Last week we looked at the Expropriation Bill 2015 and what it means for property owners. In the second part of this article we deal with an aspect beset by controversy – compensation: how much and when.
How is compensation determined?
What is ‘just and equitable’? How and when will compensation be paid?
It’s worth noting that one of the better features of the 2015 bill, compared to the 2008 version, is that compensation is decided by the courts, not by the state.
Issues affecting the amount of compensation to be paid are:
- Current use of the property
- Market value
- The extent of direct state investment and subsidy in the acquisition and beneficial capital improvement to the property
- Purpose of the acquisition
An expert, unbiased opinion might be useful at this stage – property and its value, apart from being a financial transaction, can arouse strong emotions.
You should be aware of some factors the authority will ignore when determining compensation:
- The fact that the property has been taken without the consent of the expropriated owner/right-holder
- Any special suitability or usefulness of the property, if it is unlikely that the property could have been purchased on the open market for that specific stated purpose
- Any improvements made to the property resulting in illegal use are not included in the valuation
- Improvements made after the notice of expropriation was served (unless an agreement has been reached prior to expropriation)
- Anything that was done with the aim of claiming compensation
What to do when you receive notice of expropriation
If you are the owner or holder of an unregistered right, you should respond to the notice of expropriation within a 20-day period (which can be extended), whether or not you agree to the expropriation or the amount of compensation payable.
If you claim an amount of compensation and this is rejected by the authority, the authority has to propose a ‘just and equitable’ amount, detailing how this amount has been calculated and what is included. In this situation, you will need to provide supporting documentation within 20 days of delivery of the statement indicating the amount claimed.
If an agreement is not reached at this stage and you don’t institute legal proceedings, it is assumed that you have accepted the offer. If you are entitled to compensation, 80% must be paid to you on the date the authority takes possession of the property.
Mortgaged property and rates
If there is a mortgage or a deed of sale on your property, the appropriate amounts are paid by the authority to the bond-holder or buyer. If you cannot reach agreement with the bond-holder/buyer, then the matter will be decided in a court application.
Property rates and other charges are paid by the authority from the compensation. (The municipal manager is responsible for ensuring that the information regarding outstanding charges is forwarded to the authority.)
Under certain circumstances, it may be necessary for compensation to be deposited with the Master of the High Court – for example if the property was a bequest to people unknown to the parties involved, or if the address of the payee cannot be provided.
Your property may be expropriated on a temporary basis – in the event of a disaster, for example. ‘Temporary’ means a period not longer than 12 months (this may be extended by court order) and some of the provisions of the bill are waived. Compensation is payable.
If, for any reason, the property is no longer needed – perhaps the reason for the expropriation is no longer in the public interest – it can be withdrawn, in which case there is provision for recompensing the owner.
The way forward
Does the bill infringe the Constitution on issues such as property rights and the removal of the ‘willing-buyer, willing-seller’ approach? The bill seems to relate not only to land, but to shares, intellectual property and, indeed, moveable property. Are we heading for a Zimbabwe-style land grab or are we protected, at least to an extent, by our Constitution?
As mentioned in the first part of this article, there has been a great deal of discussion around the Expropriation Bill, mostly relating to the constitutionality of the powers given to the minister and state organs to expropriate property either for ‘public purposes’ or ‘in the public interest’.
The debate is likely to continue until the pertinent points have been addressed and clarified, probably in the Constitutional Court, and there are calls from the DA, AgriForum, and the Institute of Race Relations for further discussion.
Help is at hand
Meantime, if you are faced with a possible expropriation, we strongly advise you to read the bill/act and prepare to take legal advice. This is a potential minefield, but with the right approach you could save yourself time, money AND heartache.
Contact Simon today on 087 550 2740 or email email@example.com