The Subdivision of Agricultural Land Act, No 70 of 1970 (“the Act”) prohibits the sale of a portion of undivided agricultural land in terms of section 3(e)(i) which provides that ‘no portion of agricultural land, whether surveyed or not, and whether there is any building thereon or not, shall be sold or advertised for sale, except for the purposes of a mine as defined in section 1 of the Mines and Works Act, No 27 of 1956’. The definition of ‘sale’ in section 1 of the Act includes a sale subject to a suspensive condition.
In practice, many attorneys advise clients to enter into an option agreement for the purchase of a portion of undivided agricultural land which said option is exercisable upon receipt of the consent of subdivision by the Minister. In the recent judgment by the Supreme Court of Appeal in the matter between Four Arrows Investments 68 (Pty) Ltd v Abigail Construction CC and another it was ruled that an option to purchase a portion of undivided agricultural land is null and void. In this case, the parties entered into an option agreement and apart from the clause purporting to confer an option on the other, the remaining clauses all clearly indicated the intention of the parties namely to enter into an agreement of sale subject to a suspensive condition. The Court went further and stated that even if the option was valid, the ruling would have been exactly the same namely that the option is null and void due to the fact that the option grantor purports to be bound to sell a portion of agricultural land.
In view of this Supreme Court of Appeal ruling, all existing option agreements must be reviewed and all future agreements of sale or option agreements may only be entered into once Ministerial consent has been received.
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