besides conveyancing

In addition to the conveyancing process involved in the opening of a sectional title
register, certain other processes must be carried out before the sectional title register
can be opened and the sections can be transferred.
For example, in the planning phase the financial aspects of the proposed scheme will be
considered, a marketing and selling process has to be planned and executed, building
plans must be drafted by an architect and approved by the local authority, and the legal
procedures for building the units in the scheme must be observed.

4.2.7 Summary
In a nutshell, these are the conveyancing-related procedures required in connection with
the opening of a sectional title scheme:
• planning stage: drafting site plans, acquiring the land;
• land surveyor to comply with all necessary town-planning and local authority
requirements and legal provisions, and to draft sectional plans;
• sectional plan lodged with the SG for approval;
• once approved by the SG, the sectional plan is forwarded to the conveyancer and
the plan as well as the application to open the sectional title register are lodged in the
deeds office;
• the deeds office registers the sectional plan and opens the sectional title
register. Now the individual sections may be transferred.

4.3 An existing building is sectionalised

Mr X buys an old three-storey building on Naval Hill, Bloemfontein. It is a block of flats
and at the time of purchase there are eight tenants and two empty flats.
Mr X is not interested in letting the flats; he wants to sectionalise the building and sell
the flats to individual owners, for a profit.
This is the procedure to follow:
• a land surveyor must draft a sectional plan for the building and ensure that it
complies with all building laws, town-planning regulations and other local authority
requirements;
• in the meantime, the developer must notify the tenants of his intention to
sectionalise the building and must offer them the first opportunity to buy the flats they
are renting (the STA contains many provisions that must be complied with in this
regard);
• next, the sectional plan will be lodged with the SG for approval;
• while the plan is being considered for approval by the SG, the conveyancer will
draft the application to open a sectional title register. As soon as the plan is approved
and delivered to the conveyancer, the application and the approved sectional plan will
be lodged in the deeds office;
• once the sectional plan is registered and the sectional title register is opened in
the deeds office, the individual flats (now called ‘sections’) may be transferred to
their new owners.

4.4 Transfer of units after opening of the sectional title register

Sometimes the units in a new sectional title scheme are transferred immediately after
the opening of the register, sometimes only much later. In some cases all the units are
transferred at the same time, in others the transfers take place piecemeal and over a
long period of time.
How long it takes for transfer of a particular unit will depend on:
• when it was sold and what the agreement provides for;
• how soon after purchase the purchaser complied with the legal requirements,
such as paying the purchase price and transfer costs and signing the transfer
documents;
• how soon the conveyancer was able to comply with other conveyancing
requirements, such as obtaining a transfer duty receipt/ transfer duty exemption
certificate;
• how soon any legal input required from other role-players (for example consent
by the bondholder) have been obtained.
When the sectional title scheme is in existence and the sections have been transferred,
the sections are by law individually owned, but the common property (the stand that the
scheme is situated on and every part of the scheme that is not specified on the plan as a
section) is owned jointly by all the owners of sections in the scheme. This fact is
reflected in the title deed of the section concerned.

4.5 Sectional title schemes can be developed in stages

It is possible for a developer to develop a sectional title scheme in stages, or phases.
The procedure is provided for in section 25 of the STA. For example, a developer intends
to develop a new scheme that will ultimately consist of 20 sections, but initially he builds
only four sections and opens a sectional title register for these units.
The STA requires in instances such as these that the developer ‘reserves the real right to
extend the scheme’ and particulars of this reservation of rights must then be specified
when the sectional plan and application for the opening of the scheme are lodged in the
deeds office. (See Precedent P13: Certificate of real right to extend, for an example of a
certificate of real right to extend, issued in favour of the developer.)
Such a scheme is generally known as a ‘phased development’ and in due course the
developer will build further sections and transfer them to new purchasers. In
conveyancing practice this is often referred to as a ‘section 25 right of extension’.
If the developer reserved such a right, it will show up on a deeds office print-out, as the
existence of this right is noted against all sections in the scheme. See also chapter
15.24 --- the existence of such a right must be made known to purchasers of sections in
the scheme, in the sale agreement.

4.6 Living in, and managing a sectional title scheme

Once a sectional title register is opened, the sectional title scheme functions in an
orderly fashion. Each owner has real and true ownership of his or her individual section,
and joint ownership of the common property. Owners and occupiers must comply with
rules that govern the day-to-day aspects of living in a sectional title scheme.
Sectional title living is definitely more intimate than living in a single house situated on a
stand in a township. Because sectional title units are normally physically close together
and because the owners share certain facilities and the costs of maintaining them, the
people who buy into a sectional title scheme need to function to some extent as a
separate community. There have to be certain rules that all owners must comply with to
ensure they will co-exist harmoniously.
Up until September 2016, these rules were generally prescribed by provisions included in
the STA. On 7 October 2016, however, the Sectional Titles Schemes Management Act
(STSMA) was promulgated. Provisions regarding management and day-to-day
functioning of sectional title schemes are now contained in the STSMA. The STA is
retained and its provisions deal with the conveyancing and registration aspects of
sectional title schemes.
The STSMA has a list of prescribed management and conduct rules which apply, by
default, to schemes opened after 7 October 2016. A developer may make amendments
before the scheme is opened, with the consent of the Community Schemes Ombud.
After the scheme has been opened, owners can, in voting at general meetings of
owners, change or add to some of the prescribed rules that they want to be applicable
to their scheme. Certain requirements must be met before an amendment or new rule
becomes enforceable, most importantly that the change must be approved by the
Community Schemes Ombud to be valid. (See also ch 4.6.4.)

4.6.1 The body corporate

The STSMA determines that as soon as the sectional title register is opened, a governing
body (that is, a body taking care of the management and administration of the scheme),
called the ‘body corporate’, comes into existence. This body has certain powers, such as
to enforce rules and collect money (called ‘levies’) from each owner in the scheme to
cover the expenses incurred in the operation of the scheme. This typically includes water
and electricity, maintenance, security, garden services, insurance policies and the like.
The body corporate is not some mysterious group of outside rulers that acquire powers
over sectional title schemes; the body corporate has as its members none other than all
the owners of sections in that scheme. If you own a sectional title unit, you
automatically, by law, become a member of the body corporate, and as such you are
part of the governing structure in respect of that scheme. All the owners of sections in
the scheme (and no one besides the owners) are the body corporate.

4.6.2 Trustees of the body corporate

Because it is impractical for all owners in a scheme to be involved in the day-to-day
management of the scheme, the members of the body corporate elect a number of
‘trustees’ of the body corporate whose job it is to run the scheme.
The trustees must report to the body corporate on their work, and the body corporate
must hold meetings at least once a year to decide matters of importance, such as who
the trustees for the next term should be, and how much levies should be paid by each
owner during the next financial year, in order to cover expenses.

4.6.3 Managing agents

In some schemes, the owners ‘outsource’ certain functions of the body corporate (such
as the collecting of levies and administrative duties) to an outside business that
specialises in sectional title management. These bodies are called ‘managing agents’.
Although they fulfil many of the tasks and duties that the STSMA assigns to bodies
corporate, the responsibility for the proper fulfilment of these duties still remains with
the body corporate.
The STSMA distinguishes between ‘executive managing agents’ and (ordinary)
‘managing agents’. The former performs all the management tasks of the trustees while
the latter performs only specific tasks on behalf of the body corporate.

4.6.4 Rules of the body corporate

Where do the rules come from that a body corporate imposes on its members? These
rules must be formulated by the developer before opening the sectional title register or
they may be amended from time to time afterwards by resolution of the body corporate,
if required. See para 4.6 where it is explained that the Community Schemes Ombud
must approve amendments to rules before the new rule will be valid. The rules must be
filed in the deeds office when the application for opening of the sectional title register
and registration of the sectional plan is made to the Registrar of deeds.
Although a developer is free to design new rules from scratch in certain circumstances,
the STSMA contains as an annexure a standard set of rules which developers generally
adopt with or without amendments.
These rules are divided into two broad categories: management rules and conduct rules.
The management rules deal with important aspects of management while the conduct
rules determine what is permissible and not permissible in terms of conduct of owners
and their guests.
Management rules prescribe, for example, how many trustees there must be, who may
and may not act as trustees, how meetings must be held, how voting should take place,
what the functions of the trustees are, that the body corporate must insure the buildings
in the scheme, how levies shall be determined and collected, where and how funds will
be kept, and so on. (See Precedent P117: Extract from management rules for a sample
of management rules.)
Conduct rules prescribe certain standards of conduct for owners, occupiers and visitors.
The rules will specify, for example, whether pets are allowed on the premises, where
vehicles may park, the appearance of units from the outside, rules relating to laundry,
littering, letting of units and so on. (See Precedent P118: Extract from conduct rules for
a sample of conduct rules.)

4.6.5 Specialised areas of law and administration

People tend to think of ‘sectional titles’ as a single field of law and generally expect
attorneys, estate agents and managing agents to have expertise in all areas concerning
the topic.
However, it has to be noted that some attorneys specialise in sectional title
developments yet have only rudimentary knowledge of the practical requirements of
administering sectional title schemes. Similarly, skilled managing agents will know
exactly how to administer sectional title schemes and will understand the procedures to
be followed in case of disputes between owners and bodies corporate, yet will know next
to nothing about the legalities involved in registering sectional plans and transferring
sectional title units.
It is possible to generally distinguish between the following ‘specialist’ areas of sectional
title law and administration:
• sectional title development: opening of sectional title registers and registration
of sectional plans (conveyancers);
• transfers of sectional title units (conveyancers);
• management of sectional title schemes (bodies corporate, managing agents,
certain attorneys);
• managing and resolving disputes amongst sectional title owners and between
owners and bodies corporate (certain managing agents, specialist sectional title
arbitrators and practitioners, certain attorneys).
 Chapter 5

Sectional titles: How the components of a scheme fit

together

5.1 The components of a sectional title scheme: sections and common

property
Any part in a sectional title scheme that you can see or touch, such as the land or any
building or structure will, legally speaking, be one of two things: it will either be a
‘section’ or it will be ‘common property’.
A section is owned by an individual owner on the strength of a title deed and the owner
may deal with the section (within reasonable limits) as he or she pleases. Common
property, on the other hand, is owned by all the owners in the scheme, jointly and pro
rata in accordance with their respective participation quotas (see para 5.6). In order to
be a co-owner of the common property, one has to be an owner of a section in the
scheme. No ‘outsider’ can be an owner of any part of the common property.
How does one know if a certain building or part of the land in a scheme is a section or
common property? By consulting the sectional plan. The sectional plan will clearly
indicate whether the space in question is a section or whether it is common property.
Any part of the scheme, whether land, building or other structure that is not specifically
described as a section on the sectional plan, is common property.

5.1.1 Sections
The question arises as to what exactly is capable of being called a ‘section.’ For example,
can an open-air parking bay be designated as a section, or a swimming pool, or a
carport?
The STA provides a definite answer but it is hidden in technical language. Without
discussing the legal-technical aspects, it is sufficient for purposes of this book to state
that, in order for something to be a ‘section’ in a sectional title scheme, it generally has
to have four walls and a roof. In other words, the space must have definitive three
dimensional boundaries (floor, walls, ceiling) so that it can be clearly established where
the owner’s ownership begins and where it ends.
Any space enclosed by a floor, walls and a roof qualifies to be a section. A flat can be a
section. Similarly, an enclosed garage, a lockable storeroom or an office could be
sections in a sectional title scheme.
In terms of the STA the boundaries of a section reach to the middle of the floor, the
middle of the walls and the middle of the ceiling board that separates the ceiling cavity
from the rooms below. If you own a freestanding housing unit in a sectional title
scheme, the inner half of the walls will be part of the section, while the outer half of the
walls are common property. Up to the middle of the ceiling board is part of the section,
the roof is common property. This is important because the owner is liable for
maintenance of his part of the section, and the body corporate is responsible for
maintenance of the part of the section that is common property. Figure 5.1 explains this
concept.
Doors and windows are not always positioned exactly in the middle of a wall.
Amendments to the STA in 2011 determine that the median (‘middle’) line is deemed to
pass through the centre of any door/window or other structure that divides two sections
or a section and the common property. This means that, in principle, the body corporate
is always liable to share the costs of maintaining doors and windows if the ‘outer part’
thereof is part of the common property.
An open parking bay cannot be a section, and neither can an open balcony, or a carport.
A swimming pool cannot be a section either — if any of these areas are present in a
sectional title scheme they are parts of the common property, and as a result they
cannot be separately owned by individual owners. These areas can be designated as
exclusive use areas which would afford specific owners of individual sections certain
rights of use (see para 5.3) but they are not capable of being separately owned.

5.1.2 Common property

Common property is owned by (and may generally be used by) all the owners in the
scheme. Anything that has not been labelled as a ‘section’ on the sectional plan, is
common property.
Typical examples of common property are lifts, corridors, all of the land on which the
scheme is built, recreational and entertainment facilities.
Any part of the common property in a scheme will either be just ‘plain old common
property’ or it could be a part of the common property reserved for the exclusive use of
the owner of a particular unit in the scheme.
The larger the section owned by a particular owner, the larger that owner’s share in the
common property. This fact has no particular physical consequence — in practice no one
is going to say to the owner of the smaller section ‘you may only swim in the pool/use
the stairs once a day’ and to the owner of the larger section ‘you may swim in the
pool/use the stairs two and a half times a day.’
Legally speaking, however, it does make a difference what the owner’s share in the
common property is. (See para 5.6 dealing with participation quotas.) The owner of the
larger section will have greater voting power than the owner of the smaller section but
will generally also have to pay higher levies than the owner of the smaller section.

5.1.3 Not all buildings in a scheme are sections

The mere fact that a particular space is enclosed by four walls and a roof and is situated
in a sectional title scheme does not necessarily mean that the space is a section; it could
still be common property, depending on how it was described on the sectional plan. For
example, a developer established a scheme with sixty housing units (all described as
sections on the plan) and one building containing sixty storerooms (described as
common property on the plan). Even though the latter building it is a building with four
walls and a roof (and even though each of the storerooms
have four walls and a roof) neither the building as a whole nor any of the storerooms in
the building, are sections.
We find, as a result, that a mere physical inspection of the buildings in a sectional title
scheme does not provide sufficient information to know for certain whether a certain
building or part of a building is a section or not. In order to establish the true legal
nature of the space concerned, one will have to consult the sectional plan.
Similarly, one cannot by a mere inspection of spaces that are clearly common property
(parking bays, open carports) ascertain whether they are exclusive use areas or not. A
deeds office search and inspection of the sectional plan (and in certain cases, the rules
of the body corporate) are required to determine the true nature of the particular space
(see para 5.3.7).

5.1.4 Buildings or parts of buildings may be sections

In one scheme one may find six buildings, each being a section in itself. In another,
there may be only one building yet the building is divided (by walls) into 120 sections.
In yet another scheme there may be found three buildings; building A is described as
‘section 1’ on the sectional plan and building B houses sections 2 to 20. Building C is an
entertainment area and is common property.
In other words, whether or not an entire building will be designated as the section or
whether parts of a building are designated as sections will depend on the circumstances
in each case. The only rule is that a sectional title scheme must consist of at least two
sections.

5.2 ‘Section’ versus ‘unit’

In conveyancing we often use the terms ‘section’ and ‘unit’ interchangeably. This is all
right, because they mean more or less the same thing. Technically speaking, however,
the term ‘section’ refers to the physical building; the bricks and mortar that make up the
particular section, while the term ‘unit’ is an abstract term that refers to something
more.
The term ‘unit’ means a particular section plus that section’s share in the common
property. This is more than just a reference to bricks and mortar; it refers to the whole
interest that a specific owner has in the sectional title scheme. Let us explain;
Every owner of a section also owns a share in the common property (remember, the
common property is jointly owned by all the owners of sections in the scheme). The
owner’s share in the common property is pro rata (in proportion) to the size of his or her
section (and is expressed as that owner’s participation quota — see ch 5.6).
Bear in mind, then, that when a person buys into a sectional title scheme, he or she is
not only buying the section (the bricks and mortar, the physical building). The person is
also buying a share in the common property (the land on which the scheme is situated
and the right to use the common property).
Section + Share of common property = Unit

It would be more correct to say that a person is buying a ‘unit’ in a scheme than merely
to say he or she is buying a ‘section’ in a scheme. Similarly, it is better to say that the
conveyancer is transferring the ‘unit’ than to refer to transfer of the ‘section’. The only
time when it will, strictly legally speaking, be correct to use the term ‘section’ rather
than ‘unit’ is when one refers to the physical structure only. For example, it is technically
correct to say that ‘the roof of the section is leaking’ but incorrect to say ‘the roof of the
unit is leaking’.

5.3 Exclusive use areas

Exclusive use areas (‘EUAs’) are areas that form part of the common property (in other
words, they are not sections) but which are in terms of the law reserved for the
exclusive use of the owner of a particular section.
Examples of areas that could be EUAs are gardens, balconies, patios, parking bays and
outdoor entertainment areas. It is even possible that storerooms and garages could be
EUAs, if they were not included as sections in the original sectional plan. See Figure 5.2
for an example of a layout of sections and EUA in a sectional title scheme.

Figure 5.2: An example of the situation of exclusive use areas in a sectional

title scheme

5.3.1 Only owners of sections may be holders of EUAs

One has to be an owner of a section in the scheme before one can ‘own’ the rights to an
EUA. It is not possible for an ‘outside person’ to have exclusive use rights to, say, a
parking bay or storeroom in a scheme. It is permissible, however, for the owner of the
section and holder of the rights to the EUA to lease the EUA to an outsider, provided the
rules of the body corporate do not forbid it.
Note the terminology concerning ownership of sections and EUAs: The ‘owner’ of a
section is the ‘holder’ of the rights to an EUA. The right to an EUA is not ownership but a
lesser right. All the owners in the scheme jointly own that area (because it is part of the
common property) and the particular owner merely has the right to use it to the
exclusion of the other owners. In many respects, the right to the exclusive use of an
EUA amounts to a servitude over that area.

5.3.2 Two types of EUAs: s 27 (STA) rights and s 10(7) (STSMA) rights
In law there exist two types of EUAs. The one type is created in terms of s 27 of the STA
(for ease of reference we refer to this type of area as the ‘formal’ EUA) and the other is
created in terms of s 10(7) of the STSMA (we call this type the ‘informal’ EUA). The
reason why two types of EUAs exist and the differences between them require some
explanation.

5.3.3 Section 27 EUAs

Until 1997 the STA only provided for the creation of s 27 (the formal) EUAs. This is how
it works:
• in the process of developing the scheme, the developer will tell the land surveyor
which parts of the common property were selected to be EUAs, and the land surveyor
will specially measure them and show them on the sectional plan;
• the conveyancer will indicate in the documents intended for registration of the
scheme that the developer reserves the right to these EUAs;
• a title deed called a ‘certificate of real right of exclusive use areas’ is issued
to the developer when the sectional title register is opened in the deeds office;
• as and when the developer transfers the sections to individual purchasers, the
rights to the EUAs are also ceded (because these rights are lesser rights we use the
term ‘ceded’ rather than ‘transferred’) to the new purchaser;
• the purchaser will, on registration, have a title deed for the section he owns (this is
called a ‘deed of transfer’) and he will have a separate title deed for the EUAs to which
he has acquired the rights. This title deed is called a ‘notarial deed of cession of
exclusive use area’.

5.3.4 ‘Formal’ EUAs: costly and cumbersome procedure

Often when developing new schemes, developers will decide it is too costly and
cumbersome to create EUAs. To bring ‘formal’ EUAs into existence a land surveyor needs
to measure the areas and describe them on the sectional plan. This involves additional
cost and time.
As a result, many developers had decided ‘not to bother’ with EUAs and when their
schemes were registered the parking areas, gardens or other areas intended for use by
individual owners remained ‘plain old’ common property. This left owners of sections
with practical uncertainties and no rights to exclusive use of particular areas.
If the owners of sections later feel they have a need to assign exclusive use of these
areas, it is up to the body corporate to apply to the deeds office for the amendment of
the sectional plan and the registration of the rights into the name of the relevant owners
of sections. Because this is a cumbersome and costly process, the legislator came to the
aid of bodies corporate by introducing s 27A into the STA in 1997 (which section was
replaced, in October 2016, by s 10(7) of the STSMA).

5.3.5 Less formal and less costly

In terms of s 10(7) of the STSMA a body corporate (or a developer) may make rules to
declare certain parts of the common property as ‘exclusive use and enjoyment parts’
and may then in the rules assign these areas to individual owners of sections as needed.
There is no need to amend the sectional plan, nor to issue title deeds for the EUAs; the
only requirement is that the amended rules must be properly adopted by the body
corporate and then filed.
Increasingly developers (and bodies corporate) are making use of this mechanism to
create ‘informal’ EUAs. It is simpler, less expensive and less time-consuming than the
‘formal’ s 27 method of creating EUAs.

5.3.6 Comparison between formal and informal EUAs

Broadly speaking the effect of the formal and informal EUAs are the same: both afford
the person entitled to the EUA the right to use the particular area to the exclusion of
other owners in the scheme. However, there are some important legal differences which
one must not lose sight of. The formal and informal EUAs are distinguished in Figure 5.3.

Figure 5.3: Comparison between exclusive use areas created in terms of s 27

(STA) and exclusive use areas created in terms of s 10(7) (STSMA)

EUAs created in terms of s 27 (STA) EUAs created in terms of s 10(7) (STSMA)

Of a formal nature More informal than the s 27 EUA

Shown on the sectional plan; not mentioned in the No EUAs shown on the sectional plan, only
rules of the body corporate reference is in the rules

A separate title deed, a ‘notarial deed of cession of No title deed exists for the EUA; the only reference
exclusive use area’ is issued in respect of the EUA to it is found in the body corporate rules

The right to the EUA is a real right (similar to a Technically speaking it is not a right at all; it is a
right of usufruct) concession by the body corporate which (in theory
at least) may be withdrawn by amendment of the
rules

This right to an EUA may be mortgaged, ceded Because this is not legally speaking a ‘real right’, it
(transferred) and leased cannot be mortgaged, ceded or leased

The existence of this EUA will show up on the
sectional plan and a reference to the title deed will
be reflected on a deeds office print-out as an ‘SK
number’ (obtained when an electronic or manual
search is conducted on the person (the owner of a
section)
The sectional plan contains no indication of the
informal EUA — to learn of its existence one will
have to obtain and read the rules of the body
corporate, either by conducting a manual search in
the deeds office or by requesting a copy from the
body corporate or (if applicable) the managing
agent
5.3.7 A physical inspection does not reveal the legal nature of an area: consult
the plan and the rules
It will not be clear from a mere physical inspection of the scheme which areas are
sections, which are ordinary common property and which are EUAs. This fact sometimes
causes practical difficulties when sections and EUAs are sold. For example, how can it be
proved that the seller really has the rights to the section as well as to a garden and a
storeroom, as he claims? Figure 5.4 suggests a method for enquiring about the
possibilities of the legal format for the various types of spaces commonly found in a
sectional title scheme.

Figure 5.4: Determining the legal nature of an area in a sectional title scheme
As can be seen from Figure 5.4, a particular space or area situated in a sectional title
scheme can be one of a number of things, legally speaking.
The options are:
• a section;
• ordinary common property;
• EUA in terms of s 27 of the STA;
• EUA in terms of s 10(7) of the STSMA.
The physical appearance and use of the space does not indicate for certain what its
underlying legal nature is. To be absolutely sure, one has to conduct a deeds office
search and in the process examine the sectional plan, deeds office print-out, title deed
relating to the particular area (if applicable) and, if necessary, the body corporate rules.
It should be standard practice for a conveyancer and conveyancing paralegal dealing
with a sectional title transfer to find out the true position relating to EUAs in that scheme
before transferring the unit. Better still, the estate agent involved in marketing and
selling the unit should have a clear understanding of the legal nature of the particular
owner’s rights before marketing the property to prospective buyers.

5.3.8 Conveyancers, estate agents and banks: beware the pitfalls of EUAs
Mistakes with regard to the existence (or not) and nature of EUAs can be costly.
Consider for example, the instance where a purchaser buys a section in a sectional title
scheme as well as the rights to exclusive use of a garden, a parking bay and a store
room. She automatically assumes that all of these rights exist and will be registered in
her name once the section itself is transferred to her. But what if the garden (or store
room or parking bay) has never been designated by the developer or the body corporate
as an EUA?
If the estate agent and the conveyancer do not check the status of these areas before
transfer, it is possible that the purchaser may discover only years later that she has no
exclusive rights to the area which she initially paid a price for. If she suffers any
damages as a result, it is likely that she will be able to prove negligence on the part of
the seller, agent and conveyancer (who left her under the impression that she had
exclusive use rights) and to recover these damages from one or more of these parties.
Not only must the estate agent and conveyancer check whether a particular area is an
EUA (as opposed to mere common property) they must also obtain clarity as to whether
an EUA is a s 27 type EUA (a formal EUA) or a s 10(7) type EUA (an informal EUA). In
the case of a formal EUA, the title deed for the EUA must be obtained and the rights to it
must be ceded to the new purchaser. In the case of an informal EUA, it is sufficient to
provide the purchaser with a copy of the relevant body corporate rule indicating the
allocation of the use of the EUA to him or her as owner of the particular section.
Where a purchaser relies on mortgage finance, it is also important to distinguish
between formal and informal rights to EUAs. In the case of a formal EUA, the bank is
likely to require that the mortgage bond be registered over the section as well as the
EUA. In the case of an informal EUA the ‘right’ is not capable of being mortgaged, so the
bank will have to be satisfied with a bond over the section only. Banks need to bear this
fact in mind when determining the value of the security (the section only), because the
purchase price is likely to also reflect the ‘value’ of the EUA.
Another pitfall to avoid is where the seller, agent and/or conveyancer overlook the fact
that the seller is (in addition to being the owner of the relevant section) the holder of an
EUA in terms of s 27 STA. If the section is transferred to the purchaser, but the EUA
remains in the seller’s name, in terms of the law the seller’s right lapses as soon as
transfer of the section is registered, and the rights to the EUA will then automatically
rest in the body corporate.

5.4 ‘Levies’ versus ‘rates and taxes’

5.4.1 Levies
The body corporate needs money for communal expenses, such as maintenance,
insurance and garden services. In order to pay these expenses, the body corporate
draws up a budget showing the estimated amount required to pay the expenses for that
year.
The trustees then divide the required amount amongst the number of owners in the
scheme, according to one of three formulas determined at the time of registration of the
scheme. The owners must contribute:
• equally; or
• in proportion to the size of each owner’s section, as reflected in the participation
quota (this is generally the fairest and the method employed in most sectional titles); or
• in terms of any other pre-agreed formula.
Once the amount due by each owner is known, an account is sent (usually on a monthly
basis) to him/her. The money that is levied against the owners in this manner is
generally referred to as ‘levies’. The (general) levies collected from owners of sections
are then applied to pay the relevant costs.

5.4.2 Municipal rates and taxes

Remember that a sectional title scheme, regardless of how many units there are, only
occupies one erf (or in rare instances, two or more erven that are notarially tied). In the
past the local authority imposed rates and taxes on the erf as a whole in the same way
that it imposed rates and taxes on the owner of an ordinary freehold erf. The body
corporate would then divide the amount amongst owners, in terms of the applicable
formula. Since 2007 however, in terms of new legislation, municipalities started rating
the individual sectional title units and no longer the erf on which the scheme is situated.
The process was finalised in 2009 and owners of sections in schemes receive separate
municipal clearances in respect of their properties.
Owners of units in sectional title schemes therefore also pay for municipal rates in
respect of their ownership in the scheme. See ch 35.3 for a detailed explanation of rates
and taxes and property owners’ liability for these charges.

5.5 What are special levies?

In the previous paragraph it was explained that general levies relate to all the
anticipated costs of the running of the scheme and will typically include:
• insurance in respect of buildings in the scheme;
• managing agent fees;
• annual audit fees; and
• security and maintenance costs.
Despite the fact that it is, in terms of the STSMA, obligatory for schemes to have a
reserve fund for unforeseen and future obligations, it can happen that insufficient funds
are available unforeseen, necessary expenses. A body corporate may then pass a
resolution to raise a special levy in order to have the necessary improvements attended
to. All owners at the time of raising the special levy are liable to contribute, in
accordance with their participation quotas.
If an owner sells his unit shortly after a special levy was raised, he remains liable for this
expense. Purchasers and sellers can agree, in the sale agreement, that the purchaser
will be liable for the special levy. Such an arrangement will be reasonable in instances
where the benefit of the necessary improvement for which the special levy was raised,
falls in the lap of the purchaser.

5.6 Participation quota

One of the things a land surveyor must specify on the sectional plan before submitting it
to the Surveyor-General for approval is the ‘participation quota’ for each section. The
participation quota of a section is that section’s share in the common property. A
participation quota is a percentage, but expressed to four decimal places.

Example:

There is a sectional title scheme on Erf 435 Hopeville (2 000 square metres in extent), consisting of
four sections and common property. The sizes of the sections are:

• Section 1: 300 square metres

• Section 2: 250 square metres

• Section 3: 250 square metres

• Section 4: 200 square metres

• Total: 1 000

Participation quotas are determined by dividing the floor area of a section by the total
floor area of all the sections in the scheme, times 100 (to get the percentage) and then
expressed to four decimal places.
The participation quota of section 1 will be 300/1000 x 100= 30%, expressed to four
decimal places, thus 0,3000. The participation quotas of all the sections in a scheme
must add up to 1. This is the result of the calculation:
• Section 1: 0,3000

• Section 2: 0,2500

• Section 3: 0,2500

• Section 4: 0,2000

• Total: 1,0000

Participation quotas are used to calculate the size of that section’s share in the common
property. This is a rather theoretical exercise, but it also has practical relevance.
It determines the weight of the section owner’s vote (in instances where vote is to be
reckoned in value), and, in most cases, the proportion of levies that the owner will be
responsible for. Having a larger section has advantages when it comes to voting, but
costs more when it comes to levies. And in the event of the body corporate going
bankrupt, this is the proportion in which the section owners will have to contribute to
payment of the body corporate’s debts.
Chapter 6
The South African Deeds Registration System: An
introduction

6.1 Introduction
South Africa has an official system of recording and keeping track of information
regarding immovable property and changes in the ownership of immovable property.
This system is known as the ‘deeds registration system’ because its main purpose is to
register deeds. It is sometimes also referred to as ‘the land registration system.’
The information recorded in a deeds office is public information, meaning that members
of the public have access thereto. Any person has the right to information about any
property, for example, information about the identity of the owner, the date the owner
bought (or otherwise acquired) the property, how much he paid for it, whether or not
there is a mortgage bond over the property and what the amount secured by the bond
is. (See, for example, Precedents P1 to P5 for records relating to a search on a person
and a property.)
A search in a deeds office (whether a physical visit to the deeds office or an electronic
search conducted from afar by means of computer) will also reveal information about
the extent (size) of the property, previous owners, and conditions and servitudes that
apply to the land.
There are a number of components that interact with one another to form the system we
call the ‘South African deeds registration system’. The most important of these are:
• The deed of transfer. This document (also known as the title deed of the property)
serves as the vehicle whereby ownership in a property is transferred from one person to
another. After registration, the deed serves as proof of the new owner’s ownership, and
is referred to as ‘the title deed’ in respect of the property. (See Precedents P81 and
P45.)
• The diagram. The diagram of the property is a special type of map, showing the
boundaries, the size and the coordinates (reference points or beacons used to define the
property’s location in relation to other land) for the particular piece of land. (See
Precedent P6 for an example of a diagram.)
• The deeds office and deeds office personnel responsible for deeds registration and
related tasks.
• The conveyancer and conveyancing paralegals who administer and manage the
conveyancing processes required to achieve registration.
• The transfer process and other conveyancing processes.
• Law and legal requirements.
• Various role-players who make use of the system, interact with one another and
benefit from the system such as sellers and purchasers, estate agents, banks, tax
authorities, local authorities, and so on.
6.2 Movable property versus immovable property: Different legal
requirements for transfer of ownership
If you do grocery shopping, how and when exactly do you become the owner of the
groceries in your trolley? And how and when exactly do you become the owner of a
piece of land?

6.2.1 Movable property: Ownership is transferred by physical delivery

The law of things states that in cases where movables are sold, ownership is generally
transferred as soon as the particular thing has been delivered and the purchase price
has been paid.
The law distinguishes between all kinds of acts that can be regarded as delivery, but for
our purposes it is sufficient to regard delivery as the physical handing over of the item
to the new owner.
For example, when a person buys a box of breakfast cereal in a supermarket, the box
and its contents become the property of the purchaser as soon as he has paid for and
received it. Simply put, ownership of the box and its contents is transferred to the
purchaser on payment of the purchase price and delivery.

6.2.2 Immovable property: Transfer of ownership takes place by means of

registration
In the case of immovable property it is not physically possible for one person to pick up
the land and deliver it to another person. So our legislator came up with a different
requirement: Registration of a deed of transfer.
While in our law ownership of movables is transferred by means of physical delivery,
ownership of immovable property is transferred by ‘registration of a deed of transfer’ in a
deeds office.

6.3 The registration of a deed of transfer: How it works

6.3.1 The deeds office process
The deeds office keeps a register describing all the land in our country (there are a few
exceptions, but you do not need to know about them at this stage).
All relevant information relating to a specific piece of land and its owner are kept in the
deeds office’s database. In addition, a ‘title deed’ (in most cases, a registered deed of
transfer) exists for each privately-owned property, and the deeds office has a copy
(known as the ‘deeds office copy’) of this deed, either on microfilm (deeds registered
from about 1990 onwards), as a paper copy (older deeds that have not yet been placed
onto microfilm), or in recent times, in digital format.
The original paper deed (drafted by the conveyancer and lodged in the deeds office) is
handed to the owner after registration of the transfer and is held by him or her as proof
that he or she is indeed the owner. If the property is mortgaged to a bank or other
institution, it is likely that the bondholder will have the original title deed in its
possession as a safety measure, and that it will only release the deed to the owner once
the loan is paid off or when cancellation of the bond is requested.
Each registered title deed has its own unique registration number. This number (and the
Registrar’s seal and signature on the document) is the proof that the deed has officially
been registered in the deeds office. (See Precedents P81 and P45 and note the prefix ST
where it is a sectional title deed and T where it is a title deed to conventional property.)
A deed of transfer states, amongst other things, the names of the previous owner (as
transferor) and the new owner (as transferee), the description of the property, and the
conditions that apply to the use and ownership of the property.
When selling the property, the owner hands the original title deed (‘the existing deed’) to
a conveyancer and instructs the conveyancer to transfer the property. The conveyancer
draws up a new deed (‘the draft deed’), which states that the owner (transferor)
transfers the property to the purchaser (transferee). The heading on this document is
‘Deed of Transfer’. (See also paras 6.7 and 10.4.3.)
When the purchaser has paid the purchase price and all other requirements of the
transfer process have been met, the existing deed, the new draft deed and other
supporting documents are lodged in the deeds office. About ten to fourteen working
days after lodgment the new deed is ‘registered’ and the old deed is ‘killed off’ (by
means of a rubber stamp imprint by the deeds office).
At the very second that the new deed is registered, the ownership in the property is
transferred from the seller to the purchaser. The newly registered deed of transfer then
becomes the ‘title deed’ of the new owner (the purchaser) and the old title deed is now
‘dead’. Figure 6.1 explains the process visually.

Figure 6.1: A visual portrayal of what happens to title deeds in the transfer
process

Transfer of ownership by means of a deed of transfer from A to B.

6.3.2 Distinguish between a ‘title deed’ and a ‘deed of transfer’

The terms ‘title deed’ and ‘deed of transfer’ are commonly used to describe one and the
same document. The document has two names because it fulfils two functions: Firstly, it
is the owner’s proof that he is indeed the owner, in other words, that he has ‘title’ to the
land. Secondly, the document is the instrument/vehicle whereby ownership is
transferred from the seller to the purchaser. (Other kinds of documents that also qualify
for the name ‘title deed’ exist, such as certificates of title — see para 6.7 and Precedent
P13: Certificate of Registered Title.)

6.4 The meaning of the term ‘registration’

When, exactly, does registration of a deed of transfer take place? In other words, how do
we recognise the ‘magic moment’ when the invisible ownership departs from the
previous owner to settle on the new owner?
Actually, there is very little magic in the moment. When the day arrives for the transfer
to be registered, the conveyancer calls at the deeds office, signs the deed and hands it
to the Registrar of deeds or to one of the assistant registrars. The Registrar also signs
the deed... and at that moment the transfer is registered.
If there are other transactions that are required (for financial or legal reasons) to be
registered at the same time as the transfer, such as a new bond over the property or
cancellation of an existing bond, these documents must also be handed to the Registrar.
These documents, intended for simultaneous registration, are called ‘simuls’ in
conveyancing speak. It is customary for the transfer attorney, on the day intended for
registration, to collect all the simuls and hand all of them to the Registrar in a batch (a
group, a heap). When the whole batch of simuls is with the Registrar, he or she signs all
the deeds and bonds in the batch. The moment the Registrar signs the last deed or bond
in the batch, the transfer and other simuls are registered. (See also chapter 36.6.)

6.5 In South Africa we register deeds, not title

In the South African system, every time a property is sold or otherwise disposed of, or
alienated, the transfer must be recorded in the deeds office. In practice this means that
a new (draft) title deed (deed of transfer) is lodged. Once registered, this new deed
replaces the previous title deed and becomes the new title deed.
In some countries systems exist where there is a permanent title document for each
property in the registration office, in the form of a deed or a certificate or a simple title
page. Whenever the particular property changes hands, this title document is updated or
endorsed to reflect the particulars of the new title holder (the new owner). In these
systems there is no new ‘deed of transfer’ as such.
In contrast, South Africa registers deeds as opposed to title. We do not have a
permanent ‘title page’ in the deeds office that is updated from time to time. Instead,
every time a property changes hands, we start afresh with a new deed of transfer.
Different registration systems each have their own advantages and disadvantages. For
our purposes it is sufficient to state that South Africa is generally regarded as having
one of the best registration systems in the world.

6.6 The purpose of the deeds registration system

Why do the authorities keep track of ownership and changes in ownership of immovable
property? And why is it necessary for a deeds office to keep so much information about
properties and their owners?
Here are four important reasons:
• publicity as prerequisite for ownership The law demands that a thing (movable
or immovable) be publically passed on to the new owner before the law will acknowledge
that ownership has legally passed. Registration in the case of immovables publicises the
change in ownership, thus complying with the legal publicity requirement;
• proof of ownership If disputes ever arise between people as to the identity of the
real owner of a particular property, there should be some objective (impartial,
independent, neutral) way of proving ownership. For this reason, the system needs to
keep track of changes in ownership and be able to reflect the up-to-date facts;
• certainty about property boundaries If disputes ever arise about the
boundaries of a property or if transactions happen which propose to change boundaries,
there must be an objective way of confirming the original boundaries. For this reason
the system must have accurate records and must be able to furnish this information
when required. In this regard the deeds office and office of the Surveyor-General (where
information about diagrams and the physical features of properties are kept) interact
closely with one another;
• transparency and legal certainty Land is a crucial element in the political and
economical stability of a country. A well-ordered and publicly transparent system of land
registration assists in legal certainty and promotes order in a society.

6.7 Certificates of title versus deeds of transfer

While all deeds of transfer are title deeds (as discussed in the preceding paragraphs),
not all title deeds are deeds of transfer — other types of title deeds exist as well.
Consider the following example: Mrs X owns a large stand, namely Erf 123 Durban
North, measuring 3 000 square metres. She bought the property a few years ago and
transfer was registered in her name by virtue of Deed of Transfer number T
12345/2004.
Mrs X decides to subdivide her stand (see para 7.2 where this topic is explained) in a
way that she will own two pieces of land, and on separate title deeds. On her
instructions the land surveyor prepares a diagram for a portion of the land, which is
called ‘Portion 1 of Erf 123 Durban North’, measuring 1 200 square metres. After
obtaining all local authority approvals the land surveyor submits the diagram to the SG,
and the SG approves the diagram.
Up to this point both pieces of land (the ‘cut-off’ portion and the ‘remaining extent’)
remain her property in terms of the one title deed, namely Deed of Transfer T
12345/2004. However, Mrs X would like to retain the portion on a separate title deed,
because she intends to one day ask the bank for a loan and to offer a mortgage bond
over the portion as security for the loan. She does not want the title deed for the
remaining extent of the property to be retained by the bank, though.
In order to obtain a separate title deed for the ‘cut-off’ portion, the deeds office needs to
be involved. But it is not possible for the deeds office to issue a ‘deed of transfer’ in
respect of the portion as no transfer of the land is taking place. Mrs X was the owner of
the property before the subdivision and she remains the owner after the subdivisional
diagram has been approved.
Does this now mean that no procedure exists for Mrs X to obtain a separate title deed for
the subdivided portion? No, it merely means that the title deed that she will be issued
with will not be a ‘deed of transfer’; it will need to be called something else.
The correct procedure is for Mrs X (aided by the conveyancer) to apply to the deeds
office for the issue of a Certificate of Registered Title (‘CRT’). The application, the draft
CRT and supplementary documents are lodged in the deeds office. On registration of the
CRT (let us say its registered number is T 6543/2007), Deed of Transfer T 12345/2004
will be endorsed to reflect that the portion is now held by virtue of Certificate of
Registered Title no T 6543/2007. The deed of transfer still remains the title deed for the
remaining extent. See Precedent P13 for an example of a Certificate of Registered Title.
Now, if Mrs X had decided to subdivide the property in order to immediately sell the
portion, it would not have been necessary for her to obtain a separate title deed for the
portion. After the sale agreement has been signed, the conveyancer would have
prepared a deed of transfer for the portion, and after transfer of the portion, Deed of
Transfer T 12345/2004 would be the title deed for the remaining extent, endorsed to
show that a portion has been transferred to a new owner.
Many instances other than subdivisions exist where property owners have a need for the
issue of CRTs, for example where joint owners own a property by virtue of one title deed
and one of the owners wishes to obtain a separate title deed for his share in the
property. As this book focuses on basic procedures and an introduction to conveyancing,
however, the ‘how to’ of drafting and registering CRTs are not dealt with in detail. See
also chapters 6.3.1, 7.2 and 10.4.3.

6.8 Shares in immovable property are always ‘undivided’ shares

Consider the following example: Sara Smith bequeaths Erf 435 Sunnyside to her two
daughters Sally and Susan. After Sara’s death the executor transfers the property to
Sally and Susan by means of Deed of Transfer T3523/2016.
Sally and Susan are co-owners of the property, each holding a half share. It is said that
they own the property in ‘undivided shares’. This means that Sally cannot draw a line in
the middle of the property to divide it in half and then say to Susan ‘this half belongs to
me and that half belongs to you’. Both of them own the whole property, in ‘undivided’
shares.
If a piece of land is owned by more than one owner, the joint owners will always own the
land in undivided shares. Note that the shares need not be equal — it is possible for a
person to own a third share or a 1/10th share or any other proportion that is
mathematically possible. In theory, a hundred owners can co-own a single stand,
however in practice this is likely to cause many problems.
There is currently a prohibition on increasing share holding in agricultural land. This
effectively means, for example, that a farmer cannot bequeath one farm to two children
— the deeds office will not permit transfer of agricultural land from a single owner to
more than one person unless certain prescribed consents have been obtained.
6.9 A practical demonstration of the function and relevance of the deed
of transfer: case study
To help you understand the relevance of title deeds and provide practical insight into the
purpose of deeds registration, we have included a case study. Read the case study and
answer the question posed below.

6.9.1 Case study: Mr Honest and Mrs Evilhorn

About seven years ago Mr Honest bought a property, Erf 123 Cape Town, from Ms
Quickbuck for R250 000. Mr Honest now comes to you for advice. About a week ago,
there was a knock on his door. He opened and the woman standing on his porch
introduced herself as Mrs Evilhorn.
Mrs Evilhorn produced an agreement signed by herself and Ms Quickbuck, in terms of
which Erf 123 Cape Town had been sold to Mrs Evilhorn for R200 000. The date on the
document was about one week earlier than the date on which Mr Honest had signed his
agreement with Ms Quickbuck. She also produced a receipt signed by Ms Quickbuck,
acknowledging that she had received the sum of R200 000 in cash from Mrs Evilhorn,
being the purchase price of the property. And then, as a final blow, Mrs Evilhorn
produced a copy of a sworn statement that she had handed to the police that very
morning, claiming that she was the rightful owner of Erf 123 Cape Town and that Mr
Honest had stolen it from her. She then demanded that Mr Honest move out of the
property within a week, so that she could move in. If he did as she said, she would drop
the charges she had lodged with the police.
Mr Honest asked Mrs Evilhorn why she had waited seven years before attempting to
claim the property. She said a bus had run her over on the day she had handed Ms
Quickbuck the money and she had had amnesia until two weeks before.
Mr Honest asks you what he should do about this disturbing incident.

6.9.2 Comments on case study

The purpose of the case study is not to shed light on the finer intricacies of property law;
it merely demonstrates the basic relevance of title deeds. As a result, we keep the
answer simple and short.
Ms Quickbuck was, until transfer of the property to Mr Honest, the registered owner of
the property. She ‘sold’ the property in a fraudulent manner to two different persons:
first to Mrs Evilhorn and then also to Mr Honest. Fortunately for Mr Honest, he obtained
real rights (stronger than personal rights) to the property, in that the property was
transferred to him and he obtained a registered title deed to prove his ownership. Mrs
Evilhorn has no claim against Mr Honest — if she has any claim (she will have to prove
the existence of the agreement and payment of the funds) she will have to enforce her
personal rights against Ms Quickbuck. Mr Honest need not be concerned about Mrs
Evilhorn’s allegations — his title deed is sufficient proof of the fact that he is the rightful
owner of the property.
 Chapter 7

The diagram: Foundation of the land registration system

7.1 Introduction
The law states that every piece of land must be depicted on a diagram. But what is a
piece of land and what is a diagram?
Picture a chocolate cake. To help yourself to a piece of this cake you need to take a knife
and cut off a slice.
The slice on your plate is the ‘piece of cake’ and the rest of the cake is that which
remains. In conveyancing terms it would be called the ‘remainder’ (that which remains
after the slice is removed), and the piece on your plate would be referred to as ‘the
portion’.
It is easy to see where the piece of cake starts and where it ends. It has been separated
from the remainder and its boundaries are clearly defined, thanks to the knife.
Land, being immovable, cannot be separated into pieces in the same way that a cake
can be sliced up. If we want to show an area of land as separate from the other land
that surrounds and adjoins it, a different method has to be found. Physical separation is
not possible, but a symbolical (representative, abstract, figurative) separation can be
made by drawing a map of the piece of land in question.
South African law makes provision for just such a specialised kind of map. In the various
Acts of Parliament that deal with this map, it is called a diagram. (See Precedent P6 for
an example of a diagram.)

7.2 Subdivision: The process of ‘creating’ a piece of land and obtaining

a diagram
Before a piece of land can be transferred or otherwise dealt with in a deeds office, there
must be a diagram in existence for that piece of land. Differently stated: for deeds office
registration purposes, a piece of land is not really a piece of land until a diagram has
been framed (drawn and approved) for it.

Example:

X owns Erf 123 Tamboerskloof, Cape Town in terms of Deed of Transfer T 3089/2010. It is 1 700 square
metres in extent (a large stand, compared to others in the neighbourhood). Y offers X one million rands
for a vacant portion of the stand, 700 square metres in total. X is willing to sell. They draw a sketch
plan of the piece of land and sign an agreement of sale. Figure 7.1 portrays the sketch plan. (See also
Precedent P6 for an example of a subdivisional diagram.)
figure 7.1: Example of a sketch plan showing the proposed subdivision of Erf
123 Tamboerskloof

The process of ‘chopping off’ a piece of land from other land is called ‘subdivision’. The
‘chopped-off’ piece is called the ‘portion’ and the rest of the land is called the
‘remainder’, or the ‘remaining extent’.
What must be done before the deeds office will register the transfer of the portion from
X to Y?
Subdividing a property (whether to sell or retain it) involves the following steps:
• obtain approval from the relevant town-planning authorities (usually the planning
department of the municipality) to subdivide the land;
• once approval is granted, instruct a land surveyor to survey the land and to draw a
diagram in respect of the brand new piece of land, the portion;
• the land surveyor submits the draft diagram to the office of the Surveyor-General
(‘SG’) for approval;
• if the diagram meets all legal requirements, the SG approves the diagram and gives
it a registered SG number. The SG keeps a copy, updates the diagram of the remaining
extent to show the ‘subtraction’ of the portion, and issues the subdivisional diagram in
respect of the portion to the owner;
• the owner can now instruct a conveyancer to draw up the transfer documents (if
the property is to be transferred, because it has, for example, been sold). The diagram
will be lodged in the deeds office with the transfer documents, and will be attached to
the registered title deed and sent to the new owner after registration.
What happens where X in our example decides to retain the portion but sell the
remaining extent, instead of the other way round? In this case, he will need to apply to
the deeds office for a Certificate of Registered Title (‘CRT’) in respect of the portion first.
The diagram for the portion — a brand new piece of land — needs to be lodged with the
application.
Deed of Transfer T 3089/1997 will then be endorsed by the Registrar to reflect the fact
that the portion is no longer held in terms of that deed, but in terms of the newly
registered CRT. (See para 6.7 for a discussion of CRT’s.)
Once the portion has its own title deed, the remaining extent can be transferred from X
to Y on the strength of its existing title deed (T 3089/1997). After transfer of the
remaining extent, Deed of Transfer T 3089/1997 is ‘killed off’ as no property remains
held thereby.

7.4 Drafting and approving the diagram: How it works

The land surveyor inspects the site that is about to be subdivided. Then he or she looks
for permanent beacons on the site, or in the area close to it. (‘Permanent beacons’ are
usually 12mm round or square iron pegs that are hammered into the ground by land
surveyors in the process of surveying land.)
If there are no existing beacons suitable for use in the survey of the particular land, the
land surveyor will establish beacons on the site. The length and width of the erf is then
measured, the boundaries are marked on the diagram in relation to the beacons, and
the erf is further described in relation to other erven in the area, by having reference to
other beacons and markers in the area. The land surveyor uses technologically advanced
equipment, and must know a great deal about mathematics to do the necessary
calculations and record the co-ordinates accurately.
All the information about beacons and the calculations relating to the distances (called
co-ordinates) are entered on the diagram, and the sketch of the boundaries of the land
is made according to scale. Once the diagram complies with all the technical aspects of
the law, it is signed by the land surveyor and lodged with the office of the
Surveyor-General for approval.

7.5 The meaning of the term ‘general plan’

When a developer decides to subdivide one large piece of land into, say, ten or more
erven (stands), the land surveyor will draw up a single ‘general plan’ rather than ten
separate diagrams. (See Precedent P7 for an example of a general plan.) A general plan
is depicted on a large sheet of paper (A2 size, usually) that combines the diagrams of all
the proposed erven into one document.
The general plan serves exactly the same function as the diagram, namely to indicate
the location, size and boundaries of the erven. It has the added advantage of showing
the erven in relation to one another, and will also show roads and other aspects relevant
to the development as a whole.
Generally when we use the word ‘diagram’ in conveyancing, we also signify general plans
(which substantially serve the same function as diagrams).

7.6 The general plan and township development

Usually, when a large piece of land is subdivided, provision has to be made for roads,
electricity, water connections and other services. The development will then involve far
more than a mere subdivision and application will have to be made to the local authority
for approval of a township. Once the township is approved, the developer will apply to
the deeds office for the opening of a township register and the general plan will be filed
with the register.

7.7 A diagram is lodged with the first transfer of the land

The diagram of a particular property is filed in the deeds office with the first title deed
ever registered in respect of that property, as in our subdivision example described
earlier on. In other words, the diagram must be lodged in the deeds office when a brand
new piece of land is being dealt with for the first time.
It is not necessary to lodge the diagram (or general plan) every time a particular
property is transferred; it only has to be lodged the first time the property is transferred
as a separate piece of land. For subsequent (later, following) transfers one must just be
able to prove that the diagram exists, and that a copy has been filed in the deeds office.
How do you prove there is a diagram in existence for the piece of land you want to
transfer? Simply refer (in the new deed of transfer that is being drafted) to the diagram
number and the deed to which that diagram was attached (in other words, the first deed
of transfer ever lodged for that particular piece of land). Refer to Precedents P81 and
P82, where the extending clause (just below the property description) shows the
reference to the General Plan or diagram on which the erf being transferred, was first
delineated.
As a standard rule, then, subsequent title deeds for that property must contain a
reference to both the diagram number and the number of the title deed with which the
diagram is filed. If ever it becomes necessary to look at the diagram, it is easy to find —
merely refer to the current title deed for its number and location.

7.8 The extending clause in a deed of transfer refers to the diagram

Every title deed has an ‘extending clause’, and this clause refers the reader of the deed
to the relevant diagram or general plan. Table 7.2 gives a few examples of typical
extending clauses. (See also Precedents P81 and P82.)

Table 7.2: Examples of various extending clauses

Example Extending clause

Erf 123 is 5 000 square metres in size. X owned it, First transferred by Deed of Transfer T 435/1965
and in 1972 transferred it to Y. The extending with general plan SG no A relating thereto and held
clause in Y’s title deed will read: by Deed of Transfer T367/1972.

Y subdivides Erf 123 into portion 1 measuring 1 As will more fully appear from diagram SG no
000 square metres and the remaining extent. Y 345/2000 annexed hereto.
sells the portion to A in 2000. The extending clause
in A’s title deed will read:

A’s title deed is registered and is numbered T First transferred and still held by Deed of Transfer T
694/2000. In 2001 she sells the property to B. The 694/2000 with diagram SG 345/ 2000 annexed
extending clause in B’s title deed will read: thereto.

B’s title deed number is T 997/2001. In 2005 he First transferred by Deed of Transfer with diagram
sells to C. The extending clause in C’s title deed will SG 345/2000 annexed thereto and held by Deed of
read: Transfer T 997/2001.
One could say that the extending clause in a deed of transfer is the ‘birth certificate’ of
that particular piece of land. A study of the extending clause in the current title deed of a
property will reveal the property’s origins. It indicates:
• the first title deed ever for the property, in other words the title deed registered
when the property became a separate piece of land;
• the diagram (or general plan) in terms of which the property was created a
separate entity of land;
• the title deed by which the property was held just before the current title deed
came into existence.
Drafting extending clauses in deeds of transfer can be tricky and requires practice. More
will be said about the extending clause later in chapter 32.6.7.

7.9 All dealings with land require a diagram

It is not only when a new piece of land is transferred that a diagram must be framed for
it. A diagram is required before property can be dealt with in any way in the deeds
office. Here are a few examples of where diagrams are required, where a transfer is not
involved:
• when two pieces of land are consolidated (consolidation is the opposite of
subdivision — see the discussion below at para 7.12);
• when an owner subdivides an erf and does not sell the portion but wishes to
retain the portion on a separate title deed (see the discussion of certificates of title
above at para 6.7);
• when the owner of a large piece of land wants to mortgage only a portion of
land, not the whole piece;
• when a servitude is registered over property;
• when the opening of a sectional title register is required. In this case a
sectional plan must be drawn; the ST plan fulfils the function of the diagram, the
difference being that it describes not only the land, but the dimensions of the buildings
as well.

7.10 The diagram is the foundation of the registration system

The diagram is rightly regarded as the foundation of our registration system. Without it,
the system would not be effective. What good will it do for an owner to show his title
deed as proof of ownership of Erf 123 if the exact location and boundaries of Erf 123
cannot be pointed out? The system of keeping records of accurate diagrams is essential
for an effective deeds registration system. The system relating to the survey of land and
the system of deeds registration are dependent on one another for their existence,
maintenance and effectiveness.

7.11 The relationship between the diagram and the deed

While the purpose of the title deed is to show which owner owns which property, the
diagram aims to establish the exact location, size and boundaries of the property. The
deed describes the property in broad terms, so as to distinguish it from other property.
By consulting the diagram and relating it to the physical beacons and coordinates therein
described, interested parties will know for certain where a particular property is situated,
where it begins and where it ends.
Example of relevance of title deed: X owns Erf 234 Hoopstad. Y (the next-door
neighbour of X) wants evidence that X is indeed the owner of the erf. X will provide his
title deed to prove his ownership.
Example of relevance of diagram: Y now alleges that a 2-metre strip of land which is on
X’s side of the fence is actually part of his (Y’s) land and that the fence has been
incorrectly positioned on Y’s land, instead of indicating the boundary between X and Y’s
land. X will need to consult the diagram of the erf and will then have to conduct a
physical inspection of beacons to establish the erf’s true boundaries. This will reveal
whether or not the fence is correctly positioned.

7.12 Diagrams and consolidations

While subdivision of land involves the ‘cutting off’ of a piece of land, consolidation is
about joining two or more pieces of land together to make one larger piece. In this
sense, consolidation is the opposite of subdivision.
An example would be where an owner of two adjoining small stands in a suburb wishes
to build a large house that will be positioned over both stands. Depending on building
regulations and other factors, the best solution could be to consolidate the stands.
Figure 7.3 shows what happens when two pieces of land are consolidated.

Figure 7.3: Visual portrayal of the effect of consolidation of two properties

The procedure for consolidation is similar to that for subdivision:

• Apply to the local authority for approval of consolidation.
• Instruct a land surveyor to draft the consolidation diagram.
• Once the diagram is approved, apply to the deeds office for a certificate of
consolidated title. This certificate becomes the new title deed of the land.

7.13 Case study: The diagram, the neighbour and the garage
To help you appreciate the important role of the diagram in the registration system, we
have included the case study in para 7.13.
Mrs Verypatient owns a stand with a small house and a garage in Crosby, Johannesburg.
One Saturday morning she wakes up to the sounds of someone demolishing a building.
She runs out, and finds her neighbour, Mr Verynasty, knocking down her garage.
Mr Verynasty states that he has just learned from his architect that her garage, which
everybody thought was built on her property next to the boundary that separated their
stands, actually extends two and a half metres over the boundary.
This means, says Mr Verynasty, that half of her garage is on his property, and because
buildings on land belong to the owner of the land, half of the garage is really his, and
therefore he has the right to break it down.
Mrs Verypatient, who is now very upset, phones you to ask your advice. What will you
tell her?

7.14 Comments on case study

The comments provided here do not intend to cover all legal implications of this
particular problem; they merely aim to indicate the role of the diagram.
The first step towards a solution is to ask a land surveyor to study the diagrams of the
two erven and to locate the physical positions of beacons on the site. This will indicate
whether the fence is indeed correctly positioned or not. If the fence is on the boundary,
Mrs Verypatient’s rights are secure and she will be able to claim from her neighbour for
damage already caused. If Mr Verynasty’s claim of an incorrectly placed fence is true,
Mrs Verypatient still has some options open to her.
If she can prove that the fence has been in that position for thirty years or more and
that she and previous owners of her stand always regarded that part of the property as
theirs, and have experienced no adverse claims from Mr Verynasty or his predecessors in
title, she will successfully be able to argue that she acquired ownership of the portion by
means of ‘acquisitive prescription’.
If the fence has been in place for less than 30 years, Mrs Verypatient cannot claim to
have acquired ownership due to prescription. In this instance she could negotiate with
her neighbour for, say, payment of a sum of money, in exchange for which he will grant
her a servitude of encroachment. If he is not open to the suggestion, she could approach
the courts, first to seek an urgent interdict preventing Mr Verynasty from demolishing
the garage and then to request the court to order the payment of compensation to Mr
Verynasty and transfer of the piece of land to her, rather than order demolition of the
structure on it.
What a court will order if such a case ever goes to court (similar cases have been
reported over the years) will depend on the circumstances in each case.
Chapter 8
The deeds office, the conveyancer and the conveyancing
paralegal

8.1 Introduction
The success of the South African deeds registration system is dependent on the
institutions and individuals responsible for its existence and proper functioning.
A number of stakeholders regularly participate in the process of deeds registration. The
most prominent players in the property industry, and, as a result, in conveyancing, are
property developers and investors, sellers, purchasers, estate agents, the deeds office,
conveyancers and conveyancing paralegals, banks and other financial institutions,
mortgage originators, managing agents and bodies corporate, local authorities and tax
authorities.
In this chapter we first examine the role and functions of the deeds office and secondly
those of the conveyancer and conveyancing paralegal.

8.2 The deeds office

There are 10 deeds offices in the country and each of these serves a specific region.
These deeds offices, or ‘deeds registries’ as they are also known, are (roughly in order of
largest to smallest, measured in terms of volumes of transfers registered):
• Pretoria (Tshwane) deeds registry;
• Cape Town deeds registry;
• Johannesburg deeds registry;
• Pietermaritzburg deeds registry;
• Bloemfontein deeds registry;
• King William’s Town deeds registry;
• Nelspruit (Mpumalanga) deeds registry.
If a property is situated in Johannesburg, one cannot lodge a transfer of that property in
the Cape Town deeds registry, and so on. The simplest way of finding out which deeds
office has jurisdiction in respect of a particular property is to look at the title deed of the
property — the relevant deeds office is clearly indicated on the first page of a deed of
transfer. (See Precedents P81 and P45 in the first paragraph, following on the heading
‘Deed of Transfer’.)
The deeds office keeps records of all the properties that have been registered in its area
of jurisdiction (area of authority). As they are public offices, the deeds offices supply
information about properties and owners of properties to anyone who is enquiring, at a
prescribed fee. (‘Prescribed’ in this case, means prescribed in terms of the regulations to
the Deeds Registries Act.)

8.3 The Registrar of deeds and the deeds office personnel

In charge of each deeds registry there is a Registrar of deeds. A number of assistant
registrars and various other members of staff assist the Registrar.
The Registrar of a deeds office must see to it that the operations of the deeds office are
carried out correctly and effectively. The many functions of the Registrar include,
amongst others:
• preserving the deeds office records;
• examining all deeds submitted for registration, rejecting documents that do not
comply with the law and registering those that do;
• registering transfers, certificates of registered title and certificates of consolidated
title;
• registering mortgage bonds, bond cancellations, consents to releases and
cessions of bonds;
• registering general plans and opening township registers;
• registering sectional plans and opening sectional title registers;
• registering various other documents, such as notarial bonds, servitudes,
antenuptial contracts, certain leases of land, waivers, cessions and so on;
• issuing copies of deeds when original deeds have been lost, amending errors in
deeds and documents and issuing copies of deeds and documents for information and
judicial purposes.
The personnel responsible for examining the deeds and documents lodged on a daily
basis are known as ‘deeds controllers’. They are often referred to as ‘examiners’ due to
the nature of their duties. Conveyancers and deeds controllers interact on a daily basis.
Good relationships and cooperation between the conveyancing profession and deeds
office personnel are essential for the effective administration of the deeds registration
system.

8.4 The deeds office and technology

The deeds offices have technologically advanced computer systems. When deeds and
other documents are registered, the information about the transactions is entered into
the database of that deeds office. In addition, copies of the documents are kept on
microfilm, where they can easily be retrieved when required. During 2007/2008 deeds
registration offices introduced a scanning system and copies of documents are now kept
in digital format.
A person who requires information about a particular property or its owner could either
personally visit the deeds office concerned and request the information over the counter,
or access deeds office information by means of computer, modem and a special
computer programme designed for this purpose and provided by the deeds office or by
specialist conveyancing software companies. It is possible (and in real life happens
hundreds, if not thousands, of times every day) for a person in, say, Bloemfontein, to
obtain information about a property in the jurisdiction of the Kimberley, Cape Town or
Pietermaritzburg deeds registry, within minutes of pressing a few buttons on the
computer.
Although this is not yet possible in respect of all the deeds registries, some of the larger
registries are able to issue copies of deeds and documents (as opposed to mere
information from its database) electronically or by fax. This makes access to deeds office
records accessible to people far from the particular deeds office.
In the not-too-distant future, lodgment and even registration will take place
electronically rather than physically. Draft legislation regulating electronic conveyancing
(or e-conveyancing, as it is more often referred to) is underway and the industry
expectation indicates that implementation will follow in the next five years.

8.5 Deeds office fees

The deeds office charges conveyancing firms a fee for every service rendered. For
example, from 1 April 2022 it costs R16 to obtain a computer print-out and R521 for the
issue of a duplicate original title deed when the original has been lost. The fees for
registration of transfers vary from R43 to R6 111 depending on the purchase price, while
a bond could cost between R468 and R7 640 to be registered. (For the latest schedule of
applicable deeds office fees, see Annexure 2: Deeds Office — fees of office applicable as
at 1 April 2022.) The deeds office uses the fees earned to fund its operations.
Conveyancers add these costs to the accounts of their conveyancing clients. While the
seller in a transaction will be liable for the fees relating to cancellation of her existing
bond, most of the costs relating to a transfer (including the deeds office fees for
registering the transfer) are generally for the purchaser’s account.
Some publishers issue a ‘table of costs’ booklet that is regularly updated and which
specifies the deeds office fees, transfer duty (payable to SARS) and guideline
conveyancing fees levied by the conveyancing firms. The publication lists a number of
possible purchase prices for properties (ranging from R10 000 to R10 million) and
indicates the amounts due in respect of each particular price. The specialist
conveyancing software packages used in conveyancing firms also have built-in tables of
fees and costs to automatically calculate the amounts due in specific transactions.

8.6 The Chief Registrar of Deeds

Based in Pretoria, the Chief Registrar of Deeds is charged with the responsibility of
overseeing the operation of all the deeds registries in the country. The Chief Registrar
meets with registrars on a regular basis to solve problems, improve processes and to
communicate with deeds office personnel. The Chief Registrar sets the policy and
determines the overall strategy to be followed by deeds offices in the fulfillment of their
duties.
When questions of law arise about specific transactions or general principles, the Chief
Registrar will interpret the law and make a ruling. Important rulings are noted in
‘Circulars’ issued to the Deeds Registries and circulated to conveyancers. These ‘Chief
Registrar’s Circulars’ (CRCs) are to some extent regarded as law and are binding on all
the deeds registries.
The Chief Registrar and all the Registrars of deeds meet regularly (generally once every
year) for a conference. At this conference they consider difficult points of law, unresolved
questions and interesting transactions they have had to deal with in deeds offices over
the year. They provide answers to the questions and pen them down as decisions, or
‘resolutions’. These resolutions are called ‘Registrars’ Conference Resolutions’ (RCRs).
These resolutions are binding on all deeds registries, which have to follow the rulings
when dealing with similar cases.

8.7 Conveyancers and conveyancing paralegals

Transfers of immovable property, mortgage bonds, bond cancellations and other
processes that involve acts of registration in a deeds office, are generally referred to as
‘conveyancing work’.
In terms of current law, only conveyancers may perform conveyancing work. Banks send
their bond and bond cancellation instructions to firms of attorneys that employ qualified
conveyancers. Estate agents and property owners also send their conveyancing work to
these firms. There has for some while been talk of ‘deregulation’ that will permit banks
and estate agents to do their own conveyancing, but this has not happened so far.
Recently the debate was re-opened after an enquiry was initiated by the Competition
Commission with regard to possible deregulation. The conveyancing industry as a whole
rejected the proposal (including the Law Society of South Africa and the office of the
Chief Registrar) because the current high level of specialization and qualifications are
part and parcel of the land registration system’s integrity and security.
The conveyancer has specialised knowledge and skills and is a key role-player in
maintaining the integrity of the South African deeds registration system. (See also para
10.4.2.)

8.7.1 What is a conveyancer?

A conveyancer is a person who has met three specific requirements. He or she has:
• qualified as an attorney (an attorney is a lawyer who has a recognised law degree
and who has been admitted by the High Court of South Africa to set up practice as an
attorney);
• passed a further exam (known as ‘the conveyancing admission exam’) set by the
Law Society of South Africa;
• been admitted by the High Court of South Africa to practise as a conveyancer.

8.7.2 The conveyancer’s role and function

The conveyancer takes overall responsibility for the proper and efficient handling of
conveyancing matters. Here are some of the most important things a conveyancer takes
responsibility for in a transfer file. He or she must:
• secure the purchase price by way of cash or acceptable guarantees, and collect
the cash (usually on registration);
• organise repayment of the seller’s mortgage bond from the funds available
from the purchase price;
• collect the conveyancing fees, costs and transfer duty (a tax payable to the
government);
• pay the seller’s outstanding rates and taxes on the property;
• ensure that all parties keep their promises in terms of the sale agreement,
reporting any breach of contract to the client (seller) and carrying out the seller’s
instructions regarding such breach;
• draft the new deed of transfer and supplementary transfer documents;
• generally, keep all parties informed of progress;
• ensure the property is transferred from the seller to the purchaser at the
correct time;
• on registration of transfer, pay the purchase price (less lawful deductions) to the
seller;
• on registration of transfer, pay the agent’s commission;
• ensures that the transaction poses minimal risk of money laundering or financing of
terrorist activities, by complying with the requirements of the Financial Intelligence
Centre Act (see chapter 18).

8.8 The nature of conveyancing work: An administrative side and a

legal side
To understand what a conveyancer does one has to know more about the nature of
conveyancing work. Conveyancing work has an administrative component and a legal
component. The administrative component is very visible in a conveyancing transaction,
while the legal implications are not so obvious to the untrained eye. One could compare
the administrative aspects of a transfer to the ‘tip of an iceberg’; it is above the ‘surface’
and therefore ‘visible’. The legal component, which is very important, lies beneath the
‘surface’ and is not normally visible. Figure 8.1 illustrates this point.

Figure 8.1: Distinguishing between the admin component and the legal
component of a conveyancing transaction

To fulfil the administrative duties, active steps or action is required, while the legal
requirements are of a more passive (but no less important!) nature.
On the administrative side one will notice constant action in a conveyancing transaction;
there are many letters to be written, letters to be read, documents to be drawn up,
phone calls to be made, appointments to be made, and so on. However, if all goes well in
a transaction, there is not much obvious legal work to be done.
It helps to place the conveyancer’s role in proper perspective if one distinguishes
between active and passive legal functions. In most transfers a passive legal presence is
required. The conveyancer must generally just monitor the transaction to ensure no legal
problems arise. If problems of a legal nature do occur, active legal steps become
necessary. The conveyancer must assess the situation, apply the law, and take the
necessary steps to remedy the situation. The sooner legal problems are detected and
dealt with, the less damage will occur.
If any party in a conveyancing transaction breaches (fails to honour) his or her legal
obligations, or if the conveyancer misses a minor legal development (such as an
unfulfilled condition) the situation can become serious very quickly. Depending on the
transaction and the nature of the breach, the damage done can amount to thousands,
sometimes even millions, of rands.
Although the legal side of a conveyancing transaction is more passive in nature and
therefore not visible in the ordinary day-to-day conveyancing activities, the risk that
something could potentially go wrong is very high. The conveyancer has few active
duties in a transfer (viewed from a legal as opposed to an administrative angle) but his
or her legal knowledge and expertise must constantly be ‘on stand by’, as it were. This
passive role is vital to the wellbeing of the transaction.
Because the legal aspects of a transaction are hardly ‘visible’ unless something goes
wrong, people often assume that conveyancing is a simple administrative process and
that anyone able to type can handle a transfer or bond instruction. This is far from true,
and you must always be aware of the legal risks and responsibilities underlying a
seemingly simple conveyancing transaction. The legal risks in a transfer may also be
compared to the medical risks present when a doctor performs an operation on a patient
under general anaesthetics.

8.9 Conveyancers and administrative personnel share the workload

While a qualified conveyancer has the skill and experience to monitor the legal wellbeing
of a transaction, the administrative side of things can be delegated to a person with the
necessary secretarial skills and practical conveyancing knowledge.
In small firms of attorneys where there are relatively few conveyancing instructions, a
conveyancer will probably do all of the actual conveyancing work (administrative and
legal) himself or herself. In larger practices it is customary for conveyancers to employ
secretarial personnel to attend to the day-to-day handling of transfer, bond and other
conveyancing files.

8.10 The meaning of the term paralegal

The prefix ‘para-’ is used in many words to signify a range of concepts meaning ‘to
support’, ‘to help’, ‘side by side’, ‘similar to’ or even ‘in place of’. A parachute helps you
to float down safely from an aeroplane, paracetamol helps to relieve headache and a
paramedic helps to administer practical medical treatment to a patient while waiting for
the doctor.
A paralegal (as the concept is generally understood in South Africa) is a person who —
• is employed by an attorney or conveyancer;
• does not (usually) have a law degree or other formal tertiary qualification;
• has sufficient practical legal knowledge, skills and experience to perform
administrative work with a legal content; and
• works in a clearly defined area of law, administering his or her own files under the
supervision of the attorney/ conveyancer.
Paralegals function in different areas of law, such as administration of estates,
debt-collection practices and conveyancing.
In recent times an expectation has developed that persons may, after obtaining a
paralegal qualification, ‘open up shop’ for their own account. This perception is incorrect
and it is against the law for a person who has not been admitted as an attorney to
practise for his or her own account. Beware advertisements by training institutions which
create the impression that paralegals who obtain a general paralegal qualification may
practise law in their own name.

8.11 The difference between conveyancing secretaries and

conveyancing paralegals
There is sometimes confusion as to whether someone should be called a conveyancing
secretary or a conveyancing paralegal. The title ‘conveyancing paralegal’ is one that
must be earned by proving knowledge, skills, experience and reliability.
There is no law or formal body (as yet) that governs the use of the word paralegal. This
fact unfortunately opens the term up to abuse. Its proper meaning, in a conveyancing
context, is to describe persons who –
• have in-depth knowledge of conveyancing procedures;
• have administered conveyancing files for a considerable period (for example, three
or more years) and are therefore highly experienced;
• administer their own conveyancing files and work independently, with
minimum interference or supervision by the conveyancer;
• have been granted a wide discretion in decision-making processes and other
aspects about their files and do not merely carry out direct instructions;
• have proved themselves over a period of time to be competent and
trustworthy.
Conveyancing paralegals tend to be women that have started out in junior conveyancing
positions, have a talent for organising and managing projects, have the ability to
communicate well with clients and other role-players, and have over the years increased
their skills and knowledge of practical conveyancing to the point where they often know
more about practical conveyancing than conveyancers.
The significant factor that distinguishes a conveyancing secretary from a conveyancing
paralegal, is this: While conveyancing secretaries merely assist conveyancers and
paralegals in aspects of their work, conveyancing paralegals work independently and
administer their own files.
In the past, conveyancing paralegals were almost exclusively women. This has changed
in the last few years and an increasing number of men are taking up positions as
paralegals in law firms.
8.12 The conveyancing paralegal handles the day-to-day administration
of files
In a typical medium to large size firm of attorneys the day-to-day administration of
conveyancing files is the responsibility of the paralegals while the conveyancer focuses
on the legal aspects of the transaction, liaises with key clients and deals with problems
that present legal risks.
The conveyancer ultimately bears the responsibility for the proper administration of the
files under his or her command, but in practice it is the conveyancing paralegal who
determines the speed and efficiency with which a conveyancing transaction is brought to
a close.
Many things can potentially go wrong in a conveyancing file. In a transfer file, for
example, the documents can be drawn up wrongly, which will result in the documents
being rejected by the deeds office, thus causing a delay, or transfer can mistakenly be
registered before the full purchase price has been collected. Not all mistakes are serious,
but even small errors in the conveyancing process can cause delays, and delays cost
money.
In conveyancing, speed, accuracy, attention to detail and good communication with
parties to the transaction, are the keys to success. The paralegal must understand the
conveyancing process and must know how to avoid the common risks and pitfalls often
encountered in conveyancing transactions.
It is the paralegal’s responsibility to see that every file is neatly organised,
correspondence and enquiries are promptly attended to and any problems or potential
difficulties are brought to the attention of the conveyancer timeously. He or she should
keep a checklist in the file cover and this checklist should enable any interested party to
establish at a glance what the status and state of progress are in each file.
The successful paralegal knows that time is of the essence and that transactions must be
processed and finalised as soon as possible. The balance between working accurately
and getting things done in the least amount of time is difficult to achieve, but necessary
for a successful conveyancing practice. Viewed from one perspective, conveyancing is a
race against time and in another sense it is about avoiding mistakes.
Conveyancing attorneys rely on estate agents, banks, mortgage originators and
individual clients for work and these clients will only instruct an attorney if they are
confident that their transactions will receive priority treatment. It is generally the
paralegal who determines the perception that these clients will have of the firm.

8.13 The secret to keeping existing conveyancing clients and attracting

new ones
Although the theory of how to get new business and keep it is easy to understand (and
is generally the same for all types of enterprises), it is often hard to execute in practice.
Law firms should continually strive to improve their performance by implementing
systems and procedures that promote the following qualities in regard to conveyancing
employees:
• up-to-date knowledge of conveyancing law and practice;
• good communication with clients and other stakeholders;
• organising skills;
• the balancing of accuracy and speed.
 Chapter 9

What is law and where does it fit in?

9.1 What is law?

The preceding chapters of this book serve as a general introduction to conveyancing.
Amongst other things it was established that conveyancing involves both law and
administration.
If conveyancing involves ‘law’, it becomes necessary to understand what law is, to
determine how it comes into existence and to find out how the law impacts on
conveyancing practices and procedures.

Our definition of law:

‘Law’ can be described as a set of rules designed and enforced by persons in

authority on a society (group of people, public, community), with the intention of
creating order in that society.

Note that although we naturally desire law to be fair and even-handed, it is order, and
not justice, that is generally regarded as the primary function of a legal system.
However, for a legal system to function optimally in the particular society it should be
fair, impartial, reasonable and consistent.

9.2 Who makes the law?

The people of South Africa are the society, and the ‘person in authority’ that creates new
law is the South African Parliament. Parliament has the authority to make new laws, and
to repeal (cancel) old laws. Laws made by Parliament are called ‘Acts’. ‘Acts’ are also
referred to as ‘legislation’ and it is said that Parliament has ‘legislative powers’, meaning
it has the authority to create Acts. Provincial governments may also pass legislation for
their respective provinces.
In theory the three important functions of authority have been separated: Parliament
makes the law, Government executes the law and the courts (also called the ‘judiciary’)
enforce and interpret the law. Government appoints officials to make sure that the
citizens and residents of the country follow (and benefit from) the law (the police, for
instance, in the case of criminal matters).
In developed judicial systems, high priority is placed on the independence of the
judiciary; in line with the doctrine of the separation of powers, the judiciary’s function is
to keep government in check.

9.3 Law is like the rules of a soccer game

Think of society (or everyday life) as a game of soccer. If there are no rules, chaos will
result. No one will know what is permissible and what is not. The ‘chancers’ will do what
they like and the honest players will suffer injustice. Even those players who want to be
fair will be forced to become aggressive or dishonest players. The game will be no fun for
the spectators, either.
Without rules there can be no fair play. This is as true for the functioning of society as it
is for the playing of a soccer game. And not only must the rules exist, they must also be
enforced. If the rules exist but are not enforced, they become as meaningless as if they
had never existed in the first place.

9.4 Who enforces the law?

In South African society, the courts exist to uphold the law. Differently stated, the courts
ensure that the laws of the country are followed. If a law is broken, the court makes an
order to set matters right.
The judges (high courts) and magistrates (lower courts) that pass (or ‘hand down’)
judgments in the courts are independent from government (to ensure that they truly
uphold justice and do not merely act as ‘puppets’ of the government).
The Constitutional Court is the highest court in our country. South African courts are
classified into two broad categories: the high courts and the magistrates courts.
Enforcement of law is best illustrated by an example from the field of criminal law. If a
person is accused of breaking the law (for example, the person is said to have stolen a
car), a court hearing will be held. The state will prosecute the alleged thief.
The judge or magistrate (this person is referred to as ‘the court’) will listen to both sides
of the story and the court will evaluate what it hears. It will issue a ruling, or as it is also
known, ‘give a court order’ or ‘give judgment’ (that is, it will decide who was right and
who was wrong) and the parties must then obey the court’s ruling.

9.5 There are different branches of law

To make it a more workable concept, the law is divided into several categories, or
branches, of law. These various branches or categories of law, when grouped together,
are referred to as 'the law of the country' or 'the laws of the country'.
There are many viewpoints from which to make the divisions. For example one can
categorise law based on the division of law between 'civil' and 'criminal' law, or one could
take the distinction 'private law' versus 'public law' as the starting point, as we have
done in Figure 9.1. There are many instances where legal principles overlap, in other
words where they fall into more than one category. For example, contract law is formally
part of 'the law of obligations' but it is also relevant in a commercial law context.

Figure 9.1: Divisions of law

9.5.1 Criminal law
Criminal law relates to cases where a person suspected of committing a crime is caught
and then charged with a crime. A 'crime' is an offence (an act prohibited by law) for
which one may be punished by law. Examples of crimes are murder, theft, assault,
dealing in drugs, fraud and robbery. There are also lesser crimes (called 'offences') such
as parking your car in a prohibited zone, which will incur punishment, usually in the form
of a fine.
In criminal law, the concepts of 'guilt' and 'innocence' are important. Our law states that
a person is regarded as innocent of a crime until proven guilty. It is the State's
(Government's) job to prove the guilt of the suspected criminal. A court hearing is held
(called a 'trial') where the State and the person suspected of committing a crime must
each tell their version of the story. The public prosecutor appears in court on behalf of
the State and the accused may have a lawyer (the defence attorney/advocate) who
appears on his or her behalf. The court hears the evidence from both sides and then
gives judgment. The accused may be found 'guilty' (and is then punished with
imprisonment, a fine, etc) or 'not guilty'.

9.5.2 Civil law

In civil law, there is no 'guilty' party. Guilt or innocence is not at issue and the terms are
not used in this context. Civil law is the law relating to 'civil' (as opposed to criminal)
matters. Private citizens who have to resolve their conflicts (as opposed to criminal
matters where the State accuses a citizen) do so in terms of the civil law.
Here are a few examples of categories of civil law:
• the law of delict: One person acts unlawfully and negligently and causes loss to
another person, for example someone drives into the back of your car by accident and
now you can rightfully sue him for the damage;
• company law: The rules about creating and operating companies;
• tax law: The rules that determine what we pay tax on (income, purchases,
acquiring property and so on) and how much we have to pay;
• property law: How to become the owner of property, how to prove ownership and
what owners may and may not do with the property;
• conveyancing law: The law that prescribes the practices and procedures for
creating and transferring real rights in immovable property;
• marriage law and matrimonial property law: How to get legally married, the
effect of being married and who owns what after marriage;
• banking law: The law relating to creating and operating banks and also the laws
relating to cheques, credit cards and so on.
Figure 9.1 on p 9–3 illustrates the distinction between private law and public law. The
categories often overlap and interrelate with one another.

9.6 Where does one find the law?

What is the origin of law and how can one establish the legal position in a particular
matter? Differently stated, where does one find the law? How does a particular legal
principle come to be part of our law?
Generally speaking, a legal principle will exist either as part of the 'common law' or as
'legislation'. These concepts are explained in this chapter.
If a lawyer researches the legal position on a specific matter he will probably use the
method outlined below to find the law on a particular point. Let us use this example to
illustrate. Mr X, a law-abiding citizen, drives on a public road one day. At a critical
moment, without being able to help himself, he sneezes. In the process he closes his
eyes... and causes an accident. Will he be guilty of an offence (criminal law) and can the
person whose car suffered damages as a result, claim compensation from Mr X?
Mr X consults an attorney, Ms Y, for advice. Unless the lawyer immediately knows the
legal answer to the specific question at hand (this is sometimes but not often the case,
given the vast array of legal principles in our law), she may need to research the matter
in order to give the best advice. This is how she's likely to proceed:
• firstly she will look at legislation (Acts of Parliament and provincial legislation) to
find out if there is a specific provision dealing with the issue;
• next she will read through the case law (law reports) to see if there has perhaps
been a case in the past dealing with the same issue. In court cases, both legislation and
common-law principles are considered;
• then she will read through textbooks, firstly to establish if there are any
common-law principles that may possibly apply, and secondly to see if writers in South
African law possibly have anything to say about sneezing and causing accidents;
• if she is still unable to find a specific aspect of law applicable to the particular
situation (this is unlikely, as most legal issues are addressed in legislation, the law
reports or texts on common law) she may wish to research the law of other countries
such as English law or Australian law, for a recommended course of action.

9.6.1 Legislation
In South Africa our Parliament makes laws when it thinks that a need for rules in a
particular area exists or if existing rules under common law become outdated. These
laws are called 'legislation' or 'Acts of Parliament' or sometimes 'Statutes'. The
Constitution of the Republic of South Africa, 1996, is now the supreme law of the
country, and any law (whether common law or an Act) inconsistent with it is invalid.
Another example of legislation is the Matrimonial Property Act 88 of 1984. Amongst
other things, this Act governs the aspects of 'who owns what' in a marriage. Many, many
other topics are dealt with in South African legislation. Currently there are more than
500 Acts applicable in our country.

Figure 9.2: Explaining the name of an Ac

Another example of legislation is an Act that stipulates that residents in South Africa
must pay a certain portion of their income towards taxes. This Act (which was made by
Parliament and which is regularly revised and updated) is known as the Income Tax Act
58 of 1962.
In addition to the national legislation created by Parliament, the legislative body of each
of South Africa's nine provinces may also make laws for that particular province. This
type of legislation is called provincial legislation. Provinces do not have power to make
legislation that conflicts with or overrules national legislation.

9.6.2 Common law

South Africa inherited its law from the Romans, as adapted and modified by the Dutch.
Roman-Dutch law was introduced in South Africa when Jan van Riebeeck arrived on our
shores to represent Dutch interests. This law (which has over the years been influenced
by English law, given that the country was for some time a British colony) is called 'the
common law' — in the sense of generally applicable law — and it still remains the basis
of South African law. As and when modern needs require, Parliament uses legislation to
change outdated common-law concepts. The courts also develop, through interpretation,
the common law applicable in a particular situation.
The Constitution and other legislation override common law. If an Act determines the
legal position, then the common law on that point becomes irrelevant. However, if a legal
issue arises and it is not solved by what legislation provides, one has to establish the
common-law position and interpret the common-law position in line with constitutional
principles.

9.6.3 Court cases

Although judges, strictly speaking, cannot ‘make’ law, they have to consider the court
cases brought before them and then decide which of the parties is right and which of
them is wrong. The judges cannot base their decision on which party they like or dislike
and they cannot base it on what they personally think is fair or unfair. They must base
their decision on what the law says about the particular situation.

9.6.3.1 The court’s judgment

In deciding the outcome of a case, the judge must consider the facts of the matter and
the general principles of law (legislation and common law) that apply to the particular
situation.
A person who is party to a court case will often (not always, as one may represent
oneself) appoint an attorney (and sometimes also an advocate) to represent him or her.
In the court hearing the lawyers will state the common-law principles or legislation that
they rely on for their client’s case. Each lawyer gets a turn to state his or her client’s
case by presenting evidence and legal argument. After listening to the lawyers, the
judge will write down his or her decision and the reason for the decision. He or she will
inform the parties of the outcome either immediately or after some time. The written
version of the decision is known as the court’s judgment.
Unlike what we get to see on television and films, South Africa at present does not have
a jury system — the outcome of a case is decided by the judge, not by members of the
jury (in countries like the USA, juries are selected from the general public).
The court’s judgment contains an order demanding specific things from the parties to the
court case. It is also an interpretation of the law in view of the specific facts of the
particular case. For example, the judge may order that the sneezing Mr X pay damages,
as he was negligent in driving too close to the car in front of him.
In this sense, a judgment handed down in the courts is a source of law. Lawyers who are
in later years faced with similar facts can look at the reasoning and the outcome of a
particular judgment, to assist in preparing their clients’ cases.

9.6.3.2 Judicial precedent

There is a hierarchy (‘pecking order’) of judgments that binds courts to follow decisions
of other courts. If a court is faced with a set of facts and legal principles that are similar
to those of another matter (which gave rise to a judgment handed down by a higher
court in the same province), the ‘junior’ court must follow the ruling of the ‘senior’ court.
This method is called ‘judicial precedent’ and aims to create certainty amongst the public
as to what the outcome of a court case (given certain facts) is likely to be.
For example, if the Supreme Court of Appeal gives a ruling, then all the other courts
(high courts and magistrates’ courts) in the country are bound to give the same
judgment if a case with similar legal issues is placed before them. If a high court hands
down a judgment with five judges on the bench, all one-judge decisions of that particular
province and all magistrates’ courts are bound by the decision.
Decisions of magistrates do not constitute judicial precedents and the rulings of such
courts therefore do not need to be followed by any courts.

9.6.3.3 Publishing of case law

It is practically impossible for attorneys to learn of courts’ decisions in all matters
decided before courts in our country. There are simply too many judgments issued daily
and besides, how will an attorney practising in Durban be able to scan decisions made in
the Pretoria High Court?
To help lawyers in learning what has been decided in the higher courts (remember, these
judgments are generally binding on courts hearing similar cases), certain publishers of
legal material collect and assess, as a matter of routine, most of the cases handed down
in the higher courts.
The written judgments of cases dealing with new or important legal principles are then
published by Juta and Butterworths (two privately-owned publishers) on a regular basis.
Other publishers also exist, but they tend to specialise in reporting only particular types
of cases, for example commercial law reports.
The reporting of cases is of great value to attorneys, advocates and academics, since it
enables them to learn what the courts have to say about various principles. These
reported court cases are published in books and are then called ‘Law Reports’. Law
reports are given distinct names when they are published, to make it easier to find them
and refer to them. Figure 9.3 explains the components of the name of a law report:

Figure 9.3: Explaining the name of a reported case

With the advent of computer and internet technology and an increasing number of
judgments being available online, the matter of researching case law is, ironically,
nowadays becoming somewhat complicated.
Previously it was relatively simple: if a case was reported (in other words, if Juta or
Butterworths included it in their published law reports) everyone knew about the case
and all lawyers involved in a particular matter would be able to consider it in evaluating
their own client’s position. If a case was not reported in this way, chances were that the
other party would not know about it either and it was not likely to be important in
influencing the outcome of the particular matter at hand.
Nowadays a number of interested parties follow court decisions and ‘publish’ them on
the internet. As a single, effective internet search engine for South African case law
published on the net does not yet exist, lawyers are sometimes taken by surprise when
their opponents quote a certain case in court of which they have not yet learned.

9.6.4 Customs (habits, business practices)

If people follow customs for a long time and if the contents of the custom are accepted
by the community and if the rule is certain and reasonable, the particular custom
actually becomes part of the law.
For example, certain banking and business practices have become so entrenched in
commercial society that they get to be regarded as part of the law.

9.6.5 Other sources

If a lawyer wants to establish the legal position in a matter and finds no help in
legislation, court cases, text books and old Roman-Dutch writers, she will look at the
laws of other countries (such as Zimbabwe, Britain or Australia) to see if she cannot
perhaps find some legal principle that applies there that can solve her client’s legal
problem. She will then try to convince the judge that the particular foreign legal principle
should become the law in her client’s case.
Courts are increasingly prepared to consider the rulings of foreign courts on the basis of
‘why reinvent the wheel if it already exists’. There are clear guidelines however regarding
when and how these foreign principles of law may be ‘imported’ into South African law.
Some lawyers specialise in a study of the legal principles of other countries. These types
of studies are known as ‘comparative law studies’.

9.7 Law in everyday life

9.7.1 Mostly, things go right
Law plays an important part in everyday life, but mostly without people being
consciously aware of it.
Consider the following examples:
• Mrs B buys groceries from the local supermarket and pays by cheque (the law of
contract and cheque law apply).
• Mr and Mrs A get married (marriage law and matrimonial property law apply).
• Mr C takes care not to drive faster than 120 km/h on the highway, as he does not
want to incur a traffic fine (in terms of traffic law and criminal law).

9.7.2 Sometimes things go wrong

But sometimes things go wrong, and then people become conscious of the legal issues.
Consider the following examples:
• A buys B’s car but doesn’t pay for it. If a request for payment doesn’t work, B may
consider going to court, asking the court to order A to pay.
• C decides to divorce her husband — she will have to go through a legal process and
then convince a court to grant a divorce order.
• M drives recklessly and causes an accident in which three cars are damaged and
one person dies. The state will prosecute M for the crime of manslaughter, perhaps even
murder, or at the very least, reckless and negligent driving. Also, the owners of the
damaged cars (or insurance companies) may decide to sue M (in terms of the law of
delict) for the cost of repairing the cars and medical expenses.

9.7.3 Do not take the law into your own hands

People are not allowed to take the law into their own hands. Because law is complex, a
person often quickly realises that he needs to get help from someone who knows the law
and who will know how to solve a legal problem.
The person to approach is usually an attorney, but depending on the problem, other
persons could also help. Figure 9.4 describes how different legal needs (not only those
involving court cases) are met in South Africa.

Figure 9.4: The legal landscape

9.7.4 Law is not only about conflict

The law is not only about resolving conflict. There are many areas of law practice that
involve little or no conflict. Consider, for example, instances where a person instructs an
attorney to draw up a will or a contract to buy a business. These activities do not
necessarily lead to conflict or litigation.

9.8 Area of law practice

Legal issues can generally be sorted into two groups:
• legal matters involving conflict, for example, divorce or breach of contract
(litigious matters);
• legal matters not involving conflict (drafting a contract or will for a client)
(non-litigious matters).
A legal matter involves conflict if there is a serious difference of opinion (dispute)
between two persons or groups of persons about facts or law. With few exceptions the
conflict usually has something to do with money. If the conflict is going to be solved
through the courts, these matters are known as ‘litigation’. To ‘litigate’ means to seek the
help of the courts in solving the problem and to follow all the procedures prescribed by
law in order to bring the matter before the court and reach finality in the case.
A legal matter involving conflict develops differently to non-conflictual matters. If there
are no disputes or conflict, an attorney can finalise what he is instructed to do (register a
mortgage bond, draft a contract) with relative speed and ease. Where persons disagree,
however, the process followed must aim to resolve the conflict.
The first step when a legal problem arises is for the person to seek the legal advice of an
expert, usually an attorney. It is not possible for one attorney to have in-depth
knowledge of all aspects of law. One should therefore consult a person specialising in the
area of law relating to the problem.
Most attorneys tend to specialise in one or two areas of law. A large law practice will
typically group their attorneys into the following divisions, depending on their interests
and skills:

Litigation Commercial law

Criminal law Conveyancing

Labour law Insolvency law

Estate planning Tax law

Administration of deceased estates Family law

9.8.1 Litigation
Litigation is the process of bringing or defending a claim before a court of law. This can
be further divided into high court or magistrates’ court litigation.

9.8.2 Criminal law

Criminal law is relevant when a crime has been committed and the State prosecutes an
accused before a court of law.

9.8.3 Commercial law

Commercial law is a broad concept covering the law that applies to commercial
transactions and trade (including many aspects of banking). A lot of commercial law is
about drafting contracts, considering tax implications and shaping business deals.

9.8.4 Labour law

A labour lawyer specialises in the law concerning people’s employment. Some lawyers
represent employees who feel they have been treated unfairly while others defend the
employers against the claims of employees.

9.8.5 Estate planning

Clients want to structure their financial and personal affairs in such a way that they will
have sufficient financial means to sustain themselves in old age, and that their family
and dependants are cared for when they die. For this they need advice, structuring of
affairs, wills drawn and sometimes trusts created.

9.8.6 Administration of deceased estates

When a person dies an executor is appointed to take charge of his or her estate, to wind
up the estate and to distribute the assets of the deceased person to the heirs (those who
inherit from the estate).
Some attorneys specialise in the administration of estates while many banks also have
large estate administration divisions.

9.8.7 Tax law

One disadvantage of having too much money is that one is more likely to have tax
problems! Specialist attorneys offer tax-planning services for their clients and also assist
when the client thinks that the South African Revenue Service (‘SARS’) wants too large a
slice of her income.

9.8.8 Insolvency law

When a person’s debts exceed his assets, a creditor (or even the person himself) could
ask the court to sequestrate the person. If the court order is granted, it is said that the
person has been declared insolvent.
All the assets of the insolvent (except for a bed, some clothing and other things) are
then sold, creditors are paid proportionally and that person can start afresh, even though
this fresh start includes poverty and a lot of restrictions on legal and contractual
capacity.
Not only attorneys, but a range of other persons as well, may become liquidators.

9.8.9 Family law

This field of law covers advice on marriage law, divorce, child custody and so on.

9.8.10 Conveyancing
Some attorneys also choose to become conveyancers, specialising in certain aspects of
property law, for example property development law and/or the registration of transfers,
bonds, and bond cancellations.
Banks appoint ‘panels’ of conveyancing attorneys to do the banks’ conveyancing work
(registration of bonds and cancellations). When people ask for loans from the bank to
purchase a house, the bank will instruct the attorneys to register a mortgage bond as
security for the loan.

9.8.11 Environmental law

There is an increasing need for laws aimed at protecting our environment. Although a
relatively new branch of law, environmental law is one of the fastest growing areas of
legal practice.
 Chapter 10

The law relating to conveyancing: Legislation and other

sources of law

10.1 Introduction
Conveyancing involves processes, practices and procedures and is based on a mixture of
law and administrative activities. Where does one find the legal principles that underlie
conveyancing procedures? In other words, what are the sources of current conveyancing
law?
While law in general is found in many sources, such as common law, customs, various
pieces of legislation and case law, most of the legal principles applicable to conveyancing
matters are found in legislation, the most important of which is the Deeds Registries Act
47 of 1937 ('DRA'). There also exist regulations (practical rules) that provide the 'flesh'
to the outlines specified in the DRA and one will generally find an updated copy of the
DRA and regulations thereto in the office of every practising conveyancer.
A person who tries to read a section in an Act for the first time usually finds it somewhat
intimidating. Legislation is written in a very specific way and it takes some practice to be
able to read it with comprehension. In legislation, words used are selected deliberately
and carefully to give precise meaning to the intention of the lawmaker. It is written in
such a way as to leave no room for two different interpretations, the law maker does not
want to give persons who must comply with the law an excuse that will enable them to
say 'oh, I thought this section could also mean I am allowed to do this. . .'.
Although legislation is written in such a way as to convey a precise meaning, precision
and clarity are not necessarily the same thing. Although the meaning of the exact words
used in a section is usually clear, the context is not so obvious at first glance. To
understand why a particular section exists in an Act, it usually helps if someone explains
to the novice reader the context of and purpose for which the section was written.
While conveyancers should regularly consult the various Acts and regulations relating to
conveyancing, paralegals and other role-players do not normally need to concern
themselves with the technical directions for conveyancing administration. Paralegals
normally rely on guidance from the conveyancers as to what the law prescribes.
Experienced paralegals can, however, enhance their understanding and executive skills
by taking time to read and understand important conveyancing legislation.

10.2 Specific legislation pertaining to conveyancing

There are more than 300 pieces of legislation (national or provincial, in the form of Acts,
regulations or proclamations) that impact on conveyancing in some way or another.
Conveyancers need to keep themselves up to date with developments in law and
amendments to Acts to ensure that they handle matters correctly and give sound advice
to their clients.
In this chapter we list only the major sources of conveyancing law.
• Deeds Registries Act and regulations: This Act and its regulations regulate
conveyancing practices and procedures, sets out the role and functions of the deeds
office and the responsibility of conveyancers.
• Sectional Titles Act and regulations: This Act and its regulations make it
possible for a person to own a building or part of a building separate from the land on
which it rests (the land is owned by all the owners of sections in the scheme) and
provides the mechanism for setting up sectional title schemes. Up until September
2016, it also provided rules for the management and day-to-day operations of sectional
title schemes. The scheme management provisions are now contained in the Sectional
Titles Schemes Management Act which became operational on 7 October 2016.
• Transfer Duty Act: This Act imposes a tax called transfer duty, which is payable
when property is 'acquired' (practically, every time a property is transferred). It
prescribes the amounts due, provides exemptions in certain instances, prescribes
penalties for non-payment and generally provides for the administration in connection
with this tax.
• Alienation of Land Act: This Act states that any agreements for the sale (or other
alienation) of land must be in writing and signed by the purchaser and seller. It goes on
to regulate transactions where the land has been sold in instalments (as opposed to
being sold for cash or funded by a mortgage bond). It also contains
important clauses about deposits to be held in trust and further provides a ‘cooling-off
clause’ to protect purchasers in certain circumstances.
• Financial Intelligence Centre Act (‘FICA’): This Act, aimed at combating money
laundering, was introduced in 2001. Amongst other things, FICA forces conveyancers
(and other role-players such as banks and estate agents) to establish and verify the
identity of their clients before establishing a business relationship with them, and to
report certain deposits/transactions to the Financial Intelligence Centre;
• Chief Registrar’s Circulars: The Chief Registrar issues memoranda to all deeds
offices and conveyancers from time to time, instructing them on how to deal with
specific issues pertaining to deeds registration. These memoranda are called Chief
Registrar’s Circulars (‘CRCs’);
• Registrars’ Conference Resolutions: At the annual conference at which the
Chief Registrar of Deeds and all other Registrars of deeds are present, decisions are
made about uncertain areas of law and deeds office practice. These decisions or
resolutions are called Registrars’ Conference Resolutions (‘RCRs’) and are treated as if
they are law. CRCs and RCRs are binding on all deeds registries, which have to follow
the rulings when confronted with similar cases;
• Case law: If persons end up in a conflict about matters of law, they sometimes go
to court to ask for the matter to be resolved. The judgment (verdict) of a high court
then becomes part of the law. Conveyancers need to read the various monthly
publications that report on the case judgments. These are called ‘law reports’ and are a
very important part of legal practice.

10.3 The Deeds Registries Act and regulations

The Deeds Registries Act (‘DRA’) and regulations to the DRA can be described as a
codification of conveyancing law. This means that the legislator has attempted to put all
relevant law about conveyancing procedures into a single Act of Parliament.
Most conveyancing questions can be answered by having reference to the DRA and
regulations. Who says that a transfer of a piece of land may only be effected once a
diagram exists for the property? Regulation 32 to the DRA. What is the authority for the
statement that a mortgage bond can generally only be cancelled if the bondholder
consents to the cancellation? Section 56(1) of the DRA.

10.4 Examples of Acts and sections that specifically regulate

conveyancing issues
For the sake of those interested in the more theoretical aspects of conveyancing law, we
enclose quotes from a few relevant pieces of legislation and provide a brief discussion of
the meaning thereof.

10.4.1 Section 13(1) of the Deeds Registries Act 47 of 1937

13 When registration takes place
(1) Deeds executed or attested by a registrar shall be deemed to be registered upon the affixing
of the registrar’s signature thereto, and deeds, documents or powers of attorney lodged for
registration shall be deemed to be registered when the deeds registry endorsement in respect of
the registration thereof is signed: Provided that no such deed, document or power which is one of
a batch of interdependent deeds, documents or powers of attorney intended for registration
together, shall be deemed to be registered until all the deeds, documents or powers of attorney or
the registration endorsements in respect thereof, as the case may be, have been signed by the
registrar.

This subsection explains when a deed is registered — when the Registrar of deeds has
signed it. (See paras 6.3 and 6.4 for a discussion.) It also provides that in the case of
‘simuls’ a deed is only considered registered once all the deeds in that batch have been
signed.

10.4.2 Section 15 of the Deeds Registries Act 47 of 1937

15 Preparation of deeds by conveyancer
Except in so far as may be otherwise provided in any other law, no deed of transfer, mortgage
bond or certificate of title or any certificate of registration of whatever nature, mentioned in this
Act, shall be attested, executed or registered by a registrar unless it has been prepared by a
conveyancer.
[S 15 substituted by s 4 of Act 170 of 1993, by Proclamation R9 of 31 January 1997 and by s 2 of Act 93 of
1998.]

‘Prepared’ in this context means that the conveyancer needs to sign a ‘prep clause’ that
appears on the top right-hand corner of the first page of deeds and certain other
conveyancing documents. By signing this clause, the conveyancer guarantees that the
facts set out in the document are correct. It is said that the conveyancer ‘takes
responsibility for the correctness’ of certain facts. The extent of this responsibility is then
specified in other sections of the DRA and certain of the regulations to the DRA.
It is a heavy responsibility resting on the shoulders of the conveyancer, and the fact that
South Africa has a reliable and accurate system of registration is in large part due to this
fact. The conveyancer double-checks the work before he or she signs it off; if the
content of the deed is later found to be inaccurate, the conveyancer could be sued for
damages.
This section also has another important consequence: only conveyancers may effectively
register deeds and documents. The Registrar will not accept a deed for registration
unless it is ‘prepped’ by a conveyancer.

10.4.3 Section 16 of the Deeds Registries Act 47 of 1937

16 How real rights shall be transferred
Save as otherwise provided in this Act or in any other law the ownership of land may be conveyed
from one person to another only by means of a deed of transfer executed or attested by the
registrar, and other real rights in land may be conveyed from one person to another only by means
of a deed of cession attested by a notary public and registered by the registrar: Provided that
notarial attestation shall not be necessary in respect of the conveyance of real rights acquired
under a mortgage bond: Provided further that where the State acquires all the land held under any
title deed, whether by way of expropriation or otherwise, or where a local authority by virtue of
the provisions of any law acquires all the land held under a title deed by any other such authority,
the registrar shall make such alterations and entries in his registers and such endorsements on
any such title deed as may be necessary . . .

It is because of this section that the document called a ‘deed of transfer’ exists. This
section is largely responsible for the fact that our system of land registration is known as
a ‘deeds’ registration system.
See para 6.3 for an explanation of how new deeds are created and registered and how
old deeds are ‘killed off’.

10.4.4 Section 2 of the Sectional Titles Act 95 of 1986

2 Ownership and real rights in or over parts of buildings, and registration of title to
ownership or other real rights in or over such parts
Notwithstanding anything to the contrary in any law or the common law contained—
(a) a building or buildings comprised in a scheme and the land on which such building or
buildings is or are situated, may be divided into sections and common property in accordance with
the provisions of this Act: Provided that where a scheme comprises more than one building, any
such building may, subject to s 5(4), be so divided into a single section and common property;
(b) separate ownership in such sections or an undivided share therein may be acquired in
accordance with the provisions of this Act;
(c) the owners of such sections shall own such common property in undivided shares in
accordance with the provisions of this Act;
(d) any real right may be acquired in or over any such section or an undivided share therein
or common property in accordance with the provisions of this Act; and
(e) a registrar may, in accordance with the provisions of this Act, register in a deeds registry
a title deed whereby ownership in, or any lease of, or any other real right in or over, any such
section or an undivided share therein or common property is acquired.

This section lays the foundation for the abolition of the superficies solo cedit rule in
certain controlled instances. Because of this section, it is now possible for a person to
own one flat in a high rise building, as well as a share in the land and other common
property forming part of the scheme. See chs 4 and 5 to learn how sectional title
schemes ‘work’.

10.4.5 Section 2 of the Transfer Duty Act 40 of 1949

2. Imposition of transfer duty
(1) Subject to the provisions of section 9, there shall be levied for the benefit of the National
Revenue Fund a transfer duty (hereinafter referred to as the duty) on the value of any property
(which value shall be determined in accordance with the provisions of sections 5, 6, 7 and 8)
acquired by any person on or after the date of commencement of this Act by way of a transaction
or in any other manner, or on the amount by which the value of any property is enhanced by the
renunciation, on or after the said date, of an interest in or restriction upon the use or disposal of
that property, at the rate of-
(a) ......
[Para (a) substituted by s 2(1) of Act 136 of 1992 and by s 3(1) of Act 97 of 1993, amended by s 14(1)(a) of
Act 9 of 2006 and deleted by s 2(1)(a) of Act 24 of 2011.]
(b) subject to subsection (5)-
(i) 0 per cent of so much of the said value or the said amount, as the case may be, as does
not exceed R1 million;
[Sub-para (i) substituted by s 2(1) of Act 14 of 2017 and by s 1(1) of Act 22 of 2020.]
(ii) 3 per cent of so much of the said value or the said amount, as the case may be, as
exceeds R1 million but does not exceed R1,375 million;
[Sub-para (ii) substituted by s 2(1) of Act 14 of 2017 and by s 1(1) of Act 22 of 2020.]
(iii) 6 per cent of so much of the said value or the said amount, as the case may be, as
exceeds R1,375 million but does not exceed R1,925 million;
[Sub-para (iii) substituted by s 1(1) of Act 22 of 2020.]
(iv) 8 per cent of so much of the said value or the said amount, as the case may be, as
exceeds R1,925 million but does not exceed R2,475 million;
[Sub-para (iv) substituted by s 1(1) of Act 22 of 2020.]
(v) 11 per cent of so much of the said value or the said amount, as the case may be, as
exceeds R2,475 million but does not exceed R11 million; and
[Sub-para (v) substituted by s 2(1)(b) of Act 13 of 2016 and by s 1(1) of Act 22 of 2020.]
(vi) 13 per cent of so much of the said value or the said amount, as the case may be, as
exceeds R11 million.
[Sub-para (vi) added by s 2(1)(c) of Act 13 of 2016 and substituted by s 1(1) of Act 22 of 2020.]
[Para (b) amended by s 5(1) of Act 106 of 1980, substituted by s 2(1) of Act 136 of 1992 and by s 3(1) of Act
97 of 1993, amended by s 2(1) of Act 32 of 1999, substituted by s 2(1) of Act 30 of 2002 and by s31(1) of Act
12 of 2003, amended by s 1(1) of Act 16 of 2004 and by s 1(1) of Act 9 of 2005 and substituted by s 14(1)(b)
of Act 9 of 2006, by s 2(1)(b) of Act 24 of 2011 and by s 2(1) of Act 13 of 2015.]
[Sub-s (1) substituted by s 3(1)(a) of Act 88 of 1974 and amended by s 9(1)(a) of Act 37 of 1996.]

This section imposes transfer duty, states when it is ‘triggered’ (on the acquisition of
property) and stipulates how much transfer duty is due in every particular instance. In
other words, it provides the formula for calculating the amount of duty due. In the case
of natural persons (human beings) and entities (such as a company, close corporation or
trust) purchasing immovable property, the duty is payable on a sliding scale; the higher
the purchase price, the higher the amount of duty payable.
See ch 34 for further information on transfer duty.

10.4.6 Section 29A of the Alienation of Land Act 68 of 1981

This section is known as the ‘cooling-off’ clause and aims to protect purchasers in lower
income brackets (these are usually inexperienced or unsophisticated buyers) against
pressure-selling. (Do not confuse this with the ‘cooling-off’ right granted in terms of the
Consumer Protection Act. See para 43.5.4) If a purchaser of such a property has
‘buyer’s remorse’ after signing an agreement, he or she has the right to terminate the
obligation within (effectively) a week after having signed.
One must note however that this right to terminate only exists if the property concerned
is sold for R250 000 or less and if other, very specific requirements are met. Read the
section to see what else must be in place for the termination to be effective.
The term ‘cooling-off clause’ does not appear anywhere in the wording of the section or
the Act — it is a popular name used to describe the consequence of invoking the section.
It refers to the ‘cooling off’ of the purchaser’s enthusiasm after the sale.

29A Purchaser’s right to revoke offer or terminate deed of alienation

(1) Subject to subsection (5), a purchaser or prospective purchaser of land may within five days
after signature by him or her, or by his or her agent acting on his or her written authority, of—
(a) an offer to purchase land; or
(b) a deed of alienation in respect of land,
revoke the offer or terminate the deed of alienation, as the case may be, by written notice
delivered to the seller or his or her agent within that period.
(2) The period of five days contemplated in subsection (1) shall be calculated with the exclusion of
the day upon which the offer was made or the deed of alienation was entered into, as the case
may be, and of any Saturday, Sunday or public holiday.
(3) The written notice contemplated in subsection (1) shall be effective only if it—
(a) is signed by the purchaser or his or her agent acting on his or her written authority;
(b) identifies the offer or deed of alienation that is being revoked or terminated, as the case
may be; and
(c) is unconditional.
(4) Where an offer is revoked or deed of alienation is terminated as contemplated in subsection
(1), every person who received any amount from the purchaser or prospective purchaser in
respect of the offer or deed of alienation, as the case may be, shall refund the full amount of such
payment to the purchaser within 10 days of the date on which the notice referred to in subsection
(1) was delivered to the seller or his or her agent.
(5) Subsection (1) shall not apply if—
(a) the purchase price of the land, or the price offered for the land by the prospective
purchaser contemplated in that subsection, exceeds R250 000 or such higher amount as the
Minister may prescribe in order to counter the effect of inflation;
(b) the purchaser or prospective purchaser contemplated in that subsection is a trust or a
person other than a natural person;
(c) the purchaser or agent contemplated in that subsection has purchased the land at a
publicly advertised auction;
(d) the seller and purchaser contemplated in that subsection have previously entered into a
deed of alienation of the same land on substantially the same terms;
(e) the purchaser or prospective purchaser contemplated in that subsection has reserved the
right in terms of the deed of alienation or offer, as the case may be, to nominate or appoint
another person to take over the rights and obligations of the purchaser as stipulated in the offer
or deed of alienation in question;
(f) the purchaser contemplated in that subsection purchases the land by the exercise of an
option which was open for exercise for a period of at least five days calculated mutatis mutandis
in the manner prescribed in subsection (2).
(6) No person shall be entitled to any remuneration payable in respect of an offer or deed of
alienation which the purchaser or prospective purchaser has revoked or terminated, as the case
may be, pursuant to the provisions of subsection (1) and no such person or agent shall be entitled
to claim damages from any person following such revocation of the offer or termination of the
deed of alienation by the purchaser or prospective purchaser.
(7)(a) Any provision in any document or in any agreement or undertaking entered into by the
purchaser or prospective purchaser, in writing or verbally, whereby a penalty or fee is directly or
indirectly imposed or levied on the purchaser or prospective purcaser should he or she exercise
the rights contained in this section, shall be void.
(b) Any waiver by a purchaser or prospective purcaser of the rights conferred upon him or her in
terms of this section shall be void.
(8) A purchaser or prospective purchaser who signs an offer to purchase land or a deed of
alienation in respect of land (hereinafter referred to as the later transaction) within five days
(calculated in accordance with subsection (2)) after having signed an offer or a deed of alienation
in respect of other land (hereinafter referred to as the earlier transaction) and before he or she
has exercised his or her right as contemplated in subsection (1) in respect of the earlier
transaction, shall-
(a) on signature of the later transaction be deemed to have exercised his or her right in
terms of subsection (1) to revoke or terminate the earlier transaction; and
(b) forthwith after signature of the later transaction in writing notify the seller of the earlier
transaction of the revocation or termination, as the case may be, of that transaction.
(9)(a) Any person who wilfully or negligently fails to comply with the provisions of subsection
(8)(b), shall be guilty of an offence and upon conviction liable to a fine, or to imprisonment for a
period not exceeding one year or to both such fine and such imprisonment.
(b) The provisions of paragraph (a) shall not in any way detract from any civil remedy which a
seller may have against a purchaser who failed to comply with the provisions of subsection (8)(b).
(10) Subsections (8) and (9) shall not apply to a purchaser or prospective purchaser who bona
fide intends to purchase both the land to which the earlier transaction and the land to which the
later transaction referred to in subsection (8) relate.

10.5 Frequently asked questions and answers

Questions of practical relevance often arise about aspects of property transfers and
conveyancing in general. We discuss a few of these questions here.

10.5.1 Can you sell property if you do not own it?

In most transfers the seller is the existing owner of the property, but did you know that
it is possible for someone to sell a property even if he is not the owner?
For example, it is perfectly legal (in other words, no crime is committed) for me to
conclude a contract wherein I sell the Table Bay Hotel on the Waterfront in Cape Town to
an investor, if I am not the owner of the Table Bay Hotel.
The problem is, of course, that I will not be able to deliver on my promise, because even
though I may legally sell (conclude a contract) I cannot pass transfer of the property to
the purchaser. Only the owner of the property can do that. If I cannot fulfil the
obligations I committed myself to in the contract, I am in breach of the contract, which
means the purchaser can sue me for damages and take other steps to cancel or enforce
the agreement.
Although it is clearly not a good idea to generally sell property of which you are not the
real owner, it does happen from time to time for perfectly acceptable reasons, that the
seller of property is not the owner of that property.

Example:

Mrs G, who owns Erf 123 Cape Town, dies. In her will she appoints Mr H as the sole (only) heir of her
estate.

Mr H lives overseas and, although very grateful to Mrs G for her generosity, he does not want the
property. Before the estate is wound up and transfer of the property registered in his name, he instructs
the executor to sell the property and award the proceeds to him.
Even though Mr H is not (yet) the owner of Erf 123 Cape Town, he has concluded a
binding sale agreement. From a conveyancing point of view, transfer will take place from
the executor of the estate directly to the new purchaser.

10.5.2 Who is the conveyancing firm’s client in a transfer?

Generally there is no conflict between a seller and purchaser in the case of a transfer.
The conveyancer has duties towards the seller and purchaser and must not neglect the
one in favour of the other. However, there should be clarity in every transaction as to
who the instructing client is. If conflict arises, the conveyancer will need to follow the
instructions of the client and not those from the other party.
In a nutshell the law is said to state that unless the agreement stipulates differently, the
seller is the transfer attorney’s client. Explained in another way, the seller has the right
to appoint the transfer attorney.
In case of a dispute arising between seller and purchaser about an aspect of the
transaction, the transfer attorney ought to recommend to the purchaser that he seeks
legal representation elsewhere.
However, if the seller and purchaser agreed in the deed of sale that the purchaser has
the right to appoint the transfer attorney, then it is to the purchaser, and not to the
seller, that the transfer attorney owes her ultimate loyalty.

10.5.3 May conveyancers share their fees with estate agents?

The Legal Practice Council has rules that prohibit fee-sharing with agents (give me a
transfer and you can keep 10% of the fees) and kickbacks to agents (I give you R100
for every transfer instruction you pass my way) or any other people who are not
attorneys.
Although some people in the industry want these rules to be relaxed, the rationale
behind the fee-sharing prohibition is sound. It exists to maintain the independence of
the attorneys’ (and conveyancers’) profession.
A seller of property needs to be able to trust his legal advisor as impartial and loyal only
to him, the client. It will undermine confidence if the conveyancer has a secret
arrangement with someone else, for example the estate agent, that may interfere with
that relationship.
Besides it being good and ethical business practice, a conveyancer that adheres to the
rules promotes the integrity of the conveyancing profession itself. And this integrity, in
turn, underpins our country’s deeds registration system.
Chapter 43
Consumer Protection
43.1 Introduction
The Consumer Protection Act 68 of 2008 ('CPA') came into operation in two stages:
certain provisions were effective from 24 April 2010 onwards whilst the bulk of the Act
became came into force only on 31 May 2011.
The Act greatly improves the position of ordinary consumers in South Africa in their
dealings with business generally. The primary purpose of the Act is to prevent
exploitation of consumers and to avoid harm suffered as a result of unfair business
practices. This is achieved by prescribing rules of conduct for business in its dealings
with consumers, coupled with an overarching set of consumer rights.
Although paralegals are not required to have an in-depth knowledge of this Act, it is
necessary to understand how and when it is relevant in an immovable property
transaction.

43.2 What protection does the Act afford consumers?

Chapter 2 of the Act contains the so-called 'Consumer's Bill of Rights'. The 53 sections
are divided into nine Parts and cover a spectrum of incidences where consumers are
afforded protection in their dealings with suppliers.
An in depth discussion of these provisions is not the aim of this chapter, but the following
may be noted:–
• Part A deals with the right to equality in the market where suppliers and
consumers interact. A consumer has the right not to be unfairly excluded from access to
goods or services and may not be charged differentiated rates, if such exclusion
or differentiation is based on the consumer's race, gender, sex, pregnancy, marital
status, ethnic or social origin, colour, sexual orientation, age, disability, religion,
conscience, belief, culture, language and birth, ie the prohibited grounds of
discrimination as contained in the Constitution.
• Part B deals with the right to privacy. This right includes the consumer's right to
inform the marketer/supplier of goods or services that he no longer wants to receive
marketing communications from that marketer/supplier. If the marketer fails to heed
such a request or engages in direct marketing outside the permitted hours for such
marketing, he may be penalised. The Act also provides for the establishment of a
Central Registry where consumers can indicate their preferences with regard to the
receipt of direct marketing from suppliers and their marketers. For example, a consumer
can list that cell phone marketer 'A' may send advertising material to him, but that cell
phone marketer 'B' may not.
• Part C addresses the consumer's right to choose. Specific rights are conferred on
the consumer to allow him to 'choose' his supplier. In consequence, the bundling of
goods or services are prohibited, unless the requirements of the Act are complied with.
Bundling occurs where a supplier is only willing to sell item A to you if you also purchase
item B. This is prohibited, unless certain requirements are met, such as that there is an
advantage for the consumer in the bundling of the goods/services or that the
goods/services are available separately. For example, a car dealership may not sell a
vehicle to you on the condition that you must also, in addition, purchase a 3 year
maintenance plan from them, unless it can be shown, for example, that there is an
economic benefit for the consumer in that he receives the maintenance plan at a
favourable discount.
The Act furthermore provides that any fixed-term agreement (such as a lease or
exclusive mandate) that is not entered into between two entities, may be cancelled by a
consumer with 20 business days' notice, despite any agreement in the contract to the
contrary and the absence of breach on the side of the supplier. In Part C the Act also
grants a consumer a 5 day cooling-off right if he entered into a transaction as a result of
direct marketing by a supplier. (This is discussed in more detail in 43.5.4 hereafter.)
• Part D deals with the right to disclosure of information. Here it is provided that
a consumer has the right to receive information in plain and understandable language
and that the price of goods and services must be sufficiently disclosed. The supplier
must also advise the consumer if the goods offered are reconditioned or second-hand.
• Part E deals with the right to fair and responsible marketing. Suppliers must
comply with certain general standards when marketing and advertising their goods and
services. The making of false, misleading, or deceptive representations when marketing
to and dealing with consumers, is disallowed.
• Part F deals with the right to fair and honest dealing. The Act penalises what is
defined as 'unconscionable conduct', which includes any activity that involves force,
coercion or undue influence by a supplier when dealing with a consumer. The Act also
outlaws pyramid schemes and the like.
• Part G deals with the right to fair, just and reasonable terms in contracts.
The Act disallows agreements that (i) are unreasonably one-sided and in favour of the
supplier; (ii) are very disadvantageous for the consumer; (iii) requires the consumer to
waive his rights on unfair terms; or (iv) that contain excessively unfair terms or charge
unreasonable prices. See the discussion at 43.5.2. Furthermore, it is prohibited outright
to require of a consumer to waive or renounce any of the rights that the CPA grants to
consumers.
• Part H deals with the right to fair value, good quality and safety. Consumers
have the right to demand quality service and goods that are safe, defect-free and fit for
the purpose for which they have been bought.
The above is a brief summary of the different headings under which protection is granted
to consumers in the Act's 'Consumer Bill of Rights'. This chapter does however not deal
with the Act's general application in any detail and the next paragraphs will briefly
address aspects of its impact on everyday sale agreements involving immovable
property.

43.3 When does the Act apply to transactions generally?

Section 5 explains the circumstances when the Act will apply to a transaction or
interaction between a supplier and a consumer. In essence, it provides that the Act will
apply to:–
(i) every transaction between a supplier and a consumer that occurs in the ordinary
course of business of the supplier;
 (ii) all promotional activities (such as advertising and marketing) by a supplier of its
goods and services to consumers; and
(iii) to the goods and services themselves.
Section 5 has far reaching provisions, making the Act applicable to all three tiers of
business' interaction with consumers generally: it applies first to the promotional
activities, then to all aspects surrounding the conclusion of a transaction with a
consumer and lastly, also to the goods and services that were provided to a consumer in
terms of a transaction. The following illustration explains the Act's application:

Figure 43.1: Application of the Consumer Protection Act (section 5)

43.4 When does the Act apply to a property transaction?

As was seen from Figure 43.1, the CPA applies generally to every transaction concluded
in South Africa between a supplier and a consumer, as defined, if it relates to those
goods and services listed in the Act. Rights in immovable property (such as the right to
ownership) are included in the definition of 'goods' and as such, transactions involving
immovable property will be covered by the CPA if the agreement is entered into between
a supplier and a consumer.
In a property transaction it means that the Act will find application if the agreement is
concluded between the following parties:
1. A seller that is a 'supplier' (as defined), i.e. a person or entity selling the
property in the ordinary course of business. An example would be a developer or
property speculator selling a home to a consumer. As such the Act does not apply to
once-off transactions that do not occur in the ordinary course of business of the seller.
Therefore most everyday transactions where A sells his house to B (because he is
retiring, wishes to upgrade, downgrade or to move closer to work or schools, etc) are
not in the ordinary course of the seller's business and not covered by the provisions of
the CPA.
2. A purchaser that is a 'consumer', as defined in the CPA. 'Consumers' include all
natural persons, as well as entities whose asset value or annual turnover at the time of
entering into the transaction, does not exceed R2 million.

Example:

A, a teacher, sells his house to B in order to move closer to his place of work. A is not a supplier of the
home to B, because it is not an activity that is in A's ordinary course of business. The CPA will therefore
not be applicable to the transaction between the two of them.
If A in the previous example is a developer, then the CPA may find application because the developer
sells properties in the ordinary course of his business and is therefore a 'supplier'. If B, the purchaser, is
a 'consumer' as defined (ie, a natural person or entity with an annual turnover or asset value below R2
million), then the CPA will apply to the transaction.

It can figuratively be described as follows:

Figure 43.2: When seller-purchaser relationship falls under the provisions of

the Consumer Protection Act

In the following paragraphs, whenever there is a reference to a developer selling a

property to a purchaser, it will be assumed that the developer is selling in the ordinary
course of business (and is therefore a supplier as defined in the CPA) to a purchaser
(who is a consumer as defined in the CPA) and that the agreement is therefore covered
by the provisions of the CPA.

43.5 Provisions of the Act relevant to CPA agreements generally

Once it is determined that the CPA applies to a transaction it means, amongst other
things, that the purchaser's fundamental consumer rights are protected and the
developer-seller will have to make sure that it complies with the provisions of the Act.
Without furnishing an extensive list of CPA provisions that may apply, the following are
the most important provisions that would impact on the sale agreement concluded in
such an instance:

43.5.1 Right to documents and agreements in plain, understandable language

(s 22)
Agreements entered into between suppliers and consumers must be written in plain and
understandable language. This means that the language and style of the agreement
must be such that the ordinary consumer (of the class of consumers for whom the
agreement is intended) with average literacy skills can understand the significance and
import of the document.

Example:

Where a developer draws up a sale agreement for properties it intends selling for a price of R1,2 million,
it must be in a style and language that the average purchaser that will enter the market for properties
priced at R1,2 million, can understand.

43.5.2 Unfair contract terms are prohibited (s 48)

When an agreement is covered by the provisions of the CPA, s 48 of the Act provides
that it may not include unfair, unjust or unreasonable contract terms. In so doing, the
Act aims to introduce an underlying fairness principle to consumer agreements. This
does not mean that a term which is onerous (ie, it contains responsibilities) for the
consumer (ie the purchaser) to comply with, or which is more favourable to the supplier
(ie, the developer) than to the consumer, is necessarily prohibited. Only where such a
contract term is excessively one-sided and in favour of the supplier or unacceptably
harsh to the consumer, when viewed in the context in which the parties negotiated the
agreement, will a Court be able to pronounce that such contract term contravened the
CPA.

43.5.3 Pre-notification of certain terms (s 49)

The CPA further obliges a supplier (developer) to give pre-notification to a consumer of
certain onerous provisions in an agreement, before he signs the agreement and thereby
binds himself thereto. These are contract terms:
• in which the risk or liability of the supplier (developer) is limited (such as a clause,
for example, that determines that the seller shall not be liable for any defect in the
extent of the property);
• that constitute an assumption of risk or liability by the consumer (such as, for
example, a clause in which the purchaser (consumer) assumes liability to pay the estate
agent's commission should he, the purchaser, breach the agreement);
• constitute an acknowledgment of a fact by the consumer (such as, for example, an
acknowledgment by the consumer that no representations were made to him by the
seller (developer)).
Clauses that fall into this category, must be noticeably drawn to the consumer's attention
in an obvious and apparent way. Nowadays, drafters of agreements comply with this
provision by highlighting the relevant clause in bold font, or by adding a text box where
the consumer can initial next to the relevant provision.
The consumer must in addition be given opportunity to consider and comprehend the
relevant onerous clause. As paralegal, you will notice that in order to comply with this
provision, many agreements have text boxes next to these clauses, in which the
purchaser must initial to show that he was made aware and accepts to be bound to the
specific onerous clause.

Example:

An onerous clause in an agreement may read as follows:

“1.1 The Purchaser acknowledges he shall be liable to the Seller for interest on Initial here
the purchase price should transfer be delayed as a result of a delay on the side
of the Purchaser to furnish the guarantees on the stipulated time.''

43.5.4 The right to cool-off after direct marketing

The Act further protects a consumer's right to choose which goods (or services) he wants
to purchase. The Act acknowledges that consumers are sometimes approached by
suppliers directly (such as by telephone or an e-mail) which makes it difficult for the
consumer to say 'no' to the supplier's offer, thereby negating the consumer's right to
choose if he wants to buy something or not. The Act therefore allows a consumer to walk
away from a transaction that was concluded as a result of direct marketing.
How and when can the consumer exercise this cooling-off right? The consumer must give
written notice to the supplier of the fact that he wishes to cancel the agreement within 5
days after the later date of:
• entering into the transaction; or
• delivery of the goods (or services) that were purchased. 1

Each party must then return any moneys that he may have received from the other; no
penalty is payable in respect of such a cancellation.
The cooling-off right only applies if a particular transaction was concluded as a result of
direct marketing. A supplier uses direct marketing if he approaches a consumer in
person, by mail or electronic communication (such as an e-mail) with a view to entice
the consumer to enter into a transaction. For example: developer A sends an e-mail
brochure of a completed new development to B (who is a consumer as defined in the
Act). B opens the e-mail, likes what he sees and enters into a sale agreement with the
developer. It can then be said that the agreement was concluded as a result of direct
marketing by the supplier (developer) and as such, B will have the right to exercise the
cooling-off right.
This cooling-off right is in addition to the cooling off right in terms of the Alienation of
Land Act, discussed in para 15.18.

43.5.5 Right to receive quality goods (i.e. a house), free of defects

Where the CPA applies to a transaction, a consumer has the right to receive goods
(which include immovable property) that are of good quality, in good working order, free
of material defects and are fit for such goods' general purpose. Consequently, for
example, where a developer sells a unit in a sectional title complex to a purchaser (who
is a consumer), the developer will not be able to, without more, rely on a voetstoots
clause (see para 15.12) to escape liability for defects in the property.
The CPA makes it impossible for a supplier to exclude liability for latent (invisible) or
patent (visible) defects in the goods supplied to the consumer, unless the purchaser has
been informed of the defect beforehand and expressly agreed to accept the goods
(home) with such defects or if it can be shown that the goods conform to that which the
consumer expected in the particular circumstances of the transaction.
It must be remembered that where a seller is not a supplier as referred to in the CPA (ie
the typical private sale in which the seller is not acting in the course and scope of his
business), the agreement is not subject to the CPA. In these agreements, voetstoots
clauses will protect a (private) seller who sold a defective home to a purchaser in good
faith and without knowledge of a defect, from claims by a purchaser for defects that
become apparent after the agreement was entered into.

43.5.6 Implied warranty of quality

There exists, in addition, a six-month long implied warranty of quality in favour of a
buyer of goods to the effect that the goods will not become defective in this period. In
this regard the Act determines that should a defect appear in the goods sold (including
immovable property) within 6 months after the date of delivery, the purchaser (who is a
consumer) has the choice whether the supplier (developer) must, at his risk and
expense:
• refund the buyer (in which event the purchaser must return the property to the
supplier); or
• provide the purchaser with a replacement property; or
• repair the defect.
On a practical level in the context of transactions involving immovable property, it will be
extremely difficult, if not impossible, for sellers (developers) to comply with this
warranty if they do not have the necessary funds or a replacement property available.
There is, in any event, legal uncertainty whether this section was intended by the
legislature to apply to immovable property transactions. At the date of this issue, no
judgment has pronounced on this aspect.

43.6 Right to demand quality service and the paralegal (section 54)
The previous paragraphs dealt with some of a consumer's rights when he enters into an
agreement with a supplier, such as a developer. However, a developer is not the only
supplier in the context of property transactions: the conveyancer, paralegal and
transferring attorney firm are all providers of a service in the ordinary course of business
to consumers (ie the seller who instructs the firm) and are therefore subject to the
provisions of the Act in rendering that service and in dealing with the instructing client,
the consumer.
Consumers have the right to demand quality service from a service provider. As such,
the service that is offered by the conveyancing firm in transferring the property to a new
purchaser on behalf of and on instruction of the seller, must meet the quality
requirements of the Act.
Section 54 requires that services must be performed timeously and that adequate notice
must be given to consumers if it is anticipated that any delay may occur in the
administration of the conveyancing transaction.
The service must in addition be performed in a manner and quality that persons are
generally and reasonably entitled to expect. In other words, the service that you render
to the client must at least be of the same professional standard that is generally
rendered by conveyancing firms to their clients. It is therefore necessary to make sure
that your service delivery levels are on a par with others in the industry.

43.7 Conclusion
The CPA spans a wide range of services rendered by suppliers to consumers and this
chapter only emphasizes those aspects that are directly conveyancing relevant. The CPA
stretches far beyond the points raised here and it is envisaged that, in the long run, it
will improve the position of the consumer vis-a-vis service providers (such as
conveyancing firms). It is important that conveyancing paralegals are at all times aware
that they are 'service providers' and that their actions must meet the standards
enunciated in the CPA.
Chapter 44
Brief summary of the National Credit Act from a
conveyancing perspective

44.1 Introduction
The National Credit Act (NCA) aims to establish a non-discriminatory marketplace in
which consumers have equal rights to access credit and to prohibit unfair practices in the
credit providing market. In order to achieve these aims, the Act includes provisions for
the promotion of responsible lending by, amongst other things:
• obliging a credit assessment to take place before credit is advanced to a consumer
(borrower);
• prohibiting reckless granting of credit by penalising credit providers for lending
money to a consumer where, on information provided, the consumer was not in a
position to pay back the loan, and penalising borrowers for recklessly lending to
consumers in such instances;
• general regulation of consumer credit granting and enforcement practices;
• requiring more detailed information to be provided to consumers that take out
credit; and
• providing debt restructuring possibilities in cases of a consumer's
over-indebtedness.
A comprehensive discussion of the provisions of the Act is not required in the context of
this book; however, since mortgage agreements fall within the definition of 'credit
agreements' referred to in the Act, a broad overview of the application of the Act to
credit agreements (and specifically mortgage agreements) is provided.

44.2 What is a credit agreement for purposes of the NCA?

A credit agreement is simply an agreement in terms of which a lender agrees to lend
money to a borrower and charges some form of interest or penalty in respect of the
deferment (postponement) of the repayment of the loan.

Example 1:

Bank A (or a private person or company) lends R 100 000 to B. B applied for the loan because he is
buying a house and does not have available cash to pay the deposit. He therefore needs to borrow
money for this purpose. The loan agreement between the bank and B is that B will repay the R 100 000
over 10 years. In order to make it economically viable for the bank to lend the money, the agreement
with B will include provision for interest to be paid over the years that the loan remains unpaid and
interest will be added to each monthly instalment. Such a loan is therefore a credit agreement that the
NCA applies to.

In addition, the credit agreement must be one at arm's length, which means that the
terms of the agreement are similar to those found in everyday business or commercial
loans. This is distinguishable from agreements that are not at arm's length, for example
where a father lends money to his daughter to assist her in the purchase of a home, and
in which loan agreement 'softer' terms for repayment is likely to be agreed upon. The
father may tell his daughter that the loan is repayable at no interest or at a nominal
interest rate. If a credit agreement is not at arm's length, the NCA does not apply
thereto.

44.3 Types of credit agreements

The Act lists various forms of credit agreements, such as credit facilities, pawn or
discount transactions; incidental credit agreements; instalment agreements; mortgage
agreements and secured agreements. It is not necessary for this book to discuss the
various differences between these forms.

44.4 Classification of credit agreements

Once it is established that an agreement is a credit agreement, the NCA provides for
three different categories to which a given credit agreements can belong, being 'small',
'intermediate' or 'large' credit agreements. The categorisation is relevant as each
category has different requirements regarding the (1) contents of the agreement, (2) the
protection offered/not offered to juristic persons and (3) settlement of a debt by advance
payment, amongst others.

A small agreement is one in which the credit limit is R15 000 or less. All pawn
transactions are, in addition, considered to be small agreements.

An intermediate agreement is (i) a credit facility (as defined) where the credit
limit exceeds R15 000; or (ii) a credit transaction (as defined) where the credit
limit exceeds R15 000 but is less than R250 000.

A large agreement is any mortgage agreement or a credit transaction of which

the principal debt exceeds R250 000.

Clearly all loans to be secured by mortgage bonds, no matter the amount of the loan,
are large agreements and the NCA applies to the agreement between the borrower (in
conveyancing transactions this will be the property purchaser in the majority of
instances) and the lender (usually the bank). The reason why the legislature categorised
all mortgage agreements as 'large' agreements no matter the amount involved, is for the
protection of consumers in these transactions, as a mortgage in most instances means
that the consumer (borrower) has given his home in security for the loan repayment,
and there is always the risk that he may lose his home in case he defaults on the loan
repayments. The Act therefore requires that before a mortgage loan is granted to a
consumer, a proper analysis must be undertaken of the consumer's financial position to
ascertain if he can service the repayments. He must also be provided with
pre-quotations, setting out all the amounts that will be payable under the loan, were he
to accept it.
Having established that the agreement is a credit agreement and that it falls into the
category 'large agreements', a further relevant factor must be considered. This is the
question whether the borrower is a juristic person or a natural person. In the paragraph
that follows, the relevance of this distinction is shown.
44.5 Specific exclusions/exemptions
There are a few limited instances where the Act does not apply — in other words, certain
instances of credit agreements which are specifically excluded from the operation of the
Act. It is not necessary here to discuss all these instances. However, the following
exemptions are relevant in the context of conveyancing transactions, namely where a
borrower:
• leases of immovable property;
• is a large juristic person that enters into any credit agreement. A large juristic
person is an entity that has, at the time the agreement is entered into, assets or an
annual turnover exceeding R 1 million. The reasoning of the legislature with this
exemption was that such entities has commercial know-how and do not require the
protection of the Act;
• where small juristic persons enters into large agreements (such as mortgage
agreements). A small juristic person is one with assets or turnover of less than R1
million at the time of entering into the agreement. Protection for small juristic persons is
therefore excluded where they enter into any mortgage agreement (or another credit
agreement exceeding R 250 000). This exclusion may appear odd at first glance;
however the legislature's rationale here is that where a small entity enters into a large
agreement, it shows financial savvy and that the entity is capable of partaking in typical
commercial transactions, and such entity does not require the protection of the Act.
(Note that, for purposes of the NCA, an entity (juristic person) includes companies and
close corporations but also partnerships and a trust (if the trust has 3 or more trustees
or a trustee is also a juristic person.)
The position with entities obtaining mortgage loans can therefore be summarised as
follows:
1. All credit agreements, where the borrower (consumer) is a large entity, fall outside
the ambit of the Act. The entity, as borrower, does not have the protection that the Act
otherwise offers to credit consumers.
2. Where the borrower is a small entity, it generally receives the protection that the
Act offers, except where the small entity enters into a large agreement, being (i)
mortgage agreements for any amount and (ii) other credit transactions where the credit
amount exceeds R 250 000.
From a conveyancing point of view this means that where an entity (large or small, ie no
matter its asset value or annual turnover) takes out a loan to be secured by the
registration of a mortgage bond over its property, the loan agreement is not covered by
the provisions of the NCA. On the other hand, the agreement relating to any bond that is
registered over the property of an individual person, will be covered by the provisions of
the Act, no matter the amount thereof.

44.6 Distinguish the position of a credit provider

The position of a credit provider must be evaluated separately from the investigation into
whether a specific agreement is covered by the NCA or not. This is because the NCA
generally applies to all credit providers and, in addition, obliges a credit provider to
register with the National Credit Regulator in certain instances (see para 44.7)
44.7 Who must register with the National Credit Regulator?
Although not credit providers, the Act requires credit bureaus and debt counsellors to
register with the National Credit Regulator. In addition, until October 2016, credit
providers also had to register if they had at least 100 credit agreements or had entered
into a credit agreement with a total principal debt of more than R500 000. Since October
2016, all credit providers must register with the National Credit Regulator, no matter the
amount of credit agreements or loans made.

44.8 The protection offered by the Act

But why is it relevant that a credit agreement is one that falls under the provision of the
NCA and that it is categorised as a small, intermediate or large agreement?
The relevance lies therein that certain requirements must be met by the credit provider,
depending on the category of agreement. The requirements, as will be seen from the
summary that follows, are designed, in the first place, to ascertain whether an applicant
can 'afford' the credit (ie, can the person pay back the loan if it is granted to him?); and
secondly, gives a borrower an opportunity to study and understand all the costs involved
in the loan and to decide whether or not he or she wishes to enter into the agreement.
Where a borrower seeks a loan that is a 'small agreement', the prescribed Form 20
pre-agreement quotation must be provided to him, before the loan agreement may be
finalised. Similarly, in an 'intermediate' or 'large' agreement, the Form 20.1 information
must be provided. These documents must contain certain prescribed information
including:
• the interest rate charged, the initiation fee and monthly service fee;
• the instalment repayment period;
• the monthly repayment amount.
The quotation is binding for a period of 5 days and, if accepted, the credit provider must
abide by the terms in the quotation.
However, before the lender may enter into a credit agreement (and therefore before it
will even issue a pre-agreement quotation), the lender must do an assessment of the
applicant's ability to afford the credit. This is done by asking the consumer to disclose his
income as well as monthly expenses. The consumer must disclose information fully and
truthfully for this purpose.
A credit provider may conduct a credit check with a registered credit bureau, and may
also consult the National Credit Register to verify detail supplied by the consumer.

44.9 Over-indebtedness

A consumer is over-indebted when, according to available information, he or she is

unable to satisfy in a timely manner all the credit agreements to which he or she is a
party. In such instance, and subject to the rights of lenders who have already instituted
legal steps, a borrower can apply for debt counselling and review. Essentially the latter
processes are designed to give a borrower an opportunity to re-arrange his debt affairs
so that he can manage and maintain his monthly repayment obligations. It is possible,
for example, to come to an agreement with a credit provider (A) that borrower B will pay
75% of his monthly instalments due to A, instead of the full monthly amount, with such
added interest that A may deem reasonable.
The process is however not just an 'easy way out' to keep the banks and other lenders
at bay: the lenders must agree to the proposed new repayment terms and the terms
must therefore be commercially reasonable, and if agreed, the borrower must stick to
the new instalments, failing which the lender can cancel the debt review and institute
action against the borrower.

44.10 Reckless credit

An important tool for the protection of borrowers becomes apparent when the provisions
regarding reckless credit are considered. As will be seen from the discussion in the
paragraphs below, a lender faces substantial penalties if it is found guilty of recklessly
affording credit to a borrower.
Credit is reckless when
(i) No assessment was made of the consumer's ability to pay;
(ii) The consumer did not understand his obligations;
(iii) The specific agreement caused the consumer to become over-indebted.
If a Court declares that a credit agreement is reckless in terms of (i) or (ii) above, it
may:
• set aside all or part of the consumer's rights and obligations under that agreement,
or
• suspend the force and effect of that credit agreement.
If a Court declares a credit agreement is reckless in terms of (iii) above, it may:
• suspend the force and effect of that credit agreement until a date determined by
the Court; and
• restructure the consumer's obligations under any other credit agreements. (This
may entail the lengthening of the term of the agreement and a reduction in the monthly
payment by the consumer.)
The remedies afforded the borrower in instances of reckless credit impact negatively on
the borrower's ability to receive repayment of the money advanced and is intended by
the legislature to serve as deterrent for such practices.

44.11 Enforcement of loan agreements

The NCA further contains detailed measures to be complied with before a credit provider
can institute legal proceedings against a borrower that has defaulted. Amongst other
things, the credit provider must first notify the consumer of his default and his right to
consult with a debt counsellor or that the over-indebted consumer himself can apply for
debt review to possibly ward off any legal action a bank may otherwise have. This may
well, in some situations, prevent a mortgaged home from being sold in execution, giving
the consumer a second chance.

44.12 Other consumer rights contained in the NCA

Apart from the mechanisms discussed in the above paragraphs that works to protect the
position of borrowers in the credit market, the Act contains an array of other protective
measures too, generally aimed at enabling the consumer-borrower to make informed
decisions before buying goods and services on credit.
These consumer rights include, in addition:
• The right to be protected against discrimination on the granting of credit;
• The right to plain and understandable language being used in the credit
agreements. A minimum of 2 languages is required. Where there are special or unusual
risks/obligations, extra care must be taken to ensure that the consumer understands
these additional risks.
• The right to receive a copy of the credit agreement (and a replacement copy) when
one is requested;
• The right to privacy regarding your personal information;
• The right to redress;
• The right to a free credit bureau record once a year;
• The right to be assisted by a debt counsellor in order to restructure debts;
• The right to reasons why a credit application was refused.

44.13 Conclusion
The Act has been in operation for less than 10 years, but has had a substantial impact
on the credit lending industry. There are still many instances where better regulation is
required and amendments to the National Credit Act were tabled late in 2013, but no
changes were made to the Act yet at the time of this Service.
 Chapter 45

Section 45 endorsements and Section 57 substitutions

45.1 Division of a Joint Estate

45.1.1 Introduction
When persons marry in community of property their assets are pooled together and they
become the joint owners each of an undivided half share of the joint estate. A marriage
does however have a limited lifespan: sooner or later every marriage dissolves, either by
a court order on divorce or by the passing away of one of the spouses.
The termination of a marriage in community of property necessarily causes the
dissolution of the community of property and the joint estate that existed between the
spouses during the marriage. The dissolution of both the marriage and the community of
property that existed, results in the estate being divided between the parties, affording
each his/her separate estate. It follows that division of a joint estate will affect
immovable property that formed part of the joint estate. Moreover, if the property was
mortgaged the interests of the mortgagee are affected.

Example 1:

A and B, married in community of property, are the registered owners of Erf 456 Newlands by virtue of
Deed of Transfer No T887/2001. The property is mortgaged to ABC Bank. Since their marriage is in
community of property, they both own an undivided half share in the property and are joint debtors
under the mortgage bond.

A and B divorce and in the settlement agreement they determine that A will retain the property. A will
need to approach ABC Bank to deal with the liability under the bond.

45.1.2 How to 'transfer' when a joint estate dissolves

Section 16 of the Deeds Registries Act 1 determines that ownership from one person to
another may only be conveyed by a deed of transfer save as otherwise provided for in
the Act.
Sections 45 and 45bis2 are two of the 'otherwise provided for' provisions. They provide
for a change in ownership of a property by virtue of an endorsement on the current title
deed.

Example 2:

Further to example 1: Upon divorce it is agreed in the settlement that A will get the property.

The procedure in the deeds office is to effect transfer by way of an endorsement on the title deed which
records that ownership in the property has passed from the joint estate of A and B to A alone. There is
therefore no new Deed of Transfer.

All the procedures in terms of ss 45 and 45bis apply ONLY with regard to marriages in
community of property as follows:
• section 45: where a spouse who was married in community of property dies and
the survivor acquires the deceased's share in the property;
• section 45bis:
• where parties divorce and the one spouse gets the other spouse's half share in
the property by virtue of the divorce settlement (see example 2); or
• where parties divorce and they agree, in their settlement, that each will receive
an undivided half share in the property (see example 3); or

Example 3:

A and B were married in community of property. They divorced. The settlement agreement determines
that upon divorce, each spouse gets a half share in the property.

A and B's conveyancers will apply to the deeds office in terms of s 45bis to endorse the title deed to the
effect that ownership from the joint estate of A and B has passed respectively to A (owns one half
share) and to B (owns one half share).

A and B's joint estate is no longer the owner of the property; A and B are now co-owners of the
property.

• where parties to a marriage in community of property, change their property

regime by virtue of a Court order (see example 4); or

Example 4:

A and B who are married in community of property, wish to change their matrimonial system to one out
of community of property. They need to apply to the High Court in terms of s 21 of the Matrimonial
Property Act and the Court may then make an order to that effect.

If they were joint owners of immovable property at the time of bringing the application, the change in
ownership will be dealt with in terms of this section by endorsing the title deed to the effect that
ownership has passed from the joint estate to A (who now owns a half share) and B (who now owns a
half share).

• where a Court orders division of the joint estate of spouses married in

community of property, but the spouses are not getting divorced. (This is a procedure
that allows a Court to order division of a joint estate (whilst the marriage is still in
existence) if a spouse can prove that conduct or proposed conduct by the other spouses
will have the effect of seriously prejudicing the joint estate. 3 )
In all of the above instances there is no 'formal' transfer of the property from A to B by
virtue of the registration of a new title deed. The current title is retained and upon
application in terms of ss 45 or 45bis, is endorsed by the Deeds Office to the effect that
the ownership, as reflected in the current title deed, has changed 'as if though it was
formally transferred'.

45.1.3 Summary: Circumstances where sections 45 and 45bis apply

We have seen from the previous discussion that ss 45 and 45bis applies only to
marriages in community of property and where the joint estate is divided in one of the
following four scenarios:
• on the death of one of the spouses; or
• on divorce; or
• with a change in the matrimonial property system of the parties (in other words
where they apply to the High Court for an order and authority to change their system
from in community of property to out of community of property); or
• where a Court orders division of the joint estate during the subsistence of the
marriage.
In short, ss 45 and 45bis provide a conveyancing shortcut procedure in the above
instances and determines that it is not necessary for a 'formal' transfer of a share.
Instead application is made to the deeds office to endorse the title deed to reflect the
new change in holding of the property.

Example 5:

G and H, married in community of property, are the registered owners of Erf 456 Newlands by virtue of
Deed of Transfer No T887/2001. Since their marriage is in community of property, they are joint owners
of the assets of the joint estate and effectively each own an undivided half share in the property.

G and H divorce and in the settlement agreement they determine that H will retain the property.

The shortcut endorsement procedure provides that H can apply to the Registrar of Deeds to endorse title
deed T887/2001 with words to the effect that A had legally acquired (by virtue of the settlement order
that was made an order of court) B's remaining half share in the property and that A can from now on
deal with the property as full owner thereof.

If the property is mortgaged, then the bondholder's consent must be obtained before the
endorsement may be effected. Moreover an arrangement will have to be made with the bank
to address the change in the details of the mortgagors under the bond. We deal with the
bondholder's position in para 45.2 below.

Note that the procedures in Section 45 and 45bis are not compulsory and parties may
still proceed by way of formal transfer. However, because the former are cheaper (and
simpler) procedures, it should be preferred.

45.1.4 Does it matter whose name is reflected in the title deed?

When transfer is passed to a new owner the deeds office requires that the name, identity
number and marital status of the new owner is correctly reflected in all the supporting
documentation as well as the title deed. This is necessary so that there is an official
record which correctly reflects the true position as to who the owner of the property is.
It sometimes happens that the title deed and deeds office database do not correctly
reflect the ownership details.

Example 6:

If A, whilst still unmarried, purchased immovable property he would be reflected as owner in the deeds
office database. If A thereafter gets married in community of property to B, B automatically becomes
joint owner of the property by operation of the law.

No registration procedure is required for this 'transfer' to B and although A is reflected as sole owner of
the property in the deeds office database, the correct legal position is that B (by virtue of her marriage
in community of property to A) is joint owner of the assets of the joint estate which includes the
immovable property.
For purposes of any application in terms of ss 45 or 45bis, it does not matter that the
title deed or deeds office record reflects only the one spouse as owner. It does however
require the conveyancer to prove the marriage (and changed ownership position) to the
deeds office before proceeding with the application, but it places no hurdle to the
procedure.

45.2 Position of the bondholder

45.2.1 Introduction
Of importance is the question as to the bank's (mortgagee's) position when there is a
division of a joint estate and a change in the holding of the property in terms of ss 45 or
45bis.
The Deeds Registries Act protects the interests of bondholders in that (except in limited
circumstances) the Registrar is prohibited from dealing with the mortgaged property
unless the bondholder consents thereto. Typically this takes the form of a consent to
cancellation of the mortgage bond which must be lodged in the deeds office together
with the documents to effect transfer of ownership. The bank will only give consent to
cancellation if payment of the outstanding amounts under the bond has been effected or
secured.
However, when application is made for a section 45 or 45bis endorsement in respect of a
property that is mortgaged, there are special ways to deal with the mortgage bond.
Sections 45 and 45bis specifically provide that the bond can be dealt with in any one of
the following ways, provided the bondholder (bank) consents thereto, namely:
• cancellation of the bond (in practice such consent will only be provided by the
bondholder once payment of the money owing to it has been guaranteed); or
• release of the property (or the share of the other spouse in a deceased estate)
from the operation of the bond; 4 or
• the deceased/divorced spouse's estate is released from the operation of the bond
and substitution of the survivor/spouse acquiring the property as the only debtor under
the bond; or
• in the case of divorce where parties agree that both spouses retain a half
share, that the former spouses jointly and severally assume liability for the
indebtedness under the bond. 5
Example 7:

On the same facts used in Example 1, assume that the property was mortgaged in favour of Bestbank.
Upon their divorce, a section 45bis application was lodged in the deeds office for endorsement of the
title deed so that it reflects A as sole owner of the property. However, because the property is
mortgaged, the deeds office will not allow the transfer of B's half share to A unless the bond has been
dealt with.

These are the bank's options:

1. cancel the existing bond. This would entail that A and B must pay the full outstanding amount
under the bond to the bank. Often in practice A will then have to take out a new bond in order to pay
the cancellation amount. The new bond will then be registered simultaneously with the cancellation of
the old bond and the registration of the section 45bis endorsement; or

2. release the property from the operation of the bond (which will only be an option if there is more
than one property mortgaged under the bond); or if the marriage dissolves as a result of the death of a
spouse, the release of the share of the deceased; or

3. arrange that A becomes the sole debtor under the bond. In other words the bank agrees to the
release of the joint estate of A & B from the operation of the bond and substituting A as sole debtor
under the bond. This procedure is discussed in chapter 45.3.

45.2.2 Sections 45 and 45bis applied in situations where the property is

bonded
45.2.2.1 Section 45: Parties MICP, spouse dies and surviving spouse gets
remaining half
Section 45(1) determines that where:
• spouses were married in community of property and owned property or a bond
which formed an asset in their joint estate; and
• one of the spouses dies; and
• the surviving spouse has lawfully acquired the share of the deceased spouse
in the property or bond (for example, in terms of the will of the deceased, by virtue of
the laws of intestate succession, the purchase of the deceased's share by the surviving
spouse or a redistribution agreement)
the Registrar may on written application endorse the title deed to reflect that the
surviving spouse is entitled to deal with the whole property as if he/she had taken formal
transfer thereof.
Example 8:

M and N are married in community of property. N dies and bequeaths his half share in the joint estate to
M. They owned immovable property which was registered in both their names.

The Executor will bring an application to the deeds office for the endorsement of the title deed to the
effect that M legally acquired the property by virtue of the will of N and that the title deed must be
endorsed to reflect that M is now the sole owner of the property.

No transfer duty is payable because N, as a surviving spouse, is exempted from paying transfer duty
in respect of property acquired from the estate of the deceased spouse. A transfer duty receipt reflecting
the exemption must however be lodged. A rates clearance certificate must also be lodged.

Where the property is mortgaged, the bond must be lodged for either:
• cancellation (where there is enough money in the deceased's estate to cover the
outstanding amount under the bond); or
• release the property or the deceased's share in the property from the operation of
the bond; or
• substitution of the survivor as the sole debtor, in the place of the joint estate.

Example 9:

The facts in example 8 applies. Furthermore note that the property is mortgaged to ABC Bank. M
approaches the bank to arrange that the estate of the deceased be released from the operation of the
bond AND that she (M) be substituted as debtor in the place of the joint estate.

After conducting a credit check and following the necessary procedures, the bank advises her that it is in
order.

The bank instructs its conveyancing attorney to register a release and substitution of debtor
simultaneously with the s 45(1) application for an endorsement in favour of M.

45.2.2.2 Section 45bis: Parties MICP divorce, or divide the joint estate or
change their matrimonial system
Section 45bis applies in three different scenarios namely (i) where the joint estate is
divided as a result of divorce; or (ii) where there is no divorce but the joint estate is
divided for other reasons by order of the Court; and (iii) where they apply to the High
Court to change their matrimonial system from micp to a marriage out of community of
property ('mocp'). Practically it is the first scenario (divorce and the joint estate) that
conveyancing paralegals will mostly deal with.
The divorce will trigger the need for a conveyancing procedure if the spouses owned
immovable property. There are two conveyancing-relevant ways in which the assets of
the joint estate can be dealt with on divorce: the parties can either agree that one
spouse will get the other spouse's half share in the joint estate or they can agree that
each one receives a half share in the property.
In both the above instances s 45bis applies and determines that the Registrar may on
written application endorse the title deed to reflect that the spouse who received the
other spouse's share is entitled to deal with the whole as if he/she had taken formal
transfer thereof. Where the parties agreed that each would receive a half share, then the
Registrar will be asked to endorse the title deed to the effect that the spouses are now
co-owners of the property and each one may deal with his half share in the property as
he deems fit.

Example 10:

X and Y who were married in community of property, divorced. Their home is bonded to ABC Bank. In
the settlement agreement it was arranged that Y would get the family home.

Y's conveyancer will lodge a s 45bis application in the Deeds Office requesting the Registrar to endorse
the title deed to the effect that Y can now deal with the property as if she had taken formal transfer.

The transaction is exempt from transfer duty. A transfer duty receipt reflecting the exemption must
however be lodged. A rates clearance certificate must be lodged.
Since the property is mortgaged, the bond must be lodged for either:
• cancellation;
• release of the property from the operation of the bond.

45.2.3 Advantages of the endorsement procedure

From a conveyancing perspective, it is generally considered more advantageous to
register a release and substitution than a cancellation and a new bond in the scenarios
discussed above because the former procedures are simple and cost-effective. It also
works out cheaper for the client.

45.3 Section 57 Substitutions

45.3.1 Introduction
When a property has been mortgaged, it cannot, except in certain limited circumstances,
be transferred without disposing of or dealing with the bond either by cancellation,
release or substitution.
Cancellation of a bond is effected once the bank (mortgagee) consents in writing to
the cancellation. This 'Consent to Cancellation' is lodged in the deeds office together with
the mortgage bond, and the Registrar will then register the cancellation. The bank will
only consent to cancellation if provision has been made for payment of all the
outstanding money under the bond.
A Release applies where more than one property is mortgaged under single mortgage
bond and one of the properties is released from the operation of the bond; or where one
property is held by a bond and the property is subdivided for on-selling. The Consent to
Release is signed by the bank (mortgagee) and will be given provided payment of the
value of part of the loan (represented by the released property/or portion) has been
guaranteed.
Substitution of debtor is a procedure which makes it possible for a debtor (mortgagor)
under a bond to be replaced by another debtor, under certain circumstances. An instance
where this may occur is where A sells his property to B and B, on taking transfer, takes
over A's rights and obligations in terms of the existing mortgage bond. He is then said to
be 'substituted' as mortgagor under the bond. The Consent to Substitution is signed by
both the mortgagee and the transferee.

45.3.2 Section 57 Substitutions

Where parties are not micp ss 45 and 45bis do not apply. For the general substitution
of debtors, s 57 has been placed on the law books and determines that where an owner
transfers land that has been mortgaged, the purchaser can take over the
seller's rights and responsibilities under the mortgage bond, by registering a s 57
substitution. 6 Section 57 substitutions will therefore apply where a property is sold and
where spouses married out of community of property divorce and one spouse wants to
be substituted as sole debtor.
Section 57 only applies where the seller sells the whole of the land to someone else (and
he is not reserving a real right over the property in his favour).
Example 11:

K and L were married out of community of property. They owned immovable property that was
mortgaged to Bestbank by virtue of B567/2009. They were joint mortgagors.

K passed away and in his will he bequeathed the immovable property to L. A certain capital amount was
still owing under the bond.

Instead of cancelling the existing bond and registering a new bond over the property in order to pay the
remaining capital owing, L approached the bank to be substituted as sole debtor under the existing bond
(B567/2009). The bank agreed. Upon transfer of the property to L (not by way of section 45
endorsement because K and L were married out of community of property) the bank will lodge a
'Consent to Substitution' for registration in terms of which L was now the sole debtor under the bond.

45.3.3 Circumstances where s 57 substitutions may not be used

There are certain instances where the Registrar may not register a substitution. These
are the following:
1. if the transferor is one of the following persons
• a trustee in an insolvent estate (in terms of s 34); or (refers to insolvent
deceased;
• an executor in an insolvent deceased estate;
• a liquidator of company or cc that cannot pay its debts; or
• a liquidator or trustee appointed i.t.o. the Agricultural Credit Act; or
2. if all the land burdened is not transferred to the new debtor;
(A substitution can however occur where a joint owner transfers his share to another
joint owner or to any other person. Consent of the co-mortgagor will be required and all
the relevant legal exceptions renounced); or
3. if the seller (transferor) reserves a personal servitude over the property for
himself; or
4. where the new owner is not in a position himself to mortgage the land (because for
instance he is a minor or fiduciary); or
5. where the bond to be substituted is a surety bond.

45.3.4 Substitution – not for full amount

Where the transferor (current owner) has repaid some capital under the bond at the time
of transferring the property to the purchaser and the purchaser intends to substitute the
debtor in terms of section 57, then a 'Noting of the Part Payment' or 'Reduction in Cover'
must be registered simultaneously with the 'Substitution of Debtor'. This ensures that
the substituted debtor is reflected as liable only for the amount still owing under the
bond.
Due to the different underlying nature of bonds, a Part Payment will be registered in
respect of a bond that does not secure future debts. When a Part Payment is
registered and endorsed against the bond, the amount secured by the bond is reduced
accordingly.
Where a bond intends to secure future debts, the parties will register a Reduction in
Cover. The effect of this will be to reduce the security offered by the bond.
Example 12:

Refer back to Example 11 above. If it had been shown that at the time of transfer of the property that a
certain amount of the capital under the bond had been repaid already, then it is necessary also to
register the Part Payment when the Substitution is registered or to register a Reduction in Cover. These
applications will be registered simultaneously with the transfer and substitution of debtor.

45.3.5 Where the transfer is to two or more transferees and there is a

substitution
Section 57 further determines that where two or more transferees substitute a
previous owner (mortgagor), the new owners must waive the exception de
duobus vel pluribus reis debendi.
General debtor-creditor principles determine that where two or more persons jointly
enter into a loan agreement with a third party, the third party can sue the debtors
individually only for their respective portion of the debt. When this exception is waived, it
makes two or more mortgagors jointly and severally liable, i.e. any debtor can be sued
for the whole debt.

Example 13:

W sells his mortgaged property to X and Y. The bank agrees that upon transfer, X and Y can be
substituted as debtors under the bond. However, the bank adds that X and Y have to waive the benefit
of de duobus vel pluribus reis debendi. This has the effect that on default, they can choose whether to
execute against X or Y, no matter who the actual defaulting debtor was.

The waiver of the benefit will be registered against the mortgage bond together with the Substitution of
Debtor.