Total recall

1. INTRODUCTION

It is well known that:

1. the provision of infrastructure (including, but not limited to streets, electricity, water reticulation, sewage disposal and storm water disposal) regarding a number of housing units is cheaper and quicker to install if those housing units are situated on one erf (regarding which a sectional title register is then opened) than if those housing units are situated on separate serviced single residential erven;
   
   
2. sectional title development makes it possible to provide more housing units on less land cheaper than would have been possible to do had the same number of housing units been erected on separate single residential erven;
   
   
3. the economic viability of development schemes consisting of large numbers of housing units depends, inter alia, thereon that the relevant developer should be able to:
   
   1. erect and sell the housing units in phases so as to enable him to use the proceeds of the earlier phases to fund the later phases; and
      
   2. adapt later phases in the sectional title scheme so as to build what the market, from time to time, requires.
      

1. The legislator, in section 25 of the Sectional Titles Act 95 of 1986 (hereinafter referred to as "the Act") (assented to 8 September 1986) and regarding which Act the date of commencement was 1 June 1988, provided a much better way of developing in phases than was possible under the Sectional Titles Act 66 of 1971 which Act 66 of 1971 was repealed by the Act. The relevant provisions of section 25 of the Act are the following:
   
   25 (1) A developer may...reserve....the right to erect and complete from time to time, but within a period stipulated in such condition, for his personal account-
   (a) a further building or buildings;
   (b) a horizontal extension of an existing building;
   (c) a vertical extension of an existing building,
   on a specified part of the common property, and to divide such building or buildings into a section or sections and common property and to confer the right of exclusive use over parts of such common property upon the owner or owners of one or more sections.
   
   (2) In the event of a reservation in terms of subsection (1), the application for the registration of the sectional plan shall....... be accompanied by-
   (a) a plan to scale of the building or buildings to be erected and on which-
   (i) the part of the common property affected by the reservation;
   (ii) the siting, height and coverage of all buildings;
   (iii) the entrances and exits to the land;
   (iv) the building restriction areas, if any;
   (v) the parking areas; and
   (vi) the typical elevation treatment of all buildings,
   are indicated;
   (b) a plan to scale showing the manner in which the building or buildings to be erected are to be divided into a section or sections and any exclusive use areas;
   (c) a schedule indicating the estimated participation quotas of all the sections in the scheme after such section or sections have been added to the scheme;
   (d) particulars of any substantial difference between the materials to be used in the construction of the building or buildings to be erected and those used in the construction of the existing building or buildings;
   
   (13) A developer........ shall be obliged to erect and divide the building or buildings into sections strictly in accordance with the documents referred to in subsection (2), due regard being had to changed circumstances which would make strict compliance impracticable, and an owner of a unit in the scheme who is prejudiced by his failure to comply in this manner, may apply to the Court, whereupon the Court may order proper compliance with the terms of the reservation, or grant such other relief, including damages, as the Court may deem fit.(my underlining)
   
   (14) In all cases where a developer or a body corporate has a real right to extend a scheme as contemplated in this section, such right shall be disclosed in the deed of alienation to every purchaser of a section in the scheme concerned.
   
   (15) (a) A deed of alienation in which a real right has not been disclosed as contemplated in subsection (14), shall be voidable at the option of the purchaser.
   
   3. DISCUSSION OF LEGISLATION
   
   
   1. Section 25 of the Act thus provides that a developer may develop in phases and, should he wish to do so he is obliged to, when the sectional title register is initially opened, lodge a plan and other documents (hereinafter referred to as "the Section 25(2) Plan") which depicts the scheme as it will look like after all the phases have been completed.
      
      
   2. The Act protects the buyers of units in earlier phases by providing that the fact that the scheme will be developed in phases needs to be disclosed in the agreements of sale of those buyers. A buyer, before signing the agreement of sale, can then inspect the Section 25(2) Plan and make sure that he is satisfied with what will be built in the further phase(s) of the relevant scheme. Should the developer deviate from the Section 25(2) Plan then the owner of a section in an earlier phase may, if he believes that he is prejudiced by the developer's deviation, apply to Court for an order obliging the developer to comply with the Section 25(2) Plan or for such other relief, including damages, as the Court may deem fit.
      
      
   3. The Act gives the right to thus apply to Court only to owners of sections in the relevant scheme and, therefore, not to owners of neighbouring land or anybody else including the Registrar of Deeds. By granting the right to apply to Court to only 'owners of sections' section 25(13) of the Act does thereby on the expressio unius est exclusio alterius principle, exclude such a right regarding everybody else (I know that the maxim is one which should be applied with great caution but I am of the opinion that it can and should be applied here as common sense dictates that it is only the owners of sections in the relevant scheme who will be affected by the developer's deviation from the Section 25(2) Plan).
      
      
   4. Members of the public at large are protected by section 4(5) of the Act which provides that an Architect or Land Surveyor may only prepare the sectional plans of any phase if the buildings in that phase comply with the operative town planning scheme, the statutory plan or conditions subject to which the development was approved in terms of any law at the date of approval of the building plans and the buildings have been erected in accordance with all applicable building regulations or building by-laws in operation at the date of erection. If the buildings regarding the relevant phase do not comply with the said requirements the Architect or Land Surveyor, as the case may be, should apply to the local authority concerned for condonation of such non-compliance failing which he may not lodge the sectional plan for approval by the Surveyor General.

4. STANCE OF REGISTRARS OF DEEDS PRIOR TO DOLPHIN WHISPER


1. It would appear as if the Registrars of Deeds initially agreed with the interpretation of section 25(13) of the Act as set out paragraph 3 above as they, as stipulated in Deeds Registries Registrars' Conference Resolution no. 4/1994, decided that it is not the responsibility of a registrar to ensure that the exercise of a right of extension in terms of section 25 of the Act is in accordance with the plans submitted in terms of section 25(2) of the Act. (The following passage in an article by Lotz and Nagel in TSAR 2007.3 at 566 which is referred to in the 'Dolphin Whisper Decision" (which decision I will deal with later in this memorandum) is also relevant and reads as follows: "Die registrateur het in Desember 1993 in 'n omsendbrief bepaal dat dit nie die plig van die akteskantoor is om hierdie konsepplanne na te gaan nie, maar dié van die plaaslike owerheid. Derhalwe is daar geen ondersoekplig op die registrateur om te kontroleer dat ? uitbreiding van ? deeltitelskema streng ooreenkomstig die konsepplan geskied nie (Van der Merwe 12-27). In die praktyk beteken dit dat die (deel)plan wat met die reg op uitbreiding handel (nuwe fase), nie met die konsepplan vergelyk word om afwykings te bepaal nie. Eweneens is die plaaslike owerheid prakties gesproke ook nie in só ? kontroleposisie nie. Daar is regtens ook nie ? plig op die landmetergeneraal om die konsepplan met die nuwe (konsep) deelplan rakende die nuwe fase te ondersoek en te vergelyk nie.")
   
   
2. For the approximately 22 years from 1 June 1988 to the date on which the Registrars of Deeds started to apply Deeds Registries Registrars' Conference Resolution no. 2/2009 (hereinlater dealt with) developers could (and did) deviate from the relevant Section 25(2) Plan after making sure that such deviations did not have the effect of any owner of a unit in the relevant scheme being prejudiced by the developer's failure to comply with the Section 25(2) Plan. It was thus possible for a developer to, when the market dictated that three-bedroom units were in demand, plan a section title scheme with say 50 three-bedroom units, build and sell a first phase consisting of 10 three-bedroom units and then, should the market at that stage dictate that two-bedroom units were in demand build a second phase consisting of 15 two-bedroom units etc. It made it possible for developers to provide what the consumer required.
   

5. THE DECISION IN DOLPHIN WHISPER


1. On 23 March 2009 judgement was delivered by Zondi J in the Western Cape High Court, Cape Town in the, as yet, unreported Case No: 20645/08 in the matter between Dolphin Whisper Trading 10 (Pty) Ltd v the Registrar of Deeds and the Body Corporate, Skilliepark 2 (herein referred to as "the Dolphin Whisper Decision"). Paragraphs [38] to [42] of Zondi J's judgement reads as follows:
   "[38] The question is whether the applicant has shown that there were "changed circumstances" which made strict compliance with the documents lodged in terms of section 25(2) of the Act impracticable.
   
   [39] It is clear that the Act does not define changed circumstances. In Knoetze v Saddlewood CC [2001] 1 ALL SA 42 (SE) the term was held to be wide enough to embrace changed market conditions having regard to the commercial context of the legislation and further that it was not confined to a physical state of affairs.
   
   [40] It is also correct that the Act does not make it clear whether it is the registrar or a Court which is empowered to determine what conditions will constitute "changed circumstances".
   [41] I agree with Mr Papier's contention that the registrar of deeds is not in a position to determine whether "changed circumstances would make strict compliance impracticable". It is for the Court to make that determination." (my underlining).
   
   [42] It is correct that in terms of the Act the sections must be divided strictly in accordance with the documents submitted when the right was reserved. Where, however, it is not practicable to do so because of the existence of "changed circumstances" the Court, may on application by a developer, condone noncompliance with the provisions of the Act. The onus is on a developer pleading "changed circumstances" to set out fully facts indicating the nature and extent of the "changed circumstances" relied upon and how they came about."
   
   
2. I agree with Jondi J's finding that it is for the Court to determine whether there are "changed circumstances (which) would make strict compliance (with the Section 25(2) Plan) impracticable" but only if the matter is brought before the Court by "an owner of a unit in the scheme who is prejudiced by" the developer's failure to comply with the Section 25(2) Plan. Section 25(13) of the Act cannot be interpreted to mean that any developer who deviates from the Section 25(2) Plan, even if no owner of a section in the relevant scheme complains, should apply to Court. That is not what section 25(13) of the Act provides for. What section 25(13) provides for is that:
   
   1. The developer should, under normal circumstances, strictly comply with the Section 25(2) Plan but;
      
   2. if it would not be 'practicable' to thus comply due to 'changed circumstances' the developer may deviate from the Section 25(2) Plan (without anybody's consent) provided that if;
      
   3. the developer's failure to comply leads to any owner of a section in the relevant scheme to be 'prejudiced' that owner (but nobody else) may apply to Court for appropriate relief.
      
   4. If the developer deviates from the Section 25(2) Plan but no owner of a section in the relevant scheme feels 'prejudiced' enough to apply to court the Registrar of Deeds should register the sectional plan. He cannot, on behalf of the owners, decide that they may be 'prejudiced' and that the matter should be referred to Court.
      
      
6. REGISTRARS CONFERENCE RESOLUTION NO. 2/2009


1. The Registrars of Deeds, in view of the Dolphin Whisper Decision, passed Deeds Registries Registrars' Conference Resolution no. 2/2009 which reads as follows:
   "Where the Registrar of Deeds determines that there is a deviation from the section 25(2) plans, such a deviation must be sanctioned by an order of Court. RCR 10/2005 and RCR 4/1994 are hereby withdrawn."
   
   
2. I am of the opinion that the Registrars of Deeds passed a resolution based on an incorrect interpretation of Zondi J's judgement and one which they, in any event, are not able to properly enforce as many deviations from the Section 25(2) Plan are such that a Registrar of Deeds will not be able to determine that there is a deviation by a reference only to the documents lodged when a scheme is extended in terms of section 25 of the Act. One can take the following as examples:
   
   1. the case where, in order to protect the sea views of the units in the first phase of the particular scheme, provision is made in the Section 25(2) Plan for the units in the later phases to have flat roofs. Should the developer then build pitched roofs the Registrar of Deeds would not be able, from the documents lodged when the scheme is extended, to determine that there is such a deviation. The reason being that unlike the Section 25(2) Plan a Sectional Plan of Extension of a Scheme does not show the elevation of the buildings.
      
      
   2. The case where the Section 25(2) Plan provides for no substantial difference between the materials to be used in the construction of the building or buildings from those used in the first phase but the developer then uses completely different materials. The Registrar of Deeds would not be able to determine that there is a deviation as a Sectional Plan of Extension of a Scheme does not indicate the materials that were used.
      
3. It now happens that applications for the extension of schemes are rejected by the Registrar of Deeds when he determines that there is a deviation from the Section 25(2) Plan and regardless of how small that deviation may be. The Registrar of Deeds has also indicated that a court order will be required regarding each and every application for the extension of a scheme where there is such a deviation even if the deviation is consented to by each and every owner of a section in the scheme.


7. CONCLUSION


1. I am of the opinion that section 25(13) is clear in that it provides that the developer of a further phase in a sectional title scheme is only obliged to erect and divide the building or buildings into sections strictly in accordance with the Section 25 (2) plan if there are not "changed circumstances which would make strict compliance impracticable". Section 25(13) of the Act does not provide that the developer needs to apply to Court to obtain an order condoning his deviation from the Section 25(2) Plan. What section 25(13) provides for is that "an owner of a unit in the scheme who is prejudiced by (the developer's) failure to comply...may apply to the Court, whereupon the Court may order proper compliance with the terms of the reservation, or grant such other relief, including damages, as the Court may deem fit." A developer may, when he subjectively determines that there are "changed circumstances which would make strict compliance impracticable", deviate from the Section 25(2) Plan provided the deviation is such that it does not prejudice the other owners in the relevant scheme. Only the other owners in the relevant scheme will be able to decide whether they are prejudiced. Any existing owner can then, if he feels prejudiced, apply to Court for the relief provided for in Section 25(13) of the Act. This interpretation worked well for 22 years and there was no reason to adopt a different one.
   
   
2. I am of the opinion that the conveyancing fraternity and property developers should use all means to their disposal to convince the Registrars of Deeds that Deeds Registries Registrars Conference Resolution no. 2/2009 needs to be recalled and Deeds Registries Registrars Conference Resolution no. 4/1994 re-instated. The implementation of Deeds Registries Registrars Conference Resolution no. 2/2009 will lead to time delays and incurring of legal costs which will detrimentally affect the ability of developers to provide affordable housing units.

Roelie Rossouw
5 July 2010