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Sectional title buyers, here’s when you CAN cancel the purchase

A small, seemingly simple addition to the regulations under the Sectional Titles Act, 95 of 1986 “the Act”, has added significant consumer protection for owners in sectional title schemes that are subject to the developer’s right to extend the scheme.

The Act allows the developer of a sectional title scheme to reserve the right to add sections and exclusive use areas to the scheme at some later date. Any person buying into a sectional title scheme needs to know if this “future development right” has been reserved because the scheme as it exists at the time could be substantially changed, making the choice of that scheme a serious mistake for the individual concerned. This is so important that all sale contracts for units in schemes subject to future development rights must disclose the existence of the right. If it does not, the purchaser can void the sale and just walk away.

No checks and balancesscale

It is all very well for owners to know the scheme will be extended but there have been instances where the developer has not followed the planning they submitted when reserving the right, and until now there was no way of ensuring the developer complied with this requirement. A member in the scheme would have to go to court and prove they were prejudiced by the developer’s non-compliance to have the matter addressed.

The developer applies for the right to extend the scheme at the same time as it applies for the opening of the register for the new scheme, and must submit quite detailed plans showing what is intended. Included requirements are the siting, height and coverage of all buildings, a typical elevation treatment, details of any substantial difference between the materials to be used in the construction of the buildings, and the manner in which the buildings are to be divided into sections and exclusive-use areas.

These plans are included in the scheme’s register, so any prospective buyer can find out exactly what the extension will be, what it will look like, and how it will affect him or her as an owner.

The most common use of future development rights is in so-called phased developments. The developer builds and sells the units in the first phase and uses the profits to fund the second phase, and so on, phase by phase until the scheme is complete. But developers often reserve a future development right in the hope or expectation of town planning changes that will allow the extra development, and exercise the right at a much later date. It is in this situation that the recent addition to the regulation is significant.

When the developer (or its successor in title, because the right can be sold) eventually exercises its future development right and builds the extension to the scheme, it must be done “strictly in accordance” with the documentation submitted when the right was reserved, unless circumstances have changed so much that it is impracticable to do so. But, as mentioned above, there was no authority checking that these requirements were met.

Developers, beware the Surveyor-General

Know your do's and don'ts as a landlord this tax season.

Regulation 6, which deals with the submission of draft sectional plans to the Surveyor-General for approval, now requires that a land surveyor or architect must certify that the extensions to the scheme comply with the plans originally submitted. The Surveyor-General will not approve the draft sectional plans of extension without that certificate, and the developer will not be able to register and sell the new sections.

This simple requirement for a certificate empowers and requires the Surveyor-General to check that the developer has made the extensions according to the terms of the right it reserved, protecting owners from having their scheme altered in ways they did not expect.

Please contact consulting@paddocks.co.za for a no obligation quotation for advice on future development rights

This article first appeared on Paddocks


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