Paddocks have been presenting at the Estate Agency Affairs Board (“EAAB”) Continuous Professional Development (“CPD”) workshops currently being held across the country, and a question that has been raised on more than one occasion by the attendees to the workshop, relates to a developer’s reserved right of extension of a sectional title scheme, in terms of section 25 of the Sectional Titles Act 95 of 1986 (“the Act”). This section of the Act allows a developer to develop a sectional title scheme in phases.
In terms of section 25 (1) of the Act, the developer may, when making application for the registration of a sectional plan, reserve, as a condition imposed in terms of section 11 (2) of the Act, the right to erect, complete or include a building or buildings, a horizontal extension of an existing building, or a vertical extension of an existing building, on a portion of the common property within the scheme. This extension will then be divided into sections and common property, and may also include exclusive use areas.
The developer’s reserved right of extension must be exercised within a specific period of time, as stipulated in the condition imposed. However, this period of time may be extended if the members, via unanimous resolution, and all the bondholders consent to the extension of the period of time.
When making such a reservation, the developer will need to submit a plan of the building/s, which indicates the affected portion of common property; the siting, heights, coverage and elevation of the building/s; the entrances and exits; parking areas; and any building restrictions. The developer will further be required to submit a plan indicating the manner in which the building/s will be divided into sections and exclusive use areas. In terms of section 25 (13) of the Act, the extension must be exercised strictly in accordance with the plans submitted. As sections will be added to the scheme, the developer will also need to submit a schedule of the participation quotas of the sections following the addition of the sections forming part of the extension. The developer will need to indicate any substantial difference in the materials to be used in the construction of the building/s as compared to the building/s already established.
The developer’s right of extension is a real right and may be mortgaged and transferred via a notarial deed of cession. This right can be exercised by the developer or his successors in title, provided that it is exercised within the specified period of time or within the extended period, if approved by the members and bondholders.
Should the developer’s right lapse, due to the expiration of the prescribed time period or for any other reason, the right to extend the scheme will vest in the body corporate, who may submit new plans and exercise, alienate or transfer the right with the written consent of all the members of the scheme and that of all the bondholders.
As we have been advising the attendees of the EAAB CPD workshops, one of the most important things to remember relating to the developer’s reserved right of extension, is set out in section 25 (14) of the Act, namely the fact that this right must be disclosed in the deed of alienation (sale agreement) of every purchaser of a section in the scheme. Failing which, the deed of alienation is voidable at the option of the purchaser.
Article reference: Paddocks Press: Volume 10, Issue 6, Page 2.
Zerlinda van der Merwe has recently been admitted as an Attorney of the High Court. She is a specialist Sectional Title Attorney (BA LLB LLM) and soon to be qualified Conveyancer. Zerlinda forms part of the Paddocks Private Consulting Division and brings a wealth of experience and additional services. If you would like to schedule a consultation with Zerlinda, please contact Nicole on 021 686 3950 or firstname.lastname@example.org.
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