TSC brings life to dead capital in low-value property markets
BUSINESS
By Jessica Robey and Illana Melzer , 71point4
According to a recent analysis of property ownership records in Khayelitsha matched with Home Affairs data , 16 % of registered residential properties in the area that is , 7 580 properties , are registered in the names of deceased individuals 1 .
These properties are indeed ‘ dead capital ’, a term coined by Peruvian economist Hernando de Soto to describe land assets that cannot be effectively traded or leveraged to create value or wealth . While a similar analysis is yet to be conducted for other lower-income areas in South Africa , we believe this phenomenon is likely to be at least as prevalent in older , more established townships .
This is a real challenge for the heirs of the estates who stand to take ownership of the properties , the performance of local property markets and the South African economy at large .
Properties tied up in deceased estates cannot be legally sold without the estate being wound up , likewise , properties cannot be leveraged to fund improvements or to build formal backyard structures for rental . Furthermore , the longer properties remain in deceased estates , the more opaque ownership becomes , particularly if there was no will in place – as is common in lower income areas ; with the passage of time , many more heirs may have a legitimate claim , any informal cash sales that might have taken place become more difficult to verify , and the process to regularise the estate only becomes more difficult , expensive , and time-consuming .
It is clear that there is a need and opportunity to resolve these issues , for the country ’ s lower-value property market to perform effectively . From an economic perspective alone , the value capital that could be revived and injected into township economies by resolving deceased estate issues is immense . Assuming 15 % of all low-valued residential properties registered in the Deeds Office 2 are registered in the name of deceased individuals , the total value of this ‘ dead capital ’ tied up in deceased estates across South Africa is upwards of R50-billion 3 .
There are several reasons why this situation exists . Some researchers highlight social norms around how properties are held within families . However , with rising property prices , these norms may be challenged with successors in title having very clear financial incentives to regularise ownership and formalise tenure . This has certainly been our experience in Khayelitsha as evidenced by the number of individuals actively coming forward seeking the assistance of the TSC in winding up deceased estates . Another factor is limited awareness of mechanisms such as wills . While the legal industry has actively promoted this with National Wills Week , and banks offer free will drafting services more work clearly needs to be done . But arguably , the most important factor that impedes regularisation of properties in deceased estates is the inaccessible and onerous process to wind up an estate in South Africa , even where the estate is classified as a small estate 4 .
Heirs are required to submit extensive paperwork and official documents in hard-copy format which can be onerous to obtain from the Department of Home Affairs . In addition , office closures , delays and long queues are common at the Master ’ s Office , with that institution clearly struggling to meet demand . Beyond this , there is a lack of widespread practical advice and assistance to individuals looking to wind up estates . Then , of course , the cost of the process is prohibitively expensive in situations where the value of the estate exceeds R250000 5 .
Since opening its doors in July 2018 , the TSC has seen 142 deceased estate cases . Many of these cases are coupled with other title deed problems including subsequent informal cash sales , or primary transfer issues 6 . Despite the TSC ’ s hands-on and intensive involvement in these cases , they can still take many months to resolve , in part due to the reasons mentioned above . To-date the TSC has resolved nine cases and handed over title deeds to the qualifying heir / s , with another
1 Analysis undertaken by Knowblet Data Sciences on behalf of 71point4 2 According to an analysis of Deeds Office data conducted by CAHF , there are 2.2 million registered residential properties valued at R300000 or less in South Africa . These properties make up the entry level housing market and account for one third of all registered residential properties in the country . See : CAHF ( 2020 ). South Africa Housing Market Report 2020 . Available : https :// housingfinanceafrica . org / app / uploads / 2021 / 03 / Citymark-National-Property-Market-Report-3-March- 2021-FINAL . pdf 3 Assuming an average value of R150000 per property 4 Small estates are those valued at under R250000 . The process of winding up a small estate is simpler . The estate can be reported at the local Magistrate Court , instead of having to go to the Master ’ s Office . Small Estates do not require an attorney to be appointed to wind up the estate and other administrative processes such as drawing up a Liquidation & Distribution account and advertising for creditors are also not required . 5 Attorneys can charge up to 3.5 % of the estate value for their services and disbursement costs can be upwards of R2500 . This excludes the additional legal fees required for the transfer of the property . 6 These are cases involving RDP beneficiaries that never received formal transfer and their title deeds from the Government .
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