The effects of expropriation without compensation
Category Property
For many whose homes are where their hearts are, the Draft Expropriation Bill, 2019, which seeks to legalise land expropriation without compensation, is proving to be of great concern, especially after it was released for comment on 21 December 2019.
The biggest concern is what effect the expropriation will have on existing property loans - a concern that the Minister of Agriculture, Land Reform and Rural Development, Thoko Didiza, confirmed has not been addressed. Didiza stated that the banks were not consulted to discuss what impact a lack of compensation would have on property loans and unpaid debt.
The amendment aims to expropriate land without compensation. But when the land that is being expropriated is still being paid off and the title does not yet fully belong to the landowner, the party that is not being compensated will be the bank. But due to a lack of detail, the Bill never states that the loan repayments to the bank will cease, it simply states that the new landowner will not have to pay them.
While a landowner cannot logically be expected to pay off land that no longer belongs to them, both Nedbank and SA Home Loans have confirmed that that would be the case. Property loans will have to be paid off as contractually agreed to, even when the land or property no longer belongs to the bond owner. If the bank is not compensated and stops receiving loan repayments, it will be forced to write off billions of Rands' debt, resulting in utter devastation in the economy. If landowners are forced to pay for land and property that no longer belongs to them, it will undoubtedly result in civil unrest and, once again, devastation in the economy.
The problem with the Bill is the fact that it does not state any of this directly. The primary issue is not in what the Bill says, but in what it does not.
This is illustrated further in its definition of "land", or rather it's lack thereof. The proposed amendment does not confine the term "land" to agricultural land that is unoccupied and not utilised to its fullest potential. As it currently stands, the amendment will include urban and residential land and property, whether occupied or not, meaning every property or bond owner's land/property may be expropriated while they will still be contractually bound to their loan down-payments.
Shockingly enough, Melanie Verwoerd has stated that the primary focus of the policy would, in fact, be urban land even though many have defended the policy, stating this would not be the case. The fact is that whether or not urban reform is the main intention or not, the current wording does make it a possibility.
The initial submission of comments ended on 31 January 2020. That period has been extended to 29 February 2020.
Now, we wait and see.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Author: Dickson Real Estate
