THE LINK BETWEEN THE SALE OF LAND ON INSTALLMENTS AND THE NCA
The Alienation of Land Act, (ALA) came into operation in 1981 whereby it set out the requirements for the sale of immovable property. This Act, also makes provision for the sale of land on instalments.
The ALA sets out the requirements to be met when concluding an agreement to sell land on instalments of which the act specifically mentions that the amount of the purchase price, the annual rate of interest, the amount payable per instalment and the number of instalments and the due date of each instalment must be contained in the agreement.
The question to be answered is whether this sale of land of instalments will be regarded as a credit agreement in terms of the National Credit Act.
The National Credit Act, defines a credit agreement as an any agreement in terms of which payment of an amount owed by one person to another is deferred and any charge, fee or interest is payable to the credit provider in respect of the agreement or amount that has been deferred.
A valid credit agreement must contain the following content:
1 The amount payable in terms of the agreement;
2 The interest rate on the amount payable;
3 The amount of each instalment;
4 The number of instalments; and
5 The due date of each instalments.
A conclusion can thus be drawn that the requirements for a valid credit agreement and the requirements for a sale of immovable property in terms of Chapter two of the ALA, are very similar and therefore the sale of immovable land in instalments should be considered as a valid credit agreement.
The other question that must be answered is whether the seller must register as a credit provider when selling his/her land in terms of the ALA and “If the seller is only entering into one credit agreement to sell his/her land in terms of the ALA, does he/she still have to register as a Credit Provider for the transaction to be valid?”
Before 11 May 2016, any person must apply as a credit provider if the principal debt owed to the credit provider does not exceed the threshold of R500 000.00. The threshold has since been changed to R NIL, meaning any person who wish to enforce or conclude a valid credit agreement, must be registered as a credit provider as set out in Section 40(1)(b) of the NCA.
In the case of Friend v Sendal, which was heard in the Gauteng Division, found that a person who is a party to only a single credit agreement does not need to register as a credit provider. This would mean that the sale of immovable property on instalments between, as a once of transaction, would not be considered as a credit agreement.
In the matter of van Heerden v Nolte the court had to make a determination that whether Friend v Sendal can be applied to more than one credit agreement, as were the facts of van Heerden v Nolte. The court found in van Heerden v Nolte that the credit provider should have registered as a credit provider for the agreements to valid.
The difference between the two cases caused numerous confusions as to when a person, who is a party to one or more credit agreements, should register as a credit provider. The Supreme Court of Appeal, in the matter of De Bruyn NO and Others v Karsten, dealt with this matter.
The facts of De Bruyn NO and Others v Karsten, were that Mr Karsten would sell to Mr Du Bruyn, his interest in three businesses for the amount of R2 000 000.00 to be paid in instalments. The Court had to clarify the position as to when a person should register as a credit provider, regardless whether they entered into one credit agreement or numerous credit agreements. The Court found that a person is required to register as a credit provider who enters into credit agreements, regardless of whether the person enters into one agreement or numerous agreements. The court found that the credit agreement is unlawful as the seller failed to comply with Section 40 of the NCA.
The conclusion that can be drawn is as follows:
1 The sale of land on instalments does constitute a credit agreement if the requirements in the agreement meets the requirements set out in the National Credit Act;
2 The seller is required to register as a credit provider, should the sale agreement meet all the requirements of both the Alienation of Land Act read with the National Credit Act;
3 The agreement will not be enforceable should the seller fail to register as a credit provider when entering into a credit agreement.
Should you be unsure of the requirements or validity of any agreement, especially a credit agreement, contact our offices at email@example.com for clarity.
Friend v Sendal ; De Bruyn NO and Others v Karsten ; van Heerden v Nolte
National Credit Act and the amendment thereto
Alienation of Land Act