Tim­ing of ex­pro­pri­a­tion pay­ment at is­sue

Court rules amount need not be de­cided be­fore a prop­erty is ex­pro­pri­ated, although this route is prefer­able

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - LEZA KOTZE & LORI KATZ

ARE­CENT Con­sti­tu­tional Court decision on the ques­tion of ex­pro­pri­a­tion of prop­erty be­fore de­cid­ing the amount of com­pen­sa­tion to be paid to the owner has im­por­tant im­pli­ca­tions for prop­erty own­ers.

The mat­ter was brought be­fore the Con­sti­tu­tional Court by the YGM Haffejee Fam­ily Trust in Dur­ban af­ter a seven-year bat­tle with the ethek­wini Mu­nic­i­pal­ity.

In 2004 the ethek­wini Mu­nic­i­pal­ity re­solved to ex­pro­pri­ate prop­erty owned by the YGM Haffejee Fam­ily Trust for a canal­i­sa­tion pro­gramme to min­imise the ex­tent of flood­ing of the Um­geni River. The mu­nic­i­pal­ity started evic­tion pro­ceed­ings in 2006. In 2008, sub­se­quent to fur­ther ne­go­ti­a­tions with the trust’s trus­tees, it of­fered the trust full mar­ket value for the prop­erty. The of­fer was re­jected. The trus­tees ar­gued that var­i­ous pro­vi­sions of the Ex­pro­pri­a­tion Act (Act 63 of 1975) were un­con­sti­tu­tional as they al­lowed for ex­pro­pri­a­tion and dis­pos­ses­sion of land with­out first de­ter­min­ing the amount and man­ner of com­pen­sa­tion to be made to the owner, and that the evic­tion or­der pre­vi­ously granted against it should be reversed.

The ap­pli­cants re­lied on sec­tion 25 of chap­ter 2 (Bill of Rights) of the Con­sti­tu­tion. This sec­tion states that prop­erty may be ex­pro­pri­ated only (…) “sub­ject to com­pen­sa­tion, the amount of which and the time and man­ner of pay­ment of which have ei­ther been agreed to by those af­fected or de­cided or ap­proved by a court”.

This sec­tion also pro­vides that the com­pen­sa­tion, time and man­ner in which it be made must be just and eq­ui­table, and must re­flect a bal­ance be­tween the in­ter­ests of those af­fected by the ex­pro­pri­a­tion and the public in­ter­est. The ap­pli­cants ar­gued that a prior de­ter­mi­na­tion is a con­sti­tu­tional pre-req­ui­site for any ex­pro­pri­a­tion un­der this sec­tion.

The court did not agree. It held that there could be ex­ten­u­at­ing cir­cum­stances, such as ur­gent ex­pro­pri­a­tion in the face of a nat­u­ral dis­as­ter, which would make prior de­ter­mi­na­tion im­pos­si­ble. It fur­ther held that there could be cir­cum­stances where it would in­deed be un­just sim­ply to evict peo­ple who would stand to lose their homes should such a prior de­ter­mi­na­tion not be made. How­ever, if the re­quire­ment for prior de­ter­mi­na­tion were in­flex­i­ble the sec­tion 25 re­quire­ment that a just and eq­ui­table bal­ance must be found be­tween the public in­ter­est and the in­ter­ests of those af­fected by the ex­pro­pri­a­tion would not be met.

The court there­fore held that the de­ter­mi­na­tion of the amount, man­ner and time of com­pen­sa­tion to be paid in terms of the Ex­pro­pri­a­tion Act must as far as pos­si­ble be de­cided prior to the evic­tion of the oc­cu­pants of the land, but where this is not pos­si­ble it must be made as soon as is rea­son­able af­ter the ex­pro­pri­a­tion. The judg­ment handed down by Judge Frone­man, with Judge Mo­go­eng con­cur­ring, means that the court has de­cided that each in­stance of ex­pro­pri­a­tion should be dealt with on an in­di­vid­ual ba­sis, weigh­ing up the “public in­ter­est” in hav­ing the land ex­pro­pri­ated and the need for the im­me­di­acy of evic­tion against the “pri­vate in­ter­est” of the landowner.

Prop­erty own­ers should note that should public in­ter­est su­per­sede their pri­vate in­ter­est as prop­erty owner, their prop­erty could be ex­pro­pri­ated and they could be evicted prior to com­pen­sa­tion hav­ing been agreed upon. There­fore, landown­ers could find them­selves in a sit­u­a­tion where they have been evicted from their land and are with­out a place of res­i­dence or an in­come-gen­er­at­ing as­set un­til such time as agree­ment is reached in re­spect of the com­pen­sa­tion to be paid to them.

Leza Kotzé Part­ner & Lori Katz mem­ber Prop­erty Depart­ment; Shep­stone & Wylie At­tor­neys.

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