Illegal tenants

2014-05-25 15:00

What to do when you’ve inherited tenants from the previous owner of a property

Sebobe writes:

I bought an old four-room house as an investment property for my daughter. I bought it from a young woman who apparently inherited the property from her father.

The young woman was living on the property with her uncle, who had built a shack on it. Both the seller and her uncle had tenants on the property.

The conveyancing attorneys had served the uncle and his tenants with letters to vacate as the property had been sold. But the tenants did not leave.

I am now in possession of the title deed, but not of the property itself because the uncle and tenants are not willing to vacate. He is contesting the eviction and is also influencing the tenants. They have illegally connected electricity.

Does the uncle have a claim on the property and, if so, where do we go from here? What recourse do I have?

David Warmback, a partner at Shepstone & Wylie Attorneys, replies:

Sebobe should have been wary when purchasing, particularly as the property was already occupied by the uncle and certain tenants.

In South African law, the principle is that a lease comes before a sale. In other words, if you purchase a property with a tenant, the purchaser takes transfer of the property subject to the existing lease.

The new owner steps into the shoes of the previous owner as landlord.

The complication is that a lease does not need to be in writing to be valid and binding, and clearly this can lead to disputes regarding the actual terms of the verbal lease, particularly when a new owner takes ownership of the property.

Sometimes a tenant will take advantage of this situation and argue that he or she had a five-year lease with the previous owner, when perhaps the lease was only on a month-to-month basis. Not having a written lease document is clearly not ideal.

Sebobe should have been particularly wary about the fact that the uncle had spent money on the property and seemed to have his own tenants.

Potentially, the uncle could have a claim for unjust enrichment in that he has spent money on property not owned by him, especially if he alleges he had certain rights granted by the deceased owner of the property, his brother.

When you buy a property, you must always be particularly cautious if there are tenants. If the tenants do not have leases with the owner, it is advisable to insist that the seller concludes formal leases with the tenants before transfer of the property, so there is less chance of a dispute later on when you take transfer.

Ideally, if you believe there may be “issues” with the tenant, the best protection would be to insist that the seller terminates the lease, if he is able to, and gives vacant possession to you by no later than the date of transfer. This will ensure you do not inherit the tenants.

If this is not possible, then you, the purchaser, will always take the risk – even if there is a formal written lease agreement – that the tenants will not leave the property at the end of their lease.

In this case, the only proper recourse for the owner is to take legal action against the tenant and for a court to order an eviction of the tenant. This can, unfortunately, be costly and time-consuming.

Choosing a rewards programme

Londiwe writes:

There are so many loyalty schemes or rewards programmes available today. I have more cards in my wallet than ever before. Instead of belonging to every scheme available, I want to pick just one or two that will add real value. How do I narrow it down and what should I consider?

Sonja Fourie, Liberty’s divisional director of Own your life Rewards programme, replies:

There are a number of issues to consider. With the current economic climate, rewards programmes can help you stretch your wallet so your money goes a longer way. When choosing a rewards programme, here’s what to consider:

.?Analyse all the programmes you currently use and see which ones have given you the most benefit;

.?Look at the range of partners each programme has and their geographical footprint;

.?Make sure the rewards offered are rewards you would use. If you are not a gym person, free gym membership should not be a consideration;

.?If you have to pay a joining fee, make sure the rewards are worth the fee;

.?Find out if the rewards are limited to availability or capacity restrictions;

.?Find out if there are thresholds or amounts you have to spend before you can enjoy the rewards offered; and

.?Find out if your rewards expire after a certain period.

You should look for a programme that is simple to understand and easy to access. With the growth of mobile and internet usage, you need a rewards programme that is in touch with technology and ensures that you have access wherever you are.

Liberty’s Own your life programme has saved its members R90?million since inception. There are more than 70 partners to choose from, including Virgin Active, Planet Fitness, Vodacom, Nu Metro, Exclusive Books, Sandton City parking, Barloworld, Mangwanani Day Spa and Hirsch’s Home Store. We are proud to report an average saving of more than R510 per member per month.

A single unit trust vs a lisp

George writes:

I want to invest in unit trusts and a friend told me I would have greater choice if I invest via a LISP [linked investment service provider]. Won’t this push up the costs and how much more will I pay in fees compared with investing directly in a unit trust fund?

David Lloyd, managing director of Liberty Investments, replies:

Most investors prefer to invest with more than one fund manager. It spreads your risk and gives you more choice. The first step in investing is to select your unit trusts from the range of all the fund management houses in South Africa. That in itself is

a daunting task and I would recommend you use the services of a good financial adviser.

Each fund management company you invest with will send you statements at different times and if you choose to switch your investment, this might often require you to deal with two or more companies (the ones you are selling from and the ones you are now investing in).

LISPs were created to make life simpler by giving you access to a platform of unit trust funds across a range of fund managers. But it does come

at a premium, typically an added cost of 0.5% a year and almost certainly won’t have every South African unit trust available within its trading list.

You have to decide if the reduction in hassle is worth the extra cost. Some LISPs charge more than 0.5% as an ongoing fee and may also charge an initial fee, but I recommend you avoid these – unless they offer something extra and valuable for higher charges.

Finally, steer clear of ‘rebates’. The sales pitch is that the unit trusts you select will pay back part of their management fees as rebates to your LISP and that these rebates will be credited to your account.

What really happens is the unit trust you invest in charges you more through their portfolio management fee, by at least the rebate amount and sometimes more (to administer these rebates obviously costs money).

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