FILTERS:

CRTs and lessees

20 October 2016

The question of whether a lessee can receive a Certificate of Registered Title (“CRT”) over its interest in a portion of land, the whole of which is subject to a registered long-term lease agreement, becomes relevant when the lessee wishes to mortgage its interest in such a portion.

There is no specific enabling provision in the Deeds Registries Act 47 of 1937 (the “Act”) which authorises the Registrar of Deeds (the “Registrar”) to issue a CRT in the above circumstances. Nonetheless, there is authority in favour of it.

The Registrars’ Conference Resolution 27 of 2014 held that an undivided share in a registered long term lease agreement may serve as security under a mortgage bond - as long as such an undivided share is held under its own separate title deed.

Further, section 3 (1) (r) of the Act provides that the Registrar shall “register any real right, not specifically referred to in this subsection….” As a registered right of long term lease is a real right, and the Act makes no specific provision for the registration of a CRT in these circumstances, section 3 (1) (r) could be relied on as an enabling provision, authorising the Registrar to issue a CRT to the lessee for the portion of the lease which the lessee intends to mortgage.

It must be noted that the above reference to a CRT will relate to a notarial certificate of lease in respect of the relevant portion.

Tetyana Lobachova
Candidate Attorney
Bowmans

Reader Comments: 6
John Christie 28/10/2016:

This opinion is patently incorrect. The suggested course of action here is clearly not possible.

Warren Hamer 31/10/2016:

This is an interesting article, I can find no fault in the opinion provided by the writer. Mr Christie, you are well known for your knowledge and expertise in conveyancing matters, can you elaborate on why the Registrar would not be permitted to register a notarial deed in terms of which the holder of the lease applies for the registration of a separate title for a portion of such lease, in accordance with the provisions of Section 3(1)(r)? Lastly, what would you do in such an instance, cancel the lease and register a new one? I look forward to further comments on this article.

Allen West 31/10/2016:

I fully concur with John Christie in that the DRA , more specifically section 3 (1) (r) , does not cater or allow for the subdivision of a real right such as a lease agreement . The one way of giving effect hereto would be to release the portion in question and thereafter register a new lease over such portion .

Warren Hamer 01/11/2016:

Dear Mr West, thank you for your comments, herewith some more fuel for the fire; Section 3(1)(r ) provides, "register any real right, not specifically referred to in this subsection, and any cession, modification or extinction of any such registered right; Section 3(1) deals with the duties of the Registrar and between subsection 3(1)(a ) to (z) covers all the registrars duties, so in the plain reading of Section 3(1)(r ) above and in the context of the rest of Section 3(1) how can we say that it does not cater for the registration as proposed in the article?

1) A registered lease is a real right,

2) The rest of Section 3(1) does not cater for the registration required,

3) The registration proposed has the effect of modifying a registered real right.

It is not always practical to cancel an existing right to achieve something as this more than often has security and cost implications. "My former mentor at Justice College in Pretoria inspired me not to let a matter go until I was fully convinced of the answer!" I look forward to further comment from this mentor!

Allen West 02/11/2016:

Warren, I would be very hesitant to read into the referred to section the taking out of a CRT as a modification. I think, using the rules of interpretation of statutes, that the literal meaning be afforded. As always I am open to be convinced otherwise.

THOBELANI MSANI 03/11/2016:

While it seems too far fetched to extend section 3(1)(r) of the Deeds Registries Act to cover the situation which is being discussed, I think the legislature needs to consider consistency of law. In my mind the situation is analogous to section 25(4) of the Sectional Titles Act. In other words if a real right of extension of a scheme can be subdivided (a CRT amounts to subdivision in the situation being discussed) why would a lease not be treated the same. Quite clearly the situation would also need a sub-lease diagram.

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