The regulation of land holdings bill
Category Industry News
A BAN ON REAL ESTATE ACQUISITION BY FOREIGN NATIONALS
President Jacob Zuma recently announced a new proposed law, namely the Regulation of Land Holdings Bill, in his State of the Nation Address. In terms of this Bill, which will be submitted to Parliament later this year, foreign nationals will in future be unable to buy immovable property in South Africa*. Juristic persons whose dominant shareholder or controller is a foreign-controlled enterprise, entity or interest will also be unable to buy immovable property.
Instead of permitting foreign nationals to purchase property, only long-term leases by foreign investors will be permissible. The minimum lease period will be 30 years, and the maximum lease available will be for 50 years, which will be referred to as a “freehold ownership”. However, the announced draft legislation will not affect those who have already purchased property. The retrospective effect of such a law would be unconstitutional.
Currently, the Bill is still under discussion, but it appears that this is a Bill that will be fast-tracked to Parliament. The Bill is not yet available for perusal by the public and this leaves a long list of unanswered questions.
First of all, when a foreign property owner dies, it is unclear how his or her beneficiaries will be affected. It may be that the property will have to be sold and the beneficiaries will inherit the proceeds of the sale. Alternatively, if a lessee dies, the lease will likely be cancelled, unless the Bill makes provision for the ceding of the lease. These uncertainties might result in foreign property owners putting their properties in trusts in order to prevent the sale thereof.
A further question to be answered is how the payment for the leasing of the property will be dealt with; for example, whether a refundable deposit will be required and whether this will need to be kept in an interest-bearing account, much like a normal lease. Furthermore, necessary improvements or alterations, as well as luxurious alterations, may increase the value of the property. It is unclear how this will affect the lease amount, especially if the improvements are effected by the lessee.
Once the Bill is available, these questions will hopefully be answered. In the meantime, it would appear to be safe for foreign nationals to continue buying immovable property in South Africa.
* Earlier today, it was reported that presidential spokesperson, Mac Maharaj, said this will apply only to agricultural land and not residential property.
Bissets Boehmke McBlain Attorneys
February 2015
Author: Bisset Boehmke McBlain Attorneys
