South African Deeds Journal

thus be payable if the trust in question is a 'discretionary
ownership trust' where the trustees of the trust (in their
capacities as trustees) are the owners of 'residential property'
as defined and where beneficiaries are substituted or added in
such a manner that the new beneficiaries acquire a contingent
right to any residential property, the acquisition of which isa
consequence of or attendant upon the conclusion of any
agreement for consideration with regard to property held by
that trust; accompanied by the substitution or variation of that
trust's loan creditors, or by the substitution or addition of any
mortgage bond or mortgage bond creditor; or accompanied
by the change of any trustee of that trust; 'Non-discretionary
ownership trusts’ The position as regards the disposal by a
beneficiary of its interests in a 'non-discretionary ownership
trust' is not so clear. My opinion as regards this category of
trust is as follows: The beneficiary is not the owner of the trust
assets but has a vested right (as opposed to a contingent
right) regarding any income or capital which the trustees may
decide to distribute. If a beneficiary of such a trust disposes of
its rights as beneficiary the interest disposed of is neither a
“real right in land” (see paragraph 4 of this memorandum) nor
is it a “contingent right in a discretionary trust” and therefore
does not constitute “property” as defined in section 1 of the
Transfer DutyAct.
It would thus appear (incongruent as it may seem) as if the
disposal of a beneficiary's interest in a 'non-discretionary
ownership trust' will not attract transfer duty.
REAL RIGHTS IN LAND
The “vested right” of the beneficiary of a 'non-discretionary
ownership trust' is a personal right and not a real right in land
because:
it is not enforceable against bona fide third parties. Should the
trustees, for instance, pass a mortgage bond over the trust's
property to secure the repayment of money borrowed by the
trustees, the mortgage would acquire a real right and the
beneficiaries would not be able to enforce their “vested right”
against the mortgagee.
It is not registrable in a Deeds Registry (In Dlamini and
another v Joosten and others 2006 (3) SA 342 (SCA) the
following was held as regards a real right in land: “Such a right
is in principle registrable in a Deeds Registry because it
constitutes a 'burden on the land' by reducing the owner's right
of ownership of the land and binds successors in title” and in
Erlax Properties (Pty) Ltd v Registrar of Deeds and others
1992 (1) SA 879 (A) it was held that “the right to extend” was a
real right in land which therefore was, in principle, capable of
registration.)
CONCLUSION
It is clear that the use of the word “discretionary trust” in the
definitions of 'property' and 'transaction' in section 1 of the
Transfer Duty Act was an unfortunate one and creates
confusion. I would appreciate the viewpoint of other
practitioners.
Republished with permission from Ghost Digest - Editor
Sales from Estates: Section 18(3) Act 66 of 1965
By: L J Vosloo
Deeds Registry, CAPE TOWN
There has been an ongoing debate as to whether the Master of
the High Court needs to consent to sales of immovable
property from a “section 18(3)-estate”, and what proof the
Deeds Office requires to ensure that the estate does not
exceed the present limit of R125 000,00, notwithstanding RCR
3 of 2003.
A letter from the retired Cape Town Master confirmed that
should a sale from the estate exceed the limit of R125 000,00
then it must be referred back to him for the appointment of an
executor. It has, however, been confirmed that this only applies
to sales directly from the estate, and not to a follow-on sale. In
other words where there is a so-called “same day” transfer and
the heirs in an “section 18(3) estate” transfer the property for a
higher value, then no further deeds office examination queries
need be made, questioning the section 18(3) procedure.
However, the question now begging an answer is how does the
Deeds Registry know that the sale of the immovable property
is within the R125 000,00 limit?After all it can quite conceivably
happen that a property is valued at just below R125 000,00, yet
the other assets such as cars, etc. might cause the estate to
exceed the limit, having the result that the more formal
procedure of appointing an executor must be followed.
According to the said Master, his office now issues
appointment certificates which list all the assets, and from
such document it can then be ascertained what the value of the
estate is. Since it is not a requirement to lodge these
appointment certificates for the section 18(3) - transfers, this
information is not available to the deeds examiner.
Two schools of thought exist in this regard. Firstly, in the case
of a sale of immovable property from an estate administered in
terms of section 18(3), the Deeds Office examiner should call
for the appointment certificate by the Master's representative
to ascertain whether the sale falls within the ambit of section
18(3). If it appears from such a certificate that the combined
value of the immovable property and any other assets in that
estate will have the result that may the maximum amount
allowed for a section 18(3) is exceeded, the matter has to be
referred back to the Master for the appointment of an
executor. This has in fact been suggested by the Master.
Secondly, the Deeds Office should not concern itself with this
issue as regulation 44A(c) covers the deeds office in that the
conveyancer, who has signed the preparation clause, has
accepted responsibility that “such person has in fact been
appointed in that capacity (Master's Representative) and is
acting therein in accordance with the powers (that is not to act
if the estate exceeds the maximum value permitted by his
appointment) granted to him” (my parenthesis)
This is a contentious issue and readers are urged to
provide their views hereon. - Editor
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