There are two main differences between share block and sectional title from an owner’s point of view. One is tenure, that is, what is actually owned and the other regards management of the scheme.
The share block scheme may be converted to sectional title. The process for the conversion is built into schedules attached to the Share Blocks Control Act. First the company must draft the documents necessary to illustrate to its members what the sectional plan will look like and what rules will apply. The rules must include various elements from the company’s memorandum of incorporation (memorandum and articles of association). The decision to prepare the documents may be taken by the directors or by 30% of owners. For the final decision to convert, after the documents have been inspected, at least half the owners must support the resolution and if the property is bonded the holder of the bond must agree.
From an owner’s point of view, the main advantage of converting is that they become owners of immovable property rather than of shares in a company. They then have all the advantages of property ownership, particularly to mortgage it under a home loan and thus get access to relatively inexpensive capital, and they can participate directly in the management of their asset via their membership of the body corporate.
Anton Kelly is the course instructor of the University of Cape Town (Law@Work) Sectional Title Scheme Management short course. Next course starts, 7 June 2013. For more information please contact Emma on 021 447 4130 or email@example.com.