Legal experts at commercial law firm Cliffe Dekker Hofmeyr explore key changes in the new legislation and the delicate balance between expropriation for public purpose and/or public interest and property ownership.
Image: File: Independent Newspapers
On January 24, 2025, the country was swept into a mix of emotions as the contentious Expropriation Bill of 2020 was signed into law by the President as the Expropriation Act 13 of 2024 ("the Act").
With the commencement date yet to be announced, the Act is not yet in force and there has been no indication of when the President plans to make this announcement.
The Act is intended to replace the 1975 Expropriation Act and adopts the language of Section 25 of the Constitution, which addresses the right to property and the conditions under which property may be expropriated.
The Constitution highlights that property - whether movable or immovable - cannot be expropriated arbitrarily. The Act confirms this position, confirming that there has to a legitimate public purpose or public interest underpinning the intended expropriation, and sets out the factors which must be considered to determine suitable compensation for the expropriation.
The Act prescribes the powers of the "expropriating authority", which is defined as an organ of state or person empowered by the Act or any other legislation to expropriate property. An example of such an organ of state is the Minister responsible for Public Works and Infrastructure.
The nub of the controversy the Act brings with it is the extensively debated express power given to the expropriating authority to offer nil compensation for the expropriation of "land" – i.e. immovable property – for public interest purposes, after considering all relevant circumstances, including the ones specifically listed in section 12(3) in the Act.
There has been much discussion around the constitutionality of this provision, given that our Constitution speaks to not only the impermissibility of arbitrary deprivation of land but also to the fact that the expropriated party must be provided with compensation for the expropriation.
There was an attempt to amend the Constitution to unambiguously align with the possibility of offering no compensation, but the proposed amendment was rejected by the National Assembly and never came into force. Whether the wording of "nil compensation" versus, for example, "no compensation" is sufficient to succeed against a constitutional challenge can only ultimately be determined by our court, if and when the matter comes before it.
If an expropriating authority and a disputing party do not agree on the amount, time and manner of payment of compensation, section 19(1) of the Act provides that the parties may refer the matter to mediation.
This is a notable addition to the Act, as mediation did not feature in the 1975 Expropriation Act, which provided for either referral to arbitration or referral to court. The Act therefore emphasises mediation as the first port of call as opposed to court proceedings and thereby motivates for the resolution of disputes by way of amicable negotiations and discussions between the parties. However, if mediation fails, or if the parties do not wish to mediate, then court proceedings can be initiated within 180 days of the date of the notice of expropriation.
A further significant change to the Act is the introduction of certain time frames to be adhered to by affected parties during the course of the expropriation process, including by the property owner and mortgagee in the event of there being a bond registered over the immovable property, as well as detailing the process to be followed where there is a mortgage bond registered over the property.
The Act, while containing many of the same provisions as the previous legislation in relation to mortgage bond holders, including still making provision for payment of compensation to a mortgagee in the instance of the land having a mortgage bond registered against it at the time of expropriation, differs in that it introduces a time frame in which notice of agreement between landowner and mortgagee should be given to the expropriating authority. The Act contemplates that agreement should be reached and notice thereof given to the expropriating authority within 30 days of possession being taken of the expropriated land, failing which the expropriating authority is authorised to deposit the compensation with the Master of the High Court.
While the Act does provide for the investment of these funds for the benefit of the persons who may become entitled thereto (as did the previous legislation), the short time frame in which notice is to be given for an agreement to be reached between landowner and mortgagee before such compensation would then be paid to the Master of the High Court, may be a cause of concern and uncertainty for mortgagees and landowners from an administrative point of view. It should, however, be noted that section 23 of the Act does provide for the extension of any period applicable to certain affected persons (including holders of rights), on good cause shown and as may be reasonable in the circumstances.
Given the uncertainty in terms of the implementation of certain provisions of the Act and how parties will be expected to navigate some of the short time frames in which certain actions should be taken (such as notice of agreement between mortgagee and landowner), it is likely that certain of the time frames prescribed in the Act will be tested and developed, especially when considering the circumstances under which time frames extended.
The approach of courts, especially while in the infancy stages of implementation of the Act, will play an important role in the development of the Act. The testing and development of legislative interpretation and implementation through the courts is not unusual and is as it should be in a constitutional democracy such as ours.
The Act provides a structured and comprehensive process for expropriation in the public interest and/or for public purpose. By aligning the legislation with our constitutional mandate and values, the Act has emphasised the commitment to balance public needs with the rights of property owners.
Notably, the introduction of mediation as the first step in resolving compensation disputes shifts the emphasis towards amicable negotiations, offering a less adversarial approach which is, in our view, necessary in light of the delicate balance between expropriation for public purpose and/or public interest and property ownership.
The Act and its implementation are not without their challenges, however.
Ultimately, the implementation of this Act will require careful navigation by all stakeholders, with courts playing a critical role in response to emerging issues and disputes.
Belinda Scriba, Director in Dispute Resolution practice; Claudia Grobler, Associate in our Dispute Resolution practice and Bridget Witts-Hewinson, Senior associate in the Real Estate law practice at Cliffe Dekker Hofmeyr.
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