CHAPTER 6: Statutory Land Use

Sectional titles

• The statutory provisions regarding sectional ownership currently make it possible for
an individual sectional owner to own a part (section) of a building (flat, shop or office),
while all the sectional owners jointly own the common property in bound common
ownership.
• The common property includes the land and all parts of the building which do not form
part of the sectional owners’ sections, for instance lifts, staircases and corridors of the
building.
• For many reasons this is a better alternative for acquiring an entitlement of use in
offices, shops or flats than by means of shareblock, co-ownership or lease.

Amendment of common law principles

Common law principles:

a. The owner of a piece of land is also the owner of everything permanently attached to
the land (superficies solo cedit).
b. The owner of a piece of land is also owner of the air space above the land (cuius est
solum).
c. The owner of a piece of land may exercise his entitlements of use and enjoyment
without interference (plena in re potestas).
d. Free co-ownership implies that co-owners can, at any time, divide the land or alienate
an undivided co-ownership share.
Although the above-mentioned common law principles are still applicable to ownership of
ordinary urban and agricultural land, they have in the case of sectional titles been amended
in the following ways:

a. The rule that the owner of land is also owner of everything permanently attached to
the land was repealed in the case of sectional ownership. The common owners (or
joint owners) of the land, which can be described as the common property, are not co-
owners of everything attached to the land, but everyone is the sole owner of a part
(section) of the building. However, they are co-owners of the common property.
b. The principle that the owner of land is also owner of the air above the land (cuius est
solum), was repealed in the case of sectional ownership. The section of the building
which the sectional owner owns, is not only described in terms of vertical boundaries
(length and breadth), but also in terms of horizontal divisions (height).’
c. The principle that the owner can, in principle, exercise undisturbed entitlements of use
and control regarding the object (plena in re potestas), is to a large degree obviated
by the joint exercise of entitlements by the sectional owners regarding the common
property (subject to the rules of the sectional title scheme and the supervision of the
body corporate).
d. The joint ownership of sectional owners regarding the common property, which is
regarded as a particular form of bound common ownership, is in many respects
different from common law free co-ownership:

➢ A sectional owner cannot claim separation and division of the common property
by means of the actio communi dividundo during the existence of the sectional
title scheme.
➢ The sectional owner’s entitlement to alienate his share in the common property
is much more limited than in the case of co-ownership; it is inseparably linked
to ownership of a section of the building.
➢ A sectional owner’s participation in legal actions regarding the common
property is determined by rules and statutory measures and a sectional owner
does not necessarily have a right to veto as is the case with normal co-
ownership.
➢ In the case of sectional ownership the legal actions are performed by a body
corporate, which is not necessarily the case with normal co-ownership.
➢ In the case of sectional ownership the sectional owner’s share in the common
property is linked to his ownership of a particular section of the building, while
a co-ownership share is of an idealised nature and not linked to ownership of
a part of the object.
Legal nature of sectional ownership

Definition

A sectional title unit is described in the Sectional Titles Act 95 of 1986 (section 1) as a
composite immovable thing consisting of a section (of a building) along with an undivided
share in the common property which is apportioned to a unit on the basis of the participation
quota.

• A sectional title unit is described as ‘land’ and ownership of such a unit can be
transferred only by means of registration in the deeds registry. A sectional title unit is
a composite, immovable thing.
• It is not possible to transfer ownership in the section without at the same time
transferring the undivided share in the common property.
• The section is a corporeal principal thing, while the undivided share in the joint property
is a real right (joint ownership or a particular form of bound common ownership), which
is added to the principal thing as an incorporeal accessory thing.
• The correct juridical explanation is that the section (as corporeal principal thing) and
the undivided share in the common property (as incorporeal accessory thing) have
been combined by statute and that it is impossible to acquire or alienate the one
without the other.
A sectional title unit consists of the following components:

a. a section together with

b. an undivided share in the common property
c. apportioned on the basis of the participation quota

a. a section together with

A section is a part of the building which is indicated as such on the sectional plan and
in respect of which separate ownership can be acquired. More than one owner may
obtain ownership of a section, in which case they are co-owners of the section.

The section can be described in terms of the sectional plan:

• with reference to the floors, walls and ceilings thereof;

• which includes parts like a porch, lobby, balcony, forecourt or projection
belonging to the section.

b. Common property

The common property includes the land and all parts of the building not included in the
sections. This includes areas like stairs, lifts, corridors, service areas and so on. All
sectional owners are bound common owners of the common property. The sectional
owner’s undivided share in the common property is calculated with reference to the
participation quota.

c. Participation quota

The participation quota in the case of residential units is calculated , by dividing the
floor area (measured to the middle of the separating wall) of a specific section with the
combined floor area of all the sections together, calculated to 4 decimal points.

The participation quota determines the following:

• The extent (size) of the sectional owner’s undivided share in the common
property.
• The value of a sectional owner’s vote at meetings.
• The extent of a sectional owner’s contribution to the maintenance and
administration of the common property (levy) and the relationship in which the
sectional owner can be held responsible for the payment of debts of the body
corporate incurred in the maintenance of the sectional title scheme.
Formal requirements

Procedure

a. Draft sectional plan

b. Notice to tenants
c. Approval of sectional plan by surveyor-general
d. Opening of sectional title register and registration of sectional plan
e. Alienation of sectional title units

a. Draft sectional plan

A draft sectional plan must be drawn up by an architect or land surveyor in terms of

the requirements of sections 5 and 6. The draft sectional plan must:

➢ Set out the boundaries of the land and the position of building(s) on the land.
➢ Indicate the name of the building(s).
➢ Include a scale plan of every floor in the building(s).
➢ Describe the boundaries of every section and identify each section by means
of a number.
➢ Indicate the floor area measured to the middle of the external walls of every
section and the total floor surface of all the sections.

b. Notice to tenants

If one or more sections of an existing building are being leased by the developer for
residential purposes at the time of the drawing up of the sectional plan, the developer
must, before he may apply, give notice in writing to all such tenants of a date (at least
14 days after delivery or sending of the letter) of a meeting of such tenants. At the
meeting the developer or his agent must provide the tenants with particulars of the said
scheme.

c. Approval of the sectional plan

The architect or land surveyor must submit the draft sectional plan and other required
documents on behalf of the developer to the surveyor-general for approval. If the
sectional plan does not meet statutory requirements, the surveyor-general may order
the architect, surveyor or developer to change the sectional plan or to submit a new
sectional plan.
 d. Opening of sectional title register

Following the approval, the developer applies to the deeds registry for the registration
of the sectional plan and the opening of a sectional title register. The developer must,
among other things, hand in the following documents:

➢ The sectional plan (two copies).

➢ Schedules, certified by a conveyancer, setting out all servitudes and conditions
of title.
➢ The deed of transfer of the land.
➢ Existing mortgages and permission for the cancellation thereof.
➢ A certificate of a conveyancer regarding the rules applicable to the scheme.
➢ A certificate of sectional title regarding every section in the scheme.

e. Alienation of sectional title units

After a sectional title register has been opened and a sectional plan has been
registered, the sectional title units come into being as immovable things. A certificate
of sectional title for every unit is issued and at this point it is possible to register
sectional mortgages and other real rights against the sectional title unit. The developer
of the scheme is at this stage the owner of all the sectional title units and can alienate
(sell, exchange or donate) the units by means of a written agreement. The sectional
title unit has to be described in the agreement according to its deeds registry
description, or the three components. The ownership of a sectional title unit is
transferred by means of a deed of transfer in accordance with the normal procedure
for deeds registration.

Protection of tenants

Tenants of flats or business premises in cases where an existing building is transformed into
a sectional title scheme are protected in two ways:

• There is a prescribed notification and compulsory information procedure

• In terms of section 10 a procedure was introduced in terms of which developers must
first offer a sectional title unit for sale to the tenant (either before or after opening of
the sectional title register) before offering it to other persons.
Body corporate and rules

Aims and activities

Object of body corporate

• The object, capacities and activities of the body corporate are aimed at the
management and maintenance of the common property and the enforcement of the
rules of the sectional title community.

In terms of section 37 this implies, amongst others, the following:

➢ To open a bank account.

➢ To insure the building(s).
➢ To maintain the common property.
➢ To repair, without delay, any damage caused with insurance money.
➢ To see to it that all statutory requirements regarding the common property are met.

Definition

A unanimous resolution

➢ A resolution taken unanimously by all the members present at a general meeting at

which at least 80% of the total number of members of the body corporate (calculated
in numbers and value) are present or represented, or a resolution accepted in writing
by all the members or their proxy/proxies or their representatives.

• Written notification of the meeting must be given 30 days in advance and the proposed
unanimous resolution must be mentioned in the notice.
• In circumstances determined by the rules a meeting of the body corporate can be
convened within 30 days or less after notice has been given to all the members.
• All other management activities of the body corporate are performed in accordance
with special resolutions.

Definition

A special resolution

➢ A resolution taken by the majority of at least 75% of the votes (calculated according to
value and number) of the members of the body corporate present or represented at a
general meeting, or a resolution accepted in writing by 75% of all the members of a
body corporate (calculated according to value and number) or their proxy/proxies or
their representatives.

• For this meeting written notice 30 days beforehand is required and the said special
resolution must be mentioned in the notice.
 Entitlements and obligations of sectional owners

• The body corporate’s entitlement to control the common property and to enforce the
rules pertaining to the community of sectional owners as well as the statutory duties of
sectional owners, result in each sectional owner’s entitlements regarding his own unit.
• Although this restricts the common law principle of plena in re potestas to some
degree, this is a result of the unique development regarding sectional ownership and
the community of sectional owners.
• Ownership was, in any case, not applied as absolutely and individualistically in
common law as is often assumed.

Rules

The sectional title scheme is controlled and managed, from the date of the coming into being
of the body corporate, by means of rules. Two types of rules are distinguished, namely
management rules and conduct rules.

Definition

Management rules

• Regulate the activities of the trustees and members of the body corporate and are
prescribed by means of regulation.
• The developer can (at the time of application for the opening of a sectional title register)
replace them with other rules.
• These may be supplemented, amended or repealed by the body corporate from time
to time by means of a unanimous resolution.
• The rules can, however, be amended only to the extent allowed by the regulations,
and some rules cannot be amended at all.

The management rules deal with matters such as:

➢ Meetings of trustees
➢ Duties of trustees
➢ Meetings of sectional owners
➢ Duties of owners and tenants
Definition

Rules of conduct

• Determine the entitlements of use and duties of sectional owners regarding individual
sections and the common property.
• The rules are prescribed by means of regulation and can be replaced by the developer
with other rules at the time of application for the opening of a sectional title register.
• These rules can, from time to time, be supplemented, amended or repealed by special
resolution of the body corporate.
• A rule of conduct replaced by the developer, or a supplement or amendment by the
body corporate, may not be irreconcilable with the prescribed management rule.

Rules of conduct deal with matters such as:

➢ The keeping of animals, reptiles or birds with the permission of the trustees
➢ Refuse removal
➢ Parking of vehicles on the common property
➢ No flammable matter may be kept in the sections and no actions performed which
would affect the insurance contract for the building.

Extension of scheme

In his application for the registration of a sectional plan the developer may reserve the right,
for his own benefit and within a period mentioned in the condition, to erect and complete a
further building or a horizontal or vertical extension of existing buildings on a specified portion
of the common property of a scheme and to manage and market such building(s) as a
sectional title scheme.

Legal nature of right of extension

• A right of extension thus reserved, is a registrable limited real right which may be
encumbered by a mortgage bond or ceded by means of a notarial cession. This means
that, on completion of the extension of the building, the new sectional owners will also
acquire undivided shares in the common property.

Furthermore the body corporate, empowered thereto in writing by all its members, may buy
land to extend the common property for the purposes of providing amenities and facilities for
all its members. This land forms part of the common property and is held in common ownership
by the sectional owners in the particular scheme in the same relationship as their participation
quotas.
Destruction of building

The building(s) forming part of the sectional title scheme is/are regarded as destroyed in terms
of section 48 if:

• the building(s) is/are physically destroyed;

• the owners decide so by unanimous resolution and all holders of registered sectional
mortgages and persons with registered real rights agree thereto in writing;
• the court is convinced that, taking into consideration all the circumstances, it would be
right and fair to regard the building(s) as destroyed and issue an order to this effect.

➢ In these circumstances the court may impose such conditions and make such orders
as deemed necessary to regulate the effect of the court order between the body
corporate and the owners and between the owners, the holders of registered sectional
mortgages and persons with registered real rights.
➢ The sectional owners can adopt a unanimous resolution to rebuild the building or the
court may order them to do so, taking into consideration the way in which the insurance
money regarding the building is to be used.
➢ The court may also in certain circumstances order that the owners of the destroyed
sections must be compensated by the other sectional owners and, in this way, they
transfer their sectional ownership to the other sectional owners.
➢ If the building is deemed to be destroyed in any of the ways mentioned above, the
sectional owners can also unanimously decide not to rebuild the building or the court
may issue an order to this effect on application.
➢ Thereafter the registrar of deeds is informed in the prescribed manner, the sectional
title register is closed and the land is transferred to the land register.
➢ The sectional owners become free co-owners of the land and attachments according
to the participation quota of each owner.
Advantages and disadvantages

A sectional title scheme has several advantages for a sectional owner:

• The owner of a sectional title unit is the owner of immovable property registered in his
name in the deeds registry.
• The owner of a sectional title unit is the owner of immovable property registered in his
name in the deeds registry.
• The extension and termination of a sectional title scheme is clearly and carefully
provided for in the Act.

However, a sectional title scheme also has disadvantages:

• The application of sectional titles is limited because the developer must be the owner
of the land or hold a leasehold in respect of the land.
• Despite the extensive provisions dealing with the termination of a scheme, it will often
be the task of the court to finally end the scheme, for instance in cases where the
building is destroyed and a unanimous resolution to rebuild cannot be reached.
• The establishment of a sectional title scheme is an expensive and lengthy process
because of the fact that the sectional plan must be approved by the surveyor-general,
the sectional plan must be registered in the deeds registry and a sectional title register
must be opened. Therefore there are many more formalities and requirements to be
met than in the case of a shareblock scheme.
Shareblocks

Functioning of shareblock scheme

Definition

A shareblock scheme

• A scheme in terms of which a shareholder in a shareblock company, which is the owner

or lessee of a building or building complex, acquires a use right based on his
shareholding in respect of a part of the particular building or building complex (usually
a flat, office or shop).

In contrast with a sectional title scheme a shareblock scheme can be operated in respect of
immovable property leased by the company and ownership of immovable property is not a
requirement for the establishment of a shareblock scheme.

The functioning of a shareblock scheme was summarised as follows:

a. The shareblock company acquires ownership of or concludes a registered long-term

lease of the building to be marketed as a shareblock scheme.
b. The share capital of the shareblock company to be issued is divided into shareblocks.
Every shareblock gives the holder thereof the sole right to use or occupy a particular
part or section of a building.
c. The shareblocks, to which is attached the use right to a certain part of the building, are
then sold and transferred to shareholders by the shareblock company.
d. The holder of the right is, therefore, a shareholder in the shareblock company and as
a result of his shareholding he acquires a creditor’s right to use and occupy a part of
the building.
e. If the buyer is unable to buy the shareblock for cash, the shareblock is usually pledged
to the seller by the buyer until the purchase price is paid in full.
Protective measures

a. Main object and capacity

• The main object and capacity of a shareblock company must be to manage a

shareblock scheme in respect of immovable property bought or leased by it.
• The capacity of the shareblock company to perform legal actions is determined by its
main objectives, as described in section 7(1), and the objectives ancillary to the main
objective included therein.
• The main object and capacity of a shareblock company must be to manage a
shareblock scheme in respect of immovable property bought or leased by it.

b. Doctrine of ultra vires

• Any action of a shareblock company which exceeds its abilities or capacity is void. In
the case of such an invalid action the person who performed this act on behalf of the
company, is personally liable toward a third party injured as a result of the fact that the
company is not bound by the action, provided the third party acted bona fide and
reasonably.
• This provision relates to the application of the doctrine of ultra vires, which, in the case
of other companies, has largely fallen into disuse.

c. Memorandum of incorporation

• The memorandum of incorporation of a shareblock company must provide that a

member is entitled to use a specified part of the immovable property in respect of which
the shareblock scheme is in operation, subject to provisions and conditions contained
in a use agreement concluded between the company and that member.
• A copy of every signed use agreement and any amendments thereto must be kept by
the company at the immovable property in respect of which the shareblock scheme is
operated.

d. Directors

If a shareblock company has ten shareholders (excluding the shareblock developer),

the shareholders have the right to appoint at least one of the directors of the company,
and if there are more than ten shareholders, the shareholders have the right to appoint
at least two of the directors of the company.
 e. Limitation on acceptance of payment

• A limitation is placed on the acceptance of payment in respect of shares by the

developer of the shareblock company before the incorporation of the company.
• Before incorportation any sum received may be paid into a trust account of an
attorney or estate agent for the benefit of the person to whom the consideration
is due.

f. Use of funds

• Sections 13 to 15 lay down certain requirements for and limitations on the use
of funds of the shareblock company.
• The most important protective measure for the shareholder is that funds for the
payment of the shareblock company’s loan obligations which are not
immediately utilised, must be held in trust.
• All money paid for this purpose must immediately be deposited in a separate
trust account opened by the shareblock company at a bank or building society
or paid into a trust account of an attorney or estate agent.

g. Increase in loan obligations

• A shareblock company may not increase its loan obligations or encumber any
of its assets, unless the increase or encumbrance has been approved by a
resolution of 75% of the number of members of the company (excluding the
members of the shareblock developer) who have the right to vote at the
meeting and who together hold at least 75% of the total votes of all those
members

h. Formalities of contract

• A contract to acquire a share, a use agreement and an amendment or cession

of such a contract or agreement, must be in writing and signed by the parties
thereto or their representatives acting in accordance with their written mandate.
• Non-compliance with this requirement will make the contract, agreement,
amendment or cession void.

Advantages and disadvantages:

A shareblock scheme has several advantages for shareholders:

• It can be used in cases where a sectional title scheme cannot be launched. That would
be the case where the developer is not the owner of the land or in the case of
 agricultural land, where it is possible to develop a shareblock scheme with the consent
of the Minister of Agriculture.
• A shareblock company can start marketing shareblocks immediately after registration
even if the building has not been erected. The shareholders are protected in that all
payments not used immediately to pay loan obligations, are held in trust for the buyer.
• The Share Blocks Control Act contains several protective measures to safeguard the
position of shareholders.

There are, however, also certain disadvantages for shareholders in a shareblock scheme:

• The shareholder acquires only a creditor’s right against the shareblock company and
the object of his right is not an independent, immovable object in respect of which
ownership or another real right can accrue. This creditor’s right implies that the
shareholder can claim to use a part of the building for a specific period. The ownership
of the land and the building still vests in the shareblock company.
• If the shareblock company should become insolvent, the shareholder is not protected
as the holder of a real right. He has only a concurrent claim against the loan account
of the company and also loses his use right in respect of the unit.
Time-sharing

Definition

A time-sharing interest is described as any right to or interest in the exclusive use or

occupation, during determined or determinable periods in any year, of accommodation, which
always indicates the use or occupation of immovable property in terms of a real right or a
creditor’s right.

• In the first place there are several ways of getting a use right for the purposes of time-
sharing without the holder of the right acquiring ownership in a part of the building, for
instance in the case of a time-sharing interest based on a shareblock scheme or by
means of membership of a club or by means of a long-term lease.
• In the second place an interested party in time-sharing in a sectional title scheme does
not acquire ownership in time, but an undivided co-ownership share in a sectional title
unit, and the use right (as entitlement of the co-ownership) is divided on the basis of
time.
• The holder of the right is therefore a co-owner of a sectional title unit on a continuous
basis, but the use right is divided on the basis of time between the co-owners.

Protection of purchaser

Purpose of the Act

The primary purpose of the Property Time-sharing Control Act is to protect the purchaser of a
time-sharing interest. The protection will, necessarily, depend on the nature of the time-sharing
scheme, which will imply that the protective measures of the Share Blocks Control Act 59 of
1980; the Alienation of Land Act 68 of 1981 and the Sectional Titles Act 95 of 1986 might, in
certain cases, also be applicable.

The following protective measures are contained in the Property Time-sharing Control Act:

• Formalities regarding the contract as prescribed in sections 2 to 5.

• The advertisement of a time-sharing interest must contain prescribed particulars, and non-
compliance with these provisions is punishable with a maximum fine of R1 000 or one year’s
imprisonment or both.
Time-sharing on the basis of a club

Club without legal personality

In the case of a club without legal personality, the members’ time-sharing interests are
determined by the nature of their rights as members.

• All members are common owners of the assets of the club (except if the assets are
held by a trust).
• Members can be held personally liable for the obligations of the club.
• All legal relations between members are of a contractual nature.

Club with legal personality

In the case of a time-sharing scheme run by a club with legal personality, the members’ rights
will differ from those in a club without legal personality.

• On the basis of their rights being membership rights, members will acquire creditors’
rights only regarding the use of the club’s property.’
• The members are not the owners of the club’s assets, but the club (as a body
corporate) is the owner of all assets. The legal relationships between members and
between members and the club are therefore not real rights, but creditors’ rights
resulting from the relationship between the members and the club as legal person.
• Members cannot be held personally liable for the club’s obligations.

Levies

Levies must be paid by the buyers of an interest in time-sharing on the basis of time modules
sold and the developer pays levies on the same basis for unsold time-modules.

Housing development schemes for retired persons

Definition
In terms of the Housing Development Schemes for Retired Persons Act 65 of 1988 (as
amended) a housing interest in respect of a housing development scheme for retired persons
(persons older than 50 years) is a right to occupy a specific part of the immovable property
managed in terms of the scheme, which right to occupy is based on ownership or a creditor’s
rights.

Types of housing development schemes

A housing development scheme can be managed in any of the following ways:

• Membership of or participation in a club, association or organisation which manages a

housing development scheme, in which case the right to occupy is based on a
creditor’s right.
• However, a housing development scheme cannot assume the form of time sharing in
terms of a time-sharing scheme.

Several other protective measures and formalities of contract are prescribed for the alienation
of housing interests to retired persons. The most important of these are:

• the limitation on the acceptance of any payment for the alienation of a housing interest
in a housing development scheme to a retired person before the seller has complied
with certain preconditions; and’
• the meeting of certain contractual formalities in the deed of alienation of a housing
interest to a retired person.