A pension fund recently lost 80% of the buildings that it had bought from the sponsoring employer, because it failed to register them in the fund’s name.
The sponsoring employer was liquidated and all its assets, including the buildings bought by the pension fund, were counted as still belonging to the sponsoring employer. As a result, the buildings went with the liquidated assets.
The Court ruled that the sponsoring employer owned the buildings since there was no proof of ownership on the part of the pension fund beyond a mere agreement of sale.
In the case of insured schemes where the assets are registered in the name of the life assurer, pension funds can still lay a claim on the assets as provided for in terms of section 16 of the Pension and Provident Funds Act.
In terms of section 6(a) of the Pension and Provident Funds Act [Chapter 24:09], a fund upon registration becomes a body corporate that is capable of owning assets in its own name.
Section 15(1) of the same Act goes further to require every registered fund to
“maintain such books of account and other records as may be necessary for the purposes holding of assets of the fund.”
This requirement is at the centre of pension fund administration, owing to the fact that the fund can only assert its rights on any asset that it purports to own if the fund has evidence to prove that it is the legal owner of the assets.
Legitimacy of ownership in immovable property is proved through possession of a Title Deed bearing the endorsement of the Registrar of Deeds. Therefore, once a fund acquires immovable property, it must prioritise registering them in its own name.
If the fund fails to register the property in its name, the previous owner or the developer will be considered the legal and rightful owner.
Legally, the evidence of an agreement of sale and proof of payment of purchase price is merely an indication that the process of acquiring ownership had started, but it does not amount to proof of ownership. Ownership is only valid when a deed of transfer is executed through a Conveyancer and the transfer deed is duly stamped and registered.
The basic purpose of the registration is to record and prove the ownership of the property.
The process of registering the property also ensures that in any disputes of ownership, the rights of the seller to dispose of the property and any encumbrances such as mortgages can easily be established as part of the conveyancer’s due diligence process.
Prior to the deed of transfer being executed, duly stamped and registered, no right, title or interest in an immovable property is considered to have been transferred.
In such cases, should a dispute arise in relation to its ownership, the fund cannot easily prove its rights on the property and will have to go through the costly court route to try and prove that it purchased the same.
While this route is available, it is costly and only offers only temporary relief. The outcome of the court proceedings are at the discretion of the court, which may not even rule in favour of the fund, especially if there is no satisfactory evidence presented before it to prove the purchase.
Pension funds are run by trustees who are elected or appointed to manage the affairs of the fund on behalf of and for the benefit of the fund members.
It is, therefore, the duty of trustees to ensure that when their fund has acquired some assets, these should be registered in the name of the fund even if they have been bought from the sponsoring employer.