FILTERS:

Section 15B(3)

22 September 2005

Paragraphs (a) and (b) of Section 15B(3) of the Sectional Titles Act, 95 of 1986 were substituted by Section 10(a) of Act No. 44 of 1997. The writer has, however, observed that some examiners and some conveyancers presently misinterpret these provisions. This article is intended to clear up the misconceptions surrounding the application of these provisions.

In dealing with this matter, paragraph (a) will first be discussed, and then paragraph (b).

Subparagraph (a)(i), which protects the interests of the body corporate, places an injunction on the Registrar of Deeds not to register a transfer of a unit unless a conveyancer's certificate confirming certain facts has been lodged.

It is imperative at this stage to determine what the word "certificate" in this section means. The word "certificate" in the section refers to a formal document attesting a fact. In this regard, see the ninth edition of The Concise Oxford Dictionary on page 241. In other words, a certificate must relate to a factual position.

Subparagraph (a)(i)(aa) is framed in the alternative and provides as follows:
If a body corporate is deemed to be established in terms of Section 36(1), that body corporate has certified that all monies due to the body corporate by the transferor in respect of the said unit have been paid, or that the provision has been made to the satisfaction of the body corporate for the payment thereof.

The question that then arises is: What is the responsibility that is placed on the conveyancer by this subparagraph? The answer to this question is quite simple and it is that the conveyancer must firstly confirm whether the body corporate is in existence or not and secondly whether the said body corporate, if in existence, has certified that all monies due by the relevant transferor have been paid or that satisfactory provision for the payment thereof has been made. In other words, the conveyancer's certificate should confirm one or the other of the above cases, as they are mutually exclusive.

The intention of the legislature was, and still is, to enable the body corporate to accept guarantees in appropriate cases and not to permit certificates that actually do not certify anything, as is presently the practice with many conveyancers. The following examples of certificates indicate a proper application of this subparagraph.

1. "I, xyz conveyancer, certify that a body corporate of abc scheme is in existence and that the said body corporate has certified, as at date of registration, that all monies due to it by the transferor of section 1 have been paid."
2. "I, xyz conveyancer, certify that a body corporate of abc scheme is in existence and that the said body corporate has certified, as at date of registration, that provision, to its satisfaction, has been made for the payment of all monies due to it by the transferor of section 1."

It must, however, be categorically stated that the framing of the relevant certificate by a conveyancer in the alternative, as is normally the case, though inappropriate, does not justify a rejection of the relevant transaction.

However, in their certificates, some conveyancers simply repeat the wording of the section. In doing so, there is nothing that they really certify because it is necessary categorically to certify the existence, or otherwise, of the body corporate. This way of formulating a certificate warrants its rejection.

Some certificates are worded as follows:
A body corporate in respect of the aforesaid scheme is deemed to be established and accordingly monies are payable.

This manner of formulating a certificate, though the existence of the body corporate is appropriately dealt with, is not acceptable because the issue of the due payment of monies is not dealt with. This manner of formulation, naturally, warrants an outright rejection of the said certificate.

Does the certificate by the conveyancer absolve the examiner from verifying the issue of the existence, or otherwise, of the body corporate? In view of the provisions of Section 3(1)(b) of the Deeds Registries Act 47 of 1937, the answer is an emphatic "No". It must be stated that the writer has observed certificates that state that there is no body corporate in existence while in fact a body corporate is in existence. Is it is without doubt that such certificates warrant an outright rejection.

Subparagraph (a)(i)(bb) provides as follows:
If a body corporate is not deemed to be established no monies are payable.

Here the conveyancer is, once again, expected to certify that a body corporate is not in existence. Once again the examiner is not absolved from verifying the existence, or otherwise, of the body corporate. The examiner should, naturally, reject a certificate that states that there is no body corporate in existence when there is one. Where there is no body corporate in existence, does the matter then end there? The answer to this question is a simple "no". In this instance the provisions of Subparagraph (b)(ii) become operative. The question however is: Whose responsibility is it to determine whether the relevant transfer will result in the establishment of the body corporate or not? The answer to this question is simply that it is in the examiner's responsibility to determine the issue.

The reason for this proposition is that subparagraph (b)(ii) is not part of the conveyancer's certificate, despite the fact that many conveyancers think it is. It must be noted that it is only paragraph (a) that deals with a conveyancer's certificate. In the determination, an examiner must naturally be guided by Section 36. It is important to note, however, that where a co-developer transfers a section to another co-developer, such a transfer can never result in the establishment of a body corporate because a body corporate comes into existence only when a section is transferred to a person who is not a developer.

Subparagraph (a)(ii), which protects the interests of a purchaser of a unit, places an injunction on the registrar of deeds not to register a transfer of a unit unless a conveyancer's certificate confirming certain facts relating to the existence, or otherwise, of a right of extension has been lodged.

Subparagraph (a)(ii) is also formulated as an alternative and provides as follows:
No real right of extension of a scheme as contemplated in Section 25 is registered in favour of a developer or the body corporate 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.

The responsibility of certifying the existence or otherwise of a real right of extension clearly lies with the conveyancer. However, in terms of Section 3(1)(b) of the Deeds Registries Act, an examiner is still expected to verify this fact.

If no real right of extension has been registered, a conveyancer's certificate must just disclose the fact and nothing more. If such a right has been registered, a conveyancer's certificate must disclose such a fact and must then deal with the aspect of disclosure in the deed of alienation. If no disclosure has been made in the deed of alienation, a conveyancer's certificate must indicate that the transferee has, in writing, elected not to annul the alienation. It must be noted that the positions referred to above are mutually exclusive. In other words, it is either the one or the other.

Some conveyancers, however, merely repeat the wording of the section in their certificates and such a manner of formulation does not certify anything and warrants an outright rejection. Some conveyancers would certify that there is no right of extension reserved while, in fact, such a right has indeed been registered. This also warrants an outright rejection.

Other conveyancers would certify that a right of extension has been registered and that it was disclosed in the deed of alienation, whereas no such right was ever registered. In this instance the deed must be passed because the rights of the transferee are not adversely affected. This must, however, not be seen as an encouragement of certification in respect of untrue statements.

The importance of the examiner verifying the existence or otherwise, of the right to extend cannot be over-emphasised. It often happens that the office records do not indicate the registration of a right of extension whereas such a right has indeed been registered and is still operative. An operative right is one which has not lapsed by effluxion of time or the completion of phased development. If an examiner finds out that such a right exists, the relevant deed must be rejected, irrespective of the fact that the office records indicate otherwise.

It often happens that the office records would still indicate the registration of such right while the said right is no longer operative, either because too much time has passed or because phased development, as per the reservation, has been completed. In this instance, irrespective of how the certificate is formulated, rejecting the relevant deed is not justified because the rights of the transferee can never be adversely affected.

It is clear, from what has been said above, that verification by an examiner is indispensable and can assist an examiner in making correct decisions.

Paragraph (c) finds application only in cases where a developer is the transferor. It is up to the examiner to determine whether the transferor is a developer or not. In most cases it is easy to determine this fact, that is, in most cases in which the title deed is a certificate of registered sectional title. It must be noted that a developer could still be the registered owner under a title deed that is not a certificate of registered title, for example, a rectification transfer or an ordinary deed of transfer.

It is the writer's submission that the developer would remain the developer, irrespective of the nature of the title deed under which she or he is the registered owner and that this paragraph ought to be applied accordingly.
Conveyancers and examiners are requested to air their views with regard to this topic and correct the flaws of the writer, if any.

Lastly, it is hope that this article has achieved its purpose and that the parties concerned will view it in the spirit of collegiality.

Republished with permission from SA Deeds Journal

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