Property can be owned through different vehicles and in different forms. More than one person can be registered as joint owner of a property. Property can be owned by a company in which the shareholder’s ownership is linked to a specific property via his share. It can be owned via a sectional title scheme or in a ‘build-together cooperative.
In these instances the land is not registered in the name of a single person. Can a pension fund grant a loan to a fund member in respect of a property in which the member is not the only owner?
Ownership of fixed property is recorded in the deeds office for each surveyed piece of land in the proclaimed areas of the country. If it is within the borders of Namibia but not in a proclaimed area it belongs to the government. The irrefutable evidence of ownership of land is thus if your name is reflected on the relevant title deed at the deeds office and the title deed can reflect more than one person as being the co-owner of that piece of land. Of course for properties registered in the name of a legal entity, ownership of any portion of that property registered in the name of a legal entity will have to be established by reference to the legal documents in terms of which the legal entity has made over ownership to that portion to someone.
In terms of section 19(5)(a) of the Pension Funds Act the prerequisites for the granting of a housing loan to a member by the Fund are that a member or his or her spouse must own the property in question and that the dwelling must be occupied by the member or a dependant of the member. Section 19 (5) (a)(i) requires that such a loan must be in respect of a property "...which belongs to the member or his or her spouse...". The word 'belong' is nowhere defined in the Act and one would have to consult a dictionary to determine the meaning of this word and whether or not this would exclude a property registered in the name of a Close Corporation or a Limited Company.
The Oxford Advanced Learner's Dictionary defines belong as "....be the property of..., i.e. mine...". There is no reference to any formal or legal requirements underlying the word 'belong' in this definition. One may consequently argue that it is a question of substance rather than law and that the substance of 'belonging' can also be fulfilled in this context, through the member's and/or the spouse's sole ownership of the property holding Closed Corporation or Limited Company, or through the conclusion of a legally enforceable contract that secures ownership for the person applying for a loan.
In all instances, ownership of a property must entail the freedom to hold, dispose, encumber, transfer or bequest the property at any time. This is implicit when being the registered owner at the deeds office but not necessarily so when owning a property through a legal entity. Where a member intends to borrow from his pension fund for a property occupied or to be occupied by him, his spouse or a dependant, the trustees will have to establish whether the member has the right to hold, dispose, encumber, transfer or bequest the property at any time. At the end of the day, the fund must be able to sell the property should the member fail to meet his obligations under the loan agreement with the fund.
Of course, once satisfied that the property in question is indeed owned by the member, the trustees need to satisfy themselves that the loan will generate an acceptable return, that it represents an acceptable risk profile in terms of the inflation risk and the risk of incurring a capital loss when being obliged to sell the property. Such a loan must be approached by the trustees with the same prudence as they would approach any other investment opportunity. Finally, the trustees must ascertain that all the other prescriptions of section 19(5) will be complied with before making payment.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.