ANSWER SHEET

LEARNING UNIT 2
TASK 1: REAL ESTATE LEGISLATION
ACTIVITY 1: KNOWLEDGE ASSIGNMENT

Question 1.1 Contract Requirements

Question 1.1(a)
A contract is an agreement between two of mor parties to establish a legal obligation that they intend
to be bound by
Question 1.1(b)

CONCEPT DEFINITION EXAMPLE

Essential Terms Essential Terms must be Positively identity the property,
included in a contract to make physical address, Full names
it legally binding and and ID nrs of both seller and
enforceble purchaser and the amount of
the sale
Material Terms Material Terms focus more on How the purchaser is going to
the more important, although pay for the property (cash or
not essential for the validality bond), when can he/she occupy
of the contract but specific the property, Occupational rent
guidelines and details amount if applicable via prior
pertaining to the purchasing of arrangement, COC certificates
the property. obtained and all in order,
procedures to follow when in
breach of contract, etc
Suspensive Conditions A clause in an agreement of If an agreement is subject to
sale or lease providing that the the suspensive condition that
agreement will be enforceable the buyer obtain a mortgage
only if a specific event and loan for a certain amount from
requirements are met a financial institution and only
have a certain period (specific
date stipulated) to do so. If the
loan cannot be obtained in such
period, the sale agreement
becomes null and void
Resolutive Conditions A clause in an agreement of a In the event Mrs Smith does
contract contains a resolutive not provide proof that she has
condition, the continuance of resigned as a director of ABC
such a contract is made Company by 15 March 2019
dependent upon the happening the contract will be deemed to
of an uncertain future event. be cancelled and be of no force
or effect”

Question 1.1(c)
Contractual consensus is a phrase in contract law used to describe the intentions of the parties forming
the contract. It refers to the situation where there is a common understanding in the formation of the

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contract. Formation of a contract is initiated with a proposal or offer. This condition or element is
considered a requirement to the formation of a contract in some jurisdictions.
Question 1.1(d) – 3 factors
Mistake - Mistake can be defined as a misunderstanding or mistaken
perception of the identity of the other contracting party or the
obligation(s) of one or both the contracting parties which influences
the mistaken party’s (or parties’) decision to contract. Apparent
consensus exists between the parties, but due to mistake the
parties do not reach consensus and no agreement exists between
them. Mistake can be about various aspects of the agreement.

Mis presentation - Where consensus was obtained because of misrepresentation, duress or undue
influence, such a Contract will be valid and binding but voidable at the instance
of
the Innocent Party to the contract who is legitimately exercising a power to avoid
the contractual obligations ex property facts not clear.

Intoxicated – A state in which an individual’s normal ability to act or make reasonable decisions is
inhibited by drugs or alcohol.

Question 1.2(a)

Concept Influencing Factors Example

Contractual capacity is the 1. Mentally Incapacity 1. When an individual is
ability of a person to enter a 2. Intoxication mentally disabled or

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 contract. 3. Minors otherwise lacks mental
There are certain classes of 4. Insolvency capacity, a contract will be
people that are typically 5. Marriage – in/out of treated as voidable because
incapable of entering a contract community of property & of the lack of contractual
or lacking contractual capacity. foreign marriages capacity.
Person fails to understand
the meaning of the words
in the contract.

2. An individual under the

influence of alcohol, street
drugs, or certain
prescription medications
cannot legally enter a
contract or give their
consent for any action

3. Individuals under the age

of 18 years are typically
considered to be minors.
Minors are automatically
deemed as lacking the
capacity to enter most
contracts. There are some
limited exceptions to this
general rule.
One limitation relates to
things that are seen as
necessary, such as food
and clothes. If a minor
enters a contract for these
items, the contract may
still be deemed as valid

4. Conveyancers and
examiners should take
cognizance of the fact that
even though an insolvent
has been rehabilitated, a
right to property acquired
by such rehabilitated
insolvent prior to, or
during, his or her
insolvency, continues to
vest in the trustee despite
the rehabilitation

5. Persons married in COP

requires written consent
from both parties to enter
an agreement. This also
pertain to the selling of
furniture or any other items
of the common
househould, not allowed

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 without approval from
spouse (written / verbal)
Persons married out of
COP can act in their own
capacity and don’t need
any approval from spouse.

Foreign Marriage is
dependable on citizenship
and that specific country’s
laws will then be applied.

Question 1.3(a)

 The seller did not accept the offer from a purchaser

 If the any of the parties (seller / buyer) dies before the contract was signed
 If an offer is not accepted by a certain time and date as per the OTP signed
Question 1.3(b)

Concept Damages Remedies Example

There is a myriad of A homeowner hires a
cases that result from contractor to put a
breach of contract in pond in the backyard,
real estate contracts, Aggrieved party to Homeowner can make as per the sales
but most relate to real sue, only for an arrange with new agreement, showing
estate purchase “actual damages owners to refund them the contractor the
agreements. for any expenses while black liner, her would
the job is finished like installed under the
Date of occupation - sand. The contractor
new owner cannot instead installs a blue
move into property as liner of the same
the agreed terms has design and thickness.
not be met making The homeowner could
some changes and ask that the contractor
adding on to a be ordered
property to refund new owners
for any expenses.

Property’s good-faith Failing to pay on time The seller can retain The buyer has time
deposit the contract can be the good-faith deposit until 12pm on Friday,
void as it is considered and terminate the 31 Jan 2020, as agreed
breach of contract contract, sue for by the signing of the
breach of contract to contract. Buyer did
obtain money not make payment and
damages, or file suit the agent cannot get
for specific hold of his/her client
performance
Unauthorized Seller’s Eviction of an The seller can always Subletting is
subleasing of a Actual Tenant sue the breaching something that

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 property in either Liable for damages party for damages. happens very often in
residential or and any maintenance Beyond that, they may SA where a tenant of a
commercial leases be able to seek property is renting it
specific performance, out to another person
restitution, and or agree with a person
rescission depending to come and live with
on the facts of the case him/her by paying a
certain rent with
notifying the landlord
or rental agency

Question 1.4(a)

• A description of the property (both physical and legal description),

• the names and ID numbers of the buyers and sellers (parties) and,

• the amount payable

 Finance: How will the buyer pay for the property? Terms regarding deposit, guarantees for
the remainder and the granting of a bank loan (mortgage) are included.
 Occupation date

Question 1.4(b)

TERM DEFINITION EXAMPLE

SOLE MANDATE A sole mandate is an A single estate agent is
instruction to an agency to authorised to market your
sell/let, with the undertaking property and, when the
not to give the same instruction property is sold, the agent is
to another agency, but you as paid regardless of who sourced
an owner can also sell the the buyer (although it is
house usually the agent). As the
seller, you are required to sign
a fixed period contract, usually
for 3 months.
OPEN MANATE An open mandate is an As a seller, an open mandate
instruction to more than one can seem an attractive option
estate agency to sell/let. because you could have many
estate agents selling for you
and thus you would expect to
get greater marketing exposure.
- But there are
significant problems
with going the open
mandate route and
having multiple agents:
there is a risk that you
might have to pay
“double” commission
to 2 estate agents, each
of whom may have a
claim as to why they
were the “effective

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 cause” of the sale. This
could happen, for
example, if a viewer
contacts one agent
first, and then views
again through another
agent
- co-ordinate home
viewings with several
different agents
- each agent will put up
a For Sale sign outside
your home and there
could be multiple
listings on the portals.
This can create the
impression that your
house is less exclusive
or that there is
something wrong with
it.
SOLE & EXCLUSIVE The Agent and Owner can sell Sole Mandate - As the seller it
MANDATE the house if it is a sole may seem unfair that if you
mandate. Exclusive mandate find a buyer yourself then the
then only the agent can sell the estate agent will still earn a
house for the period of the commission. Plus, you are
mandate granted by the seller locked in to using the services
of that agent for the agreed
time. So, as the seller, you do
take a risk when you grant a
sole mandate, and you must be
certain you are selecting a
great agent who will give your
Question 1.4(b) - continues property maximum exposure.

Exclusive mandate - ABC

Estates the sole and exclusive
right, from the date of
signature hereof until
_______________to sell the
property, on the following
terms:

1. The minimum selling price

is R __________________ or
any such other amount as I
may agree to in writing, which
shall include the service fee.
Marketing shall begin at R
_________________.

2. I agree to pay the service fee

to ABC Estates (who act as
agents of _________________

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 in receiving same) at the rate of
7.5% of the full purchase price
of the property, plus VAT
calculated at 14 % of the
service fee, if: a) the property
is sold by
__________________ of ABC
Estates, by myself or by any
other person who was
introduced to me or the
property during the period of
the mandate, at a price
acceptable to me; or if b) The
property is sold within 30 days
after the expiry of this
mandate, to any person who
was introduced to me or the
property while the mandate
was still current, either directly
through my own activities, by
_____________________ of
ABC Estates or by any other
person.

FREEHOLD PROPERTY Freehold or full title describes These kinds of properties

the transfer of full ownership include free-standing houses,
rights when you own a cluster houses, residential
property, which includes the property used for business
building and the land it is built purposes, and smallholdings
on.

SECTIONAL TITLE Sectional title on the other When you buy into a sectional
PROPERTY hand, describes separate title complex, you purchase a
ownership of units or sections section or sections and an
within a complex or undivided share of the common
development. property. These are collectively
known as units. Sectional title
dwellings comprise mini
subtype houses, semi-detached
houses, townhouses, flats or
apartments, and duet houses.”
Sectional title developments
are governed by a Body
Corporate, which is the
collective name given to all the
owners of units within any
particular complex. The Body
Corporate is responsible for
managing the scheme and
taking care of its finances. A
managing agent is often
appointed to take care of the
duties of a Body Corporate,
which includes collecting

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 Question 1.4(b) - continues

monthly levies, paying the

scheme’s insurance premiums,
arranging meetings, ensuring
compliance with the Sectional
Titles Act, and ensuring that
the owners and tenants comply
with the Body Corporate
rules.”.
FRACTIONAL Fractional ownership is a Fractional ownership is a
OWERNERSHIP percentage ownership in an common investment structure
asset. Fractional ownership for expensive assets such as
shares in the asset are sold to aircraft, sports cars, and
individual shareholders who vacation properties. With
share the benefits of the asset fractional ownership, if the
such as usage rights, income asset increases in value, the
sharing, priority access, and value of the shares in the
reduced rates. investment does as well.
SHARE BLOCK A Share Block is a form of . The Share Block Company
property ownership and is acquires title to property by
applied in cases where the land means of registered title, use or
is leasehold and not freehold lease and certain occupation
property since the property is and other rights are then
either registered in the name of conferred in the Memorandum
or leased by a Share Block of Incorporation and in the Use
Company. The Share Block Agreement entered into
Company acquires title to between the Share Block
property by means of Company and the holders of
registered title, use or lease and share for ex timeshare where
certain occupation and other you can buy a certain week pe
rights are then conferred in the annum in a certain block or be
Memorandum of Incorporation part of a Timeshare scheme
and in the Use, Agreement who has lots of different
entered into between the Share holiday resorts which you can
Block Company and the choose a week depending on
holders of share. the amount of points, etc

RETIREMENT SCHEMES The Housing Development Ex Retirement Villages is a

Schemes for Retired Persons community where: most
Act, 65 of 1988, regulates the residents are 55 years or older
housing development for or are retired from full-time
retired persons employment (or are
spouses/partners of such
people) with medical care
fascilities and consist of
freestanding houses,
complexes and additional
fascilities like swimming pool,
hair salon, etc.

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Question 1.4(e.1)
Correct answers circled
Question 1.4(e.2)
Correct answers circled
Question 1.4(e.3)
Correct answers circled
Question 1.4(e.4)
Correct answers circled

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Question 1.5(a)

- Address of the property

- Rental amount payable
- ID & Banking details of the Lessor
- Lease Term

Question 1.5(b)

SECTIONAL TITLE LEASE AGREEMENT RESIDENTIAL LEASE AGREEMENT

Sectional title complexes have clear guidelines Freehold properties you have more freedom
with regard to management rules, conduct rules and less rules to adhere too.
and other regulations pertaining to amongst
other things the keeping of pets, noise levels,
speed limits in the complex, parking
arrangements for visitors, prohibitions on
hanging laundry over balconies, the holding of
parties at night and the like.
The water usage, sewerage collection, security With private residences the lessor usually pays
fees and other similar expenses are normally the rates and taxes and makes the lessee pay
included in the levy, which is usually (but not the water charges, sewerage fees and garbage
always) paid by the lessor collection, aside from the fact that the tenant
must accept the financial responsibility for all
security arrangements and armed response
contracts, if any.
In sectional title leases, the maintenance clauses In leases for private dwellings the opposite is
are normally very short and almost true as most houses have an extensive garden
inconsequential as most of the maintenance and sometimes swimming pools to maintain.
aspects fall within the common property, which
is the responsibility of the body corporate

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Question 1.5(c)
Deposits - In terms of Section 5(3)(c)(d) of the Act, a lessor may require a lessee to pay a deposit.
Section 32 of this act states that estate agents shall open and maintain a trust account and that all funds
held or received by estate agents on behalf of clients, shall be deposited into the trust account in terms
of the provisions of that section.
The lessee may, during the period of the lease, request the lessor to provide proof in respect of the
interest accrued on such deposit. The exception is where an estate agent acts for and on behalf of the
lessor. The deposit and any interest thereon may then be dealt with in terms of the Estate Agency
Affairs Act 112 of 1976.

Breach Notices - In terms of most lease agreements, the lessor must give notice to the lessee if the
lessee is in breach of the lease agreement. A breach is when a party performs late or fails to perform
on its contractual obligation; the innocent or aggrieved party can cancel for a major breach.
A clause stating that the landlord has the right to cancel should the tenant fail to pay his or her rent,
municipal charges for the water and electricity consumption on time, affords the landlord the right to
cancel.
The Rental Housing Act requires that the grounds for cancellation for residential dwellings must be
stipulated in the lease and may not constitute an unfair practice
Renewal Notices – A Lease Renewal Agreement is a written document that extends the term of an
existing Lease Agreement between a landlord or owner of a property and a tenant or renter of the
property. The lease extension modifies the expiration date of the original Lease Agreement, and the
amount of rent, but the terms of the Lease Agreement otherwise remain the same
By being familiar with the specific terms and conditions of the renewal clauses in the estate agency’s
lease agreements, the agent will be able to assist the client, the lessor in protecting his/her rights, both
in instances where the lessor would welcome a renewal, or alternatively wants to make use of the
opportunity to get rid of an unsavoury tenant.
Most lease agreements contain a clause granting the lessee a right of extension of the lease period.
Many agreements however, stipulate that the lessee must give the lessor notice of the intention to
renew, sometimes months before the agreed expiry date. Most parties give little thought to this
clause, until it becomes an issue, or a dispute develops.
Question 1.6(a)
Personal Servitudes - A personal servitude is a servitude granting rights in property to a particular
person. Such servitudes are personal in nature and ordinarily terminate on the servient holder’s death.
Praedial Servitudes - A real or predial servitude is a charge laid on an estate for the use and utility of
another estate belonging to another owner. The registration of servitudes for a limited period and they
may terminate on a certain event, for example, a water servitude may be expressed to terminate when
a local authority is formed to supply water.
Question 1.6(b)

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Municipal rates - Property-related taxes include - Most South African property owners must pay
municipal rates, based on the ‘market value’ of their property
Transfer duty – is tax payable to the state on all transfers of immovable properties. Property will not
be registered if the there is no proof that the transfer duty was paid
Value Added Tax (VAT) – Vat rate is currently 15%. Vat is payable on the purchase price of a
property if the purchase is from a seller who is a registered VAT vendor, and the sale is conducted as
part of the seller’s business activities

Question 1.6(c)

 Property details – ex freehold, sectional title

 Seller details – sold by individual / trust / company
 Bond details – what is still owed by the owner
 Purchaser – did he obtain a full of only a % bond, if so was the difference paid over to the
Attorneys
 Any servitudes on the property
 Who was the previous owners?
 Different Acts that we have to obey as an agent and know what is required for ex Sectional
Title Act

Question 1.7(a)
a-1 Individuals (natural persons)
• Whether the individual in fact owns the property.
• Whether this individual has full contractual capacity.
• Whether this individual needs to exercise the contractual capacity in conjunction with another
person, such as a co-owner.

Section 15(2) of the Matrimonial Property Act 88 of 1984 requires spouses in community of property
to get the written consent of the other spouse when selling immovable property.
ndividuals married out of community of property do not have this problem and can act on their own, if
the property is registered in only one party’s name.

To determine the marital status of a party, the agent has to:

• Ask the seller for a copy of the marriage certificate, which usually indicates whether an ante-nuptial
contract has been entered into.
• Ask for a copy of the ante-nuptial contract.

If neither of these documents are in the possession of the agent’s clients, a copy of the marriage
certificate can be requested from the Department of Home Affairs and a copy of the ante-nuptial
contract can be obtained from the Deeds Office.

A copy of the client’s identity document must always be obtained for the following reasons:

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• To verify the identity, identity number, date of birth and citizenship of the seller.
• To ensure that that seller is not a minor.
• To satisfy the requirements of the Financial Intelligence Centre Act 38 of 2001

a-2 Companies
Companies are legal entities and obviously cannot enter into agreements by themselves. The board of
directors is the elected representative of the company, validly appointed by the shareholders. In their
capacity as directors, they enter into agreements on behalf of the company. A company is bound by a
contract entered on its behalf by a person authorised to conclude the contract

• To prove that the company has authorised the relevant transaction.

• To prove that the person signing the relevant documents on behalf of the company, is empowered to
do so.
• To indicate acceptance of other important terms and conditions of the transaction, such as the
selling price, or the rental amounts or the approval of commissions paid to agents, the appointment of
conveyancing attorneys or other professional advisors and other issues of relevance.
When companies sell immovable property, the estate agent must obtain the following documents:

• A resolution from the board of directors authorising the sale, as well as the terms and conditions of
the agreement and confirming the authority of the person mandated to sign all the relevant documents.
• A copy of the identity document of the authorised representative.
• A copy of the company’s Articles of Association to make sure the transaction is not contrary to the
company’s statutes.
• A solvency certificate from the company’s auditors to confirm that the company is not liquidated (or
stands to be liquidated as a result of this transaction) and that the company is solvent and financially
sound.
• If the greater portion of the company’s assets is sold in this transaction, then a resolution is required
from the shareholders (51%) of the company in terms of Section 228 of the Companies Act. • The
company will have to prove its VAT status by submitting a VAT Registration Certificate, also known
as a VAT 103.

a-3 Closed corporations

Close corporations are easier to administer than companies.
It is still prudent to be as thorough as possible and it is suggested that estate agents follow much the
same procedure as with companies:
• Obtain a resolution signed by all the members authorising the sale of immovable property. (Note
that Section 46 of the Close Corporations Act only requires 75% of the members to agree, but to
prevent problems, try to get 100% consensus between all the members).
• Make sure the resolution also appoints an authorised representative to sign on behalf of the close
corporation.
• Obtain a copy of the identity document of the authorised representative.
• Obtain a solvency certificate from the close corporation’s accounting officer to indicate that the
close corporation is not liquidated or stands to be liquidated as a result of this transaction and that the
close corporation is solvent and financially sound.

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• If the close corporation is to levy VAT on the transaction, and transfer duty is not payable by the
purchaser, the close corporation will have to prove its VAT status by submitting a VAT Certificate,
also known as a VAT 103 Certificate.

a-4 Trusts
The administration of trusts is regulated by the Trust Property Control Act 57 of 1988.
Although a trust is not a legal person like a close corporation or a company, it is a good idea to deal
with a trust as though it were a legal person.

For that reason, it will be to the parties’ benefit to obtain a resolution passed by the trustees, to
authorise:

1. That the intended transaction can be entered.

2. That the trustees signing the relevant documents on behalf of the trust are in fact empowered to
do so.

This means that a trustee cannot act on behalf of a trust unless a letter of authority has been issued by
the Master of the High Court specifically identifying that individual as a trustee of the trust.

a-5 Deceased Estates

After the executor has mandated the estate agent to sell the property, transfer can be affected to the
purchaser under the following circumstances:
• The permission of the heirs, or if the heirs are minors, then their legal guardians, is obtained by way
of an affidavit.
• The executor has given permission and has completed a form produced by the Master’s Office,
called a JM33. This form, together with the affidavit from the heirs, is submitted to the Master.
• The Master has had regard to the affidavits and the JM33 and has issued an Endorsement in terms
of Section 42(2) of the Administration of Estates Act.

a-6 Partnerships
A partnership is nothing more than a few individuals trading together for profit. The documentation
required in any property transaction involving a partnership, would then be like the documents
required for individuals.
The following documents should be obtained:
• A copy of the identity document of each of the parties.
• A copy of the marriage certificates of each of the parties, which usually indicate whether an ante-
nuptial contract has been entered.
• A copy of the ante-nuptial contracts.

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