In one of the worst judgments to come out of the Supreme Court of Appeal recently (by judges who should know better) the court in Four Arrows Investments 68 (Pty) Ltd v Abigail Construction held that an option for the purchase of a portion of agricultural land without the consent of the Minister is prohibited in terms of section 3(e)(i) of the Subdivision of Agricultural Land Act 1970.
The parties to an agreement relating to the sale of agricultural land clearly recognised the problem. Somewhat clumsily, they put a clause in the middle of an agreement of sale of agricultural land to the effect that the agreement must be “deemed to be an option to purchase the property” on the terms set out in the agreement exercisable by the purchaser at any time after the purchaser and seller succeeded in obtaining Ministerial consent for the subdivision of the agricultural land.
The court, contrary to years of practice and ordinary principles of options, said that the true nature of the agreement was a sale subject to a suspensive condition which was prohibited by the Act. This, the court said, was because the agreement did not make provision for repayment of the purchase price if the sale did not go ahead (a term which anybody would imply into the contract).
If you want to sell agricultural land get the Minister’s consent before signing the transaction documents.
The court held that the object of the legislation was not only to prohibit concluded sale agreements but also preliminary steps which may be a precursor to the conclusion of a prohibited sale. You have to ask yourself how the parties get a transaction going if they can’t grant an option which can be exercised if the Minister’s consent is given.
For the time being that is unfortunately the law. If you want to sell agricultural land get the Minister’s consent before signing the transaction documents.
