Notarial leases in the mining sector
Notarial lease agreements are defined as long-term agreements on immovable property attested by a Notary Public and registered in the Deeds Office. “Long-term” in this respect has been explained as a period exceeding 10 years. The laws that govern notarial leases include the Formalities in Respect of Leases of Land Act 18 of 1969 and also the Deeds Registries Act 47 of 1937.
Section 102 of the Deeds Registries Act provides that a notarial lease agreement is entered into for a period of not less than 10 years or for the natural life of the lessee or any other person mentioned in the lease. This is further supported by section 2(1) of the Formalities in Respect of Leases of Land Act, which provides that notarial lease agreements entered into for a period exceeding 10 years that are not registered are not enforceable against any creditors or successors. This brings us to the reasons why notarial leases have to be registered.
Registrations of notarial leases are effected in the Deeds Office in the form of a Notarial Deed against the Title Deed of the lessor. This is done in order to award the lessee a real right that is enforceable against the lessor and all third parties for the entire term of the agreement, and also to ensure protection over their rights of use and enjoyment over the property within the rules and regulations.
It should be noted, however, that notarial leases with regards to the mining sector are regulated further by the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). This act grants to the holder of a notarial lease agreement, the sole and exclusive right to mine, recover the minerals in, on and under the mining area for the holder’s benefit and account, and to deal with, remove and sell or otherwise dispose of the minerals, subject to the terms and conditions of this mining right.
In light of the view that the state is the custodian of the nation’s mineral and petroleum resources, this act introduced the conversation of the older mining rights in terms of item 7 of schedule 2. This conversion was highlighted in the case of Minister of Minerals Resources and others v Sishen Iron Ore Company (PTY) Ltd and Another (2013) ZACC 45. The facts of this case are as follows: Sishen and Arcelor Mittal SA (AMSA) were co-owners of the mineral rights at the Sishen mine, holding 78.6% and 21.4% respectively. The coming into force of the MPRDA abolished private rights to minerals, and cut the currency of existing mining permits to five years. The holders of permits were required to convert their rights within five years to avoid losing them. Upon expiry of the five years an unconverted right ceased to exist. Sishen successfully converted its rights, but Arcelor Mittal SA failed to do so.
Sishen together with another company, Imperial Crown, applied for the mining rights in respect of the shares previously held by AMSA. Imperial Crown was granted the rights, which meant Sishen’s application was not successful. Sishen appealed against the grant of the rights to Imperial Crown. The Supreme Court held that Sishen obtained conversion of its own and AMSA’s old order mining rights. It concluded that due to AMSA’s failure to convert its old order mining right, Sishen became the sole holder of the mining rights in respect of the relevant properties. Sishen had received the full 100% rights upon converting its share within the five year period.
The Constitutional Court ruled that there was no way Sishen could have converted more rights than it already had. AMSA rights had fallen away and belonged to the state as the “minerals custodian”, however, before granting them to Imperial Crown, a third party, Sishen should have been given preference as it already held some shares in the same property.
In conclusion, it should be noted, that these new rights granted under the Mineral and Petroleum Resources Act have to be registered as Notarial Deeds in the Deeds Office for they are long-term leases exceeding 10 years.