Confusion

The real right of extension of a scheme, reserved by the developer in terms of section 25 of the Sectional Titles Act 95 of 1986 ("the Act"), must be made subject to any bond registered against the land. The real right of extension "Shall for all purposes be deemed tod be a right to urban immovable property which admits to being mortgaged… and may be transferred by the registration of a notarial deed of cession in respect of the whole, a portion or a share of the right… " (see section 25(4)(a) and (b) of the Act). In practice the section 11(3)(b) schedule of conditions is endorsed as to the issuing of the certificate.

In essence a real right of extension entitles the developer, or his successors in title, to effect an extension of the scheme by the addition of units within a stipulated period of time by applying to the registrar for the registration of the section plan of extension and the inclusion of the additional section(s) in the relevant sectional register and the issuing of certificate(s) of registered sectional title in favour of the developer for each section reflected on the plan of extension. Furthermore, all the mortgagees of bonds over the land shall consent to the registration of the extension of the scheme and the endorsement of such bond to the effect that it is attached to each section shown on the sectional plan of extension and its undivided share in the common property.

The legal effect thereof is that the units reflected on the sectional plan of extension substitute the real right of extension as security for the bond, since the right no longer exists. A proper update of the Deeds Registries records will follow where the right is fully exhausted. The small substituted endorsement will be endorsed against the bond endorsement on the title and the noting of the lapsing in terms of section 68(1) will be insisted upon (see RCR 47 of 2005). Bonds need not be lodged for endorsement (see RCR 61 of 2008).

In a transaction in Pretoria deeds registry, a section 68(1) application was lodged to note the lapse of the real right of extension due to effluxion of time. On examination, it was found that the right of extension was exercised fully, however, open bond endorsements were identified on the certificate of real right of extension. From further enquiries it became evident that the bonds were never substituted, however, units were released upon transfer. The question is, what should be done with the open bond endorsements?

Amid the confusion a note was raised alerting the conveyancer to deal with the bonds. The above scenario may add to the cost and negatively impact on our registration system. Examiners beware, and apply the practice correctly.

Republished with permission from SA Deeds Journal