Things to know before you undertake a sectional title development

Clients often walk in and ask about the process to undertake a sectional title development, thinking it is an opportunity to develop a piece of land they have. In this article we unpack a few of the practicalities relating to establishing a sectional title development and what you should keep in mind when considering this.

Sectional title schemes continue to be hugely popular in South Africa with more and more South Africans electing to move away from conventional standalone properties in exchange for the benefit of, among others, increased security, convenience and affordability that comes with a sectional title unit. With approximately 56 000 sectional title schemes registered in South Africa to date, according to Lightstone Research reports, sectional title properties account for approximately 30.7% of all transfers registered in South Africa in 2021.

Sectional title schemes are planned and developed in accordance with the procedures set out in the Sectional Titles Act 95 of 1986. It all starts with a developer acquiring a piece of land. Here it is vitally important that the developer ensure that the proposed sectional development is not contrary to any by-law or conditions imposed by the local authority, including the Town Planning Scheme of the local authority of the area in which the property is situated. In most instances, consent must also be obtained from the local authority in terms of the Spatial Planning and Land Use Management Act 16 of 2013 (SPLUMA). If the land is mortgaged, the mortgagee must also obtain consent.

Once the necessary consent has been obtained, the next step is for the developer to instruct a qualified land surveyor or architect to prepare draft sectional plans for the proposed scheme. Before the sectional plans can be drafted and submitted for approval, there must be a minimum of two units that have been built from their foundation to the roof. The draft sectional plans must set out, among others, the name and layout of the scheme, the number of buildings, the extent of each section and whether there are any exclusive use areas. The land surveyor or architect is hereafter required to submit the draft sectional plans to the Surveyor-General for approval.

Once the sectional plans have been approved, the services of a conveyancer come into play. The conveyancer will proceed to apply for the registration of the sectional plans and the opening of a sectional title register in terms of the procedure set out in section 11 of the Sectional Titles Act. The effect of the registration of the sectional plans and the opening of the sectional title register is that the land in question becomes sectional property and ceases to be conventional property.

Upon registration, Certificates of Registered Sectional Title will be issued in favour of the developer in respect of each sectional unit. At this stage, the units have not yet been transferred and are all owned by the developer. It is, however, possible to transfer the units to new owners simultaneously with the opening of the scheme using a deed of transfer. It is therefore prudent to engage the services of an estate agent to line up potential buyers if a developer wishes to transfer ownership of the units at the same time as when the scheme is opened.

Transferring a unit to a new owner is the legal act that results in establishing the body corporate of the scheme. The body corporate therefore automatically comes into existence as soon as a unit has been transferred from the developer to another person. Every new owner thereafter becomes a member of the body corporate and is bound by the rules of the scheme and liable to pay levies in respect of his or her unit. As soon as the body corporate has been established, the developer must within 60 days conduct a meeting during which the sectional plans and rates clearance certificates, amongst others, must be furnished to each new owner as members of the body corporate. If the developer fails to conduct the aforementioned meeting, he will be guilty of an offence and expose himself to the possibility of a fine or imprisonment or both.

The above should provide a bird’s eye view of the process to establish a sectional title scheme. It should also be clear that establishing a sectional title development can be quite complex and involve several role players and steps that need to be followed. In all cases, engaging a property professional early in the process is advisable to help prepare you for the complexities, costs and necessary specialists that will need to be engaged for the successful opening of a sectional title development.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).

April 24, 2023

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