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14 May 2014

High-rises to replace houses, says Absa

There are so many posts on my Blog where I contend that Urban Sprawl is totally unsustainable and that densification of South African cities is absolutely essential!

Here are some links to a few of these Blog posts:






Gareth Shepperson
Commercial and Property Attorney

High-rises to replace houses, says Absa

The development of flats and townhouses is the relative sweet spot in the residential property market at the moment.

Absa Home Loans property analyst Jacques du Toit believes the focus in the future, particularly in metropolitan areas, will shift to high-rise residential space because of issues such as service delivery and land availability.

'South Africa will move in the direction of the major cities of the world with high-rise residential property development. South Africans are not keen on it but they will have little choice.'

Du Toit conceded that high-rise living was already a feature in some city centres, with office blocks being converted into apartments for the lower end of the market.

However, he stressed there were only so many office blocks that could be converted before new developments needed to be built. 'We've seen it in Sandton for the upper end market. But it will filter down.'

Absa's latest quarterly housing review, released this week, revealed that the best-performing segment of residential building activity last year was new flats and townhouses. The number of plans approved grew 5.9 percent year on year and 9.1 percent more units were built.

This refers to houses financed by the private sector, excluding government-subsidised housing.

'This emphasises that there was a strong focus on higher-density housing, affected by a number of factors, such as urbanisation, affordability, land scarcity, building costs and lifestyles,' Du Toit said.

Absa's review said overall residential building activity remained under pressure throughout last year, with the number of building plans for new housing, including houses, flats and townhouses, approved by local government institutions rising by only 1.3 percent to 50 484 units.

New housing under construction contracted by 3.7 percent to 41 398 units last year.

The review revealed that the average new house cost R565 000, or 31.9 percent, more than an existing house in the first quarter.

Du Toit said there was only likely to be a revival in the residential building market once the price gap between new and existing houses narrowed to at least the mid-20 percent level.

He said the gap had been above 30 percent since early 2011 and had see-sawed within a narrow band. It reached a peak of 36.9 percent in the first quarter of 2012 and was back at 36.7 percent in the third quarter of last year.

Despite the challenges in the market, Du Toit said, residential property had still experienced steady price growth at levels slightly above the inflation rate.

Absa said the average nominal price of a home in the middle market segment increased by 8.5 percent year on

Jacques du Toit of Absa Home Loans year to about R1 230 400 in the first quarter compared with 8.8 percent growth in the fourth quarter of last year.

'It's not that bad, although it's well off the levels from 2003 to 2006. I don't expect the market to boom but we're also not looking at a crash despite the increase in interest rates and expectation of further interest rate hikes.'

Business Report

Gareth Shepperson
Commercial and Property Attorney

How the Prescription Act applies to property matters

How the Prescription Act applies to property matters

The Prescription Act 68 of 1969 states that a claim to a debt must be finalised within a specified time limit. The claim to rental, for example, is extinguished or rendered unenforceable after three years.

A judgment obtained for a debt in South Africa will prescribe or fall away after 30 years; so would a debt for a mortgage bond, taxation and certain debts owed to the State.

Prescription is a way to 'punish' the creditor for taking long to claim her/his debt (Daily News, August 13, 2013).

The act also refers to 'acquisitive prescription', the real right a person acquires over a servitude held or used for an uninterrupted period of 30 years.

Section 6 of the Prescription Act 68 of 1969 (the 'Act') provides that '... a person shall acquire a servitude by prescription if he has openly and as though he were entitled to do so, exercised the rights and powers which a person who has a right to such servitude is entitled to exercise, for an uninterrupted period of 30 years or, in the case of a praedial servitude, for a period which, together with any periods for which such rights and powers were so exercised by his predecessors in title, constitutes an uninterrupted period of 30 years.'

Servitude is a registered right a person has over the immovable property of another.

Some tenants are led to believe that they are entitled to own the leased property after 30 years.

To satisfy a claim for an 'acquisitive prescription' the person must possess or have use over servitude for a continuous period of 30 years, without an express or tacit consent or a contractual obligation.

In other words, if an owner allows a person to occupy her property or consents to the use of a piece of her land for access, there is no right of claim.

In Pezula Private Estate (Pty) Ltd v Metelerkamp (149/2013) (2013) Zasca 188 (29 November 2013), the Supreme Court of Appeal overturned the judgment of the Western Cape High Court that granted Neil Metelerkamp the right of having acquired a servitude of unhindered pedestrian access along a defined route over property owned by Pezula Private Estate (Pty) Ltd (Pezula).

Alan Stephan Accra Henderson, an owner of an adjoining farm, entered into a lease with Geo Parkes & Sons (Pty) Ltd in 1940 to build a road on the property to gain vehicular access to his property.

Metelerkamp, also an owner, rented a garage and was given access to his property through this strip road, which was also used by the public to gain access to the beach.

In 2000 Pezula bought the land from Geo Parkes and closed the strip road during May 2006.

Metelerkamp instituted legal action in 2007 claiming his right to the access road due to prescription. The SCA held that a servitude did not exist because Metelerkamp had permission to use the access road.

In Summers and Another v Kiewitz and Another (14722/10) (2011) ZAWCHC 331 (1 September 2011), the occupants, Johnie Boy Kiewitz and Johanna Kiewitz, refused to move out of the property they occupied in Church Street, Hawston, in the Western Cape.

They claimed that through acquisitive prescription they had become the owners of the property.

The court stated that the elements of acquisitive prescription possession have been described as a combination of the physical control of the corpus (the thing) by a person, together with a controlling mental attitude ( animus) towards the thing.

It is therefore argued that for the purposes of acquisitive prescription, full juristic possession is required, namely, possessio civilis (possession by means of prescription).

However, the court did not decide on acquisitive prescription, since the matter before it was for eviction based on the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act 19 of 1998 (PIE). The court had to decide whether the requirements for PIE were met.

The Kiewitzes contended that there was a dispute of facts which could not be decided on papers, since this was an application and not summons for eviction.

The applicants, Charles Bernard and Katrina Summers, according to the court, failed to meet all the requirements of the PIE Act. They failed to show that they had ownership rights.

'The applicants have failed to satisfy the requirement of ownership, in that their registered title has been challenged with a claim of acquisitive prescription.

'They have further failed to satisfy the court that the respondents were in unlawful occupation of the property.'

Accordingly, the application to have the Kiewitzes evicted was denied and the case was dismissed.

Dr Sayed Iqbal Mohamed
Chairman, Organisation of Civic Rights
Tenant Matters
Daily News

Do you still have questions about prescription.  Contact Shepperson Attorneys

Gareth Shepperson
Commercial and Property Attorney

Joburg mayor to pay R50 000 fine over erroneous billing

Joburg mayor to pay R50 000 fine over erroneous billing

Failure by the City of Joburg to rectify an erroneous account has left city of Joburg mayor Parks Tau with a R50 000 bill.

Along with his entire mayoral committee, Tau was left with egg on his face when the South Gauteng High Court fined him for contempt of court last week.

The court also ordered that a copy of the judgment be served

Fpersonally on Tau and the council's head of legal services, also slapping them with an order to pay the contempt of court application costs. The application was brought by the Hellenic Community of Joburg against the council for ignoring an earlier court order.

The case stems from a billing error in which the Hellenic Community, owners of a building in Banket Street, were incorrectly charged. They were unable to get resolution from the council, so they approached attorney Dino Tzerkezis, who took the matter to court after he too failed to get a resolution.

In October last year, Tzerkezis won the case, with the court ordering the council to reverse the incorrect charges and to install a new meter. The order also interdicted the council from billing the owners incorrectly.

After the order was granted, the council applied for a rescission order, but later withdrew it.

In it, the attorneys accused the Hellenic Community of being desperate to 'take undue advantage'.

Judge CH Nicholls lambasted the council's attorney not only for attempting to get the order reversed, calling this 'ill-conceived', but also for 'unbecoming behaviour and accusing the Hellenic Community of abusing the process of the court'.

She said the attorney had perjured himself by stating under oath that no electricity had been charged to the building since 2010. She also said the conduct of the attorneys and officials litigating in its name should be brought to the council's attention. The council has been given 20 days to pay R50 000 and costs.

The Star was unable to get comment from the City of Joburg at the time of publication.

The Star

Arrowhead aims for target of R2bn in residential property : Property News from IOLProperty

Is the entry of the Listed Property Sector into the Residential Market a good or a bad thing?

What are your thoughts?

Gareth Shepperson
Commercial and Property Attorney

Arrowhead aims for target of R2bn in residential property

Arrowhead, the listed property company, has set itself a target of increasing the value of its residential portfolio to R2 billion in the next 18 months from R150 million in March.

Imraan Suleman, the chief financial officer of Arrowhead, said yesterday that it had added residential property valued at R300m to its portfolio since March and would access further residential stock from private players and institutions.

The sale of residential property to listed companies was a natural exit strategy for developers that had built up equity in their portfolios because it allowed them to sell some of this stock to free up cash for other developments, Suleman said.

Arrowhead was not predisposed towards any particular sector of the property market and was not looking to achieve any predetermined percentage holding in any sector.

'We evaluate each potential property acquisition on its own merits. At present the residential property we have acquired is all in Gauteng but we are also not limiting ourselves to any region. We have set our targets high in residential as a way to incentivise us to achieve that.'
When Arrowhead listed, it set itself the target of growing its portfolio to R10bn within five years; in three years had grown it to just under R7bn.

He said that if Arrowhead achieved its residential portfolio growth targets, it would be about on a par with the residential portfolio of Premium Properties and Octodec, which were planning to merge.

However, he said Arrowhead would like to grow its residential portfolio more significantly beyond its 18-month target.

Arrowhead made its first foray into residential property in October last year when it reached agreement to acquire a residential portfolio from Jika Properties for R406m cash.

The company said yesterday that listed residential property in South Africa represented less than 1 percent of the listed property sector's market capitalisation. It was as high as 15 percent in listed property sectors internationally.

Entry-level housing for rent was a low-risk investment for an income fund and it fitted Arrowhead's model because revenue-enhancing acquisitions were available, the risk was lower because of the greater number of small tenants, equity and loan capital could be raised on residential assets, and the company had the capability and experience to assume the increased management requirements.

Arrowhead yesterday reported 13.49 percent growth in distributions per combined A and B linked units to 62.58c for the six months to March.

Its assets increased to R4.6bn from R3.1bn and its market capitalisation to R4.4bn from R2.8bn in the same period.

In the reporting period Arrowhead acquired 22 percent of the B units in Dipula Income Fund and 32 percent of the units in Vividend Income Fund and the Vividend Management Company for R 88.6m.

It plans to make an offer to acquire all the issued linked units in Vividend through schemes of arrangement, with the circular expected to be sent to linked unit holders by the end of this month.

Suleman expected the transaction to be finalised by July but stressed Arrowhead did not have any intention of becoming a hybrid property company.

Arrowhead A units gained 0.8 percent to close at R7.56 on the JSE yesterday.

Business Report

Gareth Shepperson
Commercial and Property Attorney

Signed agreements are binding, no matter what

The heading of this article is not entirely correct because the merits of each and every case must be independently evaluated.  I have seen some contracts voided and some upheld.

No blanket statement is applicable and it is always better to obtain independent legal advice from an expert in the field of Property Law.

Gareth Shepperson
Commercial and Property Attorney

Signed agreements are binding, no matter what

In property matters signed agreements are binding no matter how much one or other of the parties involved would like to see them cancelled or reversed.

A case in which Denver Vraagom, a conveyancing attorney at the Cape legal firm, Gunston Attorneys, was recently involved shows how essential it is for buyers to check every aspect, not only of the property they are buying but also of the neighbourhood in which it is situated.

In this particular case, said Vraagom, the seller sold his home without first finding an alternative home to purchase and move into. This put him under pressure to purchase (and may have led to his not taking sufficient care with the investigation of a new home). His problem however seemed to have been solved when Vraagom was told that he had now bought elsewhere.

It was arranged that the transfer of his first home would go through almost immediately, while the transfer of the home he was buying would be done as soon as possible thereafter. The first transfer took place on a Friday and the buyer moved in on the Saturday.

On the following Monday morning Vraagom learned from the buyer that he had wanted the bond reversed and the deal overruled. Apparently he felt justified in asking for this because he had discovered that the crime situation in the area was, in his view, far from satisfactory and because certain faults in the electrical network had not yet been rectified by the seller. (An electrical compliance certificate had been issued but the electrician appeared to have overlooked certain faults).

'What the buyer was now asking for, i.e. the cancellation of the whole deal, was impracticable,' said Vraagom. 'He would have had to get a court order to bring this about and it is highly doubtful that this would have been granted.'

The buyer, Vraagom added, should have checked the crime statistics before making the purchase - and the buyer could feasibly have made the deal subject to his finding the crime situation to his liking. However this step had not been taken.

'In property law it is strongly advisable to include all possible special considerations / conditions related to transaction in the written contract - once they are in writing it is extremely difficult to get them changed unless both parties agree to this,' said Vraagom.

Gunston Attorneys Press Release

Gareth Shepperson
Commercial and Property Attorney