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Developer's powers - II

12 April 2012

The statements made by Mr. West regarding a developer’s powers (see Developer's powers) prior to the establishment of the body corporate need to be looked at carefully. Let us look at the situation from the beginning:

  1. The need for a registration process such as sectional titles was developed to satisfy a growing need in the economy of the world we live in. Regardless of whose example we followed in devising the South African sectional title Act, there was a real need for developers of all kinds of properties to be able to divide whatever buildings they developed into separate, registerable units. Until the advent of the Sectional Titles Act it was impossible to register any part of a building situated on one piece of land, short of subdividing the property in some practical way, in the name of someone other than the owner of the land. Leases, servitudes etc. were used to get around the problem, but this was not a satisfactory arrangement. It was difficult to use your right to raise funds by means of mortgage or otherwise. The Sectional Titles Act (STA) made it possible for developers to develop land for residential, commercial, industrial, etc. purposes and sell of separate parts of the building or buildings to separate purchasers. This made mortgage, letting etc. of the units by the separate owners possible and easy.

  2. The developer of an erf has all the normal common law rights that make up full ownership of land as we know it in the South African law.

  3. The developer when wishing to develop a sectional scheme on his land has a sectional plan prepared etc. and goes through the motions of having the plan registered in the deeds office and the sectional title register opened.

  4. There clearly are two distinctive phases in a sectional scheme that concern the Deeds Office for the purposes of this argument:

    i) the first phase from opening of the register to the establishment of the body corporate. The STA does not, in any manner, infringe on the developer’s rights of ownership until this point. In fact, the developer is issued with a title for every unit and exclusive use area, if any, forming part of the scheme. Also for a right to extend the scheme as envisioned in section 25(1) of STA if reserved. The definition of “owner” in STA does not exclude a developer in any way. STA does not state or imply that a developer’s powers or rights of ownership are “suspended” or reduced until such time as the body corporate is established.

    ii) The second phase is from the date of establishment of the body corporate onwards. These provisions of STA were necessary to inter alia protect the rights of parties who bought units in the scheme, both as opposed to the rights of the developer on the one hand, and the rights of other owners who bought units in the scheme. Obviously when a unit in the scheme is transferred to another person and the body corporate is thus established, the rights of the developer are then curbed obviously because others now have an interest in the scheme. This is when the second phase of the STA kicks in. The part where new owners and the body corporate are afforded rights by the legislator.

  5. The STA does not, in any manner, infringe on the developer’s rights of ownership until this point. In fact, the developer is issued with a title for every unit and exclusive use area, if any, forming part of the scheme. Also for a right to extend the scheme as envisioned in section 25(1) of STA if reserved. The definition of “owner” in STA does not exclude a developer in any way. STA does not state or imply that a developer’s powers or rights of ownership are “suspended” until such time as the body corporate is established.

  6. As the developer is an owner as defined in STA why would he not be entitled to subdivide, consolidate or extend any unit? Sections 22, 23 and 24 provide very clearly that it is the owner of a unit or units that may undertake such actions. If the body corporate has not been established there is no consent as envisaged in section 21(1) required. The developer complies mutatis mutandis with the requirements of section 21(1) and (2) as well as section 7(2). Certainly the developer may separately mortgage the units he holds, he may pass and register a lease over any such unit, he may grant a usufruct or habitatio over such a unit. Why? Simply because he is the registered owner of the units. He derives this ownership from the rights of ownership he had as owner of the erf on which the development or sectional scheme is situated. The legislator did not “afford” the developer such rights, as Mr. West alleges in his reply. The legislator did not inhibit the owner/developer’s rights, except that his rights now relate to sectional titles and not land. Until such time as the body corporate is established certainly the developer can make other changes that he wishes. What if a rule change is required by the developer? He is after all the person who imposed the first/existing set of rules, and as owner of the scheme he should not be prevented from exercising his right to amend the rules. Section 14(6) of STA is available to a developer to close a sectional register if he so wishes. Does that prevent the developer, as the registered owner of all the units in the scheme, from using section 48(1)(b) of STA, from deeming the buildings in the scheme to be destroyed and lodging with the Registrar the notice etc. as provided for in section 49(1) of STA? It would seem silly to deny him this right. Why can the developer also not extend the scheme by the addition of common property? If the developer owns or acquires land adjoining the land on which the scheme is situated, what will prevent him from having a plan of extension of the original scheme, which extension is situated on the “new” land, drafted, approved and submit same to the Registrar for registration? I do not see anything in the act preventing that. Should a registrar resist such registration I submit that that will be in contravention of section 26(5) of STA. Section 26(7) will simply apply to such extension of the scheme. Certainly the body corporate, if in existence, and being a creature of statute, is afforded that power by section 26(1) of STA. The developer, however, has that right inherently as owner of the scheme before the body corporate is established. The point of all of this is that there is no body corporate that needs to be consulted. All rights relating to the scheme vest in the developer, who cannot be prevented from exercising such rights.

  7. Once the body corporate is established I am certain Mr. West will have no objections to the developer subdividing, consolidating, extending units, etc. Why only then? The developer does not suddenly acquire rights by Immaculate Conception. He had those rights all along, as I illustrated above, only now he is subject to the rights and interests of other parties who are protected by the provisions of the STA. Before the body corporate there was no-one else to consider (let us also assume there is no bondholder for the sake of the argument) and all rights to deal with the scheme and its components vested in the developer.

  8. Mr. West’s statement:”…If the legislature had the intention of also affording the developer the powers alluded to, it would have been spelt out in the Act. The omission of such must clearly indicate that it was never the intention of the legislature and cannot be a common law right which is ultra vires the Act…” makes no sense then:

i) There was no “omission” on the part of the legislature. What is clear is that it was clearly not the legislature’s intention to inhibit the developer’s existing rights until third parties need to be considered. Only then does STA inhibit the developer’s rights of ownership;

ii) At most, as pointed out above, rights are afforded to others in a scheme when they become owners of units in the scheme. It may be better to say that their rights as owners of units are protected rather than that they are afforded rights. The developer has common law rights as owner of the scheme until establishment of the body corporate inhibits those rights;

iii) I fail to understand how it is possible that the common law can be ultra vires the STA in this instance;

iv) The statement earlier by Mr. West:”..On closer perusal of the Sectional Titles Act 95 of 1986….the above acts of registration only befall the owner of the section(s)(sic) or be done with the permission of the body corporate…” does not make sense in my view. The developer, before the body corporate is established, is an owner and the right to do these acts do in fact befall him as well. The whole thing works the other way round from how you perceive it to be, Mr. West. The developer has rights which the STA limits once others become involved.

Dudley Lee

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