Vincent’s RDP story – a tale of informal property transactions

Vincent is a journalist who we’ve worked with recently to document some of our client case studies. In a recent conversation he mentioned his own experience of buying and selling a property informally which we asked him to write about.  Vincent’s story echoes that of many of our TSC clients and demonstrates how and why informal transactions of RDP properties took place in the past, and continue to take place to this day. Perhaps most importantly his story reflects the risks buyers carry when engaging in informal transactions as evidenced by the length of time it took him to resell the house and the fact that many potential buyers became uninterested as soon as they found out he didn’t have the title deed. Here is his story from his own perspective. 

I worked as a Senior Communications Officer on a contractual basis at the Western Cape Department of Transport and Public Works until November 2008. After my contract expired, I feared that I would not be able to continue to stay at Hibiscus in Brackenfell, where I rented a flat. Accordingly, I put up notices on spaza shops that said I wanted to buy an RDP house in Wallacedene. An RDP house owner saw the notice and phoned me to say he was selling his house for R24 000.00. 

When we met, he showed me an RDP house which was still under construction but about to be completed. I moved into the house on May 26, 2009 and paid him his money in the presence of his wife, an area committee and a local businessman, who had transported me to the Bank in Tygervalley to withdraw the money. 

I took down the names of the committee members and gave them money to buy a ‘cool drink’, witness and approve the sale. It was a standard practice to ask community leaders to witness such house sales.

Buying an RDP house without involving community leaders meant that no one would stand up for the buyer when the owner returns to claim his or her house. The community leaders asked him to confirm to them that he was indeed selling the house to me, and he did so. The committee counted the money and handed it to him. 

The house Vincent purchased in Wallacedene, Kraaifontein in 2009 (Google StreetView)

The house owner gave me his ID, his wife’s ID and a letter that confirmed that the house belonged to him and his wife. I believed that these documents served the same purpose as a title deed and a proof that I got the house from its owner. 

I was happy that I had my own place, and that I would no longer have to pay rent because I was unemployed. 

The inside of the house and windows still needed to be painted and varnished. Construction workers, painters and other workers often came into the house to put final touches here and there. 

I paid a professional electrician to wire the house, a welder to fit the house with burglar doors and burglar windows and a handyman to tile the floor. I also hired a local plumber to link my water pipes to underground municipal water pipes so I could get water inside the house. 

I always feared that the owner might come back, reclaim the house and refund me. However, I drew comfort from the fact that he was unemployed and as such would battle to raise R24 000 and repay me.

There were rumours that the government might evict me because I moved in before the house was officially handed over to the owner. Some residents said government officials would visit each new RDP house just before the official handover to check if its occupants were legitimate owners. These rumours worried me. 

I asked two lawyers how I could transfer the house to my name, and they both said I could only do so after five years or so. Even after such a period, I would have battled to register the house in my name because the owner was no longer staying in the Western Cape. 

I ran out of my savings and started to do freelance work for newspapers such as the Daily Sun, Daily Voice and The Cape Argus. I battled to get stories to sell to newspapers in Wallacedene. 

Consequently, I made a decision in 2011 to sell the house and relocate to Khayelitsha. I put up notices that said I was selling the house on local taverns and spaza shops, and people came to view it. 

Most of them wanted to buy the house but changed their minds as soon as I said I didn’t have a title deed. 

One potential buyer said: “Buying a house without getting a title deed is like throwing your money into the sea because the owner may return and reclaim the house. 

Since I had no title deed, I battled to find a buyer until 2014, when I told a local restaurant owner that I was selling the house. He knew me very well because I frequented his Tshisanyama to listen to music, eat and have fun. Also, he trusted me because I published some stories about his skirmishes with the police who initially deemed his restaurant illegal. 

The restaurant owner said he wanted to relocate his neighbour to my house because he needed more space as he was expanding his business place. Also, he wanted to move his neighbour elsewhere because she often complained about the noise from his restaurant. 

I sold the RDP house to him for R75 000, which was the standard price for RDP houses in Wallacedene then. On 26 May 2014 he initially deposited R50 000 into my bank account and subsequently paid the remainder in June. He personally organised a truck and youths to load my belongings and drove me to Khayelitsha, where I rented an RDP house. We never bothered to get people to act as witnesses because we knew and trusted each other. We continued to meet and chat after the sale until he unfortunately passed away due to Covid in 2020. 

 

Vincent does not know who is currently living in the house. However, based on records the TSC could access, it appears that the house was formally registered in the original beneficiary’s name in 2010, after Vincent had already purchased the property informally. It is not clear what, if any, validation process the City followed to validate ownership prior to transfer.

The current off-register owner faces the risk that the registered owner/s could try to claim the property. As evidenced in other cases, local community structures can be effective in discouraging this. But it is by no means that case that off-register owners face no risks. In addition, like Vincent they might find it difficult to sell the house without a title deed. They also cannot use their property to access finance and may not be able to engage with the City as recognised property owners.

Where the off-register owner wants to formalise ownership, he or she can attempt to contact the registered owner(s) and regularise the sale retrospectively. The TSC has helped several clients formalise past informal cash sales. There are two critical success factors: (1) the registered owner needs to be contactable and (2) the registered owner needs to agree to participate in the process.

In some cases where the registered owner is contactable and agrees to participate, he or she will request more money from the buyer. The latter scenario is the risk buyers face when approaching sellers to regularise a past sale. However, when this happens, the two parties reach an agreement and the sale proceeds, often with the off-register owner paying over additional funds.

Some researchers maintain that poor households do not care whether they have a title deed. No doubt in some cases they are right. But the clients who approach the TSC are acutely aware of the importance of a title deed and make a real effort to secure it. Many succeed only because of the assistance of the TSC and its conveyancing partner STBB, who does the conveyancing work on a pro bono basis.

Unwinding informal cash sales and unlocking security of tenure

This is the story of Ms Duma (not her real name) and her experience of buying a house through informal channels and having to defend her purchase when the seller came back to claim the property. Ms Duma is one of the TSC’s many successful informal cash sale regularisation case studies. Her story illustrates the very real risks buyers face when property transactions are not formally registered but also how informal mechanisms such as street committee letters, police affidavits and witnesses can work to validate a buyers claim to a property. Her story further reiterates the value that is unlocked when informal cash sales are regularised.  

Ward councillor Lucky Mbiza says many residents don’t have title deeds for their houses and properties in ward 96, Khayelitsha.

“The majority of the residents in my ward don’t have title deeds. It’s a nightmare,” he said.

Mbiza said: “Residents sell their properties and go back to their home provinces without transferring their title deeds to the new owners.”

The original owners of the properties sometimes return to reclaim them, he said.
Mbiza said: “In one instance a father died and his family sold their house so they could get money to bury him.”

“Family members who were kids then are now adults, and they are trying to evict the family that bought the house,” he said.

Vuyiseka Duma*, who owns a property in Makhaza, Khayelitsha, said she went through a similar experience. When she bought it, the property did not have a house on it – it was just a shack which was in a bad-shape. Still, she knew that this would be the place where she could build her home.

“I bought the property from the wife of the former owner who was living in Johannesburg at the time. He was aware of the sale, his wife was acting as the intermediary and three people who also lived in the area acted as witnesses”, she said.

Duma estimates that she has spent close to R30 000 to date on fixing up the property. “I fenced the yard, put a new roof on the shack, tiled and cemented the floor, put in new doors and a ceiling to make it liveable and comfortable”, she says.

But one day the former property owner arrived at her door with “a tall and bulky man” and tried to intimidate her to leave the property.

“They said the property still belonged to the former owner and that I must exchange properties with him and go live in his shack in Site C”, she says. But she refused, reminding the former owner about the police affidavit that was signed as well as the people who acted as witness to the sale.

“They left me feeling stressed out,” she said, “but now I feel comfortable and happy because I have the title deed.”

Duma told how the Tenure Support Center (TSC) helped to regularise the transaction with the former owner and get her the title deed for the property.

“I told TSC staff that I had bought a property in 2003, but I had no money to hire a lawyer to transfer the title deed to me,” she said.

The TSC is a non-profit project that helps low-income residents resolve their title deed challenges.

Duma said TSC staff told her that she would need to sign a new sale agreement with the former owner and obtain his co-operation in the process. Fortunately, he agreed.

Duma explained why getting the title deed mattered so much to her. “Now that I have the title deed, the former owner or his children can’t come back and lay claim to the property,” she said.

Duma, who stays with her sisters along with their kids, said the title deed would help her qualify for an RDP house subsidy when the government allocates RDP houses to residents in her area. “My sisters and their kids will have a place they can call their own when I die,” she said.

She also said that is getting ready to register with a local Peoples Housing Project that will help her get an RDP house on the land she now owns. “I would not be able to join a PHP without the title deed,” she said.

Duma said she recommends the TSC to her friends when they want to be assisted with acquiring a title deed.

“Because the TSC helped me get a title deed, I always refer people who have properties that are not registered in their names to it,” she said.

*Not her real name

Housing Act charade

A 2001 amendment to the Housing Act saw the addition of Section 10, which makes it illegal for housing subsidy beneficiaries to sell their houses for a period of eight years.  Twenty years on, it is clear to everyone that the law has had no impact. The illegal sale of subsidy houses continues apace. In March this year, the Minister of Human Settlements noted on SAFM [1] that there are too many subsidy beneficiaries who are selling their houses to foreign nationals and moving back into shacks. The Minister noted that the Department cannot police the law and relies on whistle blowers in communities to come forward to report this kind of illegal activity.  The Minister also claimed that people are selling their houses for R20 000.

Perhaps the Minister needs to broaden her base of community informants. In our experience in Cape Town, RDP houses are being sold to decent families who are working hard, saving up and buying houses in good faith for R200 000, not R20 000. Beyond this, the sellers are not moving back into shacks, but are moving back to the Eastern Cape where they invest their funds in building houses. This should be a cause for celebration for the Minister.

Of course, one can understand why this might upset the Provincial MEC of Human Settlements in the Western Cape who might resent the outflow of money from his province to the Eastern Cape. His DA credentials might lead one to think he holds property rights as sacrosanct. Not so. Also in March this year, he went on a walking tour of Highbury Park Housing Project and issued a stern warning to people who have bought RDP houses [2]. No doubt that walk-around has been very effective and purchasers have followed his advice to report the sellers to the police and get their money back.

The stupidity of a law that prevents people from selling their houses is even more obvious in the context of the title deed backlog that exists in South Africa. According to the Department of Human Settlements, there are over 1.1 million title deeds that have yet to be issued to owners of RDP properties. These property owners have no option but to transact informally if they choose to transact. While some might call these transactions illegal, in reality, the bit that was well and truly illegal was the construction of the house to begin with. In some cases, there is no title deed because there is no registered plan, and there is no registered plan because subsidy houses were built in violation of SPLUMA and NEMA. If the private sector had built these houses they would have been demolished.

We can rant and rave as much as we like – about people selling their houses or the stupidity of laws that criminalise this. The reality is many thousands of decent people are living in houses that they paid hard earned cash to buy. They are not criminals. They are the people we should celebrate and support. They have invested in property, put down solid roots in the city and got on with their lives. They are not demanding a hand out from the government, or waiting for the State to give them a house.

It cannot be nice for them to hear the Minister calling for local informants to come forward to report them to the authorities or to see the MEC walking around issuing warnings. Clearly, this needs to stop. Government needs to take responsibility for creating an unenforceable law that is creating havoc in the lives of too many good people. At worst government should acknowledge the law as a bit of a blunder, turn a blind eye and let people get on with it. At best the law should be scrapped.

Author: Illana Melzer

References

[1] See Interview with Minister Mmaloko Kubayi by Stephen Grootes, Sunrise, SAFM, 15 March: https://omny.fm/shows/safm-sunrise-1/the-minister-of-human-settlements-says-that-she-s

[2] See Minister Simmers conducts impromptu visit at Highbury development 17 March 2022, available at: https://www.westerncape.gov.za/gc-news/71/5801

Regularising an informal cash sale after 12 years

In many low-income neighbourhoods across South Africa, two forms of land administration co-exist; the formal system governed by laws and regulations facilitated by legal professionals, and the informal system typically facilitated by local community leadership structures. Informal or ‘off-register’ property transactions are not recorded in the Deeds Registry and ownership of the property does not legally change from one owner to the next.

While informal transaction mechanisms are accessible and affordable, they create material risk. Local property markets are unstable, with competing systems to record and enforce property rights; local government is unable to identify and engage with property owners, impeding citizen-centric governance; and the financial sector is unable to support secured, housing-led investment, blocking a critical pathway for transformative financial inclusion. Critically, property owners are unable to realise the value of their housing assets and their wealth levels remain low.

While it is difficult to determine how many informal transactions have taken place in an area, the experience of the Transaction Support Centre in Khayelitsha, as well as other evidence, suggests that the practice of selling properties off-register was widespread.

Since its opening in July 2018, the Transaction Support Centre (TSC) in Khayelitsha has logged 112 cases with title deed problems due to past informal cash sales. Most of these sales took place over ten years ago but with rising property prices and increased awareness of the risks of not having a title deed, homeowners are actively coming forward to secure their property rights. To date the TSC has regularised ten informal cash sale cases and has a further 18 cases that are currently in the process of being resolved.

The TSC’s experience demonstrates that it is possible to regularise some informal transactions that have taken place in the past. Where the original sellers have been located, in the TSC’s experience, they are generally willing to participate in the regularisation process and sign the necessary documents. There are, of course, some cases that cannot be resolved through current processes. To date the TSC has had to close or pend 37 informal cash sale cases. In 22 cases, it is because the seller cannot be traced through the buyer, community networks or credit bureaus. In some cases sellers dispute the transaction, while in others the seller is deceased and heirs dispute that the sale ever took place. Where there is a dispute, registered property owners can evict off-register owners who may not have sufficient evidence of the transaction.

This exact risk prompted Nomathansanqa and her husband to approach the TSC for assistance with regularising a house they purchased 12 years ago. The couple bought the property in Khayelitsha for R15 000 in 2007. The property was badly damaged and the seller had already moved back to rural Eastern Cape. The seller’s brother, who still lived in Khayelitsha, helped facilitate the sale. Nomathansanga and her husband invested between R200 000 – R300 000[4] to rebuild the property. Nomathansanqa and her husband remained in contact with the seller’s brother and when they learned that the seller was in poor health, they were concerned that she might pass away putting them at risk of being evicted by her heirs.

With the assistance of the TSC, Nomathansanqa and her husband became the registered owners of the property in November 2019.

We spoke to Nomathansanqa to learn more about her housing story and how she feels now that she has a title deed.

https://youtu.be/pUWsIFn3vY0

REFERENCES

Barry, M (2020). Hybrid land tenure administration in Dunoon, South Africa. Land Use Policy, 90 (2020). 104301, 1 – 11.

Urban Landmark (2007). Do informal land markets work for poor people? An assessment of three metropolitan cities in South Africa. Available: http://www.urbanlandmark.org.za/downloads/Operation_of_the_market_Synthesis_Report.pdf

Some studies have highlighted that the prevalence of informal cash sales in state-subsidised housing developments differs between areas with some housing developments only experiencing a small number of informal transactions because, in the main, beneficiary households recognised and valued the importance of transacting through formal channels. See: Barry, M., Roux, L. (2016). Study of effective land registration usage in state-subsidised housing. South African

The couple did not keep formal records of the amount spent on the construction but estimate that it is between R200 000 – R300 000.

When love is blind

Phelisa is a 37-year-old single female, who approached the TSC in October 2020 for assistance with a deceased estate.

For the first 16 years of her life Phelisa was the only child of an unmarried mother. Her mother received a serviced site in Khayelitsha from the government in 1997 and a few years later a subsidy was approved for a top structure. Phelisa and her mother lived in the house for over a decade, during which time Mr M entered the picture.

Mr M, also the recipient of a subsidised property, lived next door to Phelisa and her mother. A romance developed between the neighbours. They had a child together, and when Phelisa was 25 years old, they eventually married. The new family of father, mother, daughter and son lived together in the neighbouring properties until Phelisa’s mother passed away in 2018, followed shortly thereafter by Mr M in 2020. Neither left a will.

In the minds of Phelisa and her half-brother, it was obvious what should happen to these two properties: Phelisa should keep the property that was her mother’s before she met Mr M, while her half-brother should keep the next-door property that was his father’s prior to the marriage. Had Mr and Mrs M obtained prudent legal advice about providing for their heirs and executed wills, this may well have been the outcome. But herein lie the perils of dying intestate – because there was no will the siblings face a laborious and expensive process to obtain ownership of their respective properties.

The moment the neighbours married (a marriage in community of property), both properties became assets in a joint estate with each spouse effectively acquiring half of the other spouse’s property from date of marriage, regardless of the fact that their names were never formally added to the title deeds. Phelisa’s mother’s property is valued at R244 000, while her husband’s is valued at R382 000. The value of joint estate is therefore R626 000, and the value of each spouse’s estate prior to their deaths (assuming there are no other assets) is R313 000.

Figure 1: The joint estate

Phelisa took the initiative when her mother passed away to report the estate at the Masters Office. Blissfully unaware of the implications of marriages in community of property, she only reported her mother’s property valued at R244 000. She should, in fact, have reported her mother’s half share in the combined estate, which is valued at R313 000. While this might seem somewhat inconsequential, it is, in fact material. The small estates threshold as set out in S18(3) of the Administration of Estates Act is R250 000. Estates below this threshold can be wound up by way of a less expensive process in which the Master of the High Court can issue a letter of authority, allowing an appointed representative to administer the estate. Once a Masters Representative is appointed, it is simple to transfer a property to heirs without there having to be a formal winding up of that estate. In contrast, estates valued above the R250 000 threshold must follow a formal winding up process, which carries a hefty fee of 3.5% of the estate value as well as a laborious process through the Masters Office that will take months, if not years, to complete. In the case of Phelisa’s mother’s estate, the fee would be R12 500.

A further complication with this estate arises because neither Phelisa’s mother or her step-father had a will. While in the minds of Phelisa and her brother, the mother’s property should go to Phelisa, this is not what the law says. The valid intestate heirs of Phelisa’s mother are Phelisa, her half-brother and Mr M. Because Mr M was the surviving spouse, in line with the laws of intestate succession he or his estate would get the first R250 000 of Phelisa’s mother’s estate with the remaining R63 000 split equally between Phelisa and her half-brother. The net effect is that rather than receiving a property valued at R244 000, Phelisa receives R31 500, less her share of the expenses associated with winding up the estate.

Beyond this, Mr M’s estate also falls over the S18(3) threshold and must too be formally wound up, incurring a further fee of 3.5% of Mr M’s estate – approximately R22 500 – and another laborious and slow process through the Masters Office.

Process aside, the only valid intestate heir of Mr M is Phelisa’s half-brother (Phelisa is not Mr M’s biological child), meaning he is the only person entitled to inherit Mr M’s estate, comprising both properties to the value of R563 000 (R313 000 from Mr M’s half-share in the joint estate and the R250 000 he inherited from his wife’s estate).

Phelisa must now rely solely on the kindness of her half-brother to make good by her – a precarious position for someone who has lived in a property for over 20 years and who assumed the property would be hers one day.

 

Figure 2: Winding up the estates

What is the lesson in this story? Dying intestate can be a nightmare for the heirs left behind, who must try to both navigate the complexities of the Masters Office (an infinitely more complex process where there is no will) and come up with the funds to wind up a deceased estate and secure ownership of a property. A will can help avoid many of these problems and, critically, ensure that the intended wishes of the deceased as to who should inherit his / her estate are upheld.

While it is not common practice in many areas for people to have wills, a number of TSC clients have requested assistance in drafting a will. Still, many are not aware of the ramifications for heirs of dying intestate. A lot more work needs to be done to shift mindsets about the importance of having a will and to enable property owners who want to draft a will to do so.

Authors: Lisa Hutsebaut & Illana Melzer