Sectional Title Right of Extension

Introduction 

The Sectional Titles Amendment Act, 11 of 2010, which came into operation on 7 December 2010 (see Government Gazette 33849) has provided for a mechanism whereby the time period for which a right of extension was reserved can be extended. 

The time period can be extended by the entering into of a bilateral notarial deed entered into between the body corporate and the developer. It is clear from the wording of the section that the body corporate must be in existence before the time period can be extended. Should the body corporate not be in existence, the developer will have no other option but to cancel the right of extension and reserve the right de novo and include the period of extension in the new reservation (see in this regard RCR 66 of 2011). 

Supporting Documents 

The following supporting documents must be obtained and filed in the Notaries protocol or lodged with the Registrar of Deeds: 

The bilaterally executed notarial deed 
The agreement must have been entered into prior to the lapsing of the real right of extension. However, the bilateral notarial deed does not need to be registered in the deeds registry concerned, prior to the date or expiry of the real right of extension (see RCR 65 of 2011). 

The consents by all bondholders 
In terms of the Act the bondholders’ consents must be filed in the Notaries protocol. 
It is a unclear what the cut-off date for the bondholders consent will be. Once again, it is submitted that the date of execution of the agreement between the body corporate and the developer should be the cut-off date for obtaining bondholders consents. 

Transfer Duty Receipt / Exemption 
The agreement to extend the time period of the right of extension is deemed to be a transaction, as envisaged by section 1 of the Transfer Duty Act 40 of 1949, and thus a transfer duty receipt or transfer duty exemption certificate must be lodged (see RCR 68(a) of 2011). 

Unavailability of Unanimous Resolution 
It is clear from the Act, that a unanimous resolution, as defined, is required to extend the time period for exercising the right of extension. However, the Act is not clear as to whether the Court can be approached should the unanimous resolution not be obtained. Based on the unreported case of SP and C Catering Investments (Pty) Limited v The Body Corporate of Waterfront Gauteng and 17 Others (Case No. 84/2009) it does not appear as if the court has any authority to extend the time period contained in a real right of extension.
The unanimous resolution need not be lodged with the registrar of deeds but should be retained in the Notaries protocol. 

Subdivision of Real Right of Extension 
More often than not a developer subdivides the real right of extension and cedes the subdivided portions to “co developers”. The subdivision, and cession of such right, does not create a body corporate and thus the relief of extending the time period unilaterally by the “co developers” is also not possible. Their only option will be, as with the developer, to cancel the right and re-reserve the right de novo (see again RCR 66 of 2011). 

Conclusion 

Although the legislature has provided some relief in the extending of the time period in which a real right of extension must be exercised, there are still many unanswered questions.

Should you require more information in this regard, kindly contact me.

Allen West
TONKIN CLACEY PRETORIA 
012 346 1278

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