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Expropriation Bill is not the Draconian law you may think!

The Expropriation Bill is not the draconian law property owners and investors may think. This is despite populist rhetoric centred on the need for more aggressive expropriation policies.

Although seizing land without compensation is a popular mantra by politicians, the simple truth is that there will be no expropriation without compensation as long as section 25 of the South African Constitution, which protects the right to property, remains as is.

Until now, land expropriation has been addressed in the Expropriation Act, which pre-dated the South African Constitution by two decades. It is a draconian piece of legislation which confers extensive powers on the authorities (including government departments and municipalities). Little protection is given to property owners.

Misplaced anxiety

More recently, the Expropriation Bill, 2015 has been introduced as a complete replacement. The introduction of the Bill has created some anxiety for property owners and investors, but this may be misplaced given that the Bill is vastly superior legislation and has been drafted in accordance with section 25 of the Constitution.

The two most important innovations relate to the process which the authorities must embark upon before expropriating property, and the manner in which compensation is determined. The Bill provides that:

The power to expropriate property may not be exercised unless the expropriating authority has without success attempted to reach an agreement with the owner or the holder of an unregistered right in property for the acquisition thereof on reasonable terms.

The expropriating authority must undertake an extensive investigation and information gathering process to determine whether it is necessary to expropriate the particular property.

Since expropriation is a drastic step, authorities need to investigate thoroughly, then do all in their power to purchase the property on reasonable terms before expropriating.

Compensation for property?

The Bill requires compensation to be just and equitable. This involves determining the market value of the property, according to four factors: the current use, history of the acquisition and use of the property, the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property, and the purpose of the expropriation. This will, however, need to be fleshed out by courts over time.

Overall, the pre-expropriation steps introduced by the Bill are significant improvements to the current act, which is outdated and needs to be replaced. It should, in fact, go a long way towards ensuring that potential property investors in South Africa are not deterred.

For more information on purchasing, renting or investing in commercial and industrial property in Cape Town, please contact Robert Ryll | Cell Number: 082 374 2662 | Landline: 021 552 4100 or Email: rob@primeindustrial.co.za


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