Real estate legislation and developments – what investors should know about the South African real estate sector

14 May 2012 2 min read Article

South Africa has some interesting new real estate legislation that is destined to make an impact on how investors and property owners operate within the sector. Attie Pretorius, Director and Head of the National Real Estate Practice at Cliffe Dekker Hofmeyr business law firm explains further.

“The City of Cape Town recently promulgated a by-law tailored to regulate the issue of dilapidated and often abandoned buildings that may pose health and safety risks to the public in general,” Pretorius says.

“The by-law prescribes the regular inspection of buildings, the serving of notices and warnings on landowners requesting, amongst other things, the repair or demolition of the dilapidated structure. Notably, the by-law authorises the local authority to take such steps to repair or demolish these structures at the owner's expense.
“The by-law is a welcome measure as far as urban regeneration is concerned. Other provinces may benefit from enacting similar laws,” he notes.

Another important piece of legislation in terms of real estate is the Rental Housing Bill, which proposes to regulate the relationship between landlords, certain historically disadvantaged and/ or indigent tenants and the Government.
“In particular,” says Pretorius, “Chapter 4 of the Bill establishes Rental Housing Tribunals, which are responsible for resolving disputes between landlords and tenants. The tribunals will have the jurisdiction to determine issues relating to overcrowding; unacceptable living conditions; lack of maintenance and exploitive rentals.

"This Bill, if enacted, may have far reaching consequences for landlords and tenants alike.

Pretorius says that in terms of developments in the Real Estate sector, the Real Estate Investment Trust (REITS) is a novel property investment structure, which makes investment in income-producing real estate more accessible to a more diversified range of investors, including institutional and retail investors.
According to Investopedia, the definition of REIT is, “A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.”

“This structure has become increasingly popular in foreign countries and will be a welcome addition to the South African property investment milieu,” Pretorius notes.

In terms of the future of real estate in South Africa, “I believe that in the future, the residential long-term lease will become more popular as an alternative to land ownership and will offer an alternative to government in the provision of housing to persons falling in the lower income bracket,” he adds.

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