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Divorce agreements

1 June 2006

Section 14 of the Deeds Registries Act 47 of 1937 provides that transfers of land and cessions of real rights therein shall follow the sequence of the successive transactions in pursuance of which they are made, unless provided for otherwise in the Deeds Registries Act, by the Court or another law.

Section 14(1)(b)(v) allows for a redistribution of assets of the joint estate of spouses who were married in community of property and who have divorced. In practice this deviation of the sequence occurs where property is acquired by parties married in community of property:prior to the property being registered in the name of the joint estate, the parties divorce and provide in the divorce settlement agreement that the land should be transferred into the name of one spouse only. Were it not for this provision, the property would firstly have had to be registered in both the spouses' names and thereafter one spouse would have to transfer his or her share to the other former spouse.

This exception has a limited application and cannot be invoked in cases where the property is already registered in the name of the joint estate. It should be noted that, in this instance, transfer duty will have to be paid on the acquisition of the land from the "joint estate" and on the acquisition of the share of the other spouse (see section 14(2)).

As already mentioned, the sequence of transactions can only be deviated from if sanctioned by the Deeds Registries Act or another law or in terms of a court order. However, the Chief Registrar of Deeds in a directive issued under CRC 21 of 1990 held that there is nothing to prevent parties from altering their divorce agreement by a subsequent agreement, provided the rights of third parties are not affected. Reference was made to Ex parte Naude 1964 (1) SA 763 (1) and Ex parte Boshi and Another 1979 (1) 249.

The directive goes further and provides that, irrespective of the allocation in the divorce settlement, the parties can decide to sell the land, in which case the land can be transferred to the purchaser without compliance of section 45bis or 45bis(1A)(a), provided the divorce agreement is lodged to prove that the rights of third parties are not adversely affected.

It is contended that the above ruling is directly in conflict with section 14 the provisions of which are peremptory and therefore no deviation is permitted unless sanctioned by a law or an order of court.

It is further contended that the rights of third parties could possibly be adversely affected by the amendment of the initial settlement agreement. The fiscus is surely a third party and, should immovable property be allocated to a spouse in terms of a settlement agreement, then the transaction is concluded on the day the agreement is made an order of court (see the definition of transaction and date of acquisition in the Transfer Duty Act 40 of 1949). On the day the agreement is made an order of court, the spouse acquires the share of the other spouse and becomes liable for the payment of transfer duty on one half share of the value of the property concerned (see section 9(1)(h) and (i) of the Transfer Duty Act). Thus the amendment of the divorce agreement does affect the rights of the fiscus adversely, and thus the amendment of the initial agreement should not be permitted. The provisions of section 14 should be adhered to and the necessary transfer duty paid.

It is conceded that where immovable property vests in both the former spouses in terms of the divorce agreement, and they elect, in writing, to amend the agreement, the provisions of section 45bis(1A)(a) can be skipped as the rights of third parties are not adversely affected, but still the provisions of section 14 are peremptory and until such time as section 14 is amended to provide for this exception, the Act must strictly be adhered to.

From the above, it is submitted that CRC 21 of 1990 should be revoked or section 14 suitably amended.

The opinions of practitioners and deeds office staff on the above matter will be appreciated.

Allen West
Deeds Training
Pretoria

Reader Comments: 3
Herman vd Merwe 02/06/2006:

This is clearly not right. If I sell my property and I decide not to proceed with that sale (or any other transaction) how can section 14 be invoked. If I decide to cancel or amend an agreement in terms whereof I derive a benefit, like a divorce agreement, then surely I cannot be compelled to continue and take transfer. This is taking the wording of section 14 to far! Herman

Wiseman Bhuqa-Deeds Training Pretoria 07/06/2006:

The question of whether or not an amendment of a divorce agreement by parties after divorce is lawful or acceptable for deeds registration purposes can be addressed against the backdrop of the provisions of section 14 of the Deeds Registries Act 47 of 1937 and the chief registrar of deeds' directive namely Chief Registrar's Circular 21 of 1990. Despite the green light given by the above directive in favour of the said amendment there appears to be more pointers against such an amendment than there are in favour thereof as will be briefly illustrated below.

As a point of departure, section 14 of the act must be construed as strictly peremptory due to its pragamatic provisions as clearly discernible from Section14(1)(b) which states inter alia that; "it shall not be lawful to depart from any such sequence in recording in any deeds registry any change in the ownership in such land or such real right..." The peremptory nature of section 14 is even further evidenced by the fact that the said section clearly specifies all transactions that may depart or deviate from the prescribed sequence of registration, see Section 14(b)(i)-(v) of the act. It is not lawful for any other transaction to deviate from the said sequence. The fact that even the transactions that are exempt from the strict sequence provision must essentially be sanctioned by the deeds registries act, other law or court, is indicative of the extent to which the departure from section 14 is prohibited.

This leaves behind no doubt as to this section's pragmatic applicability. It is only a logical conclusion therefore that where spouses who were married to each other in community of property and have since divorced enter into an agreement (inter partes) to sell immovable property to a third the sequence prescribed by section 14 must be followed namely that the spouses must first re-vest the property in their names in terms of section 45bis(1)A and thereafter procure transfer to the third party. Chief Registrar's Circular 21 of 1990.

Covert Tax Evasion? The above provides that the divorced spouses may alter their divorce settlement agreement and even decide to sell land to a third party without having to comply with the section 45bis vesting. By skipping a registration matter the foregoing directive is fraught with the unlawful departure from section 14. Although legally speaking an alteration of the divorce settlement agreement inter partes, irrespective of the allocation in the divorce decree is permissible there is an indication that such alteration is only restricted to other aspects and patrimonial assets than immovable property. This is evidenced by the fact that section 8 of the Divorce Act 70 of 1979 which deals with amendments, alterations and rescissions of orders to divorce decrees only covers amendments only pertaining to maintenance, custody, access etc. and not patrimonial assets e.g. immovable property.

The problem with the said directive as it stands is that it seems to open a loop hole in the act for skipping of taxable registration transactions( a form of covert tax evasion), for instance where the divorce agreement awards the whole joint estate to one of the spouses and the latter simultaneously sells immovable property to a third party. In the context of the said directive it means that the transfer to the third party may be procured without first lodging a section 45bis(1)(a) application, thereby evading a taxable transaction- see section 9 of the Transfer Duty Act 40 of 1949. At least the said directive may find a considerable measure of justification in skipping a non-taxable transaction like section45bis (1)A where both spouses still acquire the dissolved joint estate and retain their undivided shares.

What is also a great cause of concern with the said directive is the provision thereof that says such an agreement needs not be lodged for examination purposes at the deeds registry; whereupon examiners should infer from the signing of the power of attorney to transfer by both parties that such alteration of the divorce decree has been effected. This automatically turns the power of attorney to transfer into a power of attorney in rem suam ie the appearer is also appointed to effect the amendment of the divorce settlement agreement.

In conclusion, although alteration of the divorce settlement is permissible in law, it should at least be restricted to other aspects of the divorce order than immovable property or it must not affect section 14 if it does extend thus far. As far as CRC21 of 1990 is concerned, it should not find application in section 45bis(1)(a) cases.

WHC Swanepoel. Rossouws Prokureurs. Bloemfontein 08/06/2006:

Dit wil voorkom dat mnr West HRO 21/1990 nie korrek vertolk nie. HRO 21/1990 is slegs van toepassing waar die partye reeds getroud was binne gemeenskap van goed; onroerende goed reeds op beide se name geregistreer was en daarna geskei is.

HRO 21/1990 het geensins betrekking op die geval waar partye onroerende eiendom verkry en voor registrasie kon plaasvind skei nie. In so geval sal Artikel 14 Wet 47/1937 toegepas moet word en die eiendom in beide se name geregistreer moet word. In die akte sal beide as ongetroud beskryf word om gevolg te gee aan die egskeidingsbevel of ooreenkoms sal formele oordrag gegee moet word. (Vorm E van die aktes wet). Daar word nie saamgestem dat HRO 21/1990 teruggetrek moet word nie.

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