Renting or selling property to foreigners

Renting property in South Africa is a straightforward process. The country has a vast selection of rental accommodation including bachelor flats in apartment blocks, Victorian cottages, stand-alone houses with big gardens, and semi-detached units in modern townhouse complexes.

In South Africa, the right of a foreigner to purchase immovable property was restricted in the past by the Aliens Control Act. These restrictions were uplifted in 2003 by the new Immigration Act (“the Act”) which repealed the Aliens Control Act and many of its restrictive provisions and now clearly defines who a legal foreigner is and who is not. In short, a legal foreigner is a person in possession of a valid temporary residence permit or a permanent residence permit approved by the Department of Home Affairs.

The new Act makes provision for various temporary residence permits to be issued to foreigners, including amongst others:

  • A visitor’s permit
  • A work and entrepreneurial permit
  • A retired person permit

In principle, a landlord or tenant can legitimately lease or sell immovable property to any person recognised under the Act as a legal foreigner.

That said, foreigners working in South Africa with a legal work permit, are not regarded as “non-residents” by the South African Reserve Bank. They are considered to be residents for the duration of the period of their work permit and are therefore not restricted to a loan of only 50% of the purchase price.

It is also important to take note that the Act criminalizes the letting or selling of immovable property to an illegal foreigner by making this transaction equivalent to the aiding and abetting of an illegal foreigner and is such an act classified as a criminal offence in terms of the Act.

In conclusion, a legal foreigner may let or buy immovable property in South Africa, provided that he is the holder of either a legal temporary residence permit or a permanent residence permit approved by the Department of Home Affairs. Ensure that you enquire from your potential tenant or purchaser whether they are legally present in South Africa and obtain the necessary proof from them before entering into any transaction with a foreigner. Also, take account of the restrictions on local financing, particularly where the procurement of financing is a condition precedent to the agreement.

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TRUSTS AND INDEPENDENT TRUSTEES: WHY AN INDEPENDENT TRUSTEE?

In the Supreme Court of Appeal case, Land and Agricultural Bank of South Africa v Parker, the dilemma of insufficient separation between the control and enjoyment of trust assets came to the forefront.

To address this issue, Cameron JA mentioned, obiter dictum, that the problem at hand may possibly be addressed as follows:

…by insisting on the appointment of an independent outsider as trustee to every trust in which (a) the trustees are all beneficiaries and (b) the beneficiaries are all related to one another. 

The Master of the High Court has now taken positive steps to implement the above obiter dictum by issuing a directive in March 2017, which requires that all new trusts registered with the Master, which are so-called family business trusts, must have an independent trustee.

The independent trustee must sign a sworn affidavit in which he/she confirms that he/she has: no family relation or connection, by blood or other, to any of the existing or proposed Trustees, beneficiaries or founder of the trust.

We therefore strongly advise that you choose your independent trustee carefully as he/she will form part of all future decisions made by the trustees.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

DEATH AND TAXES

“…in this world nothing can be said to be certain, except death and taxes

Benjamin Franklin, in 1789

Have you considered seeing a professional regarding your Estate Planning?

Estate Duty is levied at 20% on all property in your estate over the cumulative value of R 3 500 000.00. Unfortunately an estate is not only subject to Estate Duty, but also Capital Gains Tax on certain assets. This could have a negative effect on the liquidity of your estate.

Proper Estate Planning, done timeously, can limit the exposure of your estate to the legal minimum.

At Delport van den Berg Estate & Trust Services, we offer holistic Estate Planning solutions to ensure that your Assets are transferred to your loved ones in a stable and tax effective manner, thereby guarding your Legacy.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WILL, IT HOLD UP?

Is your current Will valid? Do you have your originally signed Will? Is it kept in a safe place? Do you know who your executor is? Are the provisions in your Will feasible?

All these questions are of utmost importance to ensure that your wishes are adhered to and your loved ones are able to avoid undue frustration during their time of mourning.

The Testator or Testatrix typically have good intentions when drafting certain provisos, but these often lead to unforeseen consequences.

The basic requirements for ensuring that you have a valid Will are set out in the Wills Act 7 of 1953.

Be sure to take note of the following formalities:

  1. The Testator or Testatrix must sign at the end of the Will;
  2. The Will must be signed in the presence of at least two competent witnesses, who are present at the same time and the witnesses must:
    1. Be competent persons (older than 14);
    2. Sign the Will in the presence of the Testator or Testatrix and each other;
    3. Acknowledge the signature of the Testator or Testatrix, not the content;
  3. If the Will has more than 1 page:
    1. The Testator or Testatrix needs to sign each page;
    2. The Testator or Testatrix needs to sign the last page at the end;
    3. The witnesses need to sign only the last page.
  4. If the Will is signed by the Testator or Testatrix, by the making of a mark or by some other person in the presence and by the direction of the Testator or Testatrix – additional formalities will apply.

The person who writes or witnesses a Will is disqualified from receiving any benefits from the Will. The executor, appointed trustee or guardian will also be disqualified to act should he/she or his/her spouse sign as witness.

We are able to assist and ensure that your Will gives effect to your wishes.

To draft a Will, update your Will or receive sound advice, contact the experts:

Call us: 012 361 5001 or Email us: info@delberg.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TAXATION LAWS AMENDMENT BILL 2017

Interest free loans or low interest loans to trusts and related companies – sec 7C revisited.

In our circular dated the 10th of January 2017 we discussed the newly introduced Section 7C of the Income Tax Act, which has since been promulgated into law. We made the following statement:

It seems from the wording that an interest free loans or low interest loans to a company, even if the trust owns all the shares, will not fall foul of these provisions. As legislation stands at the moment, this seems to create an opportunity to circumvent the provisions of Section 7C.

Unfortunately and, in our opinion, due to a variety of avoidance schemes utilised by certain practitioners in order to circumvent Section 7C, it was announced in the 2017 Budget Speech that Section 7C will be amended to include interest free loans or low interest loans to companies owned by a trust.

The Draft Taxation Laws Amendment Bill, 2017, which is still open for comments, contains the following amendments to Section 7C:

Section 7C (a) has been redrafted to include a loan, advance or credit made by:

  • a natural person; or
  • at the instance of that person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,
    • trust in relation to which-
      • (aa) that person or company, or
      • (bb) any person that is a connected person in relation to the person or company referred to in item (aa),
    • to a company that is a connected person to the trust referred to in subparagraph (i) of this section.

With reference to the explanation contained in the Explanatory Memorandum to the Bill, it is clear that there must have been an oversight in the wording of the new paragraph 7C(1)(b)(ii). As the paragraph stands at the moment, and due to the very wide definition of “connected person” in the Income Tax Act, even a loan to a company that has nothing to do with a trust can fall under Section 7C due to the fact that, for instance, the sole director of the company is also a beneficiary of a trust. Clearly this could not have been the intention of the legislator and we are confident that subparagraph (ii) will be amended to refer to a loan to a company that is a connected person as envisaged in paragraph (d)(iv) of the definition of connected person, to the trust referred to in subparagraph (1)(b)(i).

That would mean that only a company where the trust individually, or jointly with any connected person in relation to the trust, holds directly or indirectly at least 20% of the company’s equity share capital or voting rights, will fall foul of these provisions.

To counter certain further avoidance schemes a new subsection (1A) was introduced stating that:

  • If a natural person acquires a claim to an amount owing by a trust or a company in respect of a loan, advance or credit referred to in subsection (1), that person must for purposes of this section be treated as having provided a loan, advance or credit to that trust or company –
  • On the date on which the person acquired that claim; or
  • If that person was not a connected person on that date in relation to-
    • that trust; or
    • the person who provided that loan, advance or credit to that trust or company, on the date on which that person became a connected person in relation to that trust or person, that is equal to the amount of the claim so acquired.

This was brought into the act to counter certain avoidance schemes where a person, who made a loan to a trust, entered into an arrangement in terms of which the claim for the loan against the trust is transferred to another natural person (i.e. a beneficiary of the trust) in order to try and ensure that the link between the natural person who advanced the loan and the loan itself is severed.

Certain other subsections were amended to provide for the inclusion of loans to a company as mentioned above.

A new sub section 5(h) was added providing exemption from the provisions of Section 7C to a trust that was created solely for purposes of giving effect to an employee share incentive scheme under certain circumstances and provided that a person who is a connected person in terms of paragraph (d)(iv) of the definition of connected person in relation to any scheme company would not be entitled to participate in that scheme.

These amendments will come into effect on the 19th July 2017 and will apply in respect of any amount owed by a trust or a company as envisaged in respect of a loan, advance or credit provided to that trust or that company before, on or after that date.

The provisions of sub section 5(h) (employment share incentive trust) is deemed to have come into operation on 1 March 2017 and applies in respect of any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date.

A new Section 7D has been introduced, providing that:

Where it must be determined what amount would have been incurred as interest in respect of any loan, debt, advance or amount of credit provided to a person or an amount owed by a person had that interest been incurred at the official rate of interest, that amount must be determined without regard to any rule of the common law or provision of any act in terms of which –

  • the amount of interest, fee or similar finance charge that accrues or is incurred in respect of a debt may not in aggregate exceed the amount of that debt; or
  • no interest may accrue or be incurred in respect of a debt once the amount that has accrued or been incurred as interest is equal to the amount of that debt.

These measures are aimed at invalidating the effect of the in duplum rule in common law which basically states that the amount of interest recoverable from a debtor could never exceed the capital amount of the debt.

This section comes into operation on 1 January 2018 and applies in respect of years of assessment ending on or after that date.

SUMMARY

  • While the result of the amendments are unfortunate, it had to be expected. We again wish to stress the importance of clients contacting their advisors regarding any trusts or affected companies where loans, as envisaged above exist

Even if amended as suggested above, the provisions are still very wide.

For example:

A and four of his cousins (whether on both sides of the family or not) form a company for a business venture and fund the company with interest free loans.

As long as they are the shareholders, Section 7C will not apply. Should one of them decide to transfer his shares to a trust of which he is a beneficiary (or of which a connected person in relation to him is a beneficiary), Section 7C will apply to all loans to the company. Cousins are connected persons, and for that reason all the shareholders are connected persons in relation to the trust. They are shareholders of the company and as such, connected persons in relation to the company.

I do not think that this could have been the intention but, at the moment, it is the result.

  • This is a further chapter in the trust saga and will have an effect on the use of trusts. However, with careful planning by knowledgeable advisors it would still be possible to utilise the trust as a useful estate planning vehicle
  • Please note that this is still draft legislation open for comments. Further changes might and most probably will occur to the final bill being accepted by parliament.
  • We will inform you on any further development

GPJ van den Berg
Delport van den Berg
Estate and Trust Services (Pty) Ltd
gert@delberg.co.za
T: +27 (12) 361 5001

Can I get refunded if I’m sold a defective car?

Ford South Africa has been forced to recall more than 4500 Kuga Ecoboost 1.6 litre models manufactured between December 2012 and February 2014. Ford South Africa’s chief executive Jeff Nemeth announced the recall after more than 50 cases of engine fires had been reported.

This incident has raised the question of whether or not a buyer of a car can get a full refund if it turns out the car has a serious defect. This falls into the domain of the Consumer Protection Act, No 68 of 2008. The CPA serves to protect the interests of all consumers, ensure accessible, transparent and efficient redress for consumers who are subjected to abuse or exploitation in the marketplace and also to give effect to internationally recognised consumer rights.

According to Section 7 of the CPA, a consumer has the:

  • Right to demand quality service,
  • Right to safe, good quality goods,
  • Right to implied warranty of quality.

Will I be able to get my money back?

In terms of section 56 of the act, any product should be fit for purpose for at least six months after purchase. The Ford Kuga hazard is caused by a manufacturing defect, which implies that the owner could return the vehicle within six months of purchase and ask for his/her money back (or a replacement vehicle). The other option is to ask for or accept an offer from Ford to repair the car.

For many reasons, dealers are not just going to just give consumers their money back. The vehicle should first be taken in for the repair and if that fails – or a secondary feature fails and another hazard develops – then the supplier must replace or refund the owner of the vehicle the price that was paid.

Reference:

  • The Consumer Protection Act, No 68 of 2008

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Planning your estate as newlyweds

For newlyweds, one of the most important tasks to attend to is estate planning. The estate planning will depend on what the couple wants and what form of marriage they are in. It is therefore important to keep the following in mind when planning the years ahead together.

Marriage in community of property

There is a joint estate, with each spouse having a 50 percent share in each and every asset in the estate (no matter in whose name it is registered);

  1. In the event of the death of one spouse, the surviving spouse will have a claim for 50 percent of the value of the combined estate. The estate is divided after all the debts have been settled in a deceased estate.
  1. When drafting a Last Will and Testament, spouses married in community of property need to be aware that it is only half of any asset that he or she is able to bequeath.
  1. Upon the death of one spouse, all banking accounts are frozen (even if they are in the name of one of the spouses), which could affect liquidity.

Marriage out of community of property without the accrual system

Each estate planner (spouse) retains possession of assets owned prior to the marriage. Each spouse’s estate is completely separated, even in the event of death. If you want your spouse to inherit something, you would need to outline this in your Will.

Marriage out of community of property with the accrual system

This is identical to a “marriage out of community of property” but the accrual system will be applicable. The accrual system is a formula that is used to calculate how much the larger estate must pay the smaller estate once the marriage comes to an end through death or divorce.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

What if you’ve been a victim of cybercrime?

In the modern age, more and more criminals are exploiting the speed, convenience and anonymity of the internet to commit a diverse range of criminal activities that know no borders, either physical or virtual, and cause serious harm to victims worldwide.

In December 2016, cabinet gave the green light for a Cybercrimes and Cybersecurity Bill that has sparked criticism over its potential to curb a free internet. Cabinet said the bill is about, “combatting cybercrime, establishing capacity to deal with cybersecurity and protecting critical information infrastructures”.

What is cybercrime?

Cybercrime takes many different forms, such as using financial information to commit an offence, unlawful interception of data, computer related forgery, extortion, terrorist activity and the distribution of ‘harmful’ data messages.

Hackers can get access to your computer by simply sending you an e-mail that automatically causes malware software to download as you open the mail. The hacker then has full access to your computer and the data in it and can lock you out. So, what should you do if you have been a victim of cybercrime?

  1. Disconnect: If you’re a victim of a hack, then you should disconnect from the Internet immediately. If you’re connected via Wi-Fi, phone or Ethernet cable, you need to disable the connection as soon as possible.
  1. Scan your PC: It’s a good idea to have antivirus software to scan your computer.
  1. Create a backup: Create regular backups of your files and folders.
  1. Reinstall your operating system: Depending on the severity of the attack, it might be necessary to reinstall the operating system of your computer.

 Online Fraud

If you’ve been a victim of online fraud, such as your credit card information being stolen, then try the following:

  1. Close all accounts: If you find that you are the victim of online fraud or identity theft, the first thing you should do is close all affected accounts immediately.
  1. Contact your bank: By contacting your bank, you can notify them regarding the fraud and its source. They can also assist you in recovering any stolen finances and issuing new cards.

The new Cyber and Security Bill creates about 50 new offences for crimes such as hacking, using financial information to commit an offence, unlawful interception of data, computer related forgery, extortion, terrorist activity and distribution of ‘harmful’ data messages. Hopefully, this will help curb the growth of illicit online activities.

References:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Is the tenant or landlord responsible for the water leaks?

Questions, and sometimes disputes, often arise between landlords and tenants regarding where the responsibility lies with the maintenance of a property. The simple answer is that tenants can generally only be held responsible for repairs/replacement on the property if the damage was caused by the tenant’s actions, or items that have a short life span, such as light bulbs.

On the other hand, alarm systems, auto gates and doors, locks, fixtures and fittings, appliances, or anything provided to the tenant are generally the responsibility of the owner to repair, unless damaged by the tenant.

Fair wear and tear

Damage due to fair wear and tear is the owner’s responsibility to correct. This includes situations where the property has, over time, experienced wear due to its use or age.

Examples would include:

  1. Fireplace chimneys: The landlord should maintain the fireplace e.g. having the chimney cleaned at appropriate intervals. Gardens, however, would require the tenant to do general maintenance.
  1. Blocked drains: This is usually due to tenant usage making it the tenant’s responsibility, but if blockage is due to tree roots, it would be the landlord’s responsibility.

Regarding appliances, as with any fixture or fitting, the landlord is responsible for repairs to appliances provided under the tenancy agreement unless the damage was caused by the tenant’s deliberate actions or negligence.

Tenants should report any damage on the property. If they fail to do this, they could find themselves held liable for any further damage due to lack of immediate attention to the initial problem. Furthermore, tenants are obliged to provide access for contractors to effect repairs.

Conclusion

If there is a water leak on the property, it would most likely be the landlord’s responsibility to fix. It is advisable for tenants to read and understand the lease agreement fully and for landlords to list as much as possible that needs to be maintained by the tenant. For example, if the unit has a garden that the tenant is responsible for maintaining, this should be mentioned in the lease.

Reference:

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Antenuptial contracts: Can I get one after marriage?

Couples who are interested in an antenuptial contract often make the decision to get one before they are married. That is the ideal scenario. However, some couples may have already gotten married in community of property, and later decide to change to another form of marriage contract.

Can it be done?

The Matrimonial Property Act allows a husband and wife to apply jointly to court for leave to change the matrimonial property system which applies to their marriage.

  • According to South African law, the parties who wish to become married out of community of property must enter into an antenuptial contract prior to the marriage ceremony being concluded.
  • If they fail to do so then they are automatically married in community of property. Of course, many people are unaware of this provision and should be able to satisfy the court that it should change their matrimonial property system if it was their express intention that they intended to be married out of community of property.

What are the requirements?

In order for the parties to change their matrimonial property system, the act mentions the following requirements:

  • There must be sound reasons for the proposed change.
  • The Act requires that notice of the parties’ intention to change their matrimonial property regime must be given to the Registrar of Deeds, must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard and must be given by certified post to all the known creditors of the spouses.
  • The court must be satisfied that no other person will be prejudiced by the proposed change. The court must be satisfied that the rights of creditors of the parties must be preserved in the proposed contract so the application must contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change and whether or not any particular person will be prejudiced by the change.

What is the downside?

The downside is that the application is expensive because you and your spouse have to apply to the High Court on notice to the Registrar of Deeds and all known creditors, to be granted leave to sign a Notarial Contract having the effect of a postnuptial contract. You must also have solid grounds for wanting to switch to an antenuptial contract. Therefore, it’s not something you can do on a whim.

References:

  • The Matrimonial Property Act 88 Of 1984

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)