Section 27A Exclusive Use Areas
It is absolutely clear that when dealing with a sectional title sale that includes an exclusive use area that has to be ceded by notarial deed (a section 27 EUA) it is essential that in the transfer duty receipt, the rates certificate, the power of attorney to transfer and the Deed of Transfer mention needs to be made of the fact that the EUA is part of the subject matter of the sale. The EUA would also have been referred to in the agreement of sale.
It is reasonable to assume that a residential (or commercial) section that is sold with an EUA (which may be a storeroom, a courtyard, a garage, a carport, an open parking bay or a garden to mention a few possibilities) will sell for a higher price than a section that does not have any such EUA. If such an EUA is not so referred to as before stated, the transfer of the section will not be able to proceed unless the conveyancer in error omits the cession of the EUA. Any person looking at the details of the sale (such as a municipal valuer or an estate agent) as recorded in the deed of transfer, and seeking to compare the sale with another will be able to understand a substantial difference in the sale price for two similar sections sold at the same time, if the one includes an EUA and the other does not.
It does not seem to be equally clear that a section 27A EUA should be referred to in the transfer duty receipt, power of attorney to transfer, and deed of transfer. I have discussed this with colleagues and find that my view that a section 27A EUA should be so disclosed is considered by some to be wrong. The basis of the view is that section 27A EUAs do not get transferred. The rights in respect of any section 27A EUA automatically follow the ownership of the section to which such right is linked in the rules of the scheme.
I acknowledge that the conveyancer has no function in effecting a transfer of the section 27A EUA but he does have a responsibility to purchaser, seller and the rest of the world to properly and accurately represent what is the subject matter of the sale, or putting it differently what was paid for by the purchase price.
The same assumption about price, referred to above, applies equally to a section 27A EUA and a section 27 EUA, but of course where a section 27A EUA is not disclosed even if it a part of the subject of the sale the transfer will proceed unaffected unless either the purchaser or the seller insists on disclosure of the section 27A EUA in the documents.
When two sections in a scheme are sold at the same time and the one sale includes a section 27A EUA and the other does not and the price for the one with the EUA is higher, anybody looking at the two deeds of transfer may be mystified as to why there is such a difference unless mention is made of the section 27A EUA. It is conceivable that SARS may look at two such transfers for guidance on what transfer duty to charge in a donation of a section with no section 27A EUA in the same scheme at the same time, and very understandably insist that the correct valuation for the donated section (without a section 27A EUA) is the same as the higher price paid for the section with a section 27A EUA that is not disclosed.
It is my view that every conveyancer who fails to disclose in the documents he/she prepares that a section 27A EUA forms part of the subject matter of the sale, if this is the case, is guilty of not only bad conveyancing but also professional misconduct.
What do you think? If you disagree why do you disagree? If you agree please say so.
Guthrie & Rushton
Attorneys Notaries & Conveyancers