Late in 2011 the Constitutional Court made a decision allowing the expropriation of property prior to compensation being determined. As a result it is therefore now possible for a homeowner to lose their property before knowing what they will receive in compensation. With regard to expropriation, the decision placed public interest above private ownership.

The case, known as Haffejee vs eThekwini Municipality and others, terminated in the highest court of the land after leave to appeal the original decision was refused by both the High Court and the Supreme Court of Appeal.

The application was made by the Haffejee family trust after large pieces of subdivided land that they owned on the banks of the Umgeni River in Durban were expropriated by the Municipality before compensation was agreed.

The reason for the expropriation was that communities living along the river were struggling to cope with the flooding and the land was needed to assist in completing a programme of canal building. The trust was prepared to surrender the land for this programme but wanted other land as compensation.

However, the Municipality served a notice of expropriation on the trust without mentioning compensation. The land was expropriated in September 2006 and the subsequent Municipal offers of firstly 80% of the market value of the land and then the full amount were rejected by the trust.

The trust began to legally challenge parts of the applicable 1975 Expropriation Act and the relevant parts of the Constitution that deal with property rights. In short, the trust contended that compensation is a pre-requisite for the constitutional validity of expropriation.

The Municipality retorted that this would have frustrated the rights of others who were suffering the effects of flooding. Although compensation was found to be a condition it was not a pre-condition to expropriation. Compensation would be just and equitable but could be finalised after the expropriation.

The Constitutional Court found that although there are circumstances (such as natural disasters) when expropriation can occur prior to agreeing compensation, it was stated by the court that agreement concerning compensation must be reached as soon as is reasonably possible thereafter.

Although the fixing of compensation after expropriation may burden the property owner, the court decided that if compensation was a pre-condition, it would overburden the state.

Government is attempting to resolve some of the issues resulting from the interpretation of the 1975 legislation and the constitution by redrafting the expropriation legislation.

In this regard the 2007 Expropriation Bill which was open for comment is now on its way back to parliament. However, the bill is itself fraught with uncertainties and has caused some anxiety amongst property owners.

This article should not be used or relied upon as professional advice and is for information and marketing purposes. Please consult with one of our attorneys should you need legal assistance relating to this area of law.