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Excluding community of property
14 Jan 2021 12:00 am
From a conveyancing perspective, a testamentary condition excluding community of property in respect of immovable property and inserted into a deed when such immovable property is bequeathed or donated is a common occurrence, but is such a condition lawful and binding, and what effect does such a condition have on creditors?
To determine whether a condition is a perfectly legal and competent one to insert in a deed of transfer, it is necessary firstly to look at the position under the common law and thereafter to ascertain whether the common law position has in any way been altered by statute.
Common law position
From a common law point of view Voet (23 2 77 Stone's translation) says:
But if you declare that you make a gift or bequest to only one of the spouses, so that it shall not go into statutory community then in this case the law of donation is to be followed. For since the spouses themselves could have exempted their own property from community by means of a marriage agreement why should not the third party whose donation is quite voluntary be able to make it subject to this condition which is not essentially wrong nor opposed to legal principles? And since a donor would have prevented his gift from going into a community of burdening it with a fideicommissum, surely there is no reason why he should not do the same by means of an unequivocal prohibition contained in the deed of gift itself?
It is thus clear from the extract from Voet that a testator may avoid his bequest from forming an asset in a joint estate in two ways: he may either burden the land with a fideicommissum or expressly exclude the inheritance from community of property.
The first method of burdening the land with a fideicommissum will not be discussed in this article.
With regard to the second method, Steyn the Law of Wills in South Africa p.76 states as follows:
"A testator may validly institute as heir or make a bequest to a woman who is married in community of property on such terms that the inherited or bequeathed property is free from the husband's control", (Bosman v Richter 1853 C (2 Searle) 78.
In the case of Ex parte Bear and Sack 1926 W 240, it was further held that, from a registration point of view, there can be no objection to including such a condition in a deed of transfer because this has been done for many years.
In Cuming v Cuming 1945 A at 201, Davis AJA also held that a testator or donor can attach to his bequest or gift any modus or condition which is not prohibited, and it will be enforced. The condition under discussion in this article is obviously not prohibited, as it is not disgraceful, illegal, immoral or contra bonos mores.
From the above case law and a further passage where Voet (23 4 45 Krause's translation) also says:
For if a stranger making a gift or bequeathing the legacy has specifically directed that he does not desire what has been donated to become common property, his wishes must prevail for it is in the power of the donor making a gift to choose the condition which he desires to be attached to his gift.
It is perfectly clear that immovable property can be bequeathed subject to such condition, and the said condition may be incorporated in the title deed of the immovable property concerned.
The question now to be considered is whether there is anything in the Deeds Registries Act 47 of 1937 ("the Act") which may alter the common law with regard to the registerabilty of the condition being considered.
Section 17(1) of the Act provides that immovable property, which would upon transfer form part of a joint estate (my underlining), must be registered in the name of the husband and the wife. From the wording of this section it is clear that the common law position discussed above is not altered. On the contrary, it allows for immovable property to be registered in the name of any one spouse married in community of property, provided that the immovable property does not form part of the joint estate. Section 17(1)(c) of the Act, however, provides that the full names of the other spouse must be referred to.
Section 63(1) of the Act provides inter alia, that no condition purporting to create any personal right, and no condition which does not restrict the exercise of any right of ownership in respect of immovable property, shall be capable of being registered. The aforesaid section only applies to conditions imposing a restriction on the rights of ownership, whereas the purpose of the condition in question is not to restrict, but to preserve the legatee's full rights in the event of a marriage in community of property.
Nothing else can be found which may be regarded as altering the common law position. The condition can thus be imposed on a donation, or in terms of a testamentary bequest and may be taken up in a deed of transfer.
The common law does not, however, allow for a similar condition to be imposed on the sale of immovable property, as the imposition and registerability is restricted to a bequest or donation. Where the immovable property is purchased with money or the proceeds of the sale of immovable property that has been excluded from the community of property, such newly acquired immovable property may be registered solely in the name of the spouse thus acquiring the property, provided the Registrar of Deeds can be provided with documentary evidence that the land was purchased from funds which are excluded from the joint estate.
Cancellation of condition
Registrars of deeds are often confronted by conveyancers who require that the condition in question be removed from the title deed, the reason being that if immovable property is not registered in the name of the spouse, such a spouse cannot obtain a State housing subsidy.
Conveyancers are of the opinion that such a condition is a nudum praeceptum and does not carry a sanction of forfeiture. This argument or point of view does not hold any substance, as our courts hold that the condition is for the benefit of the owner.
The condition can only be removed from the title deed by the beneficiary, who must apply to court for the deletion of the benefit, alleging that there is no one beside himself interested in carrying out the directions of the will (see for example, Ex parte Strumfer NO 1945 2 PAG 34 and De Kock v Admin of de Kock's Estate 1945 (2) PH G 49).
As a costly alternative, the registered owner can sell or donate the land to the joint estate, in which case transfer will be effected by virtue of a formal deed of transfer and transfer duty will have to be paid on one half share of the purchase price or fair value of the land.
Effect of condition on separate estates of spouses married in community of property
It was the common belief of testators and donors that immovable property bequeathed or donated subject to a condition that the property will not form an asset in a joint estate, will be excluded from the community of property and is protected, should the spouse of the donee or heir subsequently be sequestrated. This belief was confirmed by case law (Bosman v Richter 1853 6 C (2 Searle) 78, and Ex parte Bear and Sack (supra).
The judgement in Du Plessis v Pienaar NO and Others 2003 (1) SA 671 (SCA) has overruled this belief. The condition in question is relevant only for the purposes of the relationship between the spouses themselves (I>inter partes). The court held that each spouse's estate comprises not only his undivided interest in the joint estate, but also his separate property falling outside of the joint estate. It is thus clear from the above decision that assets owned separately from the joint estate also form part of the joint insolvent estate.
From the above it is evident that the condition in question is registerable, but the relevance thereof is limited to the parties inter partes only. The common belief that such assets are protected against future creditors of the joint estate no longer prevails.
Tonkin Clacey Pretoria
Tel: 012 346 1278