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Cession of a real right

26 April 2012

CESSION OF REAL RIGHT TO EXTEND
The developer who reserves a right in terms of section 25(1) or 25(6A) of the Sectional Titles Act 95 of 1986 ("the Act"), may cede such a right to another person, by the registration of a notarial deed of cession in terms of section 25(4)(b) of the Act. The cessionary of such a notarial deed of cession (the developers successor in title) will have the same rights and duties as the developer has had under the original reservation, in terms of section 25(1) or 25(6A) of the Act.

Such a cessionary must exercise the rights within the period stipulated in the original reservation and thus the buildings will have to be erected and completed within the stipulated period (RCR 1 of 1991). If he/she fails to do so, the right will lapse due to the expiry of the period for which it was reserved.

If the real right to extend the scheme has vested in the body corporate and the body corporate has obtained a certificate of real right for the right, such body corporate may, in terms of section 25(6) of the Act, transfer the whole of the real right, with the written consent of all the sectional unit owners, as well as with the written consent of the mortgagee of each unit. Although section 25(6) of the Act provides the authority for the body corporate to transfer such right, the procedure prescribed in section 25(4)(b) of the Act will be followed for the actual cession of the right. Thus, the body corporate will cede such a right to another person for a specified period of time (consult RCR 65 of 2009), by the registration of a notarial deed of cession. The cessionary of such a notarial deed of cession will have the same rights and duties as the body corporate has had under the original reservation in terms of section 25(6) of the Act.

The holder of the section 25 right, who acquired such right from either the developer or the body corporate, as explained above, may also, in terms of section 25(4)(b) of the Act, cede the real right to yet another person. Such cession of the right will also be effected by means of a notarial deed of cession, provided that each subsequent cessionary will only acquire the rights that were held by the cedent –special attention should be paid to the period for which the right has been reserved initially – every subsequent cessionary will acquire the right only for the remaining period.

Section 25(4A) provides that the Registrar may not register a cession of real right of extension or a portion or an undivided share therein, unless a certificate by a conveyancer is produced to the Registrar confirming that, as at date of registration, if a body corporate is deemed to be established in terms of section 36(1), the body corporate has certified that all moneys due to the body corporate by the cedent in respect of the said real right have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof; or that, if a body corporate is not deemed to be established, no moneys are payable.

A right of usufruct may not be registered over a registered section 25 real right, since the Act does not provide for such act of registration (consult RCR 6 of 2007).

Upon alienation by the body corporate of the right to extension of the scheme, the consent of the members of the body corporate must be obtained and lodged. The consent of usufructuaries over the units, however, need not be obtained (consult RCR 46 of 2007).

Transfer of a portion of a real right to extend
Section 25(4)(b) of the Act provides for the ‘holder’ of the real right to extension to cede a portion of the right so held by such holder. The ‘holder’ could be the developer who initially reserved the right in terms of either section 25(1) or section 25(6A) of the Act, or the body corporate who acquired the right in terms of section 25(6) of the Act, or someone to whom either the developer or the body corporate transferred/ceded the right.

Documentation to be lodged
For the cession of either the whole of the real right to extend or only a portion thereof, the following documentation must be lodged:

  • the title deed of the real right to extension – it could either be a certificate of real right in prescribed Form F (in favour of the developer) or in prescribed Form R (in favour of the body corporate) or a notarial deed of cession in favour of another person;
  • notarial deed of cession of either the whole or the portion of the right of extension to be ceded (section 25(4)(b));
  • transfer duty receipt or exemption certificate;
  • A certificate by a conveyancer confirming that, as at date of registration, if a body corporate is deemed to be established in terms of section 36(1), the body corporate has certified that all moneys due to the body corporate by the cedent in respect of the said real right have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof; or that, if a body corporate is not deemed to be established, no moneys are payable (section 25(4A)).
  • if the right to extension is encumbered by a registered sectional mortgage bond (registered in terms of section 15B(1) or section 13(3) of the Act) the bond and the bondholder’s written consent to disposal of the bond in respect of the right (or portion thereof) to be ceded (section 56 of the Deeds Registries Act 47 of 1937);
  • if only a portion of the real right is ceded, two copies of the sectional plan of the portion ceded, approved by Surveyor General (one copy gets filed with the notarial deed and one copy gets filed in the sectional file of the first phase), unless the subdivided right is identified to the satisfaction of the Surveyor General on the block plan or a separate section 25(4) plan (RCR 70 of 2011).
  • if the cedent is the body corporate, the written consent of all the sectional unit owners and all the sectional bondholders (section 25(6)).
  • A rates clearance certificate or a certificate by the local authority to the effect that the right (portion thereof) is not rated (consult RCR 65 of 2008).

Please note:

  • The time period is important as no right ceded can extend beyond the original period.
  • The cedent may only cede what he/she holds (no more than that); therefore, the original building and site plans filed with the first phase must be checked.
  • If the right is already encumbered by a registered sectional mortgage bond, cession of the right will only be allowed if the bond is lodged for disposal. Section 18 of the Act has recently been amended to provide for a substitution of debtor

Allen West
Deeds Training
Pretoria

Reader Comments: 5
Karien van der Merwe 30/04/2012:

Wat is die prosedure waar 'n ontwikkelaar byvoorbeeld hierdie right of extension vir die oprigting van 'n motorhuis aan die 1e eienaar gesedeer het en sodanige eienaar wel binne die tydperk van 10 jaar die motorhuis opgerig het en nou die eiendom verkoop? Soos ek dit verstaan moet die landmeter nou die EUA skep, waarna die huidige eienaar 'n aansoek moet bring om die motorhuis te registreer itv art 25(9) van Wet 95/1986. Klaarblyklik word die eenheid en motorhuis dan aan die Koper oorgedra, maar moet die huidige eienaar 'n verdere aansoek bring itv art 68(1) van Wet 95/1986 om die reg van uitbreiding te kanselleer? Wat moet ek alles indien by die aktekantoor en hoe lank neem hierdie proses ongeveer?

Shivani Singh 22/11/2013:

I am the chairperson of a body corporate of a fairly new development. The right of extension expired on the 31 March 2013. Three units of the complex were incomplete and the developer abandoned site as of April 2012 when the first phase of the development was registered and transferred. Now the developer has returned after seeking approval from the managing agent. The agent however did not get approval from the body corporate. What are the rights of the trustees? Can the developer still be allowed to complete the development 8 months after the right of extension as expired? Thank you

Richard 16/12/2013:

The developer of our scheme holds a Section 25 right to develop the balance of the scheme for another 40 years (originally 50). The development (vacant) land (some 50%+ of the scheme) is overgrown & there is an unregistered structure occupied by unknowns upon it representing various health & safety risks. It is a small complex (8 residences) & the owners cannot afford to maintain the vacant land over which they effectively have no benefit. What is the developer's duty i.r.o. the vacant land & what is the B/C liability? Thx Richard

Willie 11/11/2014:

I am a holder of such a Section 25 right to develop. My right lapses in 2025 and I have not yet erected any building or standing structure on the property. The Body Corporate has started billing me for levies on this real right that was ceded to me by the original developer before a Body Corporate was established. Am I liable for these levies if I have no use of any of the common property of the sectional scheme and have even been denied entrance to the estate? Regards

Lelanie van der Merwe 01/03/2017:

According to the article: "If the real right to extend the scheme has vested in the body corporate and the body corporate has obtained a certificate of real right for the right, such body corporate may, in terms of section 25(6) of the Act, transfer the whole of the real right, with the written consent of all the sectional unit owners, as well as with the written consent of the mortgagee of each unit. " Do you perhaps have an example of what such a consent entails and how it is drafted?

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