FILTERS:

To tie or consolidate?

30 July 2009

Agriculture forms a major part of the economy of this country, and the importance placed on maintaining commercially viable farming cannot be disputed.

As far back as the 1960s the legislature sought to protect agricultural land from being subdivided into economically unviable parcels, as a result of which the Subdivision of Agricultural Land Act of 1970 (Act 70 of 1970) was enacted. Although this legislation has been repealed more than ten years ago (Subdivision of Agricultural Land Repeal Act 64 of 1998) the date of the coming into operation of this repeal has not as yet been proclaimed. Act 70 of 1970 is still with us, and finds application in all its forms ever since, even more so affecting "urban" land which normally would not be seen as agricultural land (see full discussion in Agricultural Land).

When a consent to subdivide agricultural land is sought from the Minister of Agriculture, such consent may be granted subject to certain conditions being met. More often than not these conditions affect the registration of such a subdivisional transaction in more ways than one.

An aspect which is sometimes overlooked, and which can sink a transaction is section 3(e)(i) of the Act, which prohibits the sale or advertising for sale of an unregistered portion of agricultural land before the Minister of Agriculture's consent has been first obtained (see also Geue and Another v Van der Lith and Another 2004 (3) SA 333 (SCA)). In effect this means that if a consent by the Minister is not obtained before a deed of sale is entered into, such sale is void ab initio,, and such transaction cannot be registered in the deeds office.

Once a permit is granted, it may be subject to any number of conditions, which often have a direct effect on the act of registration sought.

One such condition which is very prevalent, is a requirement that a portion of agricultural land which is subdivided (and as such not an economically viable piece on its own) be consolidated with another piece of land, and in so doing, creating a viable entity.

That is all good and well, but section 40 of the Deeds Registries Act of 1937 (Act 47 of 1937) has quite a few prerequisites which must be complied with before a consolidation of several pieces of land can be registered. One such requirement is that the pieces land sought to be consolidated be contiguous (section 40(1)(ii)). There are more, and the reader is referred to that section for guidance.

Where pieces of land are contiguous, and all the other requirements of Section 40 are met, then the registration of the consolidation can take place, and the new farm can then, if such situation arises in future, be subdivided again, but all the provisions of Act 70 of 1970 would be applicable - in particular Section 3(e)(i), mentioned above.

However, it often happens that two pieces of land which in the ordinary sense of the word require consolidation to create a new viable farm, cannot be consolidated because the requirements of Section 40 of the Deeds Registries Act 47 of 1937 cannot be met.

The way around this for the Minister is to grant a permit which ties the affected two properties by way of a requirement that a title deed condition be registered against the properties so affected, which typically would prevent separate alienation, or mortgaging or any other separate dealing, effectively creating a "single" entity, but without actually going through the procedures of consolidation for the reasons mentioned earlier.

The question begging an answer is whether we are not actually dealing with a quasiconsolidation, which for all intents and purposes must be regarded as a "single" farm?

If so, one can argue further that should any of these socalled "components" be dealt with separately (supported by a further Act 70 of 1970 consent as might be required by a condition in the previous subdivision) then the requirements of Section 3(e)(i) of Act 70 of 1970 must be complied with. That might hold if one is of the opinion that properties tied by way of Act 70 of 1970 permit conditions must be regarded as "one" economically viable farm, which must enjoy the protection of Act 70 of 1970.

Two recent judgements in the High Court of South Africa, Provincial Division of the Cape of Good Hope, have clearly argued against this.

In Naude and Another v Terblanche and Another (2008 4 SA 178 CPD) the learned Judge analysed the following condition in an endorsement on title deed reading as follows:

"Endossement kragtens artikel 6(2) van Wet 70 van 1970

Die binnegemelde eiendom is onderworpe aan die volgende voorwaarde opgelê deur die Minister kragtens toestemming nr 12704 gedateer 07/11/1985. Die binnegemelde eiendom en gedeelte 28 van die plaas Brandwacht nr 154 gehou kragtens T 4181/1954 mag nie sonder die Minister van LandbouEkonomie en Waterwese se skriftelike toestemming afsonderlik oorgedra of afsonderlik met verband beswaar of op enige ander wyse afsonderlik mee gehandel word nie"

He came to the conclusion that the consent of the Minister is a prerequisite for the transfer or the vesting of such rights, but not for the creation of the agreement creating the contract, which entitles the person to claim acquisition or transfer of the rights. The consent from the Minister is therefore not necessary for the establishment of a contract of sale between the parties.

In a subsequent judgement (not reported) (August) Christoffel Koch and Others v Jan Gerhardus Lombard Steyn and Others), Judge A H Veldhuizen of the Western Cape High Court, had to adjudicate in a matter where agricultural property had been subdivided, and consolidated with another farm to form an economical farming unit and a remainder (known as "Bakensvlei" - now apparently an uneconomic farm) tied by a condition with a third farm (remainder Portion 20 of the farm Brakfontein number 339) to create another.

The consolidation and the tie were requirements for the Act 70 of 1970 permit to be granted, and the title deeds of the above farms Bakensvlei and Brakfontein were endorsed as follows:

"……..behalwe uitbreiding van bestaande verbande nie afsonderlik oorgedra of op enige ander wyse mee gehandel mag word sonder skriftelike toestemmming van die Minister van Landbou nie"

Both farms were sold by separate deeds of sale to separate purchasers, in clear violation of the title deed conditions prohibiting certain separate dealings. The relevant applicants applied to the High Court for an Order declaring the two deeds of sale ab initio void on the grounds that the parties failed to obtain the Minister's consent prior to the conclusion of the respective deeds of sale.

Applicants argued that the condition quoted above required the Minister's consent to be obtained before a valid deed of sale could be concluded.

The judge had to consider whether there was a difference between the endorsement quoted above and that dealt with in the Naudecase or alternatively whether the judgement in the Naudecase was wrong.

The judge had the opinion that despite the difference in wording, if any, between the wording of the two conditions there is no justification for a different interpretation of the two, and he affirmed the finding in the Naudecase.

In conclusion it might be argued that a tie condition imposed in terms of Act 70 of 1970 has the objective of creating a farm which is economically viable. Where consolidation of the properties for whatever reason cannot be achieved, such tied properties cannot be regarded as a "unit" or "single" agricultural unit for the purposes of applying Section 3(3)(i) of the said Act.

This begs some thought as to why a distinction is made between creating viable farms by means of consolidation and those created by means of tie conditions (where consolidation is not possible).

Is there really a difference?

Readers your views please - Editor

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