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Conversion

7 December 2010

INTRODUCTION
Subsequent to the registration of the sectional plan effecting the conversion of a share block scheme into a sectional title scheme, the share block company may transfer units in the scheme to share block holders, or any third party. The transfer of units to share block holders is governed by the Share Blocks Control Act 59 of 1980, whilst the transfer of units from the share block company to another party, other than the share block holder, is governed by the Sectional Titles Act 95 of 1986.

It stands to reason that in view of the different legislation governing the transfers that the practices and procedures will differ. What follows is the standard documentation required with the transfer in terms of the different legislation, as well as the wording for the section 15B(3)certificates in each case.

TRANSFER OF A UNIT TO A SHAREHOLDER
The transfer of a unit is usually effected by virtue a sectional deed of transfer drafted in accordance with prescribed form H, and accompanied by the following:

  • the title deed of the unit (CRST in favour of the share block company);

  • all mortgage bonds (if any) over the sectional title scheme;

  • the written consent by such bondholders to the release of the unit from the operation of the bonds or the cancellation of the bonds (if applicable);

  • the special power of attorney to pass transfer;

  • the transfer duty receipt;

  • a rates clearance certificate for the land, if the transfer will result in the establishment of the body corporate, and a rates clearance certificate for the unit.

  • no section 15B(3)(c)affidavit need be lodged by the share block company.

  • the certificate by the conveyancer in terms of section 15B(3)(a) of the Sectional Titles Act which must contain the following information, depending on the circumstances.

    "That as at the date of registration of the transfer of the unit;

    if transfer will result in the establishment of the body corporate, that no body corporate is in existence, thus no money is payable;

    or

    if a body corporate is already in existence, that all money due to the body corporate has been paid or that payment has been secured to the satisfaction of the body corporate;

    and

    that no real right to extension of the scheme as contemplated by section 25(1) of the Sectional Titles Act has been reserved in favour of the share block scheme; or, if such right is so registered, that it is disclosed in the deed of alienation to the transferee as contemplated in section 25(14) or, if it is not so disclosed, that the transferee after the conclusion of the deed of alienation has in writing exercised his or her option in terms of section 25(15) and that he or she has elected not to annul the alienation on the ground of the said defect;

    and

    according to a sworn declaration or affidavit furnished by the share block company, the transferee has paid all the levies due to the company or has been secured to the satisfaction of the share block company;

    and

    that the share certificate, the signed share transfer form and the written waiver of the occupancy rights have been delivered, as provided for in item 8(3) of Schedule I to the Share Blocks Control Act."


    The causa of the transfer should be drafted along the following lines:

    "Transfer of the said unit arises from the following:
    The sale by private treaty on the … day of … [date] for the sum of … [purchase price of shares] of share block(s) No(s) … comprising … [number of] shares and linked loan account in … [full name of company], and the application by the transferee on the … day of … [date] for conversion of the transferee's right to occupy that part of the building shown and more fully described on sectional plan No SS … as section No … [number of unit and name of scheme] into sectional title ownership, such application being by way of exercise of the option conferred on the transferee by the provisions of item 8(1)(b) of Schedule I to the Share Blocks Control Act 59 of 1980."


    The date of the transaction reflected on the transfer duty receipt must be the date of the application for transfer of the unit - not the date of purchase of the shares.

TRANSFER OF A UNIT TO SOMEBODY OTHER THAN A SHAREHOLDER

The transfer of the unit will also usually be drafted in accordance with prescribed Form H to the Sectional Titles Act, and be accompanied by the following:

  • the title deed of the unit (CRST in favour of the share block company);

  • all mortgage bonds (if any) over the sectional title scheme;

  • the written consent by such bondholders, to the release of the unit from the operation of the bonds or the cancellation of the bonds (if applicable);

  • the special power of attorney to pass transfer;

  • the transfer duty receipt;

  • a rates clearance certificate for the land, if the transfer will result in the establishment of the body corporate, and rates clearance certificate for the unit;

  • a sworn affidavit/declaration by the share block company (as the developer) with regard to the applicability of section 10 to the specific unit, as provided for by section 15B(3)(c) of the Act;

  • conveyancer's certificate with regard to the special resolution reading as follows:

    "I, the undersigned … [particulars of conveyancer] conveyancer, hereby certify that the within sale is pursuant to Special Resolution passed in terms of section 8(1)(c) of the Share Blocks Control Act 59 of 1980 and therefore the other provisions of the Act are not applicable.

    _____________________    _______________
    [signature]                [date]
    CONVEYANCER"


  • The certificate by the conveyancer in terms of section 15B(3)(a) of the Sectional Titles Act which must contain the following information, certified by the conveyancer:

    "That as at the date of registration of the transfer of the unit -

    if transfer will result I the establishment of the body corporate, that no body corporate is in existence, thus no money is payable;

    or

    if a body corporate is already in existence, that all money due to the body corporate has been paid or that payment has been secured to the satisfaction of the body corporate;
    and

    that no real right to extension of the scheme is contemplated by section 25(1) of the Sectional Titles Act has been reserved in favour of the share block scheme; or, if such right is so registered, that it is disclosed in the deed of alienation to the transferee as contemplated in section 25(14) or, if it is not so disclosed, that the transferee after the conclusion of the deed of alienation has in writing exercised his or her option in terms of section 25(15) and that he or she has elected not to annul the alienation on the ground of the said defect;

    and

    according to a sworn declaration or affidavit furnished by the share block company, that arrangements have been made to the satisfaction of the share block company for the payment of all costs and the signing of all the documentation referred to in item 8(1)(c) of Schedule I to the Share Blocks Act (consult item 8(3) of Schedule I to the Share Blocks Act).


    The Causa for the Transfer of the Unit

    The causa for the transfer will not differ from the causa as contained in prescribed form H.

CONCLUSION
From a conveyancing perspective it is imperative to determine whether the transfer of the unit is to a shareholder or to someone other than a shareholder. When a share block company is transferring a unit it will either be to a shareholder or to someone other than a shareholder. The causa of the deed will be the guide as to whether the transferee is a shareholder or a person other than the shareholder.

The supporting documents and certificate from the conveyancer differs in the case where the transferee is a shareholder or someone other than a shareholder.

Allen West
Deeds Training
PRETORIA


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