The South African property sector needs to study the potential impact of land expropriation without compensation and make submissions to the government on the controversial policy which could potentially result in the complete abolition of property rights.

Michael Jackson, attorney and partner who heads the commercial and natural resources law division at Cox Yeats, told members of the South African Property Owners Association(Sapoa) at an event in Durban last week that there was a need to conduct research into the impact of the policy on the property sector.

“What's very important in this debate is the economic impact, and that's probably where the likes of Sapoa have a role to play because representations are not being made at the right level. No one is really studying what the impact could be to the property sector for the economy,” Jackson said.

He said the sector could play a role in the debate by acknowledging the need for land reform and distribution and by informing the government of the potentially disastrous impact if the policy was implemented in certain ways.

Jackson said experts were concerned that the government might consider following a similar route to implementing the policy as it had done when the right to private ownership of minerals were taken away.

“It is a topic that is very difficult to grab hold of, and everyone is unclear of whether what we are facing is simply political rhetoric or if it is something we have to be very concerned about,” Jackson said.

Jackson drew parallels between land rights and mineral rights, highlighting how the Mineral and Petroleum Resources Development Act essentially removed the right to privately own minerals.

Firms and individuals which held old rights prior to the Act had to apply for a license to use the minerals, and those who were already exercising their right could convert their right to a licence, conditional on obtaining a BEE partner and complying with the mining charter.

But those not already making use of the right had to prove they intended to do so, or the state could redistribute the right, without paying compensation.

Constitutional

Jackson said AgriSA took the matter to the Constitutional Court which had ruled that the concept of “the nation” owning the minerals was constitutional and did not violate Section 25 of the Constitution which protects the right to private property ownership by requiring “just and equitable” compensation if land is expropriated. It ruled that it was not an expropriation because the state did not own the minerals.

He said the minority judgment of the court said “If private ownership of minerals can be abolished without just and equitable compensation by the construction that when the state allocates the substance of old rights to others, it does not do so as the holder of those rights, what prevents the abolition of any or all property in the same way?”

Jackson said experts feared the possibility that the state was considering taking the same stance that all land would vest with the nation. Joy Clover, an attorney and director at Ramdass and Associates, said that after studying a home loan agreement it was unclear how the state would expropriate a property under a mortgage bond without obtaining the consent of the lending bank.

“A client can be placed in default/breach of their agreement with the bank if the property or any substantial portion is expropriated or appropriated.

"The bank can then obtain an order declaring the property immediately executable,” Clover said.

The Mercury