Sectional Titles

Total recall – a response 2

I refer to the article by Mr Roelie Rossouw in connection with Registrars' Conference Ruling 2 of 2009 and I concur fully with his views and the points that he makes.

May I however draw attention to the following practical aspects which, in my view, are equally relevant:

  1. It is trite that a sectional plan must be prepared "… from an actual measurement undertaken by the land surveyor or architect …." (See section 6(1) of the Sectional Titles Act, (STA) as well as regulations 6 and 7). As a result of this it is clear that the sectional plans can only be submitted to the Surveyor General for approval once erection of the buildings is complete. The practical effect of this is that, when the documents for the registration of the sectional scheme are lodged in the Deeds Registry for registration, the buildings are already a fait accompli. Some of them may be occupied already. A question which then arises is what to do with the buildings which, by now already exist, if the Registrar rejects the application for registration of the extension of the scheme because of a discrepancy between the approved plans and the so-called section 25(2) plans. Just what sort or extent of deviation between the two sets of plans will trigger the rejection of the deeds and an application to court?

  2. Both the Court as well as the conference ruling seem to have lost sight of the fact that there is no requirement in terms of Section 25(2) for those ''phase'' plans to be prepared by a land surveyor, architect or other qualified person or that they be approved by the Surveyor General. Invariably these are layout / sketch plans, and it is difficult to see how the Registrar or the Surveyor General for that matter can be expected to determine the precise location of the buildings to be erected or, indeed, the division of those buildings into separate units or the location of exclusive use areas. Just what qualification do deeds registry examiners have that qualifies them (or anybody else for that matter) to determine that there is a deviation or the extent of the deviation. In some cases it will, of course, be clear. In other cases not. What occurs when the deviation is marginal or minimal? And why should a deviation of the plans be treated any differently from a deviation in the building materials used in a later phase or a deviation in the typical elevation of the new buildings - neither of which the Registrar can (or in fact does) properly police?.

  3. The intention of the legislator in placing the requirements of section 25 of the STA on the statute book was, I submit, to give potential purchasers and mortgagors and other interested parties an approximate indication only of how the developer intended extending the scheme in the future and was never intended to bind the developer absolutely.

  4. In fact, there are many conceivable deviations from the so-called phased development plans filed in terms of Section 25(2) which cannot, with any degree of certainty, be said always to be prejudicial to any owner. Each such deviation needs to be considered separately. An example could be where the original plans provided for, say, two bedroom units while the developer decides to erect one bedroom units instead. It is also possible that the developer may wish to construct fewer new buildings on the property but to change the location of those buildings on the common property. The permutations are endless. It is precisely for this reason that the legislature provided in section 25(13) that the right to object to such deviation should lie with an owner in the scheme who is prejudiced by the deviation and that the Court has the discretion whether or not to allow the deviation - or to award damages.

  5. There is, in any event, no bar to any developer lodging a variety of permutations either in relation to the Section 25(2) plans or the various certificates which need to accompany those plans when registering the first phase of the sectional scheme. This is a very effectual way or circumventing both the Dolphin Whisper case and the Registrars' Conference Ruling as there is nothing preventing the developer from hedging his bets as far as future developments are concerned.

Potential problems with the extension of sections in terms of section 24 of STA
The problems which have been alluded to above are, incidentally, also mirrored when it comes to the extension of sections in terms of Section 24 of the STA and in particular the question of bondholder's consents. Section 24 presently provides that where the PQ of any section will deviate by more than 10% as a result of the extension of any section, the consents of bondholders must be obtained. The problem here is that by the time application is made to the bondholders for their consent to the extension, the extension of the building is, once again, a fait accompli. Exactly what happens if a bondholder declines to consent at this late stage?

Other potential problems with section 25 (14) and (15)
Consider also the following potential problem and implications unrelated to the main issue under discussion but nevertheless involving the requirements of section 25(14) and (15) of the STA, namely that rights of extension need to be disclosed in a deed of alienation: The developer designs and plans the scheme as a single phase development and markets the entire scheme at a major launch of the development. Complete plans of the development are made available at the launch, and the units are sold off-plan at the launch. All purchasers are therefore fully aware of the proposed development. No reference is made in the agreements of sale to rights of extension - indeed, there are none!
The developer then commences the development but, along the way, decides - or is compelled - for various reasons, to do the development in two or more phases, but still in accordance with the original final version of the scheme which was marketed at the launch and without any deviations from those plans. The first phase of the scheme is then registered and the conveyancer prepares the transfer documents for the first transfer. The conveyancer is now reqiured to certify, in terms of section 15B(3)(a)(ii), that the rights of extension are disclosed in the agreement as provided for in section 25(14) - which, clearly, they are not.
In order to comply with section 15B(3)(a)(ii) , the conveyancer must now contact all purchasers and notify them of their ''rights'' to resile from the contract - alternatively to confirm in writing that they have elected to abide by the contract. In the present economic times this can be a major problem for developers as this is a convenient but unintended escape hatch for purchasers wishing to renege on their agreements to do so - to the substantial prejudice of the developer.

There are, unfortunately, many other anomalies and unsatisfactory aspects of the Sectional Titles Act which need to be addressed.

JO Christie
J Leslie Smith & Company Inc
7th September 2010

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