This case study highlights the story of one client, but we do not think Nomsa’s situation is unique. Government’s subsidised housing programme has transferred a potentially valuable housing asset to over 1.8 million poor households. As more subsidy (or RDP) properties transact on the resale market and as banks and other lenders increase the provision of mortgage finance in more affordable segments of the market, prices of RDP houses are likely to rise, particularly in urban centres like Cape Town. The value of housing assets owned by subsidy beneficiary households is likely to exceed the “small estate” threshold and the threshold for subsidised legal services even though their incomes, and ability to afford such services, may remain unchanged. While heirs who wish to sell inherited properties can use the proceeds of a sale to fund legal fees, those who wish to retain the asset may not be able to formalise ownership.
Clearly there is a need to rethink “small estates” in South Africa and how thresholds are determined for access to subsidised legal services. At a minimum, if qualifying thresholds are based on estate values, then these amounts need to consider property price inflation and property market performance. As noted, the “small estates” threshold was last updated in 2014 from R125 000 to its current value of R250 000. Had the threshold been updated annually in line with national house price inflation, it would currently be around R312 000. If the threshold was aligned with provincial property price inflation, the quantum for the Western Cape would be around R356 000.
Nomsa’s case clearly demonstrates that an asset value threshold can result in income-poor households being unable to access legal services necessary to realise their inheritance. Clearly, household income should also be a factor when determining qualifying criteria.
This issue requires the urgent attention of the Department of Justice and the legal industry at large. If not resolved, more deceased estates are likely to remain unresolved, reducing the reach of formal property market mechanisms and neutralising the potential value of housing assets; banks and other lenders cannot lend against the asset and prices will not increase beyond a price affordable to cash buyers. Beyond this, the impact on heirs is significant. They must either find a way to pay for legal services they cannot afford or forego formal registration of inherited property.