BACKGROUND AND FACTS
The Appellant, Bondev Midrand (Pty) Ltd, developed over 4000 residential dwellings in Midstream Estate. The appeals in this matter relate to immovable property within the aforesaid estate as sold by the Appellant to Mr Ramokgopa and Mr and Mrs Puling, respectively. The two appeals relate to the transfer of property in case number 802/2016 to Mr Ramokgopa in November 2006 and the transfer under case number 802/2016 to Mr and Mrs Puling in March 2000
In both Deeds of Transfer the following condition is recorded, save for a difference in the date “The Transferee or his successors in Title will be liable to erect a dwelling on the property within 18 months from 16 November 2006, failing which the Appellant will be entitled, but not obliged to claim that the property is transferred to the Appellant at the cost of the Transferee against payment by the Transferee of the original purchase price, interest free. The Transferee shall not within the said period so transfer the property without the Appellant’s written consent. This period can be extended at the discretion of the Appellant.” (“the Condition”)he Appellant, Bondev Midrand (Pty) Ltd, developed over 4000 residential dwellings in Midstream Estate. The appeals in this matter relate to immovable property within the aforesaid estate as sold by the Appellant to Mr Ramokgopa and Mr and Mrs Puling, respectively. The two appeals relate to the transfer of property in case number 802/2016 to Mr Ramokgopa in November 2006 and the transfer under case number 802/2016 to Mr and Mrs Puling in March 2000.
Mr Ramokgopa failed to comply with the Condition, by not building a dwelling within the specified time period and as such, in January 2014, the Appellant instituted action against him seeking an order to transfer the property back to the Appellant and tendering payment of the original purchase price for same. Mr Ramokgopa opposed the action by claiming that the matter had prescribed as it was instituted 18 months after the expiry of the condition period.
Mr and Mrs Puling (“the Pulings”) also failed to comply with the Condition by not building a dwelling within the specified time period. As per the Condition, upon the lapse of the 18 month time period, the Appellant became entitled, but not obliged, to claim re-transfer of the property against payment of the original purchase price.
The 18 month period elapsed on 6 September 2008 and the Appellant only pursued the re-transfer on 5 April 2013, four and half years after the lapse. The Pulings’ intention was to consolidate the 2 adjoining Erven however, the Appellant was not prepared to agree to the consolidation and instituted proceedings for the re-transfer of the property against the payment of the original purchase price. The Pulings opposed the above proceedings and claimed that the matter had prescribed.
The Respondents further alleged that the claim for re-transfer of the property constituted a debt for the purposes of the Prescription Act 68 of 1969. Therefore, the prescriptive period is three years.
The Appellant argued that the registered condition was a real right which did not prescribe within three years and was not merely a personal right in favour of the Appellant.
Thus, the issue to be decided before the Supreme Court of Appeal was whether the Appellant’s claim for re-transfer of the property prescribed three years after its claim became due when the Respondents failed to erect a dwelling on their respective properties within the 18 month building period.
Court a quo
It was concluded that a repurchase clause was “grossly unfair to a purchaser intending to build a residential home, that it infringed the constitutional right to adequate housing and that enforcing it would be against public policy.”
Janse AJ found in the case of Bondev Midrand (Pty) Ltd v Madzhie and Others 2017 (4) SA 166 (GP) (16 December 2016) that the re-transfer clause was unreasonable towards a purchaser “that wishes to pursue the suburban dream incrementally” and that a repurchase clause is not crucial to the business of a developer and as such, this clause should not be enforced.
Accordingly, the Registrar of Deeds views the aforesaid judgement as binding and refuses to register deeds containing repurchase clauses. Judge Leach in the present case has now clarified the position on the matter as he identifies that the Madzhie case was in fact withdrawn by counsel in chambers before the case was heard and as such, did not require a formal judgement. Therefore,
Judge Leach confirms that it was inappropriate for the court in Madzhie to reach the conclusion that they did in respect of the constitutionality and lack of enforceability of the repurchase clause as registered against the title deed. Judge Leach further confirms that the Deeds Office should not regard the Madzhie judgement as authoritative or binding.
Supreme Court of Appeal
The condition in respect of the re-transfer consists of 2 clauses:
1. The first clause obliges the Transferee or its successors in title to erect a dwelling on the property within an 18 month period (“the first clause”);
2. The second clause identifies that in the event of a dwelling not being erected within the 18 month period, the Appellant is entitled but not obliged, to have the property retransferred to it against payment of the original purchase price (“the second clause”).
Judge Leach held that the first clause is in fact a real right as it binds the Transferee as well the successors in title. Furthermore, the requirement that a dwelling be erected results in an encumbrance on the exercise of the owner’s rights of ownership of its land.
The second clause does not amount to an encumbrance upon the land as it is a right which can only be enforced by a particular person, the Appellant, and does not bind third parties. This is a personal right which can be exercised at the Appellant’s discretion.
Section 63(1) of the Deeds Registries Act 47 of 1937 stipulates that no condition in a deed which creates or embodies a personal right shall be capable of registration. Therefore, the fact that a personal right is registered against a title deed does not convert that right into a real right. The Appellant argued that even though the second clause appeared to create a personal right, it is inextricably linked to the first clause, which created a real right.
Judge Leach confirmed that the two clauses read together do not constitute a composite whole which restricts the use of the property, as the second clause merely creates an option to purchase the land for the original purchase price in the event that no dwelling is built on the land within the 18 month period. Therefore, the first clause remains binding, should the Appellant elect not to seek the re-transfer.
In light of the above findings, Judge Leach was tasked to determine whether the debt, which is the subject of the claim in terms of the second clause, has prescribed. Judge Leach settled on a narrow interpretation of the meaning of “debt” to include the right to claim the return of property. He concluded that the second clause of the re-transfer condition creates no more than a personal right and therefore, the Appellant’s claim in each case had prescribed. As such, the appeals were dismissed.
Re-transfer conditions are relatively common in nature and are regularly registered at the instance of developers. However, the second clause to these conditions provide for an election by the developer to claim re-transfer. This constitutes a personal right and as such, is subject to the Prescription Act. Therefore, prescription begins to run at the start of the building period as stipulated in the re-transfer condition.
Written by Chelsey Byron and supervised by Vikki Revelas, October 2017