Sectional Titles Amendment Bill: adoption; Department Report on Ongeluksnek Claim: discussion

Meeting report

AGRICULTURE AND LAND AFFAIRS PORTFOLIO COMMITTEE
31 May 2005
SECTIONAL TITLES AMENDMENT BILL: ADOPTION; DEPARTMENT REPORT ON ONGELUKSNEK CLAIM: DISCUSSION

Chairperson: Ms E Ngaleka (ANC)

Documents handed out:
Department PowerPoint presentation response to public comments received by Committee on Bill
Sectional Titles Amendment Bill 2005 [B10-2005]
Department proposed amendments to Sectional Titles Amendment Bill
Ongeluksnek Farmers Association submission
Regional Land Claims Commissioner – EC submission
Department of Land Affairs Report on the Ongeluksnek Claim

SUMMARY
The Committee heard the Department of Land Affairs’ response to public comments received on the Sectional Titles Amendment Bill. One of these suggestions was accepted into the Bill. Discussion centred around the question of imprisonment acting as a deterrent for non-compliance with the provisions of Clause 36 of the Bill, and around the question of defining more clearly who was responsible for debt incurred by a body corporate. The Committee decided to accept the amendments proposed by the Department and approved the Sectional Titles Amendment Bill [B10-2005].

Members then discussed the Ongeluksnek Land Claim. There was some debate around the issue and various comments were made regarding resolution in Court, as discussion between the Farmers’ Association and the Land Claims Commission had ended unsatisfactorily for both parties. Since the matter remained unresolved, the Committee decided to arrange a meeting with the Department and to respond to the letter from the Ongeluksnek Farmers Association. The Deputy Minister of Land Affairs said he would pursue the matter and suggested the farmers seek legal advice.

MINUTES

Department response to Bill submissions
Mr S Lefafa, Chief Registrar of Deeds at the Department of Land Affairs, took Members through a slide presentation listing the Department’s position on comments received on the Sectional Titles Amendment Bill.

A comment from the National Association of Managing Agents (NAMA) suggested an amendment to Clause 4 of the Bill, regarding limiting registerable contracts of leases to owners of sections in a scheme. This was considered impractical and would serve to restrict owners’ freedom of contract. NAMA asked which Court would have jurisdiction in the event of a dispute. Mr Lefafa said the High Court and the Magistrates Court were empowered to deal with civil matters. The penalty area would be regulated by criminal jurisdiction.

The Council for the Built Environment (CBE) said they had not been consulted on the Bill and requested information in this regard. The Banking Association of South Africa (BASA) fully supported the Bill.

The South African Property Owners’ Association (SAPOA) said they did not believe imprisonment would achieve the desired objective and proposed a financial penalty on the developer. Mr Lefafa reiterated the Department and others’ view that a fine only was not sufficient deterrent. The Department would be holding a workshop to empower the National House of Traditional Leaders on the Sectional Titles Amendment Bill.

A comment regarding Clause 6 was taken up by the Department in saying that all debts owed by a body corporate may only be recovered from owners who had not paid their levies in respect of a specific debt.

Discussion
Mr T Rampele (ANC) said it would be cumbersome for a creditor or third party to establish exactly which debt was payable by whom, as there was too much administration involved and it placed the onus on the creditor to establish who was liable to pay the outstanding debt. He asked whether creditors were entitled to such information.

Mr Lefafa said it was the responsibility of every body corporate to have sound administration and to practise good governance. He said the Sectional Title industry was on the verge of collapse for this very reason. Body corporates were not imposing levies where they should and were not following sound business principles. In such cases the government could not be expected to protect them.

Adv D du Toit (Deputy Minister of Land Affairs) asked how easy it was to access such information. He mentioned the Land Bank claim where every member of the body corporate had been sued and this had resulted in their resignation en masse. One had to be fair towards creditors. The body corporate should discover the status of payments.

Mr Ogunronbi (DLA) said that the application of discovery rules in existence already should be jurisdiction enough to demand information. Should such information not be forthcoming, then resorting to a legal process would have to take its course, whether there were rules of discovery written into the amendment or not. Any addition in this regard would not facilitate matters to any degree for creditors.

Adv du Toit agreed that discovery law would provide sufficiently for access to information where necessary.

Mr Rampele reiterated that if there were a large number of titleholders it would not be easy to access exact information.

Dr E Schoeman (ANC) disagreed in that any body corporate with good governance and administration should be able to find out exactly what was paid for by whom at any time. An inability to provide such information was tantamount to non-compliance.

Mr Rampele said creditors should still not be disadvantaged in instances where such information was not available and where it could not be guaranteed. The creditor would be punished for the wrongdoing of the body corporate.

Ms Ngaleka (ANC) asked whether these matters could not be contained in regulations.

Mr Lefafa reiterated that body corporates must run a well-oiled administration and that the industry was on the verge of collapse due to its own lack of diligence and follow through. Banks were averse to them and creditors were taking their life savings to invest in these schemes.

Adv du Toit said it was important to remain aware of the objective of the legislation at all times. Would the amendment have the effect of encouraging members to comply and pay levies? They did after all have until just prior to judgement to do so. Furthermore a creditor could sue all members without having to establish who had paid levies in respect of a specific debt or who had not, since thereafter the onus was on the body corporate to establish liability. The amendment would therefore have the added effect of encouraging them to practice good governance and administration and not to enter into debts, which could not be covered by levies and which again would be in the interest of creditors.

Mr Ogunronbi said that management rules confirmed the obligation of keeping books of account and record and that where these had not been complied with, rules of access to information provided for discovery.

Mr A Nel (DA) asked whether the SAPOA had been included in consultations on the amendments. He asked who exactly would be imprisoned, considering the fact that developers usually consisted of companies or boards. He asked why legislation did not include a fine of a certain amount.

Mr Ogunronbi said the SAPOA had been represented in the consultative process and supported the amendments. He noted that the suggestion for imprisonment had come from the Estate Agents Association and had been well debated. It had been agreed that the present sanction was wholly ineffective in acting as a deterrent. It was therefore decided on a maximum of two years’ imprisonment or the commensurate fine in monetary terms. He said every company or legal entity involved in these developments had an alter ego and there were legal provisions to hold a director or an individual personally liable for such a transgression.

Adv du Toit explained that the amendment did not exclude the possibility of a fine, but left it up to the judge’s discretion to decide on the extent of the fine to be imposed, which essentially had no cap and which was in accordance with legislative drafting.

Mr Lefafa said the Department of Justice had been involved in the drafting process and it was in accordance with the Adjustment of Fines Act that even a fine of R60 000 or three years’ imprisonment could be imposed. Such a sentence could be passed only in instances of highly irregular conduct. Usually a prison sentence would only be passed on the second or third offence and not with a first offence conviction. The fine of R50 000 was commensurate with two years’ imprisonment rather than five years’ imprisonment, which had also been mooted.

Ms B Ntuli (ANC) referred to the section entitled "Parliamentary Procedure" in the Sectional Titles Amendment Bill and asked whether she was correct in assuming that this legislation had no bearing on communal land areas.

Mr Lefafa said this was correct, although it was an aspect that would have to be addressed eventually. The Communal Land Rights Act covered communal lands. There might be circumstances in the future where this Act could be invoked. A certificate of title was required to register a sectional title.

Adv du Toit said this raised an important point, since there was really a great need for sectional titles in communal land areas, if approached in a creative and people-centred style. It could offer a solution to the housing problem if developers could be attracted into these areas. The land would have to be registered first and the Minister would have to allow certification of title, which was a cumbersome process.

Ms Ntuli asked whether the amendment applied only to urban areas for now.

Mr Abrahams said that once title had been obtained the law would apply if people wished to start sectional title schemes. He said the amendment would then offer security of tenure.

Mr Lefafa reiterated that a workshop was planned for the National House of Traditional Leaders, in order to inform them of the implications of this Amendment Bill.

Ms Ngaleka asked Mr Lefafa to once again summarise the intended amendments.

Mr Lefafa said Clause 1 referred to an amendment of Section 1, in order to define "exclusive use area" as a part or parts of the common property for the exclusive use by the owner of one or more sections.
- Clause 2 contained the amendment of Section 24, increasing the deviation in the participation quota from five to ten percent.
- Clause 3 was the amendment of Section 25 and provided for the registration of any extensions by a developer and making him liable for the payment of levies.
- Clause 4 referred to the amendment of Section 27, which extended the rights of exclusive use of parts of common property.
- Clause 5 referred to the amendment of Section 36, making provision for the conviction of a developer who failed to comply with any provision of paragraph (a) or (aA), with a fine or to imprisonment for a period not exceeding two years.
- Clause 6 referred to the amendment of Section 47, which would no longer hold owners liable for debt against a body corporate if they paid their levies prior to a judgement against the body corporate. They therefore could not be joined as a joint debtor in respect of the judgement debt.

Ms Ngaleka asked whether there were any objections. Dr Schoeman proposed adoption. Mr Nel seconded the motion.

Ms Ngaleka therefore passed a Motion of Desirability to amend the definition of "exclusive use area"; to increase the percentage deviation in the participation quota as a result of the extension of any section in a scheme; to provide for the registration of a plan of extension where a scheme was extended by the addition of a section; to extend the types of real rights which might be registered against a portion of common property; to include imprisonment in a penalty provision; and to provide anew for the non-joinder of members where judgement had been given against the body corporate; and to provide for matters connected therewith.

Ms Ngaleka asked whether the Committee could agree to the Bill with its amendments after having considered the report on the Department’s response to submissions.

Dr Schoeman moved for acceptance without debate.

Adv du Toit asked that there be a full media briefing of the amendments in layman’s terms. He asked to be consulted before such a briefing took place.

Ongeluksnek Land Claim
Ms Ngaleka asked the Committee for comments on the Ongeluksnek Claim and letter received by the Committee.

Dr Schoeman said that as per the Committee’s directive, the Department had become involved in the matter and had set up two meetings. The report compiled by the Department in this regard, however, seemed to contradict statements made in the letter from the Ongeluksnek Farmers Association. Despite the fact that the Department had admitted to certain errors in addressing the problem, it was obvious that the farmers were not satisfied with the outcome and that the dispute over the claim had not been resolved. He said the Committee could not be expected to act as arbitrators in the matter. They could simply bring the parties together, but could not force either to act in a certain way. He suggested the Committee ask the Department to follow up on the matter and to keep the Committee informed.

Mr Nel agreed. He said the owner of the land was the Department of Land Affairs and that the dispute was between the Department and the Land Claims Commission. He said the Ongeluksnek farmers had occupied the land for 25 years. He said this case was unique and that it should be resolved in court rather than the Committee attempting to do so, as both parties had valid claims.

Dr van Niekerk drew Members’ attention to a paragraph in the farmers’ letter, stating that officials from the Land Claims Commission displayed "a strange hostility" during the meeting. This had "raised suspicions as to their neutrality" and that they warned the Association not to oppose the claim or face landing up in court. This created the impression that the case put forward by the farmers had been dismissed and that they had been pressurized into accepting the verdict of the Commission. There seemed to be very little consideration shown by the Commission for negotiation and threatening tactics had been used. This only served to make the farmers dig in their heels.

Mr Ngema (IFP) suggested the Committee call for a meeting with the Department to discuss the contents of the letter.

Mr P Nefolovhodwe (APO) said in the case of a dead lock such as this, the matter should be referred to a Court of Law.

Ms Ngaleka referred Members to a proposed solution that appeared on page 3 of the Report.

Adv du Toit read this out to the Committee. This included a letter of apology. It was his opinion that the farmers needed legal advice. He said that negotiation could occur at any stage and therefore the Association’s contention that "negotiations can only be entertained if the arguments are based on genuine facts" was incorrect from a legal perspective. He undertook to pursue the matter and to look at the possibility of identifying alternative land near the farm.

Mr Nel said this was land for disposal. Deeds of sale had already been signed by some of the farmers after the state had made an offer for the land, which some of them had accepted.

Dr Schoeman said initially there had been complaints over the price of the land being too high, although in his personal opinion the price at which the land had been offered was reasonable. He said when it came to the attention of the Committee that there was a land claim on the land which should enjoy preference over any other transactions, the Committee had immediately recommended that this claim be resolved before continuing with any other matters. He agreed the claim should be resolved in court if necessary. It was his opinion that Mr Haviside, the author of the letter, was acting in an inflammatory manner.

Mr Bici asked whether the proposal set out in the report had any possible legal repercussions. He asked whether the Deputy Minister could assist in verifying some of the facts.

Mr B Radebe (ANC) said that both the letter and the report had been dated on the same day and contained contradictory information, while arising from the same source. This placed a question over Mr Haviside’s integrity. The claim should enjoy precedence and should follow due course.

Adv du Toit asked that the issue be viewed from a balanced perspective. He asked whose constituency it was, in order to approach that person to find out more about what was happening on the ground.

Mr E Grieve said it was Mr J Doidge’s (ANC) constituency.

Mr Ngema suggested that the Committee respond to the letter.

Ms Ngaleka suggested that the Department be asked to intervene and that the Committee respond to the letter from the Farmers’ Association. She asked Members whether they would like to hold a farewell for the outgoing chairperson, Mr N Masithela.

Mr Ngema felt this was appropriate and said Mr Masithela had been a good Chairperson.

Ms Ngaleka proposed the afternoon of 14 June. Members agreed.

Dr van Niekerk asked when the Minister would be addressing the Committee on the Agricultural Research Council (ARC).

Ms Ngaleka said provincial visits would have to be rescheduled, since there was a Parliament debate on 7 June regarding the pace of land reform. A briefing date for the Minister to address the Committee on the ARC would be arranged in the coming week.

The meeting was adjourned.