Litigation Update, Salary conundrum for drug dealer, reported in the Sunday Tribune
Salary conundrum for drug dealer
Having reached an out-of -court settlement with her employer, the Hibiscus Coast Municipality, convicted drug dealer Sheryl Cwele is back on full pay.
But a top Durban lawyer says Cwele could lose her salary if the municipality can show he had created problems and med its good name.
Mike Maeso, a partner at Shepstone & Wylie, said the municipality had the discretion to institute disciplinary action against her for bringing it into disrepute.
Cwele, suspended from her post of director of health at the municipality in May, is appealing her criminal conviction.
"The moment you appeal a conviction; the sentence gets suspended or set aside until the process is finalised," Maeso said. He said the municipality would have to prove what the council had suffered, or it would have to prove she had created problems for it.
"In that case, the municipality may decide not to continue with the relationship it has with the employee. "It's a very difficult position for the municipality. Here you have a very senior employee found guilty by a court of law and the trick now is to determine what impact that has had on the day-to-day functioning of the council," he said.
Maeso said any employer would determine whether the person was guilty in terms of their employment, in addition to guilt in a criminal case. Cwele is asserting that the municipality based its charges of misconduct on her conviction in the High Court in May, which she is appealing, saying it would be "improper" to act until the final word from the Supreme Court of Appeal.
Cwele was convicted and sentenced to 12 years' imprisonment with co-accused Frank Nabolisa for recruiting women to smuggle drugs from South American countries.
Cwele and Nabolisa were granted leave to appeal. The municipality then suspended Cwele as director of health services and started disciplinary proceedings.
Last month, the municipality suspended her salary Cwele then filed papers with the Durban Labour Court, challenging the suspension.
This week the municipality settled out of court, and agreed to pay her salary pending the outcome of the disciplinary proceedings.
Cwele will lose her salary if the municipality's disciplinary committee finds her guilty. It's a costly situation for the municipality, which pays an extra salary while Thembi Khawula, erstwhile manager of cultural services, acts in Cwele's absence.
Municipal manager S'bu Mlihize said last week that the first leg of proceedings in Cwele's independent disciplinary hearing was complete.
"Cwele and the municipality have to submit papers to the chairman of the disciplinary committee on mitigating or aggravating circumstances. "Once the chairman makes his decision, it is final," he said referring to Cwele's comments in court papers that she would appeal the outcome of the disciplinary hearing if it rules against her.
Cwele may also face losing her house. The National Prosecuting Authority said in May it would lodge an application for Cwele's assets to be forfeited if her appeal bid failed.
Cwele's lawyer, Mvuseni Ngubane, said on Friday he was not aware of any action by the Asset Forfeiture Unit to attach her client's property. firstname.lastname@example.org
Michael Maeso, Partner & Head of Employment and Pension Law
Contact: 031 575 7207 and email@example.com
Litigation Update, Cwele back on full pay, but not out of the woods, reported in the Sunday Independent
Cwele back on full pay, but not out of the woods
Written by Nathi Olifant
Having reached an out-of-court settlement with her employer the Hibiscus Coast Municipality, convicted drug dealer Sheryl Cwele is back on full pay.
But a top Durban lawyer says Cwele could lose her salary if the municipality can show that she has created problems for it and harmed its good name.
Mike Maeso, a partner at law firm Shepstone & Wylie, said the council had the discretion to institute disciplinary action against her for bringing the municipality into disrepute.
Cwele, who was suspended from her post of director of health at the municipality in May, is appealing her conviction for drug dealing.
"In law the moment you appeal the conviction the sentence then gets suspended or set aside until such time that the process is finalised. This can happen if she is able to argue that criminal charges have less to do with her employment," he said.
Maeso said if the municipality were to take steps against her it would have to prove what the council had suffered. Or it would have to prove that she had created problems for the municipality.
"In that case, the municipality may decide not to continue with the relationship it has with the employee. This may happen if the municipality conducts an inquiry to establish if she has brought the municipality into disrepute.
"It's a very difficult position for the municipality. Here you have a very senior employee found guilty by a court of law and the trick now is to determine what impact that has had on the day-to-day functioning of the council," he said. "It seems illogical to have such a person in the employ," he said.
Maeso said any employer would determine whether the person was guilty in terms of their employment and guilty in a criminal case. Cwele is asserting that the municipality based its charges of misconduct on her conviction in the High Court in May, which she is appealing, saying it would be "improper" to act until the final word from the Supreme Court of Appeal.
Cwele was convicted and sentenced to 12 years' imprisonment with co-accused Frank Nabolisa for recruiting South Coast women to smuggle drugs from South American countries.
Cwele and Nabolisa have been granted leave to appeal. The municipality then suspended Cwele as director of health services and started disciplinary proceedings. Last month the municipality suspended her salary. Cwele filed papers with the Durban Labour Court challenging the suspension of her salary This week she and the municipality settled out of court.
Municipal manager S'bu Mkhize said that after conducting a "cost benefit analysis", the municipality resolved to settle out of court. He said they agreed to pay her salary pending the outcome of the disciplinary proceedings. Cwele will lose her salary if the municipality's disciplinary committee finds her guilty an outcome she has indicated she would appeal.
The municipality is now paying the salaries of two directors of health services after Thembi Khawula, the municipality's erstwhile manager of cultural services, was appointed to act in Cwele's absence.
Mkhize said this week that the first leg of proceedings in Cwele's independent disciplinary hearing was complete and a ruling made. "Both Cwele and the municipality now have to submit papers to the chairman of the disciplinary committee on mitigating or aggravating circumstances, to allow for a final decision.
"Once the chairman makes his decision, it is final," he said referring to Cwele's comments in court papers that she would appeal the outcome of the disciplinary hearing if it rules against her. Should she lose the appeal, Cwele will also lose her house. The National Prosecuting Authority (NPA) told the court in May that it would lodge an application for Cwele's assets to be forfeited if her appeal bid failed.
The NPAs Asset Forfeiture Unit (AFU) would argue that Cwele used the proceeds of crime to purchase her house. However, Cwele's lawyer, Mvuseni Ngubane, hit back on Friday saying he was not aware of any action by the AFU to attach her client's property regardless of whether she loses the appeal.
Michael Maeso, Partner and Head of Employment & Pension Law
Contact: 031 575 7207 and firstname.lastname@example.org
Conveyancing & Property Update, Second properties could pay busines rates, reported in the Sunday Tribune
Second properties could pay business rates
Written byNicola Jenvey and Vivian Attwood
PLANS to classify rented buildings as commercial businesses have all sorts of property owners up in arms.
Holiday homes, and investment properties in particular, are expected to be hit by an amendment to the Municipal Property Rates Amendment Bill proposed by the Co-operative Governance and Traditional Affairs department this week. The resulting higher rates will sound the death knell for developers and investors, said Wakefields Real Estate CEO Keith Wakefield.
In eThekwini, the change to commercial rates would mean a rates increase of 226 percent.
"The way the draft proposal is worded, it means you will get rates rebates only on the primary residential property in which you live," said city treasurer Krish Kumar. "We will respond with alternative submissions. "It would be virtually impossible to manage because those who own more than one property would simply put a second or third (property) in the name of a spouse or offspring."
Kumar said the South African Local Government Organisation had indicated it would oppose the draft bill.
South Africans now have only days left for input – public objections must be lodged by Friday.
Acutts property group chairman Pat Acutt said, "This is a disaster. Shame on them. It is typical of the current regime to grab money now without considering the long-term impact." He said the knock-on effect of the "flawed thinking and legislation" reflected bad governance. People did not need to be discouraged from saving, he said; instead South Africa needed tax incentives to boost retirement saving.
Meumann White managing partner Bruce Forrest condemned the amendment mainly because he said investment properties provided an opportunity for people to provide for their retirement.
"If this amendment is enacted, people will be severely disadvantaged. Their investments might be rendered unviable or unaffordable," he said.
Investment property owners already pay capital gains tax because only primary residences – the homes in which people live – are exempt. They also pay income tax on rental income.
DA caucus leader for eThekwini, Tex Collins, said, "If the new rates bill is passed, it will kill seaside towns like Umhlanga, Ballito, Plettenberg Bay and Knysna. Most of the properties in these places are either rented out or used as seasonal holiday homes. The increase would make owning or renting them prohibitive." Collins said he let a small flat in Glenwood for about R3 000 a month. "I would have to charge more than R5 000 just to cover my costs. That would put it out of reach for most people who rent because they cannot afford to buy" he said. Theoretically, cash-strapped people who bad let their primary residence to make ends meet would also be affected. Wakefield said the amendment would halt residential development because buy-to-let investors made up half the buyers of new units. Without developers and investors, there would be no rental properties, he said.
Seeff Westville principal Tony Hickman said the amendment would see higher costs passed on to tenants, and the market slump, as many people would have to offload their investment properties. The already ailing holiday home market would also be hit as higher rates would apply if the owners let them. "Increased rentals at the bottom end could even see many tenants end up homeless with some resorting to squatter camps," said Hickman.
Shepstone & Wylie partner Sifiso Msomi said fewer investors would mean a loss of treasury income from transfer duties and capital gains taxes. Department media liaison officer Vuyelwa Qinga Vila responded, "The amendments were decided on in response to problems experienced by end-users. "They are the work of a team in our legal services department. They go through many approval processes with all the relevant stakeholders."
Deputy Minister Yunus Carrim said,"It must be stressed that municipalities are empowered to decide on their own rates and tariffs. The rates bill does not stipulate how many cents in a rand they should charge property owners. Municipalities may choose to increase rates, or decline to do so, at their own discretion."
Sifiso Msomi, Partner
Contact: 031 575 7105 and email@example.com
Litigation Update, Judge must weigh up the facts before ordering a sale in execution, reported in Personal Finance in Weekend Argus
Judge must weigh up the facts before ordering a sale in execution
In April, the Constitutional Court ruled in the case of Elsie Gundwana versus Nedcor and Steko Development. Gundwana had asked the court to rule on whether a registrar of the High Court may, in the course of granting a default judgment against a borrower, grant an order for the sale in execution of a mortgaged property.
In 1995, Gunciwana bought a plot of land in George for R52 000. She paid R25 000, with the balance in the form of a mortgage bond from Nedcor. Gundwana fell behind with her monthly repayments during 2003.
In November 2003, the registrar of the Western Cape High Court granted Nedcor a default judgment against Gundwana for the amount of R33 543, together with a further order that declared that the property be sold in execution to recover that amount.
However, Nedcor did not act on the sale in execution order for about four years. During this time, Gundwana made irregular payments on her mortgage bond. In August 2007, Gundwana learned that the sale in execution was to take place that month. When Gundwana contacted the bank, she was told that she was in arrears for the amount of R5 268 and that the total outstanding amount was R23 779.
Gundwana told the bank she would pay the arrears as soon as possible. On August 13, 2007, she paid R2 000 to the bank in the belief that she had averted the sale in execution.
On August 15, 2007, the property was sold in execution to Steko Development.
On April 23, 2008, Steko launched an application in the George magistrate's court to have Gundwana evicted. The eviction order was granted on June 3, 2008. According to the Supreme Court Act, a default judgment may be granted in the High Court by the registrar of the court. However, there is no explicit reference in the Supreme Court Act to orders to declare a sale in execution for a mortgaged property specially executable.
The Constitutional Court's ruling says that the registrar of the court can issue a default judgment, but then the case must go to a judge for a sale in execution order to be granted.
WHAT THE RULING MEANS
According to law firm Shepstone & Wylie, the Constitutional Court's ruling in the Gundwana case means that a bank should do the following to obtain a sale-in-execution order:
- After a summons for a judgment has been served by the creditor and no notice of intention to defend has been entered by the homeowner, the plaintiff (the bank) must set the default judgment before a judge; and
The bank must file a supporting affidavit to the default judgment that sets out:
- The facts of the matter;
- The reasons that a sale in execution should be ordered on the mortgaged property;
- Whether the default judgment can be satisfied in a reasonable manner without involving the drastic consequences of selling the home; and
- Whether an alternative course should be considered before granting a sale in execution order.
Only where there is no alternative means to satisfy the default judgment, may a sale in execution order be granted.
Shepstone & Wylie Attorneys
Contact: 031 575 7000
Conveyancing & Property Update, Sales in execution fall as debt-heavy clients get their affairs in order, reported in Personal Finance, Weekend Argus
Sales in execution fall as debt-heavy clients get their affairs in order
Written byNeesa Moodley-Isaacs
More cautious lending practices by the banks and a proactive approach by over-indebted homeowners, who are tackling their financial problems, have resulted in a decrease in the number of sales in execution.
Banks forcibly selling homes (sales in execution) have fallen over the past year, mainly because consumers are managing their finances better and are taking steps to address their debt problems with the banks before their homes are attached, most of the big banks say. According to the National Credit Regulator's consumer credit market report for 2010, there were about 1.8 million mortgage accounts with a total outstanding balance of R760 billion at the end of December last year. For the quarter to March 2010, 87.76 percent of the mortgage accounts were up to date, and this improved to 89.08 percent for the quarter to December 2010.
The proportion of accounts more than 120 days in arrears was five percent, or 90 760, for the quarter to March 2010, and this improved to 4.74 percent, or 85 920, for the quarter to December 2010.
Of the four major banks – Absa, First National Bank (FNB), Nedbank and Standard Bank – only Standard reported that sales in execution increased over the past year. "The financial stress consumers are facing has led to more sales in execution, and we expect this to continue for some time," Funeka Ntombeka, the director of home loans at Standard Bank, says.
But figures from Lightstone, a company that researches the property market, show an overall decrease in sales in execution over the six months to March this year.
Gavin Opperman, the chief executive of Absa retail bank, says while there are still heavily entrenched debtors with poor credit profiles, more consumers are beginning to meet their debt repayments.
According to FNB, sales in execution account for only 0.5 percent of the bank's home loan client base. 'About 92 percent of our home loan accounts are in good standing. While the number of arrear accounts that are scheduled to proceed to sales in execution varies at 20 to 30 per day, this number often falls to zero as non-performing loans are processed and then cleared," Vincent Tadden, the head of collections for FNB Home Loans, says.
More homeowners are settling their home loan accounts before a sale in execution or are making arrangements to pay off their arrears over a reasonable period of time, Tadden says.
John Loos, a strategist for FNB Home Loans, says the FNB Estate Agent Survey provides an idea of the extent of homeowners selling "voluntarily" due to financial stress. 'As at the first quarter of 2011, consumers selling in order to downscale due to financial pressure was estimated at 22 percent of total sales. Although this is lower than in the second quarter of 2009, when the percentage of consumers selling due to financial pressure peaked at 24 percent, it remains a high statistic," he says.
Consumers are finding ways to stay in their homes and are negotiating repayment terms with banks as opposed to selling their homes or facing a sale in execution, Loos says. Debi Misura, the general manager of Nedbank's home loans collections and recoveries department, says the number of sales in execution has dropped significantly as a result of the bank's interventions to help distressed homeowners.
Rael Levitt, the chief executive of Auction Alliance, says the banks are aggressively using their own channels, instead of sales in execution, to sell the properties of homeowners who can no longer afford their mortgage bond repayments.
Levitt says the banks are more cautious than they were in previous years about granting residential mortgage bonds, particularly at the lower end of the market, because consumers' debt levels are high and lower-income consumers are more likely to default on their loans.
A Constitutional Court ruling earlier this year declared that only a judge can authorise a sale in execution. Levitt says that previously, when a judgment was taken against a defaulting homeowner, the registrar of the High Court could order a sale in execution. "Now the court will have to make an evaluation of the facts of each case before deciding whether or not to order a sale in execution," he says.
However, the improvement in the number of people who are managing to keep up with their home loan repayments could be derailed by changes in the economy.
Inflationary pressures are mounting on the back of rising energy costs and food prices. Employment and consumer confidence fell in the first quarter of this year compared with the fourth quarter of 2010, Jacques du mit, the senior property analyst for Absa, says.
Clarity on what a creditor must do before a court will order a sale in execution
The banks must meet certain requirements before they can sell your property if your home loan repayments are in arrears, and a recent High Court judgment has provided clarity on what is expected when a creditor applies to a court for a sale-in-execution order. The judgment was handed down by the North Gauteng High Court in the case of First Rand Bank versus Folscher Bismarck. The judgment means "there is now an onus on a creditor to provide the court with further information and documentation so that a judge will have all relevant information to make a decision on default judgment and execution",
Andrea Holder, an associate partner at law firm Shepstone & Wylie, says. The judgment does not apply to a sale-in-execution application that involves immovable property owned by a company, close corporation or trust, she says. Holder says that, according to the judgment, if you do not appear in court to defend yourself after you have been served with a summons and your creditor applies for a default judgment, the creditor must file an affidavit that states:
- The outstanding arrears at the date of the judgment;
- Whether or not the property was acquired with a state subsidy;
- Whether the property is used for commercial or residential purposes;
- Whether or not the property is occupied; and
- Whether or not the debt was incurred to acquire the property. Any matter in which the amount claimed falls within the jurisdiction of a magistrate's court must be referred to a magistrate's court if the property is to be sold in execution.
Holder says that if the bank or creditor applies to the court for a warrant of execution after judgment is granted, the court must consider:
- Whether the mortgaged property is your home;
- How the debt was incurred;
- The arrears outstanding on the mortgage bond;
- The arrears on the date when judgment is sought;
- The total amount due in respect of which execution is sought;
- The payment history on the mortgage bond;
- Your financial strength and that of your creditor or bank; and
- The possibility that your debt may be paid within a reasonable period without your home having to be sold in execution.
When you are issued with a warrant for a sale-in-execution, your attention must specifically be drawn to the fact that you can apply to the courts to have the judgment rescinded, Holder says.
Andrea Holder, Partner
Contact: 031 575 7511 and firstname.lastname@example.org
Customs @ Wylie, Update, Changes in Customs duty, reported in Freight & Trading Weekly
Changes in Customs duty — buyers and sellers are protected
Written by Mark Boucher Customs @Wylie
The Customs Act 91 of 1964 ("the Act") provides a measure of protection to buyers and sellers of imported or excisable goods affected by an amendment in the rate of duty.
A contract may be entered into between two parties based on the duties in place at the time of the signing of the contract. However, as we know, the rate of customs duty or any other duty imposed under any of the schedules to the Act may be amended at any time. This will alter the actual "landed" cost of goods.
Section 59 (1) of the Act gives the seller of goods the right to recover from the buyer, as an addition to the contract price, a sum equal to any amount paid by him/her as a result of any increase in duty, in the absence of agreement to the contrary. Say for example an importer purchases pencils from an exporter in Ireland. He and the exporter enter into a contract of sale, using the DDP Incoterm. When the contract is concluded the rate of duty is set at 15%. However, while the first shipment is on the water, the rate of duty increases to 20%. The exporter is obliged to pay the additional duty to Customs. However, the importer argues that since they signed the contract of sale at a 15% rate of duty that is all he is willing to pay.
In such a scenario, the exporter could rely on Section 59 (1) of the Act to support his claim that the importer is obliged to pay him the additional 5% duty.
Section 59 (2) affords the same level of protection to the buyer in that it makes provision for the buyer to deduct from the price payable an amount equal to the decrease in duty since the time of signing the contract to the date of customs clearance.
Not only does the Act protect buyers and sellers but Section 59 (3) also protects signatories to a contract involving the hiring of goods. This section reads as follows:
"The provisions of this section shall also apply to a contract for the hiring of any goods or the use of any goods in rendering a service at a contract price, and the expressions "seller" and "purchaser" shall correspondingly be construed as including the person by whom and the person to whom the goods are hired or the service rendered."
Section 59 of the Act theoretically provides for easy adjudication in situations where either party stands to lose out as a result of an amendment to one of the schedules to the Act. However, it is an entirely different matter in practice when trying to convince a foreign supplier to conform to our Act.
Mark Boucher, Customs @ Wylie
Contact: 031 575 7312 and email@example.com
Litigation Update, Former Chemspec CEO’s trail of debt
Former Chemspec CEO's trail of debt
ALL WILL BE EXPLAINED, WOOD SAYS
Written by Tania Broughton firstname.lastname@example.org
Strath Wood, the former CEO of JSE-listed Chemspec, who resigned under a cloud last year, stands accused of leaving behind a trail of financial destruction when he moved to America.
Not only has his uMhlanga home been attached by the sheriff, but a leading law firm and a former colleague have both gone to court to attach assets to cover alleged debts.
Wood's resignation – cited as being because of ill health – came just days after a Pietermaritzburg High Court judge said he had lied and fabricated evidence, and ordered him to pay R3 million plus interest and costs to IFA Hotels and Resorts.
The dispute related to an agreement between IFA and Wood, in which he had bought 25 million shares in the Don Hotel Group for IFA. He then sold the shares and put the proceeds into his own account.
IFAs lawyer, Patrick Falconer, said Wood owed his client about R9m. "He has not paid a cent," he added.
While Wood's home in La Palma Terraces had been attached and would be sold at auction, Falconer said the property was bonded and there was not much equity in it.
"We will pursue him for the balance, his being overseas will not stop us. We can certainly consider sequestrating him; he has left a trail of financial destruction," Falconer said.
The law firm which represented Wood in this matter, Shepstone and Wylie, had also launched court proceedings against him to recover its fees.
This application came before the Pietermaritzburg High Court on Friday, and was adjourned until later this month.
On the same day, attorney David Randles, a former director of Chemspec who has returned to the legal profession, launched an urgent application to attach shares in the Strath Wood Family Trust, pending the outcome of a civil dispute in which Randles is claiming 10 million Chemspec shares from Wood.
The shares were worth more than R10m at the time the company listed. Now they are worth about R3.8m. In his affidavit, Randles accused Wood and his wife, Kathleen, of trying to dispose of the shares "to defeat the claims of numerous creditors".
Randles said Wood offered him the shares just prior to the listing of the company as an incentive to join Chemspec. He accused Wood of reneging on this deal and placing the shares in his own trust.
Tired of Wood's "empty promises", he sued him in the high court, with a trial date likely sometime in the second half of next year.
Wood denied owing Randles the shares and is opposing the application. Randles claimed that Wood's attorney told his attorney in December last year: "Strath is never going to pay him (Randles). He can just forget about that… it is simply not going to happen."
A subsequent request for an undertaking that Wood and his trust would not deal with the shares was ignored.
Randles said it then became clear that "Wood's empire was crumbling"- sparked by his resignation after the IFA ruling.
In April, Chemspec chairman Ivan Clark told him that Wood had offered him all his shares, which had also been pledged to FNB for a debt owed by the company.
In May, he discovered that Wood had sold his car, there was no furniture in his home, the home had been attached by IFA and he had obtained a green card and "apparently emigrated" to America.
He said Wood had already encumbered the shares and it appeared that he would sell them even at a discounted price to frustrate his claim. "He is frantically trying to get rid of his assets and is in the process of cutting his ties with this country.. it appears he uses the trust as his alter ego," Randles alleged.
The matter was adjourned for papers to be served on Wood and to give him time to respond. Wood said in an e-mail to The Mercury that it was "inappropriate" to report that he had left behind a trail of destruction. He said he had "legitimate defences" to his dispute with Randles.
"I was involved in litigation with IFA. I understand that my share of a unit owned by me has been attached. My attorneys, Shepstone and Wylie, are due payment in respect of fees outstanding and I intend resolving with them issues regarding those fees." He said he was travelling and would be able "to explain the full position" later this week.
Employment & Pension Law Update, Earning threshold changes could benefit employees
Earning threshold changes could benefit employees
Employees are often unaware that they are entitled to certain rights provided for in the Basic Conditions of Employment Act, 1997 ("BCEA'.') by virtue of how much they earn.
Employees earning below an amount determined by the Minister of Labour are legally entitled to be remunerated for overtime worked, work on public holidays and work on Sundays. Those people that earn in excess of the amount set by the Minister of Labour will not benefit from these provisions and are not entitled to be remunerated.
Currently, the earning threshold is R149 736 per annum but the Minister of Labour has recently increased this threshold. Effective from July 1, the earning threshold will be R172 000 per annum.
This means that from 1 July 2011, employers must ensure that all of their employees earning less than R172 000 per annum are being remunerated in accordance with the BCEA in so far as overtime and work on Sundays and public holidays is concerned.
"Earnings" is defined as an employee's regular annual remuneration before deductions. It excludes contributions made by the employer in respect of the employee. Where an employee receives subsistence and travel allowances, achievement awards and payment for overtime worked, this will not be regarded as remuneration for calculating the threshold.
Employers are well advised to review their contracts of employment and payrolls before July 1 to ensure that those employees that are legally entitled to certain provisions of the BCEA are being remunerated.
Employees that did not previously enjoy certain benefits because they earned in excess of R149 736 per annum may now be entitled to these rights.
Siobhan Viljoen, Associate Partner
011 292 2540 and email@example.com
Conveyancing & Property Update, Buy to suit your pocket, reported in the Sunday Tribune
Buy to suit your pocket
Written by NICOLA JENVEY – PROPERTY EDITOR
The life rights issue is still a vague one for many people considering buying property, particularly when the decision is being made for retirement living.
Life rights schemes differ from sectional title properties mainly in that no actual property purchase or transfer takes place – the development retains ownership of the unit.
The basic concept of life rights is that buyers pay an amount for the right to live in a unit for a determined period. When the owner dies, a spouse may be entitled to stay in the unit until death or resale.
Shepstone & Wyle partner Sifiso Msomi said that the payment is an agreed amount that may be deemed a lifetime of rental paid in advance.
No transfer or registration fees are payable, but Tyson Property Group inland director Lee Ellis, points out buyers must know that the property cannot become an estate asset and be bequeathed.
Garlicke & Bousfield director Simphiwe Maphumulo says life rights properties can be bought with loans, but banks are not keen on the risk. Legally, life rights outrank other rights over the property including those of the bond holder.
"This is a cheaper option to secure a place in a retirement development and enjoy a lifestyle in your golden years that otherwise might not be affordable," said Wakefields Real Estate CEO Keith Wakefield.
The advantage is that life rights fix accommodation costs for the rest of the owners' lives. If the development offers a fixed-for-life levy, the associated levies and costs of frail care will not increase above an agreed level.
Hillcrest-based Le Domaine applies a reversionary rights scheme, recognised as a form of life rights, to the Village Versailles development. In this case, purchasers buy into the lifestyle at a 20 percent discount from the sectional title unit price, but on death or notice the unit reverts to the developer at the price originally paid.
Stanleys Property CEO Mike Stanley said the practice is widespread globally and popular as a retirement model.
The most common US retirement sale is a life plan model, resembling the South African life rights system, while Australia and New Zealand retirement village operators rarely transfer title to occupants, instead applying a licence to occupy scheme.
The UK uses a lifetime lease model, while in Europe the apartments-for-life concept, sold on a life rights basis, is gaining popularity.
Stanley said the 1988 Housing Schemes for Retired Persons Act recognised life rights as an ownership form, offering protection to developers and purchasers.
However, people who buy into life rights schemes should ensure they get security of tenure, physical, health and financial security.
Msomi said when a life rights unit is resold, the outgoing resident or estate gets a percentage of the market-related resale price with the details differing with each development.
However, typically this amount corresponds to the number of years the owner occupied the unit.
Sifiso Msomi, Partner
contact: 031 575 7105 and firstname.lastname@example.org
Litigation Update, Facebook, reported in Northern KwaZulu-Natal Courier
Should the new Council release the Shepstone and Wylie report on the investigation into the alleged illegal promotions at the Municipality that apparently vilified the Council's subsequent decision to suspend two managers?
Gerhard Potgieter – They should. Can Shepstone and Wylie not make it public?
Simon Manyathi – Ooops!
Ansie Graaff Jonker – Yes…
Imogene Leyland – It is the moral duty of our officials to account for their actions, the moral responsibility of citizens to hold them responsible for their actions. These are the things that make democracy a success. So, yes, it is time for them to account for their actions and called in to question.
Helen Stevens – I agree with every word that Imogene says. I could not have put it better myself. (And that's saying something as I am very opinionated!)
Gary Markham – Of course they must. But the old Councillors will probably be left with egg on their faces and because pals of pals rule the roost they will probably be an excuse like 'oh, sorry, what report – I think we lost it' .
Other issues on facebook
Berni Jacobs – To all the political parties… you have our votes, now will you please clean up our town by removing your posters ASAP!
Bobby Abrahamse – I just want to commend Glencoe police on an excellent response. I had five unauthorised persons in my yard this morning and they were on the scene within two minutes and apprehended three of them. WELL DONE!
Lucky 'Lucx Mathambo – Upon reaching the top of the hill, Hagar told the wiseman how he had fought people and critics on his way up to hear the words of the wise man. The wise man spoke:" The same people you fought on your way up, are the same people you will face on your way down."….the moral of the story is: I'd like to think of myself as one of the 'same people…. I also wish to extend best of wishes to the new council.