Will Land Expropriation Affect Private Residential Homeownership?

Some South Africans are concerned that expropriation without compensation is a threat to residential property, but are these concerns valid?

Landowners, particularly those in the agricultural sector, are understandably nervous about Cyril Ramaphosa’s comments regarding land expropriation. However, in his maiden speech delivered shortly after his election as the head of the ANC, he emphasised that while the party was resolute in its decision to forge ahead with expropriation of land without compensation, the manner in which it was carried out should not harm the economy, agricultural production or food security.

While there may not have been talk yet of expropriating residential property, there are those who believe there is a danger that expropriation may not be limited to agricultural property and many have taken to social media to advise against buying residential property.

But just how real is this threat, and is there a chance that property in this sector too could be targeted by the ruling party? More importantly, should we start selling our homes and offloading investment properties before we are forced out with no recompense? The short answer is no, to both questions.

Mark Millner from Alan Levy Attorneys, who recently presented a talk on the topic, says: “While there are a lot of people who have become paranoid about the expropriation bill, it needs to be remembered that there is nothing new about expropriation of land in South Africa - the Expropriation of Land Act existed as early as 1976. Interestingly, a number of legal authors have noted that the Bill in its current form is far less draconian than the original 1976 Bill.

“In my view, these levels of paranoia are not necessarily justified, mainly because the new Bill provides far more rights and far more considerations than its predecessor ever did. The mechanisms that are in place (including the Constitutional Court) and which have always protected landowners are going to continue to function. However, from another perspective, it needs to be noted that the redistribution of land to address historical inequalities is necessary, and has to be applied.

What also needs to be remembered is that the government cannot simply state that it’s going to expropriate land; there is a process to be followed and anyone who is affected by the decision has the right to be compensated for the loss of the property.

“This, in my opinion, is going to have an effect on what sort of property will be expropriated. For example, let’s say the expropriation committee decides it’s going to expropriate an entire suburb. Firstly, anything that is done cannot prejudice the bond holder (the banks). This is clearly illustrated by the way courts which have dealt with evictions in the past have taken cognisance that mortgages have to be respected. This is because in order for an economy to function, money has to be advanced. It stands to reason that if the government decided to expropriate properties where bonds were in place, the banks would stop granting bonds because there would be no guarantee of a return on investment. If the banks left the property market, there would be no property market.

“Secondly, it’s vital to remember that homeowners have rights which are protected by the courts. The expropriation bill is clear on this, stating that everyone - including the bond holder - needs to be taken into account. In other words, a decision by the expropriation committee isn’t necessarily something that will be cast in stone and it’s virtually guaranteed that the courts would be inundated with cases should the government try to bulldoze any expropriation decision through.”