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August : Information Document on Expropriation

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14 August, 2018

Information Document on Expropriation

Information document on expropriation


There seems to be some confusion about expropriation and how it takes place.  This information document is an attempt to clarify some of this confusion.

Section 25(2) of the Constitution regulates expropriation.  This section provides as follows: "Property may be expropriated only in terms of law of general application

(a) for a public purpose or in the public interest; and

(b) subject to compensation, the amount of which and the time and manner of payment of which have either   been agreed by those affected or decided or approved by a court."

Section 25(3) governs the calculation of compensation where expropriation takes place.  Subsection 3 provides that both the amount of compensation and the time and manner of payment should be just and equitable.  When compensation is determined, the court should consider all relevant circumstances including the current use of the property, the history of acquisition and use, the market value, state subsidies and the purpose of the expropriation.

The Expropriation Act, no 63 of 1975 determines the process of expropriation.  The Act provides that property can be expropriated for public purposes, provided that compensation is paid to the owner.

Where the state decides to expropriate land, an expropriation notice must be served on the owner, by either handing it to the owner or sending it by registered post.  The notice must contain a clear description of the property, its size and situation.  The date of expropriation must also appear on the notice.

Ownership is transferred to the state on the date of expropriation.  The owner of the expropriated property is obliged to maintain the property from the date of expropriation to the date when the state takes possession of the property.  The owner may continue to use the property and get an income from it until the state takes possession.  The owner should continue to pay taxes on the property as well as other expenditures relating to the property until the state takes possession of the property.

Compensation

Sometimes compensation is offered in the notice of expropriation.  The owner must then indicate within 60 days from the date of the expropriation notice whether he accepts the amount of compensation offered.  If he is not satisfied with the offer, he should indicate the amount desired and how it is calculated.  If no compensation is offered the owner should still indicate within 60 days the amount of compensation desired for the property.  Details should be given of all improvements to the land as well as of any leases over the property.  The Minister may request the owner to deliver his title deed to the Minister within 60 days.

If the owner requires an amount of compensation which is not acceptable to the Minister, the Minister may offer a different amount.  If the owner is not satisfied with the offer he may, within a period indicated in the notice, apply to the Court for the determination of compensation.  Failure to do so will be deemed as acceptance of the amount offered.

If the parties do reach agreement over compensation, the Minister is obliged to pay at least 80%of the amount to the owner on the day on which the state takes possession of the property.  If the land is subject to a fideicommissum, the money should be paid into the Master of the High Court's office.

If no agreement can be reached, the High Court will determine the amount of compensation.  Any of the parties may make an offer of settlement before the Court makes a ruling.

Determination of compensation

The Act provides that the compensation paid may not be more than the amount which a willing buyer would pay.  An amount for real financial loss which is the result of the expropriation may also be awarded.  If no market exists for the specific property, then the improvements should at least be compensated for, or an alternative method should be used to determine compensation.

The Act also provides for a solatium.  The Constitution does however not provide for any solatium and as a result it is possible that no solatium will be paid in future.  Provision is also made for the payment of interest at the rate specified by the Treasury Act.

The following rules apply when an amount of compensation is determined:

  1. The fact that the property is taken without the consent of the owner is not taken into account;
  2. The suitability of the property for the specific purpose which the state needs it for, is not taken into account;
  3. If the value of the property was increased as a result of it being used for an illegal purpose, this increased value will not be taken into account;
  4. Improvements effected after the date of the expropriation notice will not be taken into account;
  5. Any increase or decrease in the value of the property which is the result of the purpose for which it is expropriated, or which is the result of the conduct of the state, will not be taken into account;
  6. Any advantage which the owner will receive as a result of the expropriation will be taken into account.

Source: Agri SA