Expropriation bill raises issue of compensation

Cape Town - One of the controversial issues in relation to the proposed expropriation bill 2015, is how much compensation property owners could expect and when, explains attorney Simon Dippenaar.

"Does the bill infringe the Constitution on issues such as property rights and the removal of the ‘willing-buyer, willing-seller’ approach? The bill seems to relate not only to land, but to shares, intellectual property and, indeed, moveable property. Are we heading for a Zimbabwe-style land grab or are we protected, at least to an extent, by our Constitution?" asks Dippenaar.

"There has been a great deal of discussion around the expropriation bill, mostly relating to the constitutionality of the powers given to the minister and state organs to expropriate property either for ‘public purposes’ or ‘in the public interest’."

In his view, the debate is likely to continue until the pertinent points have been addressed and clarified, probably in the Constitutional Court.

READ: First consider govt land for expropriation - economist

How is compensation determined?

"It’s worth noting that one of the better features of the 2015 bill, compared to the 2008 version, is that compensation is decided by the courts, not by the state," says Dippenaar.

Issues affecting the amount of compensation to be paid are the current use of the property; its history; the market value; the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement to the property; and the purpose of the acquisition.

"An expert, unbiased opinion might be useful at this stage. The property and its value, apart from being a financial transaction, can arouse strong emotions," says Dippenaar.

He says one should be aware of some factors the authority will ignore when determining compensation. These include the fact that the property has been taken without the consent of the expropriated owner or right-holder.

Any special suitability or usefulness of the property will also be taken into account, if it is unlikely that the property could have been purchased on the open market for that specific stated purpose.

Any improvements made to the property resulting in illegal use are not included in the valuation. Improvements made after the notice of expropriation was served will be taken into account, unless an agreement has been reached prior to expropriation.

Anything that was done with the aim of claiming compensation also be taken note of.

What to do when you receive notice of expropriation

Dippenaar says, if you are the owner or holder of an unregistered right, you should respond to the notice of expropriation within a 20-day period - which can be extended. You must respond whether or not you agree to the expropriation or the amount of compensation payable.

"If you claim an amount of compensation and this is rejected by the authority, the authority has to propose a ‘just and equitable’ amount, detailing how this amount has been calculated and what is included. In this situation, you will need to provide supporting documentation within 20 days of delivery of the statement indicating the amount claimed," explains Dippenaar.

"If an agreement is not reached at this stage and you don’t institute legal proceedings, it is assumed that you have accepted the offer. If you are entitled to compensation, 80% must be paid to you on the date the authority takes possession of the property."

Mortgaged property and rates

If there is a mortgage or a deed of sale on your property, the appropriate amounts are paid by the authority to the bond-holder or buyer. If you cannot reach agreement with the bond-holder or buyer, then the matter will be decided in a court application.

Property rates and other charges are paid by the authority from the compensation. The municipal manager is responsible for ensuring that the information regarding outstanding charges is forwarded to the authority.

"Under certain circumstances, it may be necessary for compensation to be deposited with the Master of the High Court – for example if the property was a bequest to people unknown to the parties involved, or if the address of the payee cannot be provided," says Dippenaar.

Extenuating circumstances

Your property may be expropriated on a temporary basis – in the event of a disaster, for example. "Temporary" means a period not longer than 12 months, which may be extended by a court order, and some of the provisions of the bill are waived.

"If, for any reason, the property is no longer needed – perhaps the reason for the expropriation is no longer in the public interest – it can be withdrawn, in which case there is provision for recompensing the owner," says Dippenaar.

Read Fin24's top stories trending on Twitter:

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 925 votes
It depends on how the funds are used.
74% - 6210 votes
No. We should have gotten the loan elsewhere.
15% - 1276 votes