Notes for LAPR7311 LU 2 - Summary of the Law of Property module. Extremely helpful with examples of difficult PDF

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Summary

Learning Unit 2: Ownership 2 Definition of ownership  Ownership = most comprehensive real right a person can have with regard to a thing. In principle, a person can do on and with his property as he likes. However, this apparent freedom is restricted by law and rights of others. Ownership can be d...

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2. Learning Unit 2: Ownership 2.1 Definition of ownership  Ownership = most comprehensive real right a person can have with regard to a thing. In principle, a person can do on and with his property as he likes. However, this apparent freedom is restricted by law and rights of others.

 Ownership can be described as an abstract legal relationship, which implies that : (a) a legal relationship exists between owner and a thing (object) in terms of which owner acquires certain entitlements, and (b) a relationship exists between owner and other legal subjects in terms of which owner can require that others respect his entitlements regarding object 2.2 Entitlements of ownership  Control – to physically control (possess) and keep a thing e.g. to hold your pen  Use – to use and benefit from a thing e.g. to drive your car or to charge rent for use of your beach cottage  Encumber (burden) – to grant limited real rights in respect of thing e.g. to grant a servitude over your land  Alienate – to transfer thing to someone else e.g. to sell or donate your cell phone to someone  Vindicate – to claim thing from another person e.g. to claim your car from a 3rd person with rei vindication 2.3 Definition of co-ownership 

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Two or more persons cannot simultaneously exercise different kinds of ownership regarding same object, but two or more persons can be co-owners of a thing at same time – this does not mean that thing is divisible or that ownership is distinguishable. In case of co-ownership, thing is simply owned by several persons in undivided co-ownership shares. It is only one ownership which vests in several persons in idealised, undivided shares. Consequently, co-owners cannot divide thing physically while co-ownership still exists and a co-owner cannot alienate or encumber thing without consent of other co-owner(s). It is, however, possible for a co-owner to alienate or encumber his undivided co-ownership share. Entitlements to thing are, likewise, not divisible, but coowners must exercise entitlements jointly in accordance with undivided shares.

Bound Co-ownership Exists between common owners as a result of an underlying legal relationship between them, which forms basis for their common ownership of thing or things and which implies that common owners cannot terminate common ownership while legal relationship is still in existence

Free co-ownership Free co-ownership means that only legal relationship which exists between parties, is co-ownership of thing or things. No other (underlying) legal relationship exists between parties.

An underlying legal relationship exists between common owners which forms basis for common ownership of thing or things Examples  Marriage in COP – underlying legal relationship between parties to marriage is determined by matrimonial property law  Partnership – underlying legal relationship between partners is determined by law of partnerships and partnership contract between partners  Voluntary association – underlying legal relationship is determined by law of associations and membership contract between members Implications : (a) A common owner can usually not alienate or encumber his share of common ownership as long as underlying legal relationship exists. While a partnership is in existence, partners cannot transfer their common ownership share in assets of partnership to a person who is not a partner.

(b) Joint exercise of entitlements of ownership is determined by underlying legal relationship. During existence of a marriage in COP, law of matrimonial property determines way in which spouses may exercise their entitlements regarding communal assets.

(c) Common ownership cannot be terminated unilaterally by a common owner while underlying legal relationship still exists. A particular form

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Implications (a)A co-owner can alienate or encumber his undivided co-ownership share independently (b) Joint exercise of entitlements is not determined by an underlying legal relationship between co-owners. (c) Co-ownership can be terminated unilaterally because no other legal relationship exists between parties which would make such a termination impossible. NOTE : because there is no underlying legal relationship which determines joint exercise of entitlements by free co-owners, co-owners can arrange it by contract.

of bound common ownership exists in case of a sectional title scheme. Sectional owners are bound common owners of common property of sectional title scheme and a sectional owner cannot give up her undivided share in common property while she is still owner of a section of building.

2.3.1

Requirements for alienating and burdening a thing co-owned In case of co-ownership, thing is not physically divisible for purposes of alienation or encumbering of portions thereof by individual co-owners, but it can be divided for purpose of its use. Exercise of entitlements resulting from co-ownership and all legal actions pertaining to thing must be performed by co-owners jointly.

2.3.2

Rights and obligations of co-owners regarding the thing

1. Alienation and encumbrance

Co-owners must give permission before a thing can be alienated or encumbered

2. Use

Co-owners must decide jointly how thing is to be used – this permission can be given by means of a use agreement, but it can also be given informally. Every co-owner is entitled to use thing reasonably and in accordance with size of his share – this reasonable use means that thing may not be used to detriment of other coowners Unreasonable use takes place by changing use of agricultural land or allowing 3rd parties to also use thing without permission of other co-owners Use of a thing by a coowner must be in accordance with size of his share in joint property. This does not mean that a coowner can claim use of a

part of thing, but it means that his use of whole thing must be in accordance with size of his share while taking into consideration use rights of other coowners 3. Profit, income and fruits

4. Maintenance and expenses

Co-owners are entitled to an equal share of fruit, income or profit regarding property proportionate to every co-owner’s share – principle applies even if profit or income was initiated by one coowner, except in case where co-owners have agreed that every co-owner may appropriate fruit of use of property proportionate to his share. In this case, other co-owners share only in profit that accrues as a result of unreasonable use or use disproportionate to co-owner’s share. One co-owner cannot, therefore, appropriate for himself full profit of property through independent use and exploitation thereof Co-owners are obliged to contribute to maintenance of and expenses regarding property proportionate to their shares. Co-owners are, of course, not liable to contribute to luxurious improvements made without their approval by another co-owner. Obligation to contribute is

applicable only to necessary expenses for conservation of property 5. Right of veto

2.3.3

Decision of majority of coowners regarding use of the property is not necessarily binding on minority – a minority can veto (reject) decision of majority. In these circumstances, coownership can be terminated or reasonableness of coowners can be tested by court in that a declaratory order or prohibitive interdict, depending on case, can be sought by aggrieved co-owners

Remedies available to co-owners

Although control and use of property are usually regulated by means of a mutual agreement between co-owners, it can happen that agreement of division or use is not complied with or that the parties cannot agree on content of such an agreement. In these circumstances it is necessary to approach court for assistance. i. Damages or division of profit  If a co-owner should exceed reasonable use of thing, in terms of his share, by using thing for a purpose not previously used or intended or if extent of his use should be larger than his share, other co-owners can claim damages or division of profit resulting from use (whichever is appropriate) from such a coowner.  Division of profit and damages can be claimed from co-owner in usual manner by instituting an action.  Extent of other co-owners’ claim will take into consideration factors such as : o Income of co-owner from such use o Expenses o Profit made o Extent of the share ii.

Interdict  A co-owner who exceeds his entitlements of use in terms of his share by using property unreasonably, can, by means of an interdict, be prohibited by other co-owners from continuing this use  Basis of interdict = co-owner’s right of veto regarding use of thing (ius prohibendi) which is a common law principle. A co-owner cannot, however, prohibit use of thing by other co-owners for any reason,

since these co-owners are entitled to use property because they are co-owners. Interdict will thus be successful only if it can be proved that use was unreasonable. iii. Subdivision  If property is divisible, any co-owner can at any time claim subdivision of property in accordance with every co-owner’s share.  It is a requirement that co-owners must 1st attempt to divide thing amongst themselves in accordance with everyone’s share, but if such a division is not achieved, court is asked, by means of (actio communi dividundo) to make such a division.  Co-owners can agree not to subdivide the property for a period of time, but an agreement that co-ownership will be perpetual is not enforceable and cannot prevent introduction of actio communi dividundo. 2.4 Alternative forms of ownership 2.4.1 How did new alternative (fragmented) forms of ownership change the common law?

2.4.2

Sectional title schemes  Sectional Titles Act 95 of 1986 provides for : o Division of buildings and land on which they stand into sections and common property

Acquisition of separate ownership of sections together with coownership of common property – jointly this makes up a UNIT (object of sectional title ownership) So, an individual sectional owner can own a part (section) of a building (flat, shop or office), while all sectional owners jointly own common property in bound common ownership. Common property = land and all parts of building which do not form part of sectional owners’ sections e.g. lifts, staircases and corridors of building A sectional title unit is described in Sectional Titles Act 95 of 1986 (section 1) as: o a composite immovable thing consisting of a section (of a building) along with an undivided share in common property which is apportioned to a unit on basis of participation quota. A sectional title unit is described as ‘land’ (section 3(4)) and ownership of such a unit can be transferred only by means of registration in deeds registry. A sectional title unit is a composite, immovable thing. o

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Advantages of sectional title scheme 1.Owner of a sectional title unit = owner of immovable property registered in his name in deeds registry 2. Sectional owner can obtain financing to buy a sectional unit by registering a sectional mortgage bond in favour of a financial institution 3. Sectional title units can be marketed before building is ready for occupation (advantageous for developer). Buyer of such a future sectional title unit is protected in that purchase price must be paid into a trust account with an attorney or estate agent or a guarantee must be provided by a bank, building society or insurance company to buyer that purchase price will be repaid by such institution to buyer should unit not be completed in such a way that it is suitable for occupation 4. Interests of sectional owner in common property, as well as use of his sectional title unit and common property are regulated and protected by various statutory measures. Duties and entitlements of body corporate, trustees and sectional owners respectively are regulated by Act 5. Extension and termination of a sectional title scheme is clearly and carefully provided for in Act Disadvantages of sectional title scheme 1. Establishment of a sectional title scheme is an expensive and lengthy process  Sectional plan must be approved by surveyor-general  Sectional plan must be registered in deeds registry  Sectional title register must be opened 2. Application of sectional titles is limited because developer must be owner of land or hold a leasehold in respect of land

3. Although there are extensive provisions dealing with termination of a scheme, it is often court’s duty to finally end scheme e.g. in cases where building is destroyed and a unanimous resolution to rebuild cannot be reached 4. Expenses of a sectional title scheme regarding maintenance of common property must be paid by body corporate from common levy fund. However, section 27 provides that a sectional owner can be held personally liable for a proportion (in accordance with his participation quota) of debt not paid by body corporate. Sectional owner may reclaim such amounts from body corporate but this is a time-consuming and inconvenient process.

2.4.3

Shareblock schemes

 Shareblock scheme = a scheme in terms of which a shareholder in a shareblock company, which is owner or lessee of a building or building complex, acquires a use right based on his shareholding in respect of a part of particular building or building complex (usually a flat, office or shop). Advantages of a shareblock scheme for shareholders 1. It can be used in cases where a sectional title scheme cannot be launched e.g. where developer is not owner of land or in case of agricultural land, where it is possible to develop a shareblock scheme with consent of Minister of Agriculture. 2. A shareblock company can start marketing shareblocks immediately after registration even if building has not been erected. Shareholders are protected in that all payments not used immediately to pay loan obligations, are held in trust for buyer. 3.There are fewer formalities for establishing a shareblock scheme than in case of sectional title schemes e.g. a shareblock scheme is not subject to approval of local authority (except for approval of building plans) or of registrar of deeds. Establishment of a shareblock scheme is therefore faster and cheaper than in case of sectional title schemes. 4.Share Blocks Control Act 59 of 1980 contains several protective measures to safeguard position of shareholders. Disadvantages of a shareblock scheme for shareholders 1. Shareholder acquires only a creditor’s right against shareblock company and object of his right is not an independent, immovable object in respect of which ownership or another real right can accrue. This creditor’s right implies that shareholder can claim to use a part of building for a specific period. Ownership of land and building still vests in shareblock company. 2. Financing to buy a shareblock creates various problems. Since shareholders are not holders of real rights, they will have difficulty in obtaining financing from financial institutions. If shares are sold for cash only, this limits market for scheme. Only solution is for buyer to pay purchase price of shareblock in instalments. Since shareblock company’s main objective is limited to control and management of property, shareblock company’s only sources of income in such a case are payments of shareholders in respect of their shareblocks, levies for maintenance of scheme and leasing of units not yet sold. Danger exists that

companies with large loan obligations may become insolvent if a number of shareholders should fail to make their instalment payments. This problem obviously does not exist where shareblocks are sold for cash. 3. If shareblock company should become insolvent, shareholder is not protected as holder of a real right. He has only a concurrent claim against loan account of company and also loses his use right in respect of unit.

2.4.4

Time-sharing  A timesharing interest is described in Property Timesharing Control Act 75 of 1983 (section 1) as any right to or interest in exclusive use or occupation, during determined or determinable periods in any year, of accommodation, which always indicates use or occupation of immovable property in terms of a real right or a creditor’s right.

2.4.5

Housing development schemes for retired persons  In terms of Housing Development Schemes for Retired Persons Act 65 of 1988 (as amended) a housing interest in respect of a housing development scheme for retired persons (persons older than 50 years) is a right to occupy a specific part of immovable property managed in terms of scheme, which right to occupy is based on ownership or a creditor’s rights.  A housing development scheme is managed on basis of conferring a right to occupy in terms of either ownership, a limited real right or a creditor’s right.

2.5 Limitations on ownership 2.5.1 Statutory limitations  With statutory limitations think planning law in general.

 This refers to policies and laws that try and regulate the environment in general.  For instance, that regulate how agricultural land can be used and divided, public open spaces and the preservation of nature (for instance no big hotels on Table Mountain) and where majors roads will be built (not in residential areas, for instance).  In the urban areas law regulates how close you can build to your neighbour, for instance (to prevent overcrowding).  In terms of movable property acts like the National Road Traffic Act 93 of 1996 limits the use and enjoyment of your vehicle (think of driving a Ferrari at 60km/h instead of what it was built for).  Likewise, the Prevention of Organised Crime Act 121 of 1998 prevents one from possessing certain things all together. 2.5.2

Creditor’s rights of third parties against the owner  When you own a flat and you rent it out, your lessee will have a creditor’s right in your property.  Even though this is not a real right (in general), it still limits your use and enjoyment of the flat.  In that sense creditor’s rights can also limit your ownership.

2.5.3

Limited real rights of third parties  Probably the most onerous burden on ownership is in the form of limited real rights.  This concept and concomitant principles are dealt with in detail later on, but for now remember that servitudes, real security rights etc. can limit ownership.

2.5.4

Neighbour law  Ownership is subject to limitations. Neighbour law provides a good example of how it can be limited.  The basis for neighbour law is reasonableness.  Owners are expected to accept the limitations that goes with ownership and to respect each other’s rights, but only as far as it is reasonable.

Remedies 1. If a land user (owner or occupier) through his unreasonable actions causes patrimonial loss or personal injury to his neighbour and, therefore, commits a delict, neighbouring owner or occupier has recourse to delictual remedies. 2. Such actions will also give owner or occupier common law property law remedies since they constitute an infringement of ownership or right of occupation (or entitlements arising from ownership or right of occupation).

2.5.4.1 Nuisance in the narrow sense & remedies

 Definition = an infringement on neighbour’s use and enjoyment of his land, which constitutes an infringement of a personality right (for instance his health) or an entitlement of use (for instance his right to undisturbed enjoyment of his property), by means of noise, smells, gases and so on.  These infringements lean normally be prohibited by means of an interdict.  Point of departure = criterion of reasonableness o Following principles are taken into consideration in application of criterion of reasonableness : (a) Nuisance must usually be repetitive or continuous, since a single action of short duration must be tolerated, except if there is a reasonable expec...