A developer may transfer a portion of his right to extend, reserved in his favour. Many problems have arisen with regard to this provision, as the Act does not provide for a clear procedure to give effect to section 25(4)(b) of the Act.
Developers are increasingly utilizing this section as a means of sharing costs in the further development of a scheme, e.g.:
- Not having to finance the whole phase development out of his own pocket;
- Choosing your own interior fittings for the section;
- Sharing the costs of drawing up the plans, applications, etc.
However, a major problem that could arise is that in terms of section 36(1) of the Act, a body corporate would only be established when any person other than the developer becomes an owner of a unit in the scheme.
The owner of a split-right who has applied for an extension of the scheme by the registration of his unit must still be viewed as a developer. Most owners of split-rights have the intention to erect, and thereafter own, the unit that they have developed. A body corporate would only come into existence when the developer of a split-right extension has sold his unit. As a result, it is conceivable that no body corporate would be established for a length of time, resulting in the co-developers running the scheme with regards to all functions and duties of the body corporate, e.g. collection of levies, etc.
In addition, it should be noted that the rules are only applicable from the date of establishment of the body corporate (section 35(4) of the Act). In this regard, although the developer may make the rules that entitle members of the body corporate to enjoy parts of the common property in terms of section 27A of the Act, these owners (developers) would only be entitled to such exclusive use areas on the establishment of the body corporate.
A possible solution to counteract this problem is that section 36(1) of the Act should be amended to provide for the establishment of the body corporate once the owner of the split-right, i.e. owner of a portion of a right to extend, has registered an extension of a scheme for his unit.
Holders of split-rights must be aware that although they have received title (and diagram) for the area of their portions on which they may register such extension, they may only develop as much as was indicated on the plans lodged in terms of section 25(2)(a) and (b) of the Act. If no exclusive use areas were reserved/indicated on the original site plan lodged in terms of the above sections, the split-right developer would not be able to reserve to himself such exclusive use areas.
Although section 27A of the Act makes provision for the developer or, where no body corporate has been established, section 27(1)A allows the developer, to have the exclusive use areas delineated on a sectional plan and apply to the registrar of deeds for the issue of a certificate of real rights in respect of such exclusive use area, subsequent to the opening of the sectional title register, this right would fall upon the original holder of the right to extension who had reserved his right in terms of section 25(1) or section 25(6A).
It should be noted that where several co-owners of cessions of portions of real rights to extend jointly apply for registration of the sectional plan of extension indicating their sections, no co-owner may elect not to register if his section is indicated on such Sectional Plan, unless reference to his section is deleted entirely from such plan, i.e. with regard to description, floor plans, participation quota sheet. In this regard see section 25(10(d) of the Act which requires the registration of a certificate of registered sectional title for each section reflected on the plan of extension. The effect on section 25(4)(b) of the Act is that one plan of extension might be lodged for several developers, all applications filed in one jacket with only one registration fee of R95.00 applicable, and CRST's for different units issued into the names of different developers.
The identification of Real Right Areas with the sections on the plans lodged in terms of section 25(2)(a) and (b) of the Act, is proving to be a problem with certain conveyancers who have indicated that they have no experience in the examination of plans. In this regard it is suggested that where no such identification has been disclosed in the description of the cession of the portion of the real right, a certificate be obtained from the land surveyor identifying such portions with the sections indicated on the plans lodged in terms of section 25(2)(a) and (b).
It is important that these issues be resolved as the provisions regarding cessions of portions of real rights to extend in terms of section 25(4)(b) of the Act is proving to be increasingly popular with developers. In some cases, up to 150 split-rights have been registered for a development scheme.
In a previous newsletter, an article by Brian Daniels of Cape Town deeds registry also alluded to this problem and it was also mentioned there that where the split developers are juristic persons, the body corporate may never come into existence. This will create an untenable situation. It is thus proposed that the Deeds Regulation Board address this aspect as a matter of urgency - Editor(Deeds Registration Law Newsletter).
Republished with permission from the January Deeds Registration Law Newsletter