Can a transfer of immovable property be valid even if the underlying sale agreement is not?

Andrea Godfrey of Shepstone & Wylie Attorney

South Africa's courts have found that the transfer of immovable property may be valid despite an invalid sale agreement.

This landmark decision makes it imperative for buyers and seller to understand that once transfer takes place there is slim chance of going back for either party, explains Andrea Godfrey of Shepstone & Wylie Attorney's property department.

This important case began when Clare Shea was involved in a car accident, which left her temporarily incapacitated. Due to her condition she appointed attorney Michael McKenna to act as "proxy' (curator bonis) for her in a property sale. While acting as her curator bonis, McKenna sold Shea's house to the Erskine family who made an offer for the property, which had been increased at the request of McKenna.

McKenna signed the amended sale agreement on behalf of Shea as curator "subject to the approval of the Master of the High Court".. Mckenna, thereafter, received his letters of curatorship and the house was duly transferred to the Erskines.

However, once Shea had recovered and no longer required the assistance of a curator bonis, she claimed return of the property.

The matter went to the courts which ruled in favour of Shea. This decision was then taken up on appeal. "The issue before the Supreme Court of Appeal was whether a conditional agreement of sale was concluded or whether there was no agreement at all," explains Godfrey.

The Supreme Court held that because the Erskines offered an unconditional agreement while McKenna agreed to a conditional one, McKenna did not accept the offer by the Erskines, but rather made a counter offer.

The counter offer was not accepted as the acceptance of the counter offer was not in writing and signed by the parties. The court held that the sale agreement was never properly concluded.

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"However, what is of greater importance was the courts ruling on whether the transfer of the house was valid despite the sales agreement being invalid", says Godfrey.

In this instance the court held that the transfer of ownership is not dependant upon the validity of the underlying transaction, in this case the sale agreement.

It further concluded that the requirements for passing of ownership were complied with as delivery occurred upon registration of transfer and there was a real agreement, which is the intention to pass ownership and the intention to receive ownership.

McKenna received letters of curatorship before he concluded the real agreement so he was

Therefore authorised to enter into the agreement when he did so.

"The real agreement therefore did not contravene the law, and this is the key issue with property transactions," concludes Godfrey.