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Transfer of shares in farms

14 January 2016

Offices such as the office of the Master of the High Court and the Registrar of Deeds are regularly described as “creatures of statute”, in other words legal entities created by statute. The importance of a corporate body, regardless of its exact function, when such a body is a creature of statute is that its active functions can only be within the scope detailed by the statute which created that body. Obviously other statutes also influence the operation of such a body.

At least as far as the Deeds Offices are concerned they are also what I would like to call “creatures of convention”. Convention is inter alia defined in the Cambridge dictionary as:

“noun (CUSTOM) - a usual or accepted way of behaving, especially in social situations, often following an old way of thinking or a custom in one particular society”

An age old attitude in Deeds Offices that one sees with examiners when confronted with an unusual matter is very often “....I have not ever seen this...” and therefor the matter is not registrable. One is then referred to “deeds office practice”, in other words stick to the custom or convention, however wrong it may be. Sometimes the deed concerned is so much out of the ordinary that one can safely say that there cannot be a Deeds Office practice pertaining to the particular case in point. Also, nobody has seen every possible type of registrable deed or document, nor do I think anyone ever will.

Practices often also find the basis for their existence in notes with no basis in law being raised by examiners and conveyancers complying with such notes simply to be able to register the particular deed or deeds involved. Understandable, but in the long run such practices become almost impossible to get rid of.

My gripe with all of this (should I say my current gripe?) concerns a transfer of several farms, one of which the seller owns in undivided shares. For very good reason the shares were not merged for the purposes of the transfer, describing the different shares in separate paragraphs. This led to the rejection of the documents, calling for the merging of the shares and describing the aggregate of the shares in one paragraph only. No valid legal authority for the note was quoted.

We replied to the note as follows:

  1. Transferring the land in the fashion that our deed is drawn is not a contravention of sections 3(b) and (c) of Act 70/1970. The shares are already registered. The transfer as drawn should be accepted for exactly the same reason as per RCR29/2014, even though circumstances do differ;

  2. There is nothing in Act 70/1970 or the Deeds Registries Act which requires compliance with the note. Conversely the Registrar of Deeds, being a creature of statute, has no authority to call for the “consolidation” of the shares, analogous to section 35 of the Deeds Registries Act, which is an option given to an owner who wishes to “consolidate” his various shares held under different title deeds. There is nothing that compels such an owner to apply for a Certificate of Registered Title in terms of section 35;

  3. The definition of “land” in section 102 of the Deeds Registries Act states that “ ‘land’ includes a share in land’;

  4. The transfer as drawn is not a transfer as prohibited by section 22(1) of the Deeds Registries Act and falls within the ambit of section 22(2) of the Deeds Registries Act. It must be noted that the Act, in section 22(1) and (2) speaks of “pieces of land” as opposed to “portions of a piece of land” in section 22(3). Clearly shares in land as well as land, unsubdivided or whole, is alluded to when the Act uses the terminology “pieces of land”. Regulation 27(1) to the Deeds Registries Act is therefor in line with section 22 – the two shares constitute “pieces of land” and are described in separate paragraphs as required by regulation 27(1);

  5. It is a costly and time consuming exercise to obtain a Minister’s permit in terms of Act 70/1970 to register shares not yet registered as such. The current owner owns the farm in shares and preventing the transfer of the separate shares may be prejudicial to the purchaser and potentially also to the seller. Economically the farm is worth more if registered as existing shares than if the shares were “consolidated”.

It is also our contention that any Registrars Conference Resolution which contradicts our arguments, if not based on valid arguments must be invalid. The definition of “land” is obviously crucial.

Our reply to the note was not accepted by the senior examiner and was then submitted to the deputy Registrar of Deeds who agreed with the note but who could also offer no counter argument or legal reason to refute the arguments made by us. He wished to consult with the Department of Agriculture regarding the matter and we are anxiously awaiting the outcome of his consultation.

I am sure someone else must have had a similar experience in the past and failed to convince the powers that be that the deeds are in fact correct and must be registered by the Registrar failing a legally valid reason to not register. Any opinions?

Dudley Lee
13/1/2016

Reader Comments: 6
Allen West 15/01/2016:

It is submitted that the practice as proposed by the Registrar of Deeds is correct given the provisions of regulation 30 of the DRA which provides that a share shall be in one fraction to its lowest terms - Jones 4th Edition on page 117 confirms the above.

Dudley Lee 15/01/2016:

With respect, reg 30 is irrelevant. The meaning of reg 30 is that one cannot refer to a share as e.g. 5/10th share. It must be expressed as 1/2 share. I repeat that the definition of "land" and the use of the term "piece of land" as opposed to portion in section 21(2) and reg 27 prove my point. Reg 30 cannot feature in this argument other than what I point out above.

Mark Schäfer 15/01/2016:

Can't fault Dudley's logic - RCR 28/2014 is on point as regards undivided shares held in separate title deeds and there is no justification for a different position to prevail just because the two or more undivided shares are held by one title deed. A person might very well wish to acquire various undivided shares in a piece of agricultural land without a consolidation of those shares being compulsory when selling them.

It is important that this be clarified at the next Conference and a reasoned, transparent argument be put forward to refute Dudley's logic - if possible. An unsuspecting conveyancer complying with such a note could find him/herself causing a client significant loss if consolidating various undivided shares in agricultural land whilst complying with a misguided note.

Allen West 18/01/2016:

I reiterate regulation 30 refers to "one share" and this is illustrated by an example in Jones. This has been the practice since I commenced duties in the deeds office in 1972.

Dudley Lee 28/01/2016:

Touché, Allen. You are right. I looked at the history of regulation 30. It was substituted in 1998 by GN R762/1998, 17 years after Act 70/1970 came into operation. Before 1 January 1971 there was no consent required for subdivision of agricultural land nor was there any impediment on the registration of shares in agricultural land. Act 70/1970 dramatically changed that situation and the number of hoops one has to jump through to obtain a permit from the Minister is a very well known fact.

It is time consuming and expensive. I wonder whether no-one else ever questioned the situation? Surely many farmers have, unknowingly, been prejudiced by this regulation, either by his already registered shares being merged or having to register separate transfers, which obviously cost him unnecessary fees, etc.

In my opinion the regulation needs to be looked at to exempt agricultural land from the provisions from regulation 30.

 

 

 

Roland Darroll 28/01/2016:

Hurrah for people like Dudley Lee. Would that we had more like you. Keep fighting for common sense, Dudley, even if we are up against 'the practice since 1972'.

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