The practicalities of a sectional title scheme

21 November 2023 ,  Deonay Scholtz 389
I have recently acquired a piece of land and I think it has great potential for sectional title development. Will this be a good investment and what are the practicalities that I need to keep in mind?

Sectional title schemes, from their opening up to the transfer of individual units, have gained increased popularity in recent years. There are approximately 56 000 sectional title schemes registered in South Africa to date.  According to the Lightstone Research Reports,  sectional title properties accounted for approximately 30.7% of all transfers registered in South Africa in 2021. 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,  this guide might be worth the read for your next development. 

Sectional title schemes are planned and developed in accordance with the procedures set out in the Sectional Titles Act 95 of 1986 (as amended). It all starts with a developer acquiring a piece of land. It is of utmost importance for the developer to ascertain 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, the necessary consent must 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, consent from the mortgagee must also be obtained. 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. 

A land surveyor or architect preparing a draft sectional plan shall prepare the draft sectional plan from an actual measurement. 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 sectional draft plans to the Surveyor-General for approval. 

Once the sectional plans have been approved, the services of a conveyancer comes 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 by means of a deed of transfer.  It is therefore wise 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 when the scheme is opened. 

The transfer of a unit to a new owner is the legal act that results in the establishment of 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. 

Sectional Title Developments are much more complex and involve quite a mouthful of intricacies that are beyond the scope of this guide.  If you are seriously considering a sectional title development project, you are welcome to contact our Property Transfer and Development team to assist you with the process to be followed.


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 has 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). 
 

 
Related Sectors: Property Development
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