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Partition of sectional title units!

25 April 2013

The most significant fact concerning partition transfers of sectional title units is that the Sectional Titles Act 95 of 1986 (“the Act”) does not make specific provision for the partitioning thereof, except for the referral of a partition agreement in section 22(2)(d) and 22(2)(e) of the Act, where the partition relates to the subdivision of a unit. This section provides for the issuing of the certificates of registered titles for the new units, which must be registered in favour of the persons entitled thereto, in terms of the partition agreement, which will be elaborated on more hereinafter.

In cases where the partition does not entail the physical division of units, one has to comply with the Deeds Registries Act 47 of 1937 (hereinafter referred to as “DRA”) as provided for in section 3 of the Act. Sections 27 to 30 of the DRA provides for different scenario’s relating to the partitioning of shares owned in land, for example where the land is mortgaged (section 27), where the land partitioned is subject to other rights (section 28) and where the land is subject to a fideicommissum (section 30). These sections will apply mutatis mutandis to sectional partition transfers.

Section 26 of the DRA is prescriptive and does not create problems with simple partition transfers where the units are not physically subdivided, but the persons own them in undivided shares. In these instances a partition transfer will be registered which has to follow the prescribed Form F of the DRA regulations. Form F is used for conventional transfers and it will thus be necessary to adapt the form to conform to Form H of the Act when dealing with sectional title units.

The differences in the two transfers mainly lie in the property clauses, the extending clauses, the condition clauses, the divesting clauses and the consideration clauses. In terms of Form H, the local authority, and province are described in the property clause. There is no extending clause, but merely a holding clause. There is a general reference to the underlying land conditions of title as referred to in the section 11 (3)(b) schedule and the servitudes referred to in section 28 of the Act. The title conditions of the underlying land do not appear in Form H. The divesting clause in Form H only refers to the transferee and transferor sui generis. In terms of Form H the consideration clause appears in the causa.

In contrast to Form H, in Form E of the DRA the property clause makes no reference to the local authority and municipality, and only the province in which the land is situated is mentioned. There is a proper extending clause as provided for in Form TT and UU of the DRA. All the title conditions are brought forward, and the divesting clause mentions the names of the transferors and transferee. The consideration clause is not part of the causa, but appears after the divesting clause.

For obvious reasons, the above mentioned differences would have to be considered when adapting Form F in order to support the character of sectional transfers. As there is no pro forma available, the following are mere guidelines when drafting and examining a sectional partition transfer.

The crux of the partition agreement must be disclosed in full in the causa, viz:

  • The heading must refer to sectional partition transfer;
  • The name of all the co-owners (each co-owner joins in as transferor must be mentioned);
  • All the units to be partitioned must be included in the agreement;
  • Reference to the share(s) held by each owner/transferor in the units must be mentioned;
  • Reference to the title number of each unit must be made;
  • Where applicable, reference to the consideration paid to equalize the value must be made.

With regard to the vesting and property description clauses:

  • Reference to the names or names of the co-owners to whom the unit/portion in the unit has been awarded must be made;
  • There must be a full description of the property awarded to each co-owner.

The normal Form H conditional clause and divesting clauses are followed.

With regard to the power of attorney to transfer, as with conventional partition transfers, only one power of attorney for the partition transfers is lodged. The partition agreement may be embodied in the power of attorney or may be lodged as a separate document. The power of attorney is filed with the first deed of partition transfer. It is imperative that there is always a partition agreement and the partition transfers must be in strict accordance thereto.

A confusing situation, however, arises with regard to the intention of the legislature where the partition agreement entails the subdivision of a unit as provided for in section 22 of the Act. Of particular importance is section 22(2) which deals with the documents to be lodged and particular sub-section (d) and (e) which are quoted for ease of reference:

“(d) certificates of registered sectional titles in the prescribed form for each of the new sections and their undivided shares in the common property created by the subdivision, made out in favour of the owner or, in the case of a partition, in favour of the persons entitled thereto in terms of the partition agreement;

(a) the partition agreement (if any), if the section is owned by more than one owner;”

From the above subsections one can deduce that where the partition agreement results in the subdivision of a unit, the only two requirements are:

(1) that the certificates of registered sectional titles for the new units must be registered in the name of the party or parties who are entitled thereto in terms of the partition agreement; and
(2) that the latter must be lodged.

This is in sharp contrast with the registration of the certificates of registered sectional titles in the name of the developer as stipulated in section 11(3)(f) of the Act. As an owner of a unit does not fall within the ambit of the definition of “developer” it diminishes the requirement of registering the certificates of registered sectional titles in the name of the original owners/applicants. One can also deduce from the above-mentioned that the legislature intended that no partition transfer will be required and that Form F of the DRA will not apply. Whether this circumvents the provisions of section 14 of the DRA is debatable. There would also be no record of the partition agreement as neither Form C nor Form F of the Act makes provision for a causa. The new titles would in the same light not be endorsed with a partition endorsement which is the practice where a Form F of the DRA is registered. In the situation where property or money has been paid to equalize the partition there would be no reference thereto in the certificate of registered sectional title. One could ask, in the same vein, why the Act does not allow the certificates of registered sectional titles to be registered in the name of the new owner where a normal subdivision and a simultaneous transfer take place? It seems clear that section 22(2)(d) should be revisited.

In an attempt to rectify the confusion it is proposed that the certificates of registered titles should be registered in the names of the persons applying in terms of section 22, i.e. the joint owners of the unit about to be subdivided. Thereafter the sectional partition transfers in the adapted Form F and requirements as discussed above should be lodged. This would place the partition transfer on par with the subdivision of a unit of which new unit is to be transferred by deed of transfer to a new owner.

The Act does not make provision for the partitioning of exclusive use areas. This problem was addressed at the annual Conference of Registrars (see RCR 5 of 1991 and RCR 4 of 2003), but as yet the Act has not been amended. The exclusive use areas would have to be cancelled by notarial deed, in terms of section 27(5), and thereafter the right will have to be reserved de novo by the body corporate in terms of section 27(b), and notarially ceded to the owners of the units as in the partition agreement.

The time is nigh for the Act to be amended to specifically provide for the partition of not only sections, but also exclusive use areas, as well as real rights of extension.

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