Pre-emptive Right: Proper vis-á-vis Pre-emptive Right – Condition
From a conveyancing point of view and for the ensuing reasons it is imperative to distinguish between a pre-emptive right proper and a pre-emptive right condition which prima facie appears to be a consumable pre-emptive right, but binds successors in title or is enforceable in perpetuum.
A right of pre-emption proper is a right affording the grantee a preference to buy a particular property should the grantor (owner) wish to sell it (Hirschowitz v Moolman 1985 (3) SA 739 (A)). It must always be interpreted restrictively, that is, in favour of the obligator and against the obligee (Bellairs v Hodnett and Another 1978 (1) SA 1109 (A)).
In the case of Rodgers v Philips 1985 (3) 183 ECD the court held that a pre-emptive right is personal to the pre-emptor and the owner, and the fact that such right is registerable does not affect the issue (see also Ex parte Zunckel 1937 NPD 295). In the Rodgers-case it was further held that where the pre-emptor(s) refuses to purchase the property, it may be sold to anyone free from the restriction.
A right of pre-emption (proper) as opposed to a condition binding successor in title or enforceable in perpetuum will lapse where:
- either the owner or the pre-emptor dies. In Crous NO v Utilitas Bellville 1994 (3) SA 720 (C), the court held that the right of first refusal prohibited the alienation of the property unless it had first been offered for sale to the respondent, but that a testamentary disposition was not an alienation as contemplated I the pre-emption agreement. According to the court the generally accepted meaning of the word alienate meaning of the word alienate is the voluntary transfer of ownership by the owner to a new purchaser. A compulsory transfer of property by the executor in the estate of an owner of property, subject to a pre-emptive right to an heir, is not alienation and thus the property may be transferred free from the pre-emptive right;
- the pre-emptor does not exercise his right of pre-emption on transfer of the land. In such an instance the pre-emptor will have to formally consent to the transfer of the land and such consent must be lodged with the deed of transfer at the deeds registry concerned;
- the property is sold in terms of a compulsory sale, i.e. sales in execution or insolvency, etc. In Bodasing v Christie NO and Another 1961 (3) SA 553 (A) it was held that a pre-emptive right (proper) is one which binds the owner with regard to voluntary sales only. Compulsory sales may thus be concluded without first offering the property to the pre-emptor;
- the pre-emptor exercises his right of pre-emption. Naturally where the pre-emptor obtains transfer of the land the pre-emptive right lapses by merger;
- the pre-emptor and the owner enter into an agreement to cancel the condition; and
- the pre-emptor unilaterally waives his right of pre-emption. An application in terms of section 68(1) of Act 47 of 1937 will be required (see RCR 16 of 2008). No transfer duty receipt need be obtained and lodged.
A pre-emptive right condition usually binds successors in title or takes on the form of a praedial servitude. Such condition constitutes a real right and is not merely personal to either the pre-emptor or the owner.
A pre-emptive right condition is usually worded along the following lines:
“The owner or his successors in title are not permitted to alienate the within mentioned land without firstly offering it to B or his successors in title.”
If a condition is so worded, it can only lapse where:
- the owner of the land and the holder of the right enter into a written agreement to cancel the said condition. The condition, being a real right, will have to be cancelled by virtue of a bilateral notarial agreement (see section 68(2)). Due to the fact that the cancellation will enhance the value of the land concerned (see section 2(1) read with the definition of “property” and “transaction” in the Transfer Duty Act 40 of 1949), transfer duty will have to be paid; and
- the holder of the right renounces his right. In terms of RCR 39 of 1972 as confirmed by RCR 29 of 1990 the provisions of section 68(1) of Act 47 of 1937 may be applied to effect the renunciation against the title deed of the land, but cognizance must be taken of the provisions of the Transfer Duty Act 40 of 1949.
With due regard to what has been stated above, the wording of a condition needs be carefully studied ad hoc so as to determine whether such condition lapses, upon its being pre-emptive right (proper) or whether it needs be carried forward into the new deed of transfer, upon its being a condition binding successor in title, etc.
Please do not hesitate to contact me for further information.
TONKIN CLACEY (PTA)
TEL: (012) 346 1278