Selling property without spousal consent – what are the consequences?

June 1st, 2021
x
Bookmark

Picture source: Gallo Images/Getty

It is common knowledge that spouses married in community of property need one another to co-sign agreements and legal documents due to their limited contractual capacity. Following this logic, it is almost unthinkable that a person, so married, can awake one day to the shocking reality that their spouse sold and transferred immovable property, falling within the joint estate, without them knowing. Yet, this very scenario has transpired, and on more than one occasion, in our very own South Africa.

Sections 15(2) and 15(3) of the Matrimonial Property Act 88 of 1984 confirm the legal position as described above by providing that a spouse married in community of property, shall not without the written consent of the other spouse ‘alienate, mortgage, burden with a servitude or confer any other real right in any immovable property forming part of the joint estate’.

Case law

As recently as 11 December 2020 the Supreme Court of Appeal (SCA) was again faced with this perplexing anomaly. In the matter of Vukeya v Ntshane and Others (SCA) (unreported case no 518/2019, 11-12-2020) the respondent and Mr Ntshane (now deceased) were married to each other in community of property. The respondent is an elderly woman who moved to another province leaving her, now deceased husband, in their home. The deceased passed away in 2013. On his passing, the respondent was appointed as the executor of her late husband’s estate and only then became aware that the deceased had in fact sold their home without her consent, to the appellant.

Soon after learning hereof, this widow applied to the High Court to have the transfer cancelled. She launched the application based on her not consenting to the sale. The High Court found in her favour, but the matter was appealed, by the purchaser, and the SCA overturned the High Court’s ruling by finding that a non-consenting spouse is deemed to have consented to the sale if the purchaser was unaware, and could not have reasonably been aware, that the surviving spouse’s consent was required.

Eleven years earlier, in 2009, the High Court of the Western Cape was faced with a similar factual matrix when it had to decide the matter of Visser v Hull and Others 2010 (1) SA 521 (WCC). This time the facts were a bit different though, as the purchasers were blood relatives of the spouse who sold them the property in question. It was, therefore, argued that the purchasers ought to have known that the consent of the applicant was required.

In eerily similar circumstances to the Vukeya matter, the deceased had confirmed to the transferring attorney that he was indeed unmarried and, therefore, had the required capacity to alienate the property in question.

In both the above cases, the courts agreed that the pertinent question was whether the purchaser could reasonably have known that the seller was married in community of property and, therefore, the consent of their spouse was indeed required for the alienation of the property such purchaser had bought? The courts further agreed that the purpose of s 15 of the Matrimonial Property Act was to strike a balance between the interests of a non-consenting spouse and the innocent third-party purchaser.

The issue the writers have with the above approach is that it places a duty on the shoulders of a purchaser to ascertain, by investigation, whether the consent of the non-contracting party has indeed been obtained. We are in agreement with the stance of Prof L Steyn voiced in ‘When a third party “cannot reasonably know” that a spouse’s consent to a contract is lacking’ (2002) 119 SALJ 253 wherein it is argued that the above test should be whether a third party ‘cannot reasonably know’ and not whether such party ‘would not reasonably have known’. The test requires the purchaser to do more than simply rely on what the contracting party is averring their legal status to be. The courts require such purchaser to do an ‘adequate’ inquiry into the necessary. It is important to note that the courts demand the purchaser to investigate if the seller has the required consent. The court does not refer to the conveyancer having to do such investigation.  Indeed, a conveyancer does check for the same, but regrettably a seller may depose to an affidavit confirming them to have consent, without the same being true.

Therefore, the SCA found, in the Vukeya case, that the purchaser had done an ‘adequate investigation’ as the deed of transfer cited the deceased as unmarried and the power of attorney, which the deceased signed, further confirmed him to be unmarried. Due to the purchaser being blood relatives of the seller, the Western Cape High Court in the Visser case, remained unconvinced that the purchaser had done an ‘adequate’ investigation and thus found that such purchaser could reasonably have known of the marital status of the deceased and, therefore, ordered the transfer to be deregistered and ownership of the property to be returned to the surviving spouse.

The arising question

The question that now arises is how did these transfers happen in the first place? Should the Registrar of Deeds not have rejected them based on the required consent not being in place?

In both instances, the title deeds did not reflect the non-consenting party’s particulars. Therefore, it would seem to the Deeds Offices as if the properties were wholly owned by one person only. This is due to the database of the Department of Home Affairs incorrectly reflecting both these contracting parties to be unmarried. It would, therefore, appear as if the last line of defence – being the records provided by the Department of Home Affairs – may not always be reliable as once thought. This in turn allows a dishonest seller to alienate a property without the consent of their spouse. The remedy to the problem is a simple one – correct the incorrect records. Regrettably, although the solution may be a simple one, the practical execution thereof may be an unattainable dream.

It is for this reason that conveyancers should always be mindful that a client may either in terms of an innocent mistake or, and regrettably so, with malicious intent be portraying their marital status as something that it is not.

Conveyancing firms have adopted the stance that a marriage certificate is to be provided to their offices by both the purchaser and seller. The person attending to the transfer then also examines the parties’ marital status further by confirming whether or not an antenuptial contract is registered in any of the Deeds Offices in South Africa. The purported marital regime is also compared with that of the existing title deed.

This situation is further complicated by the fact that if a person alleges to be unmarried, and thus does not provide a marriage certificate, and the Department of Home Affairs records also reflect the person to be unmarried, conveyancers have no alternative but to accept the same and draft their documents accordingly. Similarly, if an antenuptial contract cannot be located one must assume the person to be married in community of property, if such person provides you with a marriage certificate, and the above Department of Home Affairs’ records reflect them to be married.

Regrettably despite a conveyancer duly adhering to all safety precautions, in rare instances, matters seem to slip through the proverbial cracks. If we are then to accept that the possibility exists that a property may be sold and transferred without a non-contracting party even knowing about it – what is such a spouse and purchaser then to do?

Section 15(9) of the Matrimonial Property Act provides for both the parties’ remedies:

‘(9) When a spouse enters into a transaction with a person contrary to the provisions of subsection (2) or (3) of this section, or an order under section 16(2), and –

(a) that person does not know and cannot reasonably know that the transaction is being entered into contrary to those provisions or that order, it is deemed that the transaction concerned has been entered into with the consent required in terms of the said subsection (2) or (3), or while the power concerned of the spouse has not been suspended, as the case may be;

(b) that spouse knows or ought reasonably to know that he will probably not obtain the consent required in terms of the said subsection (2) or (3), or that the power concerned has been suspended, as the case may be, and the joint estate suffers a loss as a result of that transaction, an adjustment shall be effected in favour of the other spouse upon the division of the joint estate’ (our italics).

In First National Bank of Southern Africa Ltd v Perry NO and Others 2001 (3) SA 960 (SCA) the court had to deal with an enrichment action and declared such action would also apply to situations where a third party accepts the transfer of immovable property knowing that the necessary consent was not obtained.

From this it would seem as if the non-consenting party will have a claim against their spouse and the purchaser, should the purchaser have known such spouse’s consent was required but not obtained.

The remedy for the purchaser, therefore, is quite apt in that should they prove that they did not know and could not have known that the seller required the consent of the non-contracting party, the agreement is deemed to be valid and enforceable. Thus, any transfer which has been effected, the non-consenting party is deemed to have consented cannot be deregistered.

Should the purchaser fail in discharging their burden of proof, the agreement would be void and the registration of the property into their name would be undone. In such circumstances it is quite unlikely that the purchaser would be successful with a damage claim against such seller.

Although the purchaser’s remedy looks to be sound, it once again shifts the onus to a (possibly) innocent party, who needs to institute an action, discharge a burden of proof, and only thereafter, will transfer be confirmed, and then only in the event of the purchaser being successful. The same can, unfortunately, not be said for the non-consenting spouse.

Conditions for non-consenting spouse to become eligible for compensation

The legislature has imposed two conditions on the non-consenting spouse before they become eligible for compensation. The first being that an adjustment in favour of such spouse is only possible on the dissolution of the joint estate and the second being that such a non-contracting spouse would need to prove their husband to have alienated their immovable property without the required consent.

The first condition is understandable – an adjustment is of course only possible when the joint estate is dissolved. It is incomprehensible how the court would go about effecting such adjustment if the non-contracting party and the contracting party are sharing an estate as any adjustment would have no net effect – taking from the joint estate and depositing such amount back into the exact same joint estate.

We further submit that should a property be alienated without the required consent of the other spouse, a dissolution of the joint estate, most probably through divorce (maybe death), would result. Section 20 of the Matrimonial Property Act also provides the immediate division of the joint estate but again such spouse must approach the High Court to have the same ordered. The court in Bopape and Another v Moloto [1999] 4 All SA 277 (T) also referred hereto and further confirmed that the remedies of the non-consenting spouse must not be limited to the ‘four corners of section 15(9)(b) of the Act’. An example of such ‘damage’ suffered leading to the division of the estate is discussed below in the Visser matter.

The second condition is of greater concern, but the writers propose that the same can be addressed by the non-consenting spouse joining action with the purchaser and praying for the relevant court declaring the adjustment of the joint estate be affected. The rationale is that the spouse would virtually have to present the same evidence the purchaser did in their claim against the contracting party and such duplication of matters can be curtained by simply joining the actions. Should the non-consenting party not elect to join the purchaser in their claim, their claim against their spouse is in no way affected.

It also goes without saying that the joint estate must indeed have suffered a loss before the non-consenting spouse’s claim for fraudulent concealment, as described in Caxton Printing Works (Pty) Ltd v Transvaal Advertising Contractors Ltd 1936 TPD 209 would arise. Interestingly in the Visser matter, the deceased sold the property for a mere R 10 500 to the purchasers despite the same being worth R 98 000. The effect thereof is that the joint estate was improvised by R 87 500. The R 10 500 paid by the purchasers was ordered to be recovered from the joint estate by a separate action.

Conclusion

Ultimately, the transfer of a property without the consent of a spouse to which the seller is married in community of property, is a scarcity. The checks and balances systems in place are to thank for this but as rare as these instances are, they do happen. More can be done to prevent them, but it is unlikely that the relevant entity would be inclined to effect the required changes. This leaves us, as legal practitioners, as the proverbial gatekeepers and we must be more vigilant than ever.

Alethea Verona Robertson LLB (UP) is a legal practitioner, notary and conveyancer and Herbert James David Robertson LLB (cum laude) (UP) is a legal practitioner at Dykes van Heerden Inc in Johannesburg.

This article was first published in De Rebus in 2021 (June) DR 23.

X
South African COVID-19 Corona Virus. Access the latest information on: www.sacoronavirus.co.za