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Registering agricultural land

2 April 2009

Although I'm sure that it's not the first time the question of whether or not the Minister of Agriculture's (the Minister) consent should be called for where agricultural land is sought to be registered in the name of a partnership, is considered, I would like to air my views on the subject.

Section 3(b) of the Subdivision of Agricultural Land Act, 1970 (the Act) prohibits the transfer of undivided shares in agricultural land not already held by a person, without the consent of the Minister. The purpose of the Act is "to control the subdivision and, in connection therewith, the use of agricultural land."

The Act seeks to regulate the subdivision of agricultural land, or the transfer of shares thereof, as the unhindered subdivision or increasing of shareholding in agricultural land carries the risk that the land may be subdivided in uneconomical portions, or that the shareholding in the property may become so that it cannot effectively be used for agricultural purposes.

The effect of Section 3(b) of the Act, in practise, means that agricultural land cannot be transferred, without the consent of the Minister, into the name of:

1) Two or more unmarried persons; or
2) Two or more persons married out of community of property; or
3) Two or more legal entities.

It is however, permissible to transfer agricultural land into the name of:

1) One unmarried person; or
2) One person married out of community of property; or
3) Two persons married in community of property; or
4) One legal entity.

In our legal system, only 2 types of legal persons exist namely:

1) The Company; and
2) The Close Corporation.

However, for purposes of the registration of land, it is possible to register land into the name of, inter alia, the following types of entities, which are not strictly speaking, legal persons, but which are regarded as legal entities:

1) Trusts;
2) Statutory bodies;
3) Non-profit organisations;
4) Clubs;
5) Associations (incorporated or not);
6) Churches;
7) Partnerships.

Registration of land into the name of a partnership is governed by Regulation 34 Section 24bis of the Deeds Registries Act 47 of 1937. Regulation 34(1) provides inter alia, that when land is to be registered into the name of persons who conduct business as a firm or partnership, the documents must bear the full name of the partners to the partnership.

The requirement that all the partners' full names must be disclosed in the documents does not mean that the property is being transferred to the partners in undivided shares. Specific reference is made to the registration of land into the name of a partnership, and Regulation 34 and Section 24bis specifically provides for the transfer of shares from the partnership, to the individual partners.

Furthermore, in terms of Section 17(1), land "which would on registration thereof form part of a joint estate shall be registered in the name of the husband and the wife, unless that transfer ... takes place only in the name of a partnership, and the husband or wife is involved therein only in the capacity of partner in that partnership" , in which case only the partner's full name is disclosed in the documents, and not the full name of the spouse to whom he or she is married in community of property. A partnership is therefore regarded as a separate entity from the individual partners, for purposes of registration of land.

West (De Rebus, Aktesaangeleenthede, April 1992 pp 249 - 251) is of the opinion that as Section 3(b) of Act 70 of 1970 prohibits the transfer of undivided shares in agricultural land, unless such shares are already owned by someone, that when the whole of agricultural land or an undivided share therein is to be transferred into the name of a partnership, the Minister's consent must be obtained. This is also the reason advanced by the Registrar of Deeds when deeds whereby agricultural land is transferred in the name of a partnership, without the Minister's consent, are rejected.

My first question is: Why are the shares of partners in a partnership not regarded in the same way as those of members of a club? Or those of shareholders in a voluntary association? Neither a partnership, nor a club, nor a voluntary association of persons constitutes a legal person, but all are regarded as legal entities for purposes of registration of land. The only difference is that there is no requirement that the full names of the members or shareholders of such club or association must be disclosed in the documents.

My next question is: Why are the shares of partners in a partnership not regarded in the same way as the shares of persons married in community of property?

Consider the following:

When agricultural land is transferred to two persons married in community of property, the spouses do not have "one joint share" in the property: Each spouse has an undivided half-share in the property. Strictly speaking, such transfers should be prohibited by the provisions of Section 3(b) of the Act.

However, such registrations are permitted without the consent of the Minister, for the simple reason that neither of the spouses can deal with his or her half-share in the property by virtue of such marriage, unless such spouse formally takes transfer of his or her share in terms of Section 45 or otherwise.

In the same way, by virtue of the provisions of Regulation 34(2)(c), persons who own property as a partnership, cannot deal with their shares in the property "other than an endorsement pursuant to Section 45, affecting his share in any property registered in the name of the partnership ... until transfer has been passed to such member of the share to which he is entitled."

In either instance, where a person married in community of property desires to deal with his or her share in the property by virtue of such marriage, or where a person desires to deal with his or her share in the property by virtue of the partnership, such a person must first take transfer of his or her share, in which case the consent of the Minister must be called for.

The same goes for when the marriage or partnership is dissolved - the spouses / partners must either agree, or obtain a court order, that the property shall be awarded to only one of them, or else obtain the consent of the Minister in order to transfer to each of the spouses / partners his or her share to which he or she is entitled.

Why then, is it permissible to register agricultural land in the name of two persons married in community of property, or a club, or a voluntary association, or even a church, without the consent of the Minister of Agriculture, but not in the case of a partnership? Surely the provisions of Regulation 34(2)(c) are sufficient to ensure that the purpose of the Act is not defeated?

Readers' views will be appreciated.



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