Ownership in respect of sectional title property is a creature of statute, constituting a concept of a dualistic system of ownership of property. Legislation created legal objects in the form of the concepts "section"," unit" and "common property" - legal objects that are registered as immovable property. Section 16(3) of the Sectional Titles Act 95 of 1986 ("the Act") illuminates the correlation between the said concepts, providing that a section and its undivided share in the common property shall together be deemed to be one unit, and no section shall be disposed of or otherwise dealt with apart from its undivided share in the common property.
Furthermore it is prescribed that, with the exception of dealings in terms of section 17 of the Act, no undivided share in the common property shall be disposed of or otherwise be dealt with apart from the section to which it pertains. Section 17 of the Act provides for certain sundry dealings with the common property, namely leases of (any part of the) common property and/or alienation of (any part of the) common property.
When contemplating and analyzing the possible dealings with the common property of a sectional title scheme, it is of vital importance to determine what the concept "common property" encompasses when used in the Act. In section 1 of the Act, the concept is defined to include all the land in the scheme (including land acquired in terms of section 26 of the Act) and all such parts of the buildings(s) not included in sections. However it should be understood and borne in mind that the sections, exclusive use areas and the real right to extension of the scheme as provided for in section 25 of the Act, are depicted/situated on the common property comprised in a sectional title scheme.
The practical implication is that the body corporate may be authorized to alienate a portion of the common property, which alienation could directly affect the existence of a section, exclusive use area and/or the right to extension of the scheme as contemplated by section 25 of the Act. Depending on the exact location of the portion of the common property to be subdivided and the already registered sectional rights over such portion (e.g. ownership in respect of a section; the right to exclusive use of a specific area; and/or the right to extension of the scheme), the registration procedure could become immensely intricate. To add to the already complex registration procedure it should be borne in mind that the subdivision of the common property ultimately results in the removing of a portion of the sectional title scheme from such scheme and reverting back to the conventional land register where it will be regarded as a portion of conventional land again.
In an attempt to understand the registration procedure logically, you are required to visualize a picture of a buttered slice of bread. The buttered slice is to be divided and a portion thereof is to be delivered to another person. However, the portion to be delivered must be unbuttered. Therefore, before the slice can be divided or delivered, the butter must be removed from the portion to be delivered. The slice of bread represents the underlying land (common property) on which the sectional title scheme (represented by the butter) has been developed. When subdividing the common property, the ultimate objective is to transfer a portion of land, to be vested in the acquirer (transferee) thereof in conventional freehold ownership of land (the portion of the slice of bread without the butter).
Each of the above mentioned registered sectional title rights can be represented by a different topping - thus, it is possible to have a slice of bread with butter, ham, tomato and cheese on it, but the portion to be delivered must be free of all the toppings. Therefore each of the toppings must first be removed. The same principle applies to the subdivision of the common property: before the portion of the common property may be transferred as a portion of land, all the already registered sectional title rights must be removed (cancelled).
In this article, the procedure for the subdivision of the common property where no other registered sectional rights (no sections, no exclusive use areas, and no section 25 rights) are involved will be discussed.
Prior to lodgement of the appropriate documentation at the deeds registry, the following preparatory steps should be taken:
- The transferee should obtain provisional approval of the subdivision of the common property from the trustees of the body corporate. The transferee and the trustees of the body corporate should already reach a preliminary agreement in respect of the intended subdivision, any consideration payable by the transferee and any other conditions applicable to the transaction.
- The transferee should request a land surveyor to draft a plan of the intended subdivision, if such portion of the land is not yet depicted as a separate registerable/registered entity on an existing diagram.
- The transferee must obtain as certified by two trustees, a copy of the unanimous resolution taken by the owners of the units in the sectional title scheme, authorizing the body corporate to alienate the portion of the common property.
- The transferee must apply to the local authority for the approval of the proposed subdivision.
- The transferee must make the necessary financial arrangements for the payment of transfer duty on the transaction.
- The transferee and/or the body corporate must consult with an attorney/conveyancer for the drafting and preparing of the required documentation starting with the deed of sale to be signed by the parties.
- The plan of subdivision is to be approved by the Surveyor-General
The responsible conveyancer must ensure that the following documentation is drafted and/or obtained:
- the plan of subdivision approved by the Surveyor-General;
- all the necessary consents/approvals to the subdivision required by law (e.g. the approval by the local authority);
- a copy of the unanimous resolution, certified by two trustees;
- the deed of sale between the body corporate and the transferee;
- a transfer duty receipt;
- a clearance certificate for the land;
- a special power of attorney to pass transfer, signed by the trustees of the body corporate or their duly appointed representatives;
- a deed of sub divisional transfer; and
- the consent to the subdivision of the common property of all mortgages, and the release of the portion of the common property from the working of the bonds as prescribed by section 18 of the Act (which refers to section 56 of the Deeds Registries Act 47 of 1937).
The deeds and documents to be lodged at the deeds registry will be:
- a deed of transfer in the prescribed FORM H in Annexure I to the regulations (section 17(3));
- a copy of the unanimous resolution, referred to in section 17, certified by two trustees of the body corporate (section 17(1) and section 17(2) and CRC 18 of 1997);
- a diagram approved by the Surveyor-General - if the portion of the common property to be alienated has not been demarcated and depicted on an already existing Surveyor-General approved diagram (section 17(3)(a) and CRC 18 of 1997);
- all the mortgage bonds over the units and the scheme and related written consents of bondholders in terms of section 56 and section 57 of the Deeds Registries Act for disposal in respect of the portion concerned (section 18; RCR 35 of 2002 and RCR 45 of 2003); and
- all usual prescribed documentation e.g. a special power of attorney to pass transfer, a transfer duty receipt, rates clearance certificate for the land, usual documentation pertaining to the subdivision of land, etc.
Both conveyancers and deeds examiners should pay attention to the following:
- The deed of transfer is prepared in accordance with prescribed FORM H in Annexure I to the regulations with the description of the portion of the common property along the lines of paragraph 2 in the said prescribed FORM H.
- Although the deed is drafted in accordance with the form of a sectional deed of transfer and is registered as such, it is re-registered as a conventional deed of transfer to reflect the reversion of the particular portion of the common property to the conventional land register.
- The description of the transferor will be in accordance with section 36(3) of the Sectional Titles Act (similar as explained above under the letting of the common property).
- Although section 17 of the Act explicitly permits the body corporate to alienate the common property, or a portion thereof, it remains the common law right of the developer to subdivide or alienate the common property prior to the establishment of the body corporate (RCR 40 of 2002).
- One of the differences in procedure between the registration of a lease agreement and the registration of the alienation of the common property is that, unlike with notarial lease agreements, a copy of the unanimous resolution must be lodged when the alienation of the common property is to be registered.
- Although section 17 of the Act does not explicitly prescribe the lodgement of a rates clearance certificate, it must be borne in mind that upon registration, the common property reverts to the conventional land register. Therefore section 92 of the Deeds Registries Act is applicable to the transfer of a portion of the common property and in terms of the said section 92 a rates clearance certificate by the local authority must be lodged for this transaction.
- In terms of section 17(3)(b) of the Act the registrar of deeds must inform both the Surveyor-General and the local authority of the reversion of the land to the conventional land register (CRC 18 of 1997).
- Section 17(5) of the Act provides that upon the alienation of the whole of the common property comprised in the sectional title scheme, the title deeds of all other real rights registered in the land, excluding mineral rights, shall be surrendered to the registrar of deeds for endorsement. However, it seems that the Act is silent with regard to the lodgement and endorsement of such affected rights upon the transfer of only a portion of the common property. It is submitted that, if other real rights are affected by the transfer of a portion of the common property, the title deeds of such rights should be lodged for endorsement.
- No sectional title deeds of units need be lodged. Thus, no sectional title deeds of units will be endorsed.
The procedure as discussed above is a personal recipe for the removing of the butter from the slice of bread and the subsequent dividing of the slice to deliver a portion thereof to another person. However, the recipe is not guaranteed infallible.
(This is the first article in a series of four, republished from the SA Deeds Journal)