APPLICATION OF SECTION 25(6) OF THE SECTIONAL TITLES ACT 95 OF 1986
In terms of section 25(6) of the Sectional Titles Act 95 of 1986 (“STA”) the right to extend a scheme will vest in the body corporate where no reservation was made by the developer in terms of section 25(1) of the STA, or if such a reservation was made and for any reason has lapsed.
Section 25(6) reads as follows:
(6) If no reservation was made by a developer in terms of subsection (1), or if such a reservation was made and for any reason has lapsed, the right to extend a scheme including land contemplated in section 26, shall vest in the body corporate which shall be entitled, subject to this section and after compliance with the necessary changes, with the requirements of paragraphs (a), (b), (c), (d) and (g)of subsection (2), to obtain a certificate of real right in the prescribed form in respect thereof: Provided that the body corporate shall only exercise or alienate or transfer such right with the written consent of all the members of the body corporate as well as with the written consent of the mortgagee of each unit in the scheme: Provided further that a member or mortgagee shall not withhold such approval without good cause in law.
A right of extension may lapse due to effluxion of the time if the buildings are not completed in the time provided. A question begging an answer is whether the lapsing of the right must be noted prior to the body corporate obtaining a certificate of real right? At the Registrars’ Conference in 2012, (see RCR 10 of 2012) it was resolved that the lapsing of a right of extension must be noted prior to the developer applying for a right to extend, in terms of section 25(6).
The lapsing of the section 25 right must be noted in terms of section 15B(1)(d) of the Sectional Titles Act. No proof will have to be provided where the right has lapsed due to effluxion of the time.
Section 156(1 j(d) of the STA provides as follows:
the registrar shall register any other real right (which is embodied in a notarial deed) in or over a unit or an undivided share in a unit or land held under a sectional title deed, and any notarial cancellation or modification of such a real right, by means of an endorsement made by him on the sectional title deed: Provided that in the case of any registered real right which has lapsed for any reason, the registrar shall cancel the registration on production of proof that the real right has lapsed.(my underlining).
Furthermore, RCR 10 of 2012 mentions that section 68(1) of the Deeds Registries Act 47 of 1937 must be applied with the necessary changes in order to note the lapsing of the right of extension.
If no reservation was made by the developer or the right has lapsed, the right to extend the scheme vests automatically in the body corporate. In order for the body corporate to deal with the section 25 right, the body corporate must obtain a certificate of real right. It is not necessary for the body corporate to lodge an application as is the case with section 25(6A). According to section 25(6) read with regulation 14(2) the following documents must be lodged for the issuing of the right in favour of the body corporate:
The open bonds registered over the right must not be lodged for disposal (see RCR 61 of 2006).
Once the body corporate has obtained a certificate of real right of extension of the scheme as mentioned above, it may exercise the right with the written consent of all the members of the body corporate and with the written consent of the mortgagees of each unit in the scheme. The said consents must therefore be obtained twice. i.e. firstly to authorize the body corporate to obtain a certificate of title for the right of extension. and secondly to authorize the body corporate to exercise the right. Both consents may be incorporated in one document i.e. the consent to obtain a certificate of real right, together with the consent to exercise the right of extension. The application for the registration of the plan of extension of the scheme referred to in section 25(10) must be accompanied by the said consents, together with the documents referred to in section 25(10).
Alternatively, the body corporate may alienate or transfer the right of extension with the written consent of all the members of the body corporate and with the written consent of the mortgagee of each unit in the scheme. Transfer of the right will be effected by means of a bilateral notarial deed of cession entered into between the body corporate, and the developer. It will not be necessary to lodge the said consents.
The notary must obtain the consents and file it in his/her protocol. The notarial deed of cession must state that the consents have been obtained and that it is filed in the notary’s protocol. A rates clearance certificate required in terms of section 89(3) of the Municipal Property Rates Act No 6 of 2004. read with the definition of “property” in the said Act. Obviously a transfer duty receipt or exemption certificate will also be required.
Excellent article. In relation to real right of extension - at AGM would developer have the right to vote if he has built 3 additional units but awaiting unanimous approval from body corporate as real right lapsed due to litigation with ex partner. 2 unit holders would not allow his votes and refuse to sign consent as they have issues regarding the drainage outside their units dating back 5 years ago! Would that be regarded as good cause in law not to consent. 6 of 8 have signed.