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Savannah Park

31 January 2013

Neutral citation: The Body Corporate of Savannah Park v Brainwave Projects 1147 CC (735/2010) [2011] ZASCA 239 (1 December 2011).
Coram: Mthiyane, Cachalia, Mhlantla, Leach and Majiedt JJA
Heard: 18 November 2011
Delivered: 1 December 2011

Summary

The first respondent was the developer of a sectional title scheme.  In September 2005, it concluded a lease agreement with the company.  In terms of the agreement, the second respondent was permitted to erect a cellular telephone mast on a specified portion of the developer's property.  A rental amount was payable to the developer in return.  In the process of establishing a sectional title scheme, the developer was required to submit a draft plan to the Surveyor-General for approval, and then apply to the Deeds Registry for the plan to be registered.  When applying for the registration of the plan, the developer may reserve a right, in terms of section 25(1) of the Sectional Titles Act 95 of 1986 , to extend the scheme by erecting, completing or including further buildings on a specified portion of the common property within a stipulated period.  The developer reserved such right of extension over the portion of the common property earmarked for future development, on which the mast was built. 

It was common cause that the unit comprising the building which housed the mast had not yet been registered in the sectional title register.  It was accepted that when the mast was erected, the developer intended to benefit exclusively from the rental income from the lease agreement - even after it had registered the sectional title plan with the completed unit. It believed that by reserving the extension right it was entitled to the proceeds of the lease while the reservation was extant, and that after the building was completed it would continue to receive the income as the registered owner of the unit.

However, the appellant (the body corporate of the scheme) argued that section 25(4) of the Act merely gives the developer the right to extend the property, and does not entitle it to the exclusive use and enjoyment, and to the fruits of the the specified section of the common property.  In other words the developer can have no usufructuary rights over the common property until the relevant plan is registered and the unit included in the sectional title register and that [at 7] "The specified section of the common property over which the extension right was reserved, therefore, remained subject to the control, administration and management of the body corporate in the interests of all of its members. And, because the developer had no usufruct over that portion of the property, it could not lease it without the consent of the body corporate. The developer, therefore, had no right to the income from the lease agreement. Accordingly, it is obliged to account to the body corporate for all remuneration and to disgorge any profits from the lease."

The High Court upheld the developer's contention that the right of extension entitles a developer not merely to mortgage the right and to alienate it, but to lease the land over which the right is reserved - which would include providing a third party with rights under usus, habitatio or usufruct over the land for the duration of the right.  The present appeal ensued.  

The narrow question therefore which had to be be answered in this case was whether the right of extension included a usufruct within its ambit, which necessitated a consideration of the nature of the right.

Section 25(4)(a) provides that the real right reserved by the developer to extend the scheme is deemed to be a right to immovable property capable of being mortgaged.  Taking cognizance of the disagreement between the courts and academic writers regarding whether the right can be regarded as a personal servitude, the Court aligned itself with the views of the academics that the right is not a personal servitude.  The reserved right only gives a developer the right to develop further phases of a scheme.  In doing so, the developer must comply strictly with the documentation and plans accompanying the application for registration of the sectional plan.

Having exercised the right, the developer must immediately after completing the relevant unit, apply to register the relevant plan and the inclusion of the completed unit in the sectional title register.  It is therefore, a limited real right.  Accordingly, the first respondent, as developer, was mistaken in its view that the mere reservation of an extension right, without more, gave it the right to lease that section of the common property over which the mast was erected.  The appeal was therefore upheld with costs. 

Full judgment

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