THE RIGHT TO AN EXTENSION ON THE DEVELOPMENT
Category Advice
In a sectional title scheme, provided for in the Amendment of section 25 (1) of the Sectional Titles Act 95 of 1986, a developer can register the right to extend the sectional title scheme at any time.
It says:
“A developer may, subject to the provisions of section 4 (2), in his or her application for the registration of a sectional plan, reserve, in a condition imposed in terms of section 11 (2), the right to erect and complete or include from time to time, but within a period stipulated in such condition, or such extended period as may be agreed upon by unanimous resolution of the body corporate and bondholders, from time to time prior to the expiry of the stipulated period, by way of a bilateral notarial deed, for his or her personal account -
(a) a further building or buildings;
(b) a horizontal extension of an existing building;
(c) a vertical extension of an existing building,”
This should, therefore, be one of the items that buyers look for carefully if they’re considering buying a unit in a sectional title scheme, says Michael Bauer, managing director of estate agency SAProperty.com.
In many instances the right of extension has been registered but the developer has no intention of ever exercising this right, and no one has in all probability asked whether it is possible to get the right revoked or cancelled. There could be an extension registered that neither the transferring attorney, body corporate, the seller nor the agent is aware of (as has happened in the past), he said.
What has to be asked is whether the extension might affect the values of the properties within the scheme. All parties involved must be made aware of the full extent of the situation, he said. The agents, attorneys, body corporate, buyers and sellers should know what the situation is so that an informed decision can be made as to whether to continue with a purchase of a unit, or not.
In some cases where properties have been rezoned, problems can arise where originally the developer had the right to build a three storey apartment block but on reassessment of the new zoning regulations he is now entitled to build a 16 storey apartment block. If there has been no stipulation of the time frame of the extension and no limit placed, the developer can then exercise his right to continue to build upwards and the owners of the block can do nothing about it, he said.
It is important to check, firstly, before signing an offer to purchase in a sectional title scheme, whether there is a right of extension in place, and secondly whether there is a time limit set. If there is no date or limit to the number of years, this right could be exercised at any time.
Another important thing to note, he said, is that the developer does not necessarily have to develop the extension himself, he can sell this right to another developer, who may then decide to use it.
“Unfortunately, if the right to extension is open-ended, there is nothing the owners can do to prevent the developer from exercising the right,” he said.
Author: SAPROPERTY
