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Subdivision of agricultural land - II

28 July 2011

He writes as follows:

I refer to the article Subdivision of agricultural land by Alan West on the 14th of July.

The protection of viable production capacity in the agricultural sector is obviously the rationale behind the act.  However the legislation poses serious commercial difficulties. There will always be transactions where a landowner wants to sell to a willing buyer a portion of agricultural land SUBJECT to the condition that the required consent is obtained..

In view of the provisions under discussion, such sale will be void, as stated by Mr West.  The need for transactions of this kind in commerce is evident, so parties now have to resort to artificial constructions such as an offer to sell the portion, alternatively an option, irrevocable in each case, for a period of (say) 30 days after the consent has been given.

This however poses the risk that a party could avoid the ultimate intended sale by taking the point that this was a simulated transaction, aimed at avoiding the provisions of the Act, and therefore is void as if it was a conditional sale.

I suggest that the act be amended to allow a sale of an undivided portion of agricultural land that is subject to the Minister's consent. This will bring  the legislation in line with reality, without any negative effect on the main objective of the legislature as mentioned above.

Agricultural land covers a wide spectrum. In many cases there are units that have been overtaken by urban sprawl and they have become anything but farms. These also are still subject to the Act.  Often the purpose for which the still undivided portion is purchased is unrelated to agriculture (e.g. a factory or recreational facility) for which rezoning is necessary

Applications of this kind, particularly when rezoning is involved, are notoriously expensive in some cases and it is desirable that the risks associated with the present practice be eliminated.

Reader Comments: 7
A S West 28/07/2011:

Unfortunately the Act cannot be amended as the Act has already been repealed.  Futhermore an option subject to the obtaining of the consent is also ab initio void in terms of the common law.

Selwyn Cohen 28/07/2011:

When was it repealed. I thought the act which will repeal it has never come into operation. If it has been repealed surely there is no poblem?

allen west 01/08/2011:

A repealed Act cannot be amended.

Mandi Hamman 03/08/2011:

Form LA7/100 (the application for subdivision) refers to "the transferee" of the subdivided portion in paragraph 6. This implies that a sale agreement has already been negotiated prior applying for the minister's consent. In my experience, the Department of Agriculture further calls for a copy of the Deed of Sale as a supporting document when applying for subdivision of agricultural land, in order to identify the transferee. I assume that the Department is unaware of the fact that the Deed of Sale is void.

Mandi Hamman 03/08/2011:

In Westraad N.O. v Burger (5226/06)[2007] ZAFSHC 34 (13 April 2007) the Free State High Court held that an option to purchase an undivided portion of agricultural land, which provides that the option may only be exercised after obtaining the Minister's consent, does not offend Section 3(e)(i) read with the definition of Sale in Section 1 of Act 70 of 1970. A copy of the judgment can be found at http://www.saflii.org/cgi-bin/disp.pl?file=za/cases/ZAFSHC/2007/34.html&query=Westraad v Burger, and makes for interesting reading.

Kingsley Kingon 05/08/2011:

The Subdivision of Agricultural Land Act has indeed been repealed, but the Act repealing it has never been brought into force, so we are still left with this thorn in our sides. The Act prohibits the sale, or the advertising for sale, of any portion of agricultural land (Section 3(1)(e)(i))unless the Minister has consented in writing to such sale. "Sale" is defined as including a sale subject to a suspensive condition. Hence a sale of a portion of agricultural land "subject to the Purchaser obtaining a bond" is a "sale" in terms of the definition and would be void. However, people have for years entered into agreements whereby portions of agricultural land were sold "subject to the Minister's consent" until along came that "clever" Appeal Court decision which held that (although the parties were actually trying to comply with the Act), this was a sale subject to a suspensive condition and was accordingly void.

The answer appears to be that the Seller should grant the Purchaser an option to purchase the portion and to provide that the purchaser cannot exercise his option unless the Minister grants his consent to the proposed sale within the option period. This, then, is not a sale but merely an offer by the Seller to sell the portion to the Purchaser which becomes a sale only when the purchaser exercises his option. I do not believe that an offer made by the Seller to a prospective Purchaser falls within the definition of "advertise" in the Act, which implies an offer made to the general public.

Dave Mc Naught 07/06/2013:

Does the case subsequent to Westraad/Burger, namely Colchester Zoo vs Weenen Safaris NPD 2386/2007 not settle the issue of options to purchase land to be subdivided with the Minister's Consent to be obtained? It decided that such options nevertheless fell within the legislature's intentions to prohibit sales subject to suspensive conditions and found the option in question to be invalid.

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