Subdivision of Agricultural Land Act
Section 3 of the Subdivision of Agricultural Land Act (Act 70 of 1970) stipulates that agricultural land shall not be subdivided nor that any undivided share in agricultural land shall vest in any person, if such part is not already held by any person. What this means in essence is that agricultural land can only be registered in the name of one person / entity.
There are many cases in which a farmer wishes to bequeath a farm to his or her children in equal shares. This wish contradicts section 3 of the Subdivision of Agricultural Land Act which, as mentioned, prohibits the registration of agricultural land into the name of more than one person. The same situation will also arise in situations where an owner of a farm dies without leaving a valid will as the heirs to the estate will inherit in terms of the Intestate Succession Act.
Agricultural land bequeathed to multiple heirs
There are a couple of options available to the children (heirs) and the executor of the will should the will stipulate that the farm should be inherited in equal shares.
The first is based on the Subdivision of Agricultural Land Act which stipulates that an application can be made to the Minister of Agriculture, Forestry and Fisheries to grant the registration of the farm into multiple owners’ names. Should the Minister approve the application, the consent may be dependent on certain conditions which must be met before registration can take place. However, approval of such an application is not guaranteed and is at the discretion of the Minister.
A further option would be for the children to renounce their right to inherit the farm in order for only one of the children to inherit the farm. Alternatively, the children could enter into a redistribution agreement whereby the farm is to be inherited by one heir only. For example, if the deceased left the farm and R2 million to each of three children, the redistribution agreement could state that one of the children would inherit the farm, and the other two children would each receive R3 million. Naturally, this solution requires agreement between all parties which may not always be simple in practice.
The final option available in these situations is for the executor of the estate to sell the property out of the estate. Following this, the proceeds from the sale can then be divided in equal shares between the children.
Preempting the issue
There are a number of solutions available to an owner of a farm who wishes to leave the property to multiple children or third parties. For example, it is possible to set up a testamentary trust of which the children are all trustees, or to bequeath the property to a company in which the children are all shareholders.
Either of these may assist in ensuring the smooth administration and winding up of the estate after one has passed. Care should, of course, be taken to make sure that the will is drafted properly and that the process is managed effectively. An estate planner will be able to offer valuable guidance in this regard.
Sale of agricultural land
It is worth noting that it is also not possible to subdivide agricultural land in South African when selling a property due to the same legislative regulations. A farm may only be sold to one person or entity and as such, the offer to purchase cannot be made by more than one person. An exception to this would be if a couple is married in community of property as South African law views their estate as one.
As with the case of agricultural land being bequeathed to multiple heirs, the consent of the Minister may be requested in order to grant permission for the sale of agricultural land to more than one person. This consent must be sought prior to the agreement of sale being concluded and therefore an offer to purchase by multiple purchasers can only be made after the owner has received the Minister’s consent.
Written by Wessel de Kock