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Registrars Conference Resolutions

15 July 2004

The Registrars' Conference was held from 26 to 28 November 2003. The conference resolutions are all straightforward. I will, however, discuss a few in order to highlight certain practical aspects in relation to topics dealt with by such resolutions. I will quote the relevant resolution in full and thereafter discuss the practical aspects alluded to above.

RCR 3/2003
The opinion exists that section 42(2) of the Administration of Estates Act No 66 of 1965 does not find application with the transfer of an estate in terms of section 18(3) of that Act. A Power of Attorney to transfer land in terms of section 18(3) does, therefore, not have to be endorsed with a section 42(2) endorsement.

Resolution
Section 42(2) of the Administration of Estates Act does not find application.

In practice practitioners have a tendency of referring to the "representative" as the "executor" in the power of attorney and the relevant deed. As soon as one sees the word "executor", the principles relating to the requirements that an executor has to comply with immediately come to the fore. Certainly section 42(2) is one of them. A certificate of appointment in terms of section 18(3) is usually lodged in these cases. The Deeds Registries Act, however, does not require the lodgement of such certificates. All that regulation 44A(c) provides is that the preparer who signs the prep clause of the relevant power of attorney to pass transfer accepts responsibility for the fact that the representative has in fact been appointed in such capacity and that she or he is acting in accordance with the powers so granted.

In short, if the law would be applied to its letter, then the representative has to be referred to as such and not as an executor. Where the certificate referred to above has been lodged, however, the principle contained in this resolution should be applied even if the representative has been referred to as the executor.

RCR 9/2003 Section 4(1)(b)
Where the cost clause of a bond is reflected as R0, 00, may the clause be amended in terms of section 4(1)(b) of the Deeds Act 47 of 1937 ("the Act") to reflect the cost clause to be R27 000,00, given the fact that the bond is a covering bond? If not, how should the matter be rectified?

Resolution
The omission cannot be rectified in terms of section 4(1)(b) or by virtue of an agreement in terms of section 3(1)(s) of the Act. The existing bond will have to be cancelled and a new covering bond registered.

On many occasions the error referred to above has been rectified by the use of the provisions of section 4(1)(b). This resolution has been included solely for the purposes of urging examiners to be always on the alert whenever a section 4(1)(b) application is lodged for the purposes of amending a cost clause in a bond.

RCR 16/2003 Section 95
Should the provisions of section 95 be applied and insisted upon where a document is executed outside the Republic of South Africa and duly authenticated in terms of Rule 63 of the High Court Rules?

Resolution
No. Section 95(1) only refers to a power of attorney executed within the Republic of South Africa.

Powers of Attorney executed outside the Republic are few and far between. Thus, whenever one sees a power of attorney the provisions of section 95 immediately come to the fore. This resolution is included in the discussion solely to implore examiners to remember that they should not insist on compliance with section 95 where the power of attorney has been executed outside the Republic.

RCR 25/2003
Does the prohibition on an alienation condition in a deed also include mortgage? The question often arises whether such a registered constraint on alienation also prohibits mortgage?

Resolution
Yes. See Jones 4th Edition, page 450.

This resolution is included solely to remind examiners of the importance of examining the conditions of title whenever property is to be hypothecated, lest there is a restriction on alienation.

RCR 29/2003
Property is sold for R500 000,00. The bare dominium is registered in favour of a minor and the usufruct in favour of a major. The conveyancer certifies that the value of the bare dominium is R52 000,00. Is the Masters consent acceptable or must a Court order be lodged?

Resolution
Section 80 of the Administration of Estates Act provides that where the value of immovable property being alienated is in excess of R100 000,00, the approval of the High Court is required. A court order must therefore be lodged.

This resolution constitutes a proper interpretation of section 80 of the Administration of Estates Act. The said section refers to the value of the immovable e property concerned and not to the value of any right that a minor may have therein.

RCR 35/2003
In view of the definition of a sectional mortgage bond, may a sectional bond be registered in respect of a short-term lease?

Resolution
The definition of a sectional bond must be read with the provisions of the Act. Registered short-term leases can therefore not serve as security under a sectional mortgage bond.

In an endeavour to find an answer to the question posted, Conference resolved to read the definition of a sectional mortgage bond in conjunction with the provisions of the Deeds Registries Act. In this regard the provisions of section 3(1) of the Sectional Titles Act motivated Conference.
The said section provides as follows:
"Save as otherwise provided in this Act or in any other law or the context otherwise indicates, the provisions of the Deeds Registries Act shall, in so far as such provisions can be so applied, apply mutatis mutandis in relation to all documents registered or filed or intended to be registered or filed in a deeds registry in terms of this Act."

In view of the above provisions, Conference went on to determine whether or not a sectional mortgage bond is registrable over a short term lease by making reference to the definition of a mortgage bond as contained in the Deeds Registries Act.

It is common cause that the Deeds Registries Act defines a mortgage bond as a bond that hypothecates immovable property. It is also common cause that a short-term lease is not immovable property as per the definition of immovable property in the Deeds Registries Act. On the basis of this analogy, Conference resolved that a sectional mortgage bond is not registrable over a short-term lease.

It is, with respect to Conference, my humble submission that Conference incorrectly applied the provisions of section 3(1) of the Act in this instance.

The crucial part of section 3(1) reads as follows:
"in so far as such provisions can be so applied."

The crucial question here is whether it is correct or not to apply the definition of a mortgage bond in the Deeds Registries Act for the purposes of determining what constitutes a sectional mortgage bond. In my view, for two reasons, to do so is not correct.

Firstly the Act contains a definition of a sectional mortgage bond. For the purposes of the instant case, the relevant part thereof reads as follows:

"(b) a registered lease or sub-lease of any such unit or undivided share in a unit or land,"

It is clear that the definition relates to both long-term and short-term leases. The distinction that is introduced by the resolution is, in my view, not justified.

Secondly, the resolution is not in line with the judgment in Commissioner of Inland Revenue v Estate Hewlett 1990 (2) SA 786 (A). In this case the use of a definition in one statute for the purposes of another statute came to the fore.

In delivering judgment, Friedman AJA, at pages 797-798, stated as follows:
"This line of reasoning is to my mind unsound. It involves reading into one Act (the Estate Duty Act) a definition from another act (the Income Tax Act) for a word ("donation") which, although undefined in the former Act, has a settled common law meaning differing substantially from the statutory definition sought by this argument, to be attributed to it.

Moreover, the two Acts are not, as counsel contended, I>in pari materia. Statutes are said to be in pari materia when they relate to the same person or thing ... it is not enough that they deal with a similar subject matter. There is accordingly no warrant, in the absence of any cross-reference to the Income Tax Act, for assigning the definition in that Act to the word "donation" in section 3(3)(c) of the Estate Duty Act."

The gist of the above reasoning is that, in the absence of cross-reference, it is inappropriate to use a definition in one Act for the purposes another Act, unless the said statutes are in pari materia.

The question that then arises is, what are the legal implications of the resolution? The answer to this question is not hard to find. It follows as a matter of logic that, in the light of the resolution, a sectional mortgage bond is not registrable in respect of a short-term lease and that a short-term lease can only be hypothecated by means of a notarial bond since it constitutes movable property as contemplated in the Deeds Registries Act. Another legal implication of the resolution is that bonds hypothecating short leases will no longer be prepared by a conveyancer but by a notary.

At this stage it is important to draw the readers' attention to a recent amendment to the Act. Section 1 of the Sectional Titles Amendment Act No 29 of 2003 amends the definition of "owner" in the Act so as to omit reference to notarial bonds in the said definition. The motivation for the said amendment was the fact that the definition of "owner" contained reference to notarial bonds, which reference was viewed as being superfluous since the Act deals primarily with immovable property and real rights over immovable property, yet notarial bonds constitute movable property.

The question that then arises is, where to from here?
In other words do we amend the definition of owner to make reference to notarial bonds again or do we move for the repeal of the resolution or should the definition of a sectional mortgage bond be amended so as to apply to long-term leases only? In my view, for the reasons stated above, the repeal of the resolution is the appropriate way forward.

The above observations are made solely for the purposes of stimulating a debate with regard to the said resolution and should under no circumstances be used for pursuing private agendas. For those who wish to question the reason why I did not raise this issue at the Conference, the answer is simple. There were many items for resolution by Conference, and this was one of the items for which I did not have enough time to undertake research. With regard to those items that I had time to undertake research, I contributed extensively in the resolutions concerned.

The intention here is not to give a detailed exposition with regard to the use of a definition from another Act. For a further discussion on this matter, see Greater Johannesburg Transitional Metropolitan Council v Eskom 2000 (1) SA 866 at 377(SCA) (paragraph 20)

RCR 38/2003 Section 25
Section 25 inter alia provides that a developer may reserve a condition to erect from time to time a right of extension, within a period stipulated in such condition. May the period be an indeterminate period or must the period be specified?

Resolution
In terms of the wording of Regulation 14 read in conjunction with the prescribed form F as well as the wording of section 25(1), it is clear that the legislature intended that there should be a specified period.

The practice of permitting registration of a right of extension for an indefinite period has emerged in some deeds offices. This practice is diametrically opposed to the spirit and the letter of the relevant provisions.

A right of extension is an onerous limitation on the proprietary rights of owners of sections as it eventually diminishes the participation quotas of the relevant sections. Thus to permit the registration of a right of extension for an indefinite period, contrary to clear statutory provisions, constitutes an indefensible violation of the proprietary rights of owners of sections and is something that should not be perpetuated.

RCR 40/2003 Section 26
May a developer or body corporate who intends adding land to the common property do so in a manner, other than by section 26, merely by notarially tying such land to the common property?

Resolution
The provisions of section 26(1) are peremptory, thus the body corporate or developer cannot acquire immovable property contrary to the provisions of section 26 of the Sectional Titles Act. Also see the powers contained in section 38(c) of the Sectional Titles Act.

The practice of incorporating additional land in a scheme by means of registering a notarial deed of tie has taken root in some deeds registries. This practice, however, is flawed because it loses sight of the fundamental principles relating to a notarial tie. A notarial tie applies in the case of one or more pieces of land that are in the ordinary land register. Another important feature of a notarial tie is the relevant pieces of land do not lose their separate identities as in the case of consolidation. All that a notarial tie does is to prohibit separate alienation.

With the registration of a sectional plan on the other hand, a piece of land loses its identity as a separately registered piece of land as envisaged in the ordinary land register, as it constitutes a development scheme capable of being owned by various persons. Thus a piece of land that is incorporated into a scheme as contemplated in section 26 of the Sectional Titles Act becomes incorporated in the sectional title register and loses its identity as a separately registered erf. As stated above, the registration of a notarial tie is not capable of allowing a piece of land to lose its identity as an erf.

The fact that, in terms of section 4(2) of the Act, a scheme is capable of being developed over notarially tied pieces of land does not constitute authority for incorporating new land into a scheme by the registration of a notarial tie. It must be borne in mind that it is not the registration of a notarial tie, in section 4(2) of the Act, that creates a scheme, but the registration of a sectional plan.

RCR 41/2003
May the right to an exclusive use area be the subject of a usufruct? There are numerous conflicting Conference resolutions and opinions on this matter. In practice the position is untenable as one cannot have a usufruct over a unit without also enjoying the fruits of the garden, balcony, stoep, etc.

Resolution
It is proposed that section 27(6) of the Sectional Titles Act be amended to make provision for the registration of a usufruct over such right. RCR37 of 1996 is hereby confirmed.

RCR 44/2003
Is it possible to register a servitude of right of way over an exclusive use area?

Resolution
No. According to the maxim servitutus esse non potest (a servitude over a servitude is not possible) real rights cannot be registered over exclusive use areas.

At a cursory glance, these two resolutions seem to be contradicting one another. One may argue that Conference in resolution 44/2003 viewed personal servitudes as real rights and in resolution 41/2003 as non-real rights.

The fact of the matter, however, is that Conference resolution 41/2003 was motivated by the fact that it is anomalous for one to enjoy a usufruct over a section and at the same time be unable to enjoy the same over an exclusive use area. Thus Conference viewed a usufruct as constituting a real right that should, as a matter of necessity, be registrable over an exclusive use area.

Republished with permission

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