Real Rights v Personal Rights PDF

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Summary

Summary of the Law of Property module. Extremely helpful with examples of difficult issues. Explanation of cases and themes pertaining to Law of Property....

Description

Distinction between real rights and personal rights

Object

Real rights Corporeal thing (except a pledge of claims)

Personal rights Performance (to give something, to do something or not to do something) Holder of a personal right is entitled to claim performance from a specific person

Content

Holder of a real right has a direct claim to and a right of disposal over a thing

Remedies

Holder of a real right can enforce his real right by means of a real action (e.g. rei vindicatio) of owner, which can be instituted against anyone who is unlawfully in control of thing

Holder of a personal right enforces his right by means of a personal action e.g. condictio furtiva (action of an owner against thief to claim back stolen object)

Origin

Real rights have their origin in legal facts other than obligations e.g. delivery, accession (accessio) and prescription

Personal rights come into existence through obligations e.g. in terms of a contract or a delict

Absoluteness

Real rights are absolute in principle : holder of right can vindicate his thing (subject to certain exceptions) from whomever is in control of thing

Personal rights are relative in principle : holder can enforce his right only against person who is obliged to perform in terms of an obligation

Preference

In case of insolvency, a real right enjoys preference over other rights Maxim ‘first in time is stronger in law’ (prior in tempore est potior in iure) is applied in case of two or more competing real rights.

Publicity

Creation, transfer or extinction of real rights requires some form of publicity :  Delivery – transfer of ownership of movable things  Registration – immovable property Reason for this lies in nature of real rights. Since these rights have to be respected by world at large, it is imperative that there should be some form of publicity informing outsiders of existence, transfer or extinction of real right

Apart from a few exceptions, this principle does not apply to personal rights

Distinction between real and creditor’s rights in IMMOVABLE corporeal property Problem = to decide whether certain rights with regard to immovable things are real rights or creditor’s rights. (a)

Problem is largely restricted to corporeal property – with a few exceptions it does not affect rights in incorporeal property. Incorporeals with regard to which limited real rights can be registered are registered as immovable incorporeal property e.g. long- term leases and mineral rights. Principles which apply with regard to land are, therefore, also followed in such cases.

(b)

Problem is restricted to limited real rights Distinction between real rights and creditor’s rights does not really affect ownership either – generally speaking, ownership of corporeals is easy to identify, and it is always a real right. Problem is to decide whether certain other rights in corporeal things are limited real rights or creditor’s rights – this problem is caused by fact that SA law does not restrict categories of limited real rights. Even within traditionally well-established categories of servitudes and real security rights new subcategories and forms may be created, most often by way of contract or in a will. BUT creditor’s rights in corporeal things are also created by contract or in a will – this makes it difficult to decide whether rights which were created in a contract or a will (and which pertain to corporeal things) are limited real rights or creditor’s rights.

(c) Problem is largely restricted to immovable property Acquisition of a real right with regard to movables (e.g. motor car) usually follows upon delivery. In case of immovable property, however, situation is more complex. As a rule, real rights in immovable property (land and everything attached to it permanently) are acquired upon registration of right in deeds registry. Deeds Registries Act 47 of 1937 governs registration of deeds pertaining to rights in immovable property in SA. Section 63(1) of Act = only real rights in immovable property may be registered, and consequently lawyers and courts are often faced with question as to whether a particular condition in a deed may be registered or not : 

If it amounts to a real right – condition may be registered, and in such a case registration will effect transfer or acquisition of a real right; but



If right is a creditor’s right – it may not be registered. In these cases, question whether right is real or personal can obviously not depend upon fact of registration, since question is whether or not right may be registered.

(d) Problem is limited to rights created in a will or a contract

Analysis of case law shows that majority of situations where this distinction creates problems concerns rights that were created either in a will or in a contract of sale of immovable property . In these cases it was unclear whether certain conditions in deed of sale amounted to limited real rights, which should be registered, or to creditor’s rights, which may not be registered. Problem is, therefore, to determine whether certain rights with regard to immovable property and created in a contract are limited real rights (for which registration is a requirement) or creditor’s rights (which may not be registered). 2

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Theoretical approaches

Personalist theory Classical theory So-called because emphasis is placed on person So-called because it corresponds to original against whom right may be enforced. Roman law distinction. Distinguishes between real and personal rights with reference to nature of object to which each right pertains. Real right operates absolutely – enforceable Real rights, according to this theory, concern the against ‘world at large’. relationship between a person and a thing. Recognition of and compliance with such a right A real right confers direct control and right of (e.g. ownership) may be enforced against disposal over a thing. anyone. Whatever X’s relationship with someone might be, that person will have to recognise X’s ownership of a certain thing, and X can, in principle, claim his thing from anyone who is in control of it. e.g. an owner can claim his car from a person who bought it from a thief. A personal right (creditor’s right or claim) has Personal rights concern relationship between persons. A personal right entitles creditor to claim relative operation. It can be enforced only against particular person who is obliged to performance from a particular person only. perform. Object of right = performance. In a delict, damages can be claimed only from person who caused damage apart from certain exceptions. Criticism Fundamental criticism levelled against this theory = it over-emphasises absolute operation of real rights, and in reality such rights do not always and necessarily operate absolutely e.g. there are cases where owner of a thing is prevented by operation of estoppel from enforcing his right of ownership against another person.

Criticism Although this distinction is open to criticism, in most instances this criterion will help to determine whether one is dealing with a real right.

Estoppel is a defence which operates against rei vindicatio of an owner if he has culpably created impression that a third person was owner or had

Certain personal rights ultimately also have a thing as their object, but they are not real rights e.g. personal rights to acquire a thing (iura in

However, it is sometimes difficult to determine exactly what is meant by a ‘direct relationship with a thing’.

Subtraction from dominium test In addition to theoretical approaches to distinction between real and creditor’s rights, SA courts have developed their own approach to this problem – this approach, known as the ‘subtraction from the dominium test, was first formulated in 1926 in the authoritative case Ex parte Geldenhuys Ex parte Geldenhuys 1926 OPD 155 In a mutual will, a husband and wife left a piece of land to their children in undi vided shares (co-ownership). Will determined that surviving spouse should, upon eldest child reaching majority, cause land to be divided amongst children in equal portions by drawing of lots. Child who drew portion upon which homestead was built should compensate other children by paying an amount of money to each of them. Registrar of deeds refused to register conditions imposed by will, arguing that they were not concerned with real rights in land. Two conditions that created problems are following : (a) Will stipulated specific conditions with regard to time and manner of subdivision of farm. Usually coowners are free to decide when and how they want to subdivide common property. Condition places a restriction upon this common-law freedom to subdivide, and simultaneously creates rights (in favour of each child against others) to enforce these prescriptions. 1st question = whether these rights to have subdivision done at a specific time (when eldest child reached majority) and in a specific manner (in equal portions to be determined by drawing lots) create real or creditor’s rights ?

(b) Will also stipulated that child drawing most valuable portion (with house on it) should compensate others by paying them a sum of money.

2nd question = whether right of other children to claim this sum of money is a real or a creditor’s right ? Problem with registration of rights Question as to whether these rights are real or creditor’s rights arose in context of registration : Deeds Registries Act 47 of 1937 provides in section 63(1) that only real rights in land may be registered, and registrar of deeds refused to register rights described above because he thought that they were creditor’s rights only. Question whether these rights are real or creditor’s rights is also important for their enforcement, because : 

If they are creditor’s rights – they can be enforced only against a specific debtor (other children)

BUT 

If they are real rights – they can be enforced against any person (such as subsequent owners, should one of the children sell his share).

Formulation of subtraction test Court approached problem in a very practical manner : in order to facilitate matters it was said that one should look at obligation created by right in question. Obligations implied by two rights identified above are following : (a) An obligation was placed upon all co-owners to exercise their right of subdivision at a certain time (when oldest child reached majority) and in a specific manner (by drawing lots for portions of equal size). (b) An obligation was placed upon child who drew portion with house on it to compensate others by paying

them a specified amount of money. Then court also proposed to determine effect and intention of those obligations : (a) If obligation is a burden upon land it is said to be a subtraction from dominium or ownership, and then corresponding right is a real right and it may be registered. By saying that obligation is a burden upon land, court indicates that obligation affects any owner of that piece of land, irrespective of his personal identity, and irrespective of any contract. Subsequent owners are, therefore, bound by obligation, just like original owner. (b) If burden is placed upon a specific person in his personal capacity , however, corresponding right is a personal or creditor’s right, and it may not be registered. Result = such an obligation does not affect subsequent owners of land, because burden is placed upon specific person in his personal capacity and not in his capacity as owner of that piece of land. In effect, court’s approach implies that a real right is concerned with and accompanies property (land), whereas a creditor’s right is concerned with and accompanies person. If person upon whom obligation rests sells land to a different person, a real right would ‘follow the land’ and would still be enforced against new owner, whereas a creditor’s right would ‘follow person’ and will be enforced against original person, but not against new owner. Application to facts of case Finally, court applied subtraction from dominium test to facts of case : (a) 1st set of obligations diminished co-owners’ normal right of subdivision, and was intended to do so – this obligation was meant to affect all co-owners and all subsequent co-owners. It meant that co-owners would lose some of their normal entitlements, and therefore it was a burden upon land i.e. a subtraction from dominium.

Corresponding right was, therefore, a REAL right which should (and ought to) be registered. Registrar of deeds was instructed to register condition concerning time and manner of subdivision. (b) 2nd second set of obligations placed a burden upon one child only, (one who drew portion with house on it), and it was clearly a one-off burden which was intended to restore balance once portions had been distributed. It was, therefore, a burden which rested upon a specific person in his personal capacity only (as person who benefited from division), and corresponding right did not subtract from dominium itself. Corresponding right was a CREDITOR’S RIGHT which could not be registered. HOWEVER, that part of condition in the will was so closely connected with 1 st part that court decided that both should be registered together for convenience, without thereby affecting personal nature of creditor’s right in any way. Rights of other children to demand payment from one who received house were creditors’ rights, and it was registered by way of an exception, without changing nature of right.

Obligations to pay money to someone In subsequent cases, 2nd second aspect of Geldenhuys case, concerning right to payment of a sum of money, proved to be one of major problem areas concerning distinction between real and creditor’s rights. In view of Geldenhuys decision, it was clear that one-off payments of money which affected one person personally (and not as owner of the land in question) could never be real rights, but that still left question open with regard to other rights to receive payment of money (rights to sums of money which are not one-off payments e.g. periodic payments; and rights to either one-off or periodic payments that rest upon a person as owner of the land in question and not personally). This question was addressed in several later cases.

Intention of parties What is situation if testator or parties who concluded contract intended right to be a real right ? It may be inferred from Geldenhuys decision that such an intention cannot override principles of law – regardless of intention, it is impossible to create a real right if right in question clearly places obligation upon debtor in his personal capacity. However, wherever possible, intention of parties is an important clue which may help court in deciding whether obligation was supposed to be real or personal....