TSC Case Study 7: Regularising an informal cash sale after 12 years
In many low-income neighbourhoods across South Africa, two forms of land administration co-exist; the formal system governed by laws and regulations facilitated by legal professionals, and the informal system typically facilitated by local community leadership structures. Informal or ‘off-register’[1] property transactions are not recorded in the Deeds Registry and ownership of the property does not legally change from one owner to the next.
While informal transaction mechanisms are accessible and affordable, they create material risk. Local property markets are unstable, with competing systems to record and enforce property rights; local government is unable to identify and engage with property owners, impeding citizen-centric governance; and the financial sector is unable to support secured, housing-led investment, blocking a critical pathway for transformative financial inclusion. Critically, property owners are unable to realise the value of their housing assets and their wealth levels remain low.
While it is difficult to determine how many informal transactions have taken place in an area, the experience of the Transaction Support Centre in Khayelitsha, as well as other evidence[2], suggests that the practice of selling properties off-register was widespread.[3]
Since its opening in July 2018, the Transaction Support Centre (TSC) in Khayelitsha has logged 112 cases with title deed problems due to past informal cash sales. Most of these sales took place over ten years ago but with rising property prices and increased awareness of the risks of not having a title deed, homeowners are actively coming forward to secure their property rights. To date the TSC has regularised ten informal cash sale cases and has a further 18 cases that are currently in the process of being resolved.
The TSC’s experience demonstrates this it is possible to regularise some informal transactions that have taken place in the past. Where the original sellers have been located, in the TSC’s experience, they are generally willing to participate in the regularisation process and sign the necessary documents. There are, of course, some cases that cannot be resolved through current processes. To date the TSC has had to close or pend 37 informal cash sale cases. In 22 cases, it is because the seller cannot be traced through the buyer, community networks or credit bureaus. In some cases sellers dispute the transaction, while in others the seller is deceased and heirs dispute that the sale ever took place. Where there is a dispute, registered property owners can evict off-register owners who may not have sufficient evidence of the transaction.
This exact risk prompted Nomathansanqa and her husband to approach the TSC for assistance with regularising a house they purchased 12 years ago. The couple bought the property in Khayelitsha for R15 000 in 2007. The property was badly damaged due to a car crash and the seller had already moved back to rural Eastern Cape. The seller’s brother, who still lived in Khayelitsha, helped facilitate the sale. Nomathansanga and her husband invested between R200 000 – R300 000[4]to rebuild the property. Nomathansanqa and her husband remained in contact with the seller’s brother and when they learned that the seller was in poor health, they were concerned that she might pass away putting them at risk of being evicted by her heirs.
With the assistance of the TSC, Nomathansanqa and her husband became the registered owners of the property in November 2019.
We spoke to Nomathansanqa to learn more about her housing story and how she feels now that she has a title deed.
[1]Barry, M (2020). Hybrid land tenure administration in Dunoon, South Africa. Land Use Policy, 90 (2020).104301, 1 – 11.
[2]Urban Landmark (2007). Do informal land markets work for poor people? An assessment of three metropolitan cities in South Africa. Available: http://www.urbanlandmark.org.za/downloads/Operation_of_the_market_Synthesis_Report.pdf
[3]Some studies have highlighted that the prevalence of informal cash sales in state-subsidised housing developments differs between areas with some housing developments only experiencing a small number of informal transactions because, in the main, beneficiary households recognised and valued the importance of transacting through formal channels. See: Barry, M., Roux, L. (2016). Study of effective land registration usage in state-subsidised housing. South African
[4]The couple did not keep formal records of the amount spent on the construction but estimate that it is between R200 000 – R300 000.