Transfers of land and cessions of real rights therein must follow the sequence of the successive transactions in pursuance of which they are made and it shall not be lawful to depart from any such sequence, save as is provided for in the Deeds Registries Act 47 of 1937 (hereinafter referred to as “the Act”), or in any other law or as directed by the court (section 14(1)(a) and (b) of the Act.)
Section 14(1)(b)(iii) of the Act, however, provides for a departure from this general rule, where a redistribution agreement is entered into between the heirs and legatees (including ascertained fideicommissary heirs and legatees) of the deceased, or between such heirs and legatees and the surviving spouse, inclusive of an holder of a personal servitude also being an heir (see RCR 12 of 2006). The redistribution can be with regard to the whole or any portion of the assets in such estate. Section 14(1)(b)(iv) provides further that it shall be lawful to introduce movable property not forming part of the estate for purposes of equalizing the division. The executor need not be a party to the agreement (see RCR 34 of 2005).
Hereinafter, the requirements for the conclusion of a valid redistribution agreement are considered in more detail. Examiners are warned that it is their duty to examine redistribution agreements (see section 3(1)(b) and RCR 22 of 2002). In this regard cognizance must be taken of the contractual capacity of the parties, etc. Where the agreement is ex facie faulty, the conveyancer concerned must be informed accordingly. A registrar cannot require the redistribution agreement to be redrawn solely due to the omission of the identity number and marital status. Documentary evidence may be called for where the identity numbers and marital status of the parties to the agreement are not apparent from the agreement (RCR 52 of 2010).
The Master must “accept” the redistribution agreement by placing an endorsement to this effect thereon (see RCR 68 of 2010). The mere fact that the Master has certified the agreement as true copy of the original will not suffice.
When is it lawful to enter into a redistribution agreement?
“A legatee’s interest under a will is limited to what has been given him thereunder and an executor must administer and distribute the estate of a deceased person in strict accord with the terms and directions contained in such person’s will, if any.”
This is a quotation from De Wet v De Wet 1951 (4) SA 212 (C). This case dealt with a will in which the testator directed that his farm should be sold by private treaty to the child of his who made the highest bid. In the event of none of the children bidding, the farm had to be sold by public auction. The proceeds in either event were to be divided among the children. The children waived their rights to purchase and agreed to an underhand sale of the farm. It was held that the testator’s express directions as to the manner of sale of the farm could not be varied by the children. The court would not interpose its sanction. A similar view was taken in the Appellate Division case of Bydawell v Chapman NO & Others 1953 (3) SA 514 (A): “Beneficiaries may contract to render to each other the fruits of devolution, if and when they mature or accrue, but cannot alter the devolution by contract.” Beneficiaries must have a vested interest (Leach &Others v Champion Estates Ltd 1956(3) SA 674 (O)).
From the above it is clear that heirs or legatees cannot enter into a redistribution agreement with persons who are not heirs or legatees, for example a trust, company or close corporation, albeit the heirs being trustees, directors or members of such persona.
Formative requirements for redistribution agreements
There exists no prescribed form for a redistribution agreement, however, from the wording contained in regulation 5(1)(e) of the Administration of Estates Act 66 of 1965, it is evident that such agreement must be in writing. Furthermore section 2(1) of the Alienation of Land Act 68 of 1981 also provides that if immovable property is involved in such redistribution, then it must be in writing.
Redistribution agreements pertaining to immovable property need not be signed by the contracting parties before two competent witnesses or a commissioner of oaths. However, where the agreement is signed outside the borders of the Republic of South Africa, the provisions of Rule 63 of the High Court Rules must be complied with, or the Hague Convention on Attestation, which provides for the proper authentication of documents executed outside the borders of the Republic of South Africa.
Assets which may be redistributed in terms of a redistribution agreement
From the wording of section 14(1)(b)(iii) of the Act it is clear that the redistribution agreement can be in respect of the whole or any portion of the assets of an estate. As already mentioned, section 14(1)(b)(iv) sanctions the introduction of movable assets not forming part of the estate of the deceased for purposes of equalizing the division. It is thus clear that all the immovable property forming part of the redistribution agreement must derive from the estate of the deceased.
The common law half share of a surviving spouse to a marriage in community of property is an asset which can be brought into a redistribution agreement, provided sufficient funds exist to pay estate debts.
It is permissible for certain heirs acquiring specific property from an estate to redistribute such property without reference to other heirs, and the conference of registrars regarded this as giving effect to the letter and spirit of section 14 (RCR 2 of 1951).
Foundation for a redistribution agreement
In the Klerck case (supra) on page 629 the following is averred in this respect:
“... that in every redistribution there must be involved sale, exchange, or donation between one heir and another, or between the heir and surviving spouse. But the mere fact that a sale between two heirs or between an heir and the surviving spouse is entered into does not necessarily mean that a redistribution is brought about by that sale.”
How must one determine whether the redistribution agreement does not constitute a covert donation or sale? A test which can be made use of to determine whether such redistribution agreement does not perhaps constitute a covert donation or sale is the one which was used in the case of Lubbe v Commissioner for Inland Revenue 1962 (2) SA 503 (O) whereby the following question can be posed to determine the answer to this question viz;
“If the redistribution agreement is ignored, will there, irrespective of the movable assets which are possibly introduced, be an allocation of the relevant assets being distributed in the agreement to the contracting party?”
If the question is answered in the affirmative, the redistribution agreement will be forthcoming. A similar test was also applied in the Klerck case (see the discussion supra).
Each redistribution agreement will thus have to be, as indicated above, tested to determine whether it in fact does not in effect constitute a concealed or covert donation or sale. If the latter applies, the agreement is void.
Parties to a redistributed agreement
In terms of section 14(1)(b)(iii) of the Act, a redistribution agreement can be entered into in between heirs and legatees, including ascertained and competent fideicommissary heirs and legatees. The executor need not be a party to a redistribution agreement (see RCR 34 of 2005).
To enter into a redistribution agreement, the heirs and legatees must have vested rights, and not merely a spes (see Leach v Champion Estates Ltd 1956 (3) SA 674 (O)). This is not true with regard to the rights of fideicommissary heirs, as section 14(1)(b)(iii) specifically provides that they may be a party to such agreement.
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Surviving spouse as a party
To be competent to enter into a redistribution agreement, the surviving spouse must also be an heir or legatee in the estate of the deceased or a joint estate must be involved (see Chief Registrars Circular No 10 of 1969). -
Unascertained heirs
A redistribution agreement where unascertained heirs are involved (for example unborn children) is not valid (see ex parte Grant 1952 (4) SA 95 N). -
Fideicommissary heirs
Fideicommissarii who are ascertained and competent are heirs who are capable of entering into a redistribution agreement with the fiduciarius in the estate of the creator of the fideicommissum. Fideicommissarii are also heirs or legatees in the estate of the fiduciarius and may also enter into a redistribution agreement on the death of such fiduciarius. Section 14(1)(b)(iii) was, by virtue of the Amendment Act on the Deeds Registries Act 14 of 1993, amended to specifically provide for this instance. -
Insolvent heirs
In terms of section 20(1)(a) of the Insolvency Act No 24 of 1936, read in conjunction with Wasserman v Sackstein NO 1980 (2) SA 536 (O) the assets of an insolvent heir or legatee vest in this curator. Thus, if such curator obtains the necessary authorization from either the Master or the creditors of such insolvent heir or legatee, he/she may possibly enter into a redistribution agreement. -
Heirs under curatorship
In the case of an heir or legatee being placed under curatorship, such appointed curator can enter into the redistribution agreement on behalf of such heir or legatee provided such curator has been authorized to do so by the Master or the Court (see section 72(1)) read in conjunction with section 76(2)(a) and section 80 of the Administration of Estates Act 66 of 1965). -
Trustees of trusts as party to a redistribution agreement
If a trust is an heir in an estate and is empowered to alienate assets of the trust, such duly appointed trustee(s) may be parties to a redistribution agreement. A trustee can be a party to a redistribution agreement, provided the assets in the estate have been formally handed over to the trustee and the title deeds endorsed in terms of section 40 (RCR 3 of 1954 as confirmed by RCR 1 of 1969 and RCR 47 of 2008). -
Minor heirs or legatees
Minors under the age of seven have no contractual capacity and the redistribution agreement will have to be entered into on their behalf by their parent(s) or guardian. Minors between the ages of seven and 18 can enter into the redistribution agreement, provided they are assisted by their parent(s) or guardian. Alternatively the parent(s) or guardian can enter into the agreement on their behalf. If, however, immovable property of a minor is being distributed in the agreement, both parents must enter into the agreement on behalf of such minor or assist the minor concerned (see section 18 of the Childrens Act 38 of 2005). Section 80 of the Administration of Estates Act 66 of 1965 is not applicable in the instance where a minor is a party to a redistribution agreement and immovable property belonging to such minor forms the subject of the distribution (see RCR 30 of 2010). -
The executor in the estate of a deceased heir
If the heir died subsequent to the vesting of the inheritance, the executor in his estate may enter into a redistribution agreement with the other heirs, provided: (i) The agreement amounts to a division i.e. the heirs must each obtain a defined portion in lieu of a share in the immovable property inherited. (ii) Regulation 52 has been complied with relating to the consent of the heirs in the estate of the deceased heir and the consent of the Master, in terms of section 94 of the Administration of Estates Act 66 of 1965, in respect of such heirs if any of them are minors, is lodged. -
Heirs who are married in community of property
A spouse of a marriage in community of property can be a party to a redistribution agreement, provided the consent of the other spouse is afforded (see section 15(2)(a) of Act 88 of 1984). This assistance will naturally be unnecessary if the inheritance in question is excluded from the community of property, by virtue of a testamentary provision or otherwise. -
Heirs whose marriage is governed by the laws of another country
Where an heir whose marriage is governed by the laws of another country is a party to the redistribution agreement, the assistance of the other spouse will be required unless, the community of property has been excluded (see in this regard RCR 22 of 2002 which places a duty on an examiner to examine a redistribution agreement). -
Usufructuary or holder of a personal servitude
Where the holder of a personal servitude is an heir such holder can also be a party to the agreement (see RCR 2 of 2006).
Creation of reciprocal obligations between heirs inter se in a redistribution agreement
Heirs cannot create reciprocal rights and obligations inter se in a redistribution agreement in respect of the creation of restraints on alienation cf. De Wet v De Wet and Others 1951 (4) S.A.L.R. 212 (RCR 3 of 1952). In the same vein, lease agreements and other real rights will not be capable of being created, excluding a personal servitude of usufruct, usus or habitatio (see RCR 23 of 2002).
In the latter instance the personal servitude may be created in the power of attorney in accordance with section 67 of the Act (see RCR 4 of 2004 read with Ex parte Jooste 1968 (4) SA 437 (O)).
Payment of transfer duty
Section 14(2) of the Act provides that on transfer or cession analogical to section 14(1)(b)(iii), transfer duty must be paid which would have been payable had the immovable property or right been transferred or ceded to each person who would successively been entitled thereto.
Section 9(1)(e) of the Transfer Duty Act No 40 of 1949 provides for an exemption from the payment of transfer duty on property of the deceased which was acquired in terms of a redistribution of assets in the estate of a deceased. This exemption will, naturally, also find application when the spouse of a joint estate introduces his or her common law half share into a redistribution agreement (see the discussion supra referring to the assets in the estate of a deceased).
Where movable property (including money) is introduced from outside of the estate to provide for an equitable distribution, it will be exempt from the payment of transfer duty (see Lubbe v Commissioner of Inland Revenue 1962 (2) SA 503 (O)).
In terms of CRC 10 of 2014 a transfer duty receipt or exemption certificate will only be required for the transfer by the testator to the eventual heirs entitled to the property in terms of the redistribution agreement.
Agreement entered into after liquidation and distribution account accepted
Redistribution presupposes a variation of the liquidation and distribution account and therefore any transfer in terms of the re distribution must be reflected in the liquidation and distribution account, otherwise successive transfers contemplated by Section 14 must be given effect to (RCR 2 of 1952).
