The effect of land expropriation without compensation on mortgagees

Abstract

Expropriating land without compensation is an old notion that has been in the South African legal system. The colonial history of South Africa must be considered to better understanding of the origin of this phenomenon. Through colonial and apartheid governments, most whites were able to gain exclusive use of the majority of valuable and rich land. This position was made possible by the enactment of unjust and discriminatory legislation. To redress these injustices, the democratic government enacted section 25 of the “Constitution of the Republic of South Africa, 1996” (the Constitution). Therefore, the history of land ownership in South Africa serves as a foundation for a critique of section 25 of the Constitution. Section 25 not only serves as a basis for the protection of property rights, but also to create equality by restoring all other rights, including property rights, to previously disadvantaged people. However, section 25 has been criticised for impeding any meaningful land reform, thus a call was made for an amendmend to the property clause that allows for expropriation without compensation. In this regard, the aim of the study is to examine the potential effect of land expropriation without compensation on mortgagees. To achieve this objective, an analysis of the laws and legal mechanisms regulating mortgage bonds is analysed, the constitutional perspective on the expropriation of land without compensation is assessed, and the effect of expropriation of land without compensation on mortgagees in South Africa is appraised. The study employs the doctrinal methodology. The study contends that expropriation of land without compensation has a direct or indirect effect on mortgagees in South Africa. It poses a substantial risk to the banking sector as a decrease in the value of land-based property, caused by an amendment to section 25, could impact negatively on mortgagees.