YOU PURCHASE A PROPERTY IN A NEW SECTIONAL TITLE DEVELOPMENT: HOW LONG DO YOU HAVE TO WAIT?

The establishment and operation of a new sectional title scheme is regulated by the Sectional Titles Act No. 15 of 1985 (“the Act”). The Act contains strict requirements that must be met in order for a sectional title scheme to be opened in a Deeds Office and subsequent transfers of units in the Scheme to end buyers take place. For purposes of this article it is assumed that the opening of the sectional title scheme and transfers to end buyers will take place simultaneously in the Deeds Office.

The content of the agreement is an outline of specific events that must take place before you can become the owner of a unit.  The latter is a good indication of how long you have to wait before you can harness the removal truck.

Special attention should be given to the following conditions precedent that may appear in the purchase agreement:

1. 1. Is the existence of the development subject to the sale of a specific number of units (pre- sales) before the development is considered viable? This condition usually stipulate that the agreement between the parties will only continue if the Seller could succeed with the sale of a certain amount of units in the development by a specific date.
2. Is the agreement subject to obtaining development financing by the Seller/developer by a certain date? Therefore envisages the Seller to apply for financing from a financial institution to, inter alia, finance the construction of the buildings which the Scheme will consist of?

Non – compliance of the conditions precedent within the prescribed periods means that a valid purchase agreement between the parties was not established and the agreement has lapsed. The dates referred to in the said conditions precedent is an indication of when the Seller intends to proceed with the development full steam, as the latter will only be possible after the fulfillment of said conditions precedent.

Other important clauses that indicate the passage of time are the following:

• The planned date of registration of the Scheme in the relevant Deeds Office;
• The planned date of occupancy of the unit by the Purchaser, and whether it corresponds with the date of registration of the unit.

The Purchaser should note that the Seller/developer can only start with construction of the buildings after development funding is secured, and accordingly from the date of fulfillment of the conditions precedent. Depending on the extent of the development it can take months before construction is completed, and occupation certificates for the Units are issued by the Municipality.

Pursuant to section 6 of the Act, the land surveyor can only start site measurements to draft sectional plans for the new Scheme after the buildings have been completed as the draft sectional plan is prepared from an actual survey of the buildings. After surveying and completion of the draft plans, they are sent to the Surveyor General for approval in terms of section 7 of the Act, which process can take approximately 4 – 6 weeks on average.

Only upon receipt of the approved sectional plans from the Surveyor General, the processing of transfer documents by the conveyancers can begin.  The conveyancer requires originally approved sectional plans for the processing of the transfer documentation as the actual sizes of units as reflected in the said plans must be used.

The conveyancer must send the approved sectional plans upon receipt thereof to the local municipality (within whose jurisdiction the Scheme will fall), so that the municipality can list the new Scheme, as well as record each unit within the Scheme on their system. This process is essential to ensure that every owner of a unit receives an account from the municipality after registration of the Scheme. It is also compulsory for obtaining a rates clearance certificate from the Municipality without which registration of the Scheme will not be possible.

It is clear from the above that the groundwork for the opening of a Scheme alone may take several months depending on how long the construction of the buildings of the Scheme, the duration and the time period before sectional plans are approved and the listing of units on a municipal system is recorded.  Only after the occurrence of the above, the normal transfer process between the seller and the end buyer can commence.

It is recommended that the Purchaser also pay attention to the following conditions in the purchase agreement:

• Whether the Purchaser will acquire a parking bay together with the purchase of a unit , and if so, whether the parking bay will be registered as a separate notarial exclusive use area or whether it will be dealt with under Section 27A of the Act and awarded to the unit by the developer in the rules of the Scheme;
• Whether the Seller/developer reserved for himself a future right of extension of the Scheme. The Purchaser is in such case entitled to review the plans for future extension of the Scheme;
• Whether the Seller intends to develop the development in phases, so that it can be established what facilities that form part of the development, will only be completed in a later phase.

It is clear from the above that the registration of a unit that is part of a new sectional title scheme development form part of a lengthy process and buyers would be wise not to be in a hurry to move in.

REFERENCE LIST:

The Sectional Titles Act 95 of 1986

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.