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Section 27 - Golden Unit

23 August 2018

A sectional plan is the plan approved by the Surveyor-General or pre 1988, the local authority and described as such. It shows how the land is approved to be created, and divided. Everything on this plan is common property when the scheme is approved and all of this common property is the share of the developer. When the Sectional plan is registered in the Deeds registry it becomes the title deed to the land. The land is the sum of the sections inside the buildings as depicted on the sectional plan. The common property are the parts of the land that are not included in a section. The entire scheme is divided into sections and common property. Upon registration of the plan, the developer is not only issued with certificates of registered sectional title as proof of his real right in the erected sections, he is also issued with a certificate of registered real right as proof of his acquired real right over the sections depicted on the approved sectional plan, but not yet erected.

The sections approved on the plan and not yet registered are the remaining extent or balance of the share of common property of the developer (the exclusive use part of the common property of the developer as reserved). However the ownership thereof will vest in the body corporate if the developer does not confer his share of the common property to a registered owner in the scheme within a certain time.

Common property is divided in common use and exclusive use. The sum of common use areas and exclusive use areas is the whole of the common property of the scheme and it includes the proposed approved extensions of common property. The Participation Quota (PQ) is the percentage of the undivided share of the common property that belongs to the respective sections and sums to a total of 100%.

The Exclusive Use Areas (EUAs) are the part of the common property that belong exclusively to a section and the developer in addition to the PQ of the sections that they are registered to. EUA's do not form part of the 100% PQ but they do form part of the Unit to which it is registered. So the undivided share of common property of a section is excluded from the EUAs that are also registered to a section. When a section is transferred from one owner to another, the section is transferred with its share in the common property.

Now EUAs registered on the Title deed of the land namely the Sectional Title plan is an urban right to immovable property and permanently attached to a section as per the conditions endorsed on the title deed in terms of section 11(2) (the conditions of sectional title). The certificate of registered sectional title refers to this title deed (sectional plan). The sum of all certificates of registered sectional title and certificates of real right equals the Sectional title deed. A certificate of sectional title is a description of a part of the whole and cannot describe a part of the whole that does not exist in the whole. The whole is the sum of the parts.

When a section is transferred via notarial deed of transfer, it is transferred with its share in the common property. A deed of cession of an EUA is only required when a registered EUA is transferred inside the body corporate from one owner to another owner.

The Act is clear in Section 15B that ownership of any undivided share held under a certificate of registered sectional title shall be transferred by means of a deed of transfer. I see that Registrars still battle to resolve whether an EUA can be transferred by a notarial deed of cession from a seller (member) to a buyer (non-member). This cession of EUA is illegal in terms of section 27(4)a. Transfer of a section and its common property is effected when a notarial deed of transfer is lodged and attested by the Registrar.

There is no Section in the entire Act that allows the transfer of an EUA from an owner to a non-owner. Read section 25(5) where a developer can cede his right of extension to another owner, by the registration of an EUA, and must be ceded within 12 months or the right will lapse. Does this mean that an owner of section remains the owner of an EUA for 12 months after he sells his section and the EUA is not ceded? I don't think so.

Ownership of the EUA vests in the new owner of the section. Not by cession, but by transfer. I still don't see how a right of extension can remain reserved by a developer for a period longer than 12 months if he is not a registered owner of a section.

It is my contention that the Golden Unit concept still exists in the 1986 Act if you read Section 25(5).

[Editors note:  This article was prompted by the article Section 27]

Reader Comments: 14
Dudley Lee 24/08/2018:

There is no need for a golden unit - see section 25(5) that reads : "(5) A right reserved in terms of subsection (1) may be exercised by the developer or his or her successor in title thereto, even though the developer or his or her successor in title, as the case may be, has no other interest in the common property, by the addition of rights of exclusive use: Provided that the rights of exclusive use must he ceded within 12 months after their creation, either to the body corporate of the scheme or to one or more registered owners of a section or sections in the scheme." It clearly states "...even though the developer or his successor in title has no other interest in the common property....". With respect, I cannot find any requirement for a golden unit in the subsection. If I am wrong, elaborate please.

Stuart 24/08/2018:

Interesting and thought provoking article. I have however never heard of a "notarial deed of transfer" of a section and it's share of the common property. I would appreciate some enlightenment on this.

Allen West 24/08/2018:

This article confused me totally. I was on the Regulation Board since 1984 and privy to the New STA and the amendments thereto and the necessity for a golden unit or a notarial transfer is all new to me.

Dawid Fourie 24/08/2018:

The second part of S25(5) refers. A S25(1) right may be exercised by a developer by the addition of rights of exclusive use: provided that the rights of exclusive use must be ceded within 12 months of their creation to an owner of a registered section in the scheme. If the developer does not remain the registered owner of the section to which he ceded the eua, he can no longer exercise the right.

Allen West 24/08/2018:

The amendment was merely brought into the Act to prevent the developer from owning exclusive use areas and not being a member of the Body Corporate.

Dawid Fourie 24/08/2018:

A holder of a S25(1) right is a member of the body corporate. The area affected by the reservation S25(1) is the EUA of the developer. "...On a specified part of the common property...". Regulation 28 further refers to the exclusive use areas 5(3)f and 25(1) which shall be numbered and described on the 12(1)f certificate of real rights. Do these eua's not have to be ceded to a registered owner within 12 months? Can the developer remain the owner of these EUA's for longer than 12 months without being an owner of a registered section?

Allen West 24/08/2018:

Once the RRE has been exercised in terms of section 25 (9) the developer is the holder of the EUAs and no longer a member of the Body Corporate. It is for this reason that he is compelled to cede same within 12 months to prevent such developer retaining the EUAs without being a member of the Body Corporate.

John Christie 24/08/2018:

In my respectful view neither of the two articles published by Mr Fourie in yesterday’s GhostDigest correctly state the law for reasons too numerous to mention in this reply.

I might add that I do not wish to respond to all of the submissions made by Mr Fourie – at this stage at least.

Perhaps Mr Fourie needs to consider the provisions of section 34(2) of the current Sectional Titles Act which (to paraphrase) provides that the Developer only ceases to have a share or an interest in the common property when he no longer owns any units in the scheme – or when he no longer holds rights of extension in terms of section 25(1) of the Act.

Section 25 was introduced precisely to deal with all of the problems that were associated with the rights of extension which vested automatically in the name of the Developer in terms of section 18 of the 1971 Act.

Rights of extension can confer upon the Developer the right to extend the scheme by the addition of new sections to the scheme, or new sections and exclusive use areas, or exclusive use areas on their own.

Of course, it is trite law that in certain circumstances rights of exclusive use do vest in the body corporate. I do not intend to respond further on this issue – again, at this stage at least.

Rights of extension will continue to subsist until they are cancelled by notarial deed between the Developer and the body corporate, or until they lapse by effluxion of time, or because they have been exhausted, or until they are waived by the Developer.

With the greatest respect, there is no longer any need for a ‘’Golden Unit’’. Indeed, unless the Developer has expressly reserved rights of extension in terms of section 25(1), the ownership of a so-called ‘’Golden Unit’’ will confer no rights whatsoever on the Developer – other than the usual rights of ownership of the unit concerned.

Andrew Murray 24/08/2018:

There is no such thing as a Notarial transfer of land. It must be poor editing. Rights are transfered Notarially, not land. There are other strange statements as well in the article: EUAs belong to the owner thereof, not a Section as stated, for example. They may be tied of course to a particular section. I agree with Allen and Dudley's interpretation.

Dawid Fourie 24/08/2018:

Respectfully, Section 18 of the old Act is the same as Section 24 and Section 21 of the new Act, where a developer reserves a right to extend his section, and further reserve the right to subdivide his section and extend the scheme by including the additional sections into the register. (Section 21(2)c) extension of Scheme by the addition of sections, on approval by the trustees. No mention is made of a real right certificate.

Dawid Fourie 24/08/2018:

Section 27 (6) and (7) states that an exclusive use area registered in favour of an owner of a section shall for all purposes be deemed to be a right to immovable property and may be held by title deed. Title gives you right. Right does not give you title.

Dawid Fourie 25/08/2018:

I quote S18 (old Act) along S24 and S21 (new act) to illustrate what I mean: S18: "Where a building, in respect of which a sectional plan has been registered under this Act, is to be extended in such a manner that an existing section is to be added to..." and S24: "If an owner of a section proposes to extend the boundaries or floor area of his section..." S18"...or that the building may be further divided into more sections..." and S21" "If an owner of a section proposes to subdivide his section...the new sections created".

This is specifically why S18 rights could never be subdivided and a portion of the right only be alienated, even if such right was registered under a S12(1)e/S60(1)b and a certificate contemplated in S25 issued to the owner of the non-contiguous section (the developer or his successor-in-title}. S26(3)(old Act) Where a developer alienates a share in the whole of his interest to any other person, the registrar shall endorse the full name of the successor-in-title on the developer's sectional title deed.

The definition of developer includes his successor-in-title. All registered owners of sections held by sectional title deed are successors-in-title to the developer. If the developer cease to have a share in the common property and he has not exhausted his RRE, his successor-in-title, as the owner of the golden unit to which the registered EUA is tied, may exhaust the rights of the developer, provided that the conditions of sectional title and the management rules and the sale agreements has been registered as such.

These conditions bind all the members of the body corporate and their successors-in-title.

Dudley Lee 28/08/2018:

With respect, Mr Fourie is confusing "developer" and "owner of a unit who wishes to extend his unit..." with each other. There is a big difference between the extending of the scheme in terms of a right issued under section 25(1) or section 25(6) or 25(6A) and the extension of a unit by the registered owner of the unit. The definitions of developer and owner in STA are quite different - therefor their successor in title also differ. If a developer cedes his section 25 of STA right to another, that person steps into the developer's shoes as a developer - therefor the developer's successor in title.

The owner is certainly a successor in title to the developer, but only inasmuch as the ownership of the unit is concerned. With the current act there is no reason or provision for a golden unit. All owners of units in the scheme are therefor successors in title to the developer in that way only and are members of the body corporate by virtue of their being owners of units, but they not step into the shoes of the developer and thus become developer(s).

John Christie 28/08/2018:

EUAs in terms of section 27(1) of the STA (like rights of extension in terms of section 25 of the STA) are quasi personal servitudes - sui generis. They are entirely creatures of statue, and were not known in our law prior to the advent of the 1986 Act. For the ''title deeds'' issued to the Developer for both of these rights, see forms F and G of the STA. They are both certificates of real rights - and they serve as the title deeds for those rights in exactly the same way as CRSTs do for units in the scheme. These rights can, subject only to the limitations imposed in the STA be transferred (Yes! Transferred!) only by notarial deed of cession - although endorsements section 45 of the DRA can also be used.

It is trite law that rights of extension acquired in terms of section 18 of the 1971 Act were incapable of being transferred by any means whatsoever. Those rights were totally different from rights of extension acquired in terms of the 1986 Act. Sections 21 and 24 of the 1986 Act have nothing whatsoever to do with rights of extension in terms of section 25 - or, need I say, with section 18 of the 1971 Act. These are totally different concepts in law. With respect to Mr Fourie, he is confusing a number of aspects of sectional title law and practice.

Finally, Maryke Prinsloo's submissions that a unanimous resolution of the members of the body corporate is not required in ALL instances where the BC cedes an EUA has considerable merit, and I think she is right on this.

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