PART 1
March 2011
DEALING WITH PROPERTIES IN SOUTH AFRICA
43.13.2 Properties in South Africa as assets of a bankruptcy estate
The Act provides that property, wherever it is situated in the world, forms part of the bankruptcy estate [note 1] [note 2], and the Act gives the trustee a power of sale over the property.
It is clear, therefore, that property in South Africa belonging to the bankrupt would form part of the estate and should be realised as appropriate.
43.13.3 Potential difficulties in dealing with property in South Africa
It is unlikely that the official receiver, as trustee, will be able to conduct any dealings in the property (including seeking to protect his/her interest in it without first having the bankruptcy order and his/her power to act recognised by South African courts (see paragraph 43.13.4) and the costs of obtaining such recognition will need to be taken into account when deciding how best to deal with the property.
43.13.4 Recognition in South Africa of the bankruptcy order and official receiver’s power to act
South Africa has incorporated the provisions of the UNCITRAL Model Law into its bankruptcy legislation [note 3].
Full details of the scope of the UNCITRAL Model Law can be found in Chapter 42, Part 2 and advice regarding how it might be put to practical use by the official receiver is given in Chapter 43.0, Part 4.
In short, the provisions of the UNCITRAL Model Law create a streamline process for the recognition of a foreign proceeding (in this case the English proceeding is the foreign one) in another country in which the bankrupt has assets.
It should be noted that South Africa has incorporated the Model Law in a manner that requires reciprocity (i.e., that the country will only provide assistance to countries that a minister of the South African government designates as being countries that will provide assistance to South African insolvencies). To date, no countries have been so designated, so the incorporation of the Model Law in South Africa currently has no effect.
As an alternative means of seeking power to deal with property, South Africa is one of the countries designated under the Act [note 4] that will provide assistance to the courts of England and Wales. This process is explained in Chapter 42, Part 1.
43.13.5 Ensure that value of property justifies application for recognition
It is unlikely that the official receiver, as trustee, will be able to make an application for recognition in South Africa (see paragraph 43.13.4) without local legal representation (see paragraph 43.13.17) as the process requires a hearing.
Before seeking to instruct a lawyer to undertake such an application, therefore, the official receiver should ensure that the value of the property (see paragraph 43.13.6) to the estate justifies the costs.
43.13.6 Ascertaining the value to the estate of a property in South Africa
In simple terms, the calculation of the value of a South African property to the estate involves the same process as would be required for a property in England and Wales (that is, the value of the property less any secured charges). What may be more difficult is the obtaining of accurate information regarding the value of the property and the amount and level of any outstanding charges on the property.
43.13.7 Obtaining information regarding the value of a property in South Africa from the bankrupt
The most likely source of information regarding the value of the property will be from the information or documentation provided by the bankrupt, for example:
43.13.8 Other sources of information regarding the value of a property in South Africa
As in the UK, there are websites that give the prices of properties that are for sale and, in some cases, the amount that houses were recently sold for. Examples are given here:
http://www.sahometraders.co.za/
It is possible that a local estate agent may be prepared to offer an opinion. A realtor may be located by region on the following website:
http://www.sahometraders.co.za/
Where it is necessary to obtain an accurate value of the property, the official receiver, as trustee, may consider appointing a South African surveyor. As this service is likely to attract a fee. the official receiver should consider the necessity of the valuation against the likely benefit to the estate. A surveyor may be located by regional search on the following website:
http://www.rics.org/findasurveyor
43.13.9 Establishing the position of charges against the property
It is likely, as with a UK property, that the official receiver will be able to establish what charges there are against the property from documentation or information provided by the bankrupt.
Assuming the identity of at least one of the secured chargeholders is known, they can be written to in the normal way [note 5] to obtain details of the amount outstanding under their charge and the identity of any other chargeholders.
43.13.10 Establishing the identity of chargeholders where bankrupt’s information incomplete
Where the bankrupt’s information regarding the identity of chargeholders is incomplete or suspect, the official receiver may have no option other than to seek information from official sources, such as the Deeds Registry (see paragraph 43.13.11).
The South African national register of property is the Department of Land Affairs’ Deeds Registry. Following registration, it appears possible to conduct on-line searches of the register using the following link:
http://www.deeds.gov.za/ITSODeedsWebB/deedsweb/welcome.jsp
The Service is currently exploring how registration (for The Service as on entity, or for individual official receivers) might be effected. Further details will be released here in due course.
43.13.12 Protecting the official receiver’s interest
The official receiver, as trustee, should write to the relevant Deeds Registry (see paragraph 43.3.11) and ask him/her to note the official receiver’s interest against the record of the property that they hold.
In addition, the official receiver should send the usual notice [note 6] to the mortgagees.
43.13.13 Dealing with property where it is worth the cost of realisation
Where the official receiver, as trustee, is able to establish that the value of the property to the estate is worth the cost of protection and realisation, he/she will need to appoint a lawyer (see paragraph 43.13.17) in South Africa to both make application for recognition (see paragraph 43.13.4) and, also, deal with the conveyance of the property.
The property should have equity of at least £15,000 to make such an instruction worthwhile.
43.13.14 Transferring the case to the RTLU
Where the official receiver has successfully obtained an order for recognition (see paragraph 43.13.4), and protected his/her interest in the property (see paragraph 43.3.12) (including notifying the mortgagees of his/her interest in the property – see paragraph) he/she may transfer the property to the RTLU in the usual manner.
This assumes the property has, or is likely to achieve equity at a level that would make realisation worthwhile (see paragraph 43.13.4) – otherwise, the property may be abandoned.
43.13.15 Abandoning the property (amended July 2013)
Where there is no prospect of the property achieving equity sufficient to make realisation worthwhile, the official receiver, as trustee, may cease to take any active steps in dealing with the property – effectively, ‘abandoning’ the property to the mortgagees. Where the property’s value is affected by some onerous obligation (to insure or make the property safe, for example) a disclaimer would be the more appropriate course of action (see paragraph 43.13.16).
Where this position is apparent prior to the process of registering his/her interest at the Land Registry (see paragraph 43.13.11), the official receiver may discontinue that process. The official receiver should, though, ensure that his/her interest in noted by the mortgagees in the event of a surplus arising.
43.13.16 Disclaiming the property
The official receiver, as trustee, may issue a disclaimer of the property, but only if the property has some onerous obligation attached to it (such as an obligation to repair, maintain, make safe, insure for public liability or make secure) and has no value to the estate.
See Chapter 34 for advice regarding the process of disclaiming.
43.13.17 Appointing local legal representation
As outlined elsewhere in this Part it is not envisaged that the official receiver, as trustee, will deal with property in South Africa without local legal representation and advice.
The official receiver’s usual solicitors in his/her locality may be able to recommend an South African lawyer to take the matter forward. If not, the following website provides details of lawyers in South Africa with search results able to be defined to include both geographical area and specialism:
http://www.lssa.org.za/?q=con,84,Find%20an%20attorney