Dead capital: How inefficient and unaffordable deceased estate processes compromise title

The most common type of case we deal with at the Tenure Support Centre (TSC) is deceased estate transfers. In most instances, the estate is small, valued at less than R250 000[1]. It is a relatively simple process to wind up these estates subject of course to everything going smoothly at the Masters Office. Aside from the transfer costs, there are no additional estate administration fees. However, if the estate is a large estate, it is quite a different matter. Due to rising property prices in areas like Khayelitsha, more estates are crossing this value threshold. On the one hand, if the heirs intend to sell the property, higher property values are advantageous. On the other hand, if heirs have no intention to sell, which is often the case, the cost of winding up the estate and transferring the property into the names of the heirs becomes prohibitively expensive. The process is also long and laborious.

According to data published by Property24, the average selling price of properties in Khayelitsha increased from R195 000 in 2019 to R250 000 in 2022.

Source: Property24 Trends data – Khayelitsha

Estates valued above R250 000 require administration by an attorney or other professional, who can charge up to 3.5% of the gross estate value plus VAT to wind up the estate. For a R250 000 property, this amounts to R8 750 plus VAT. In addition, clients must pay for advertising costs[2] as well as Masters fees[3], totaling approximately R2 000. On top of this they must pay a conveyancer for the property transfer once the estate is finalised. Transfer fees for a R250 000 property can easily amount to R12 500 (including VAT and disbursements), bringing the total cost of the process to approximately R24 500. This is simply unaffordable for many people who stand to inherit properties in this market.

Mrs M*’s experience offers a useful case study. Mrs M is a carer at an old age home in Cape Town. Her husband initially approached the TSC in April 2019 for assistance with amending the title deed for his 160 square metre property located in Makhaza, Khayelitsha, which he received from the government in 1997. He wanted to remove his ex-wife in accordance with their divorce order and add his current wife, Mrs M.

Unfortunately, just two months later, Mr M passed away. The TSC was then tasked with guiding Mrs M through the process of winding up her husband’s estate and transferring the property into her name. Because the property was valued at R272 000, the estate was a large estate and Mrs M did not have upwards of R20 000 to fund the process.

The TSC was able to negotiate a 20% discount on the statutory 3.5% estate fee with a willing attorney. However, the cost of R9 500 (R7 500 in estate fees plus R2 000 for advertising costs and Masters fees) was still high for our client. On her monthly salary of R3 800 (net), it would take her several months to save the required funds.

Initially, Mrs M believed a local Khayelitsha-based attorney might provide more affordable assistance. They told her they would charge her R4 500 for the estate process. But after she took them her file, they revised their fee to R15 000 for the estate process and a further R7 000 for the transfer. Mrs M came back to the TSC and asked us to proceed with her case.

By October 2019, the TSC had appointed an attorney for Mrs M and assisted in reporting the estate at the Masters Office. In total it took 3 years and 6 months to wind up the estate and effect transfer of the property to Mrs M. The case was delayed because of several factors, some of which are hopefully behind us. The Master’s Office with its laborious paper-based process was slower than usual because of COVID-19 related closures. In addition, the pro bono capacity of conveyancers was limited. It also took time for Mrs M to accumulate the necessary funds. Needless to say, everyone breathed a sigh of relief when she finally received her title deed in May 2023.

In the end Mrs M paid just over R14 000 for the estate administration and property transfer. This equates to approximately 5% of the property value and almost four times her monthly salary. While this is high, it is significantly lower than what she would have paid. Without the involvement of the TSC, Mrs M would have had to pay nearly double this amount and most likely would have been forced to abandon the process altogether.

The table below provides a breakdown of these costs. There are no professional conveyancing fees as the TSC’s partner conveyancing firm STBB provides their services pro bono. Mrs M’s costs also included an amount of R2 445 to settle an outstanding municipal bill paid to the City of Cape Town.

Table 1: Breakdown of costs (estate value: R272 000)

The TSC’s experience with cases similar to Mrs M’s prompted us to ask the Department of Justice to review the Small Estates Threshold (which was last adjusted in 2014). Sadly, they said no. We have therefore taken on the estate administration process internally to reduce costs. We are happy to report that this does not impose a significant burden in time or staff costs, particularly now that we are familiar with the process. Since the property is typically the only asset in the estate, estate administration becomes relatively straightforward.

To date, the TSC has handled the administration of five large estates internally without assistance from an outside attorney, gaining valuable insights and lessons along the way, and meeting our objective of making formal, legal processes affordable and accessible to those who need them. Had Mrs M approached the TSC today, she would not have had to pay R7 500 to an attorney, cutting her costs by half.

While we have managed to reduce costs for clients, sadly we cannot improve the inefficient processes associated with administering large estates at the Master’s Office. The length of time taken to wind up this large estate (three years and six months) is simply unacceptable given this very simple estate of only one asset and no liabilities. And this case is not an exception – we have had similar experiences with other large simple large estates.

South Africa’s inefficient, paper-based estate system may be well designed for load-shedding, but it is a relic of a long-gone analogue age and is no longer fit for purpose.

It should be entirely feasible to digitize and automate many underlying processes. These are sensible, easy to navigate and designed to protect heirs. In addition, the legislation is clear on intestacy. It is therefore relatively straightforward to ascertain who should end up with the property. Simple estates, comprising of a single asset (a subsidy house) should cost little to wind up and should take months at most, not years.

We live in hope.

[1] The small estates threshold is set by the Department of Justice and Constitutional Justice and was last reviewed in 2014

[2] The Administration of Estates Act requires two rounds of advertisement. The first advert calls for creditors to the estate to lodge their claim and the second advert calls for any interested parties to examine the Liquidation and Distribution Account at the Master’s Office. Both adverts need to be published in a newspaper circulating in the area where the deceased resided as well as in the Government Gazette. Each advert usually costs R500.

[3] Masters fees are charged on a sliding scale based on the value of a property, starting at R600. 

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