When it comes to the sale or purchase of immovable property, it is essential to understand that any legal entity, whether a company, close corporation, or trust, must have a properly signed resolution in place. This resolution, signed by all relevant parties (directors, members, or trustees, as applicable), is not merely a formality; it is a legal requirement for the sale agreement to be valid and enforceable. Without it, the agreement may be rendered null and void, exposing the parties to significant legal and financial risk.
Section 2 of the Alienation of Land Act 68 of 1981 stipulates that an agreement for the alienation of immovable property is only valid if it is in writing and signed by the parties thereto or by their duly authorised representatives, who must hold the necessary authority at the time of signing the agreement.
In the case of a company or close corporation, a resolution authorising the sale of immovable property may be passed either before or after the sale agreement is signed. However, if In contrast, where the seller or purchaser is a trust, the position is more stringent. In terms of the Trust Property Control Act 57 of 1988, a trust resolution must be in place either prior to or simultaneously with the conclusion of the sale agreement. This resolution must specifically authorise an individual to sign the sale agreement and transfer documents on behalf of the trust, and it must be signed by all trustees on the same day or before the date of the agreement. Alternatively, all trustees may sign the sale agreement and transfer documents, but this is often impractical or inconvenient in practice.
If the trust resolution is dated after the sale agreement has been signed, the agreement is rendered invalid and of no force or effect. As a result, either party may withdraw from the transaction at any stage without any legal consequences, as there is no valid and binding agreement in place.
Unlike companies and close corporations, where a resolution may ratify a prior agreement, trustees cannot ratify a sale agreement after the fact. This is a key distinction. A sale agreement signed by a trustee who did not have prior authority in the form of a valid resolution constitutes a material non-compliance with section 2 of the Alienation of Land Act, and the agreement is invalid and incapable of rectification. This has serious implications. Not only is the transaction unenforceable, but the estate agent’s commission is also at risk, as the deal cannot legally proceed. If the required trust resolution was not obtained before signing, it is essential to take corrective steps, including re-signing the agreement to protect all parties involved.
To avoid the risk of an invalid sale agreement, property practitioners and conveyancers must conduct proper due diligence when a trust is involved in a property transaction. A critical first step is to carefully review the trust Letter of Authority issued by the Master of the High Court. This is essential to confirm two things:
1. That all appointed trustees have signed the trust resolution; and
2. That the individual authorised to sign the sale agreement has been properly authorised to do so.
Equally important is the trust deed, the founding document of the trust, which must specifically and expressly authorise the trustees to enter into transactions involving the sale, purchase, or mortgaging of immovable property.
To ensure the validity of the transaction, the following documents must be obtained and thoroughly reviewed:
1. Trust Deed
2. Letter of Authority
3. Trust Resolution signed by all trustees on or before the date of the sale agreement
4. Identity documents of all trustees verified against the Letter of Authority
It is also vital to note that a person cannot act on behalf of a trust that has not yet been established. The Letters of Authority must be issued by the Master before the trust can lawfully enter into any property transaction, including sale, purchase, or mortgaging of immovable property.
Failure to follow the above steps may result in an invalid agreement, thereby placing the entire transaction at risk. To avoid costly mistakes, always seek legal clarification if there is any uncertainty before proceeding.
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