As parents we all wish to give our children the best start in life and, where possible a solid start towards financial independence. From an investment point of view, this may entail purchasing immovable property in the name of a minor.
There are no legal impediments to registering property in the name of a minor. Minors do however, have limited, or depending on age, no contractual capacity. If the minor is less than seven years old, the Deed of Sale and transfer documents must be signed by the minor’s guardian(s) on his or her behalf. Should the minor be between 7 and 18 years of age, the minor may sign, assisted by his or her guardian(s), alternatively the guardian(s) can sign the contract and relating documents on behalf of the minor.
If however a bond is to be registered over the property, or the property is to be sold or alienated in some other way in future, the process becomes more complicated and costly.
In terms of the Administration of Estates Act 66 of 1965, section 80:
“no natural guardian shall alienate or mortgage any immovable property belonging to his minor child … unless he is authorized thereto by the Court or by the Master…”
The Master of the High Court may authorise such alienation or mortgage bond registration up to a specified amount which is, at date of this article, R250 000. Should the property be sold or a mortgage bond for a higher amount is to be registered, an application needs to be brought to the High Court. Such application will only be successful should the Master or, where applicable, the High Court be convinced that it is to the advantage of the minor that the property be sold or bonded.
Proof will need to be provided to the High Court or the Master as to how the proceeds from the sale or mortgage bond are to be utilised.
If the property was purchased cash and is to be bonded at a later stage, authority will only be granted if the funds are necessary for improvements to or preservation of the property, or for the maintenance, education or other benefit of the minor.
In an instance where the property is to be sold, it will have to be shown that the sale is to the advantage of the minor. Excluding exceptional circumstances, the proceeds of the sale (if they are not to be used to purchase an alternative property) must be paid to the Guardian’s Fund to be kept and administered on behalf of the minor. This will result in the parents of the child losing control over the investment which could possibly result in the investment being administered in a way contrary to the parents’ intentions.