Portfolio of Evidence
Simon John Smith
1.2 Sectional Title
Sectional title is a form of ownership where a number of people can simultaneously own a piece of land on which a building or buildings is built, while each one of these people individually owns a townhouse or a flat in the building. Each individually owned building is called a section and this forms part of the overall sectional scheme. The remaining portion of the land is called the common property and is owned in undivided shares by each owner. Examples of the common property are;
Certain areas of the common property may be set aside as exclusive use areas for a particular owner examples of these could be;
All of the owners of units in a sectional title scheme have to pay levies, which goes towards covering the running costs of the scheme. The amount of levy payable by each owner is calculated by using the participation quota. The participation quota is calculated by taking the size of the owners unit (Floor size in SQ meters) and dividing it by the floor surfaces of all the units in the scheme. This participation quota is also used to determine the size of the undivided share the owner has in the common property as well as the weight of their vote at any meetings. All of the above is regulated by the Sectional Title Act (Act 95 of 1986)
1.2.1 Role Players
The role players in a sectional title scheme are;
Ð¿â€šÂ§ Owners (Body Corporate)
Ð¿â€šÂ§ The managing agent
Owners (Body Corporate)
The owners of each section who also make up the body corporate play a role in making sure that the complex they live in is well run and is operated accordingly to the provisions of the sectional title act. The body corporate has the obligation to ensure that a budget is drawn up and that the owners all contribute towards the budget (Levies) to ensure that all the financial obligations of the body corporate are met. The body corporate will normally appoint a group of the owners who will then be called Trustees to active control the above requirements.
In most cases the owners of a sectional title scheme hand over most of the responsibility of the control, management, and administration of the common property to a group of owners who are nominated as Trustees. All Trustees must act honestly and in good faith, and manage the functions only in the best interests of the body corporate. They cannot exceed their powers and may not have conflicts of material interest. The Trustees are appointed annually by the owners at the AGM and may serve for one year until the next AGM where he can be re-elected. The duties of the Trustees include;
Ð¿â€šÂ§ Keeping minutes of the trustees meetings
Ð¿â€šÂ§ Keeping all accounting records for a period of six years
Ð¿â€šÂ§ To insure the building
Ð¿â€šÂ§ To determine the monthly levy payable by the owners
Ð¿â€šÂ§ To keep a record of the conduct rules
As self management of a sectional title scheme can be a dangerous and onerous thing many Trustees with the permission from the body corporate appoint a managing agent to attend the affairs of the complex. Almost all relationships with managing agents differ so here are some of the most common functions of a managing agent;
Ð¿â€šÂ§ Put the insurance in place
Ð¿â€šÂ§ Ascertain the replacement values of the buildings
Ð¿â€šÂ§ Operate an account for the body corporate
Ð¿â€šÂ§ Collect levies
Ð¿â€šÂ§ Provide the Trustees with the necessary knowledge from the Act.
Ð¿â€šÂ§ Organise all meetings, AGM, Special meetings etc
Ð¿â€šÂ§ Correspond with owners who are breaking the conduct rules.
As relationship between managing agents and owners vary greatly from one scheme to another the amount charged by the managing agents all varies and is determined by the scope of the work the Trustees expect from the managing agent.
The developer is only a role player in the beginning. He is the original owner of the land on which the sectional title scheme is going to be built. The developer takes all the necessary steps to set up the development and then proceeds to sell the units to buyers. As soon as the first unit is transferred to a new owner the body corporate is formed.
The surveyor is the person who the developer appoints to draw up the sectional plans of the scheme. The plans must be prepared and signed by an architect or surveyor who is registered as a professional land surveyor in terms of the Ð²Ð‚ÑšProfessional Land Surveyors ActÐ²Ð‚Ñœ
A conveyancer is an attorney has the qualification to attend to the transfer of property in the deeds office.
1.2.2 Methods of dividing property
In order to divide property into sections, common property and exclusive use areas one uses the sectional title plan and participation quotas
The sectional title plan is the official document for detailing the boundaries of the sections, common property and exclusive use areas.
Section 5(3) of the Act requires that a draft sectional plan must include the following;
Ð¿â€šÂ§ give the name of the scheme
Ð¿â€šÂ§ include a plan of each storey in the building and this must be done according to scale.
Ð¿â€šÂ§ show the exclusive use areas
Ð¿â€šÂ§ show and define the boundaries of each section
Ð¿â€šÂ§ number each section
Ð¿â€šÂ§ show the boundaries of the land
Ð¿â€šÂ§ show the floor area which must be correct to the nearest square meter
Ð¿â€šÂ§ Total floor area of all the units
Sub Ð²Ð‚â€œsection 5(4) and 5(5) is the section of the act that deals with the boundaries of the sectional plan and must describe or include the following;
Ð¿â€šÂ§ Common boundaries between sections, common property
Ð¿â€šÂ§ Definition of the boundaries of each section must be defined by floors, ceilings, walls
Ð¿â€šÂ§ Other areas which are part of the section that must also be described are; balcony, stoep and /or porch
1.2.3 Actions and activities necessary to divide a property and acquire rights
The actions and activities required to divide and acquire rights are as follows;
Ð¿â€šÂ§ The proposed developer must first find a suitable property upon which he wishes to build his development.
Ð¿â€šÂ§ The developer must then inspect the following documents to ensure that the property is suitable for his development; Title Deed, Current Zoning Certificate, Site Plan.
Ð¿â€šÂ§ If the developer is satisfied that the property is suitable he would then appoint a conveyancer to manage all the legal aspects and transfers of the proposed development.
Ð¿â€šÂ§ The developer then appoints an architect who will prepare a building plan.
Ð¿â€šÂ§ The building plan is to be detailed tot the extent that it facilitates the construction of the building.
Ð¿â€šÂ§ The building plans are submitted to the municipality planners for consideration. If they conform to all the building and other regulations they will approve the building plans.
Ð¿â€šÂ§ The developer then submits an application to the local authority for provisional approval to start the building and open a sectional title register. The developer needs to submit the following documents with his application; Development application, Traffic Report, Surveyors report, Geo technical survey and a environmental impact study.
Ð¿â€šÂ§ The local authority take all of the above information into account and considers other factors such as; the existing zoning of the land, other limitation on the land and servitudes and then makes a decision as to whether or not to approve the application.
Ð¿â€šÂ§ Should the local authority be satisfied with everything then they will approve the scheme and issue a certificate.
Ð¿â€šÂ§ The developer may now start to market his development. He can then appoint an estate agent to handle the sales of his development
Ð¿â€šÂ§ The developer may now commence with the construction of the units.
Ð¿â€šÂ§ The actual construction of the buildings may vary from the original building plan as the land surveyor only start the sectional title plans when the construction of the buildings reaches a certain height (normally roof height). The sectional title plans will give details of the following; Divisions of land and building into sections, common property, exclusive use areas and will also show all the section number and floor areas with their participation quotas.
Ð¿â€šÂ§ This draft of the sectional plan is then submitted to the Surveyor-General for approval
Ð¿â€šÂ§ Once the sectional plan has been approved by the surveyor-general the developer may apply the deeds office to have the section plan registered and to have the sectional title register opened. This process normally takes about 2 weeks.
Ð¿â€šÂ§ As soon as the sectional title register has been opened transfer of any units that have been sold may take place simultaneously. (It is however important to remember that units can only be transferred after they have been inspected by the local authority as well as any banks that may be providing finance to the buyer.)
Ð¿â€šÂ§ The local authority will issue a certificate confirming their inspection and that they are satisfied that the units are ready for occupation and transfer.
Ð¿â€šÂ§ In the agreement of sale the developer has a clause which reserves his right to extend the scheme by adding further phases or buildings on the common property. This right is also recorded on the title deeds.
Ð¿â€šÂ§ If the development is an existing building that is being divided into sections and sold and the units in this building are currently being let out to tenants then the following procedures must be adhered to by the developer;
1. A meeting must be called with all the tenants and the proposed scheme must be provided to them.
2. If the developer intend to sell the units he must send a registered letter to each tenant offering them the first right to purchase the unit.
3. The tenant has 90 days in which to accept or refuse such an offer.
4. If the tenant refuses the offer within the 90 days the developer may sell the unit to any buyer at the same price it was offered to the tenant at.
5. If the tenant refuses the offer within the 90 days the developer may not sell the unit to another buyer at a lower price for a period of 180 days except if he make the same offer to the tenant and he has again refused the second offer within a period of 60 days.
1.2.4 Ownership in Sectional Title vs Ownership of Freehold Property
Freehold or Full title describes the transfer of full ownership rights when you own the property as well as the land it is built on. Examples of freehold properties are;
This is a normal free standing house with an ERF number
A cluster home is a freehold property that is often in a development. These developments often have some sort of access control. Each house is individually owned and no levy is charged to the occupants.
A small holding is classified as such if it is situated in or within a 150km radius of a built up area, does not exceed 20 hectares and is able to connect to a local authority water supply or has a borehole. There must be a home on the property and it must not be a farm or derive its main income from farming.
Residential Property used for business purposes
This property will also be regarded as residential provided no changes are made to the structure of the property that will result in it no longer being able to be used as a residence or home.
Sectional title describes separate ownership of units or sections within a complex or development . When you buy into a sectional title complex you purchase a section or sections and an undivided share of the common property. Examples of sectional title properties are;
Townhouse or Flat
A townhouse or flat unit must be in an approved sectional title complex. The complex must be in a development that contains only residential units.
Duet houses consist of two separate or detached houses on one stand. They can be sold separately under sectional title.
Semi Detached House
Semi detached houses are two house that are attached to one another. They may be on one stand or on separate stands and can be bonded individually. They can be sold separately under sectional title.
1.2.5 Rights and responsibilities of the developer and purchaser
The rights and responsibilities of the developer are as follows;
Ð¿â€šÂ§ To ensure that an agreement of sale has been entered into and is signed by the purchaser and the developers. This agreement of sale forms the basis of the relationship between the purchaser and the seller and contains most of the rights and responsibilities of both parties.
Ð¿â€šÂ§ That the agreement of sale contains the right to extend clause in the agreement which gives the developer the right to develop further phases or buildings on the common property in the future.
Ð¿â€šÂ§ The contract should provide the purchaser with the option to cancel the agreement with no consequences should the sectional title register not be opened by a specific date.
Ð¿â€šÂ§ The developer should provide the purchaser with an anticipated date of occupation. This should be included in the agreement of sale.
Ð¿â€šÂ§ The developer must advise the purchasers to which conveyancers the required deposit is to be paid and that they will receive interest on the deposit.
Ð¿â€šÂ§ The developer may not in term of Section 26 of the Alienation of land act of 1981 receive any consideration from any purchaser until the sectional title register has been opened.
Ð¿â€šÂ§ The developer must provide the purchasers with a certificate of occupancy before transfer of the unit takes place.
Ð¿â€šÂ§ The developer must provide the purchasers with the opportunity to inspect the unit to ensure it is completed to the agreed standard before transfer takes place.
Ð¿â€šÂ§ The developer must ensure that the sectional title register is opened.
Ð¿â€šÂ§ As soon as the first unit is transfer to a new owner the body corporate is formed and the developer must ensure that within 60 days of this transfer taking place he convenes a meeting of the body corporate and at which meeting he must furnish the members of the body corporate with a copy of the sectional title plans and a rates clearance certificate issued by the municipality.
Ð¿â€šÂ§ The developer must also provide the body corporate with the statutory rules, which is essentially the first set of management and conduct rules that will govern the scheme.
Ð¿â€šÂ§ These rules may be amended according to the requirements of the body corporate but this must be done by following the procedures as set out in the Act. Amendments can be made at a special general meeting by special resolution. All members of the body corporate must be given 30 days notice of the meeting and at the meeting there must be at least a quorum. Of which 75% of the members either present or by proxy must vote in favour of the proposed amendments to the conduct rules.
Ð¿â€šÂ§ The developer must insure the property until such time as the first meeting of the body corporate takes place.
The rights and responsibilities of the Purchaser are as follows;
Ð¿â€šÂ§ The purchaser must sign the agreement of sale in which most of their responsibilities are stated.
Ð¿â€šÂ§ The purchaser has the responsibility to submit his loan application to the necessary financial institutions for bond approval. The estate agent normally assists the purchaser with this task.
Ð¿â€šÂ§ The purchaser must pay the required deposit to the nominated conveyancer on demand.
Ð¿â€šÂ§ The purchaser should make regular site inspections of the unit as well as the common property to ensure that it is of the standard agreed to.
Ð¿â€šÂ§ The purchaser should attend the first body corporate meeting as requested by the developer.
Ð¿â€šÂ§ The purchaser should study the management and conduct rules so as to ensure they are compliant with all of the rules of the scheme. The conduct rule deal with issues such as; pets, washing of cars, noise, number of occupants per unit, uniformity of the units etc.
Ð¿â€šÂ§ Even thought it becomes the responsibility of the developer or body corporate to insure the entire scheme, it is still the responsibility of each individual owner to check and confirm his unit is in fact insured.
Ð¿â€šÂ§ Check that the participation quota for his unit has been calculated correctly as this determines how much levy he is going to pay.
Ð¿â€šÂ§ Purchaser must pay his monthly levy. He cannot withhold levies because he is unhappy about something in the scheme.
1.2.6 Necessary documents and certificates prescribed by the Sectional Title Act
Ð¿â€šÂ§ Draft Sectional Plans-Two copies: (for submission to surveyor-general)
Ð¿â€šÂ§ Schedule of conditions- Certified by a conveyancer and containing the following;
1. Existing conditions of title
2. Servitudes of title
3. Name of the scheme
4. Name and address of the developer
5. The number of the Title Deed
Ð¿â€šÂ§ Title Deed of the land in question
Ð¿â€šÂ§ Any mortgage bond over the property
Ð¿â€šÂ§ The consent of the mortgagee to
1. Opening of the sectional title register
2. Registration of the sectional plan
Ð¿â€šÂ§ A certificate by a conveyancer stating that;
1. the rules prescribed in terms of section 35(2) are applicable and/or
2. containing the other rules set up by the developer
Ð¿â€šÂ§ A certificate of real right of extension of a scheme
Ð¿â€šÂ§ A certificate of real right of the exclusive use area
Ð¿â€šÂ§ Certificates of registered sectional title in respect of each section and itÐ²Ð‚â„¢s undivided share in the common property, made out in favour of the developer.
Ð¿â€šÂ§ The Plans as referred to in section 25(2)(a)&(b) of the Act these are;
1. A plan to scale of the buildings to be erected
2. A plan to scale showing the manner in which the buildings to be erected are to be divided into sections and exclusive use areas.
Ð¿â€šÂ§ A schedule showing the estimated participation quotas of all the sections in the scheme.
Ð¿â€šÂ§ A schedule of applicable expenses as specified in Section 37(1)(a) which will be borne by the developer from the date of the establishment of the body corporate until the sectional plan of extension is registered.
Ð¿â€šÂ§ Statutory sectional title management and conduct rules which will be given to the members of the body corporate at the first meeting.
Ð¿â€šÂ§ Completion Certificate stating the unit is ready for occupation
Ð¿â€šÂ§ Rates clearance certificate issued by the municipality confirming rates paid up to date
1.2.7 Glossary of terms that are used in the sectional title property market
1. Common Property
The common property is the part of the development which does not form part of any section. Examples of structures and areas in this category include;
Ð¿â€šÂ§ Swimming pool,
Ð¿â€šÂ§ Corridors, lifts
Ð¿â€šÂ§ Club houses.
2. Exclusive use area
Ð¿â€šÂ§ Exclusive use areas are portions of the common property which have been identified and may only be used by the owner of a particular section. It is a part of the common property that you do not own, but over which you alone have use. Examples of these could include,
Ð¿â€šÂ§ Store rooms.
3. The Body Corporate
The body corporate is the collective name given to the owners of the units in a complex. All owners of units are members of the body corporate.
The levies are the amount of money each owner has to pay to cover the costs incurred in running the complex. Examples of the costs covered by the Levies are;
Ð¿â€šÂ§ Rates and taxes,
Ð¿â€šÂ§ Insurance premiums,
Ð¿â€šÂ§ Repairs and maintenance of the common property,
Ð¿â€šÂ§ Staff wages.
A Section is the term used in the act for a particular portion of the building a person occupies. An Example of a section in a scheme is; Flat or Townhouse.
6. Participation quota
The participation quota is the formula used to determine for example the size of the ownerÐ²Ð‚â„¢s undivided share of the common property.
7. Sectional Mortgage Bond
A sectional mortgage bond is a bond over a unit or an undivided share in a unit or land which is on a separate title deed.
8. Sectional Plan
The sectional plan is the plan that has been approved by the Surveyor-General. The sectional plan will for example show the following; buildings, land and common property.
9. Annual General Meeting
The annual general meeting is a meeting which is held once a year. All members of the body corporate are invited to attend. An example of the issues discussed at the meeting are;
Ð¿â€šÂ§ approval of a budget for the next financial year,
Ð¿â€šÂ§ re-election of trustees,
Ð¿â€šÂ§ appointment of an auditor for the new financial year
10. Special Resolution
A special resolution is a resolution passed by at least 75% of the votes (in value and number) of the body corporate either present or by proxy at a meeting for which the body corporate were given 30 day notices. Examples of issues which could be discussed at such a meeting are;
Ð¿â€šÂ§ The approval of unbudgeted for expenses
Ð¿â€šÂ§ Proposed changes to the Conduct Rules
11. Management Rules
The management rules of a sectional title scheme are the rules which are laid out in the sectional title act to control the management of a sectional title scheme and the functions and powers of the trustees. They will for example cover the following;
Ð¿â€šÂ§ Appointment and duties of the trustees
Ð¿â€šÂ§ Duties of the owners and tenants
12. Conduct Rules
The conduct rules are those rules which are put in place in the sectional act to control the owners in a scheme. Examples of such rules are;
Ð¿â€šÂ§ Keeping of pets
Ð¿â€šÂ§ Renting out of units
Ð¿â€šÂ§ Refuse Disposal
Ð¿â€šÂ§ Washing of vehicles
12. The right to extend
The right to extend is recorded in the title deed of the sectional title scheme and gives the developer the right to extend the scheme within a specified period of time. This right must be recorded in the sale agreement. This normally happens when the developers id building the scheme in phases.
13. Undivided share
The common property owned by the owners of the different sections in undivided shares which are calculated proportionately as per the participation quota.
The developer is the registered owner of the land on which the scheme is to be erected. He is the person who has applied to have the land divided into two or more portions for the purposes of erecting the scheme.
15. Local Authority
The local authority is the municipality in whose area the scheme is to be built. Examples of local authorities are;
16. Draft Sectional title plans
The draft sectional title plans are the plans that are drawn up first and which are then submitted to the local authority for approval. These plans are drafted in accordance with the provisions of the Sectional Title Act and show the following;
Ð¿â€šÂ§ Terrain plans
Ð¿â€šÂ§ Building Plans
17. Sectional Title Register
If all the requirements are met for the final approval of the draft sectional title plans approval for the opening of the sectional title register is granted by the local authority. Once the sectional title register is open in which all actions and details of the scheme are recorded it takes about 12 days for the registration to take place in the deeds office.
Land means the land on which the scheme is to be developed as shown on the sectional plan
Council means the various councils to which the different professionals involved in the scheme belong. Examples are;
Ð¿â€šÂ§ SA council for Architects
Ð¿â€šÂ§ SA council for Professional Land Surveyors
20. Development Scheme
The development scheme is the scheme which is situated within the jurisdiction of a local authority on which is situated a building or buildings which has been divided into two or more sections for the purposes selling or letting.
References used in the compilation of the above assignment. (1.2, 1.2.1, 1.2.2, 1.2.3, 1.2.4, 1.2.5, 1.2.6 & 1.2.7) Ð²Ð‚â€œ Sectional Title
Apart from the knowledge I have acquired over the years working as an estate agent and principal I also used the following as reference points to obtain clarity and understanding of various issues and topics in my assignment.
1. Sectional Title Act, 1986 (Act No.95 of 1986)
2. Self Ð²Ð‚â€œ Study Deeds Course
3. Information and workshops at Acutts Training Academy