Repudiation
March 2, 2018
Oral cancellation of a written contract?
April 6, 2018

The extension of a sectional title scheme is a matter of great interest to the owners of first phase property in a phased development.

A right of extension, in terms of Section 25 of the Sectional Titles Act 95 of 1986 (“the Act”), allows the developer of a sectional title scheme to reserve a right in its favour, to erect further phases to the development, within a stipulated period and for its personal account, further buildings or extensions on a specified section of the common property, and to divide these buildings into sections.

The right to extend is a real right, which may be exercised by the developer or its successor in title, is transferable, and may be sold. The right to extend is embodied in a certificate which is the registered title of the right to extend.
The Act requires that a developer must comply strictly with the original plans submitted for the extension (section 25(13)). However, the courts have recognised that extension plans may be changed, if there are “changed circumstances”. What constitutes “changed circumstances”?
“Changed circumstances”

In Knoetze v Saddlewood CC [2001] 1 ALL SA 42 SE the court interpreted “changed circumstances” as circumstances which in the relevant commercial context make strict compliance with the submitted plans for phase two of the development, impractical.

The developer in this case erected single story units instead of double story units, as he has initially registered. The reason was that the second phase development would not have been profitable if it was built in accordance with the initially submitted plans and that the natural slope of the property would have resulted in the double story units blocking the ocean view of the phase one owners.

In Oribel Properties 13 (Pty) Ltd v Blue Dot Properties [2010] 4 ALL SA 282 (SCA) a “change in financial considerations” was found to be a change in circumstances which would make strict compliance with the originally submitted plans impractical as it would be impractical for a developer to build units which would not be sold in the market.

In Dolphin Whisper Trading 10 (Pty) Ltd v Registrar of Deeds and Another [2009] ZAWCHC 31, the court found that a change in the property market (buyers demanding more freedom when purchasing a sectional title unit) constitutes a changed circumstances, for example if buyers prefer a tandem parking bay for a two-bedroom apartment, instead of a single parking bay.

The court decided that the developer had to disclose full details of the extent of the changed circumstances. If this approach had to be followed, a developer must approach the court to ratify each and every transfer of a unit pursuant to a change in the sectional title plans, even in matters where there is no prejudice to the first phase owners.

The approach of the court in Dolphin Whisper Trading 10 (Pty) Ltd was challenged by the court in PCL Trust and Others v The Registrar of Deeds 2011 JDR 0232 (unreported judgment). The court in the PCL Trust matter questioned why the developer should have to approach the court to justify a deviation from the submitted plan. This approach was also adopted in Hartenbos Woonwapark CC v Registrar of Deeds & 5 Others (Nuku JA – 29 May 2017), for the following reasons:

– The Act does not provide that a court has to approve each and every amended site development.
– The Act places no duty on the Registrar to approve or disapprove the amended site development plans.
– The unit owners must approach the court should they feel their rights (as section owners) are being infringed upon.
– Should the onus be on the developer to approach the court for every deviation from the original plan, courts may be inundated with such applications.

Owners’ remedies

Section 25(13) provides that “an owner of a unit in the scheme who is prejudiced by (the developer’s) failure to comply…may apply to the Court, whereupon the Court may order proper compliance with the terms of the reservation, or grant such other relief, including damages, as the Court may deem fit.”

In Dolphin Whisper Trading 10 (Pty) Ltd did the court find that the Registrar of Deeds does not have to determine whether the changed circumstances make the strict compliance with section 25(13) of the Act impractical, but (in accordance with section 25(13) of the Act) that the first phase owners should approach the court.

In Oribel Properties 13 (Pty) Ltd v Register of Deeds & Others the court considered the prejudice of the owners of the buildings which were erected in the first phase of the scheme. Brick walls were built in the garden area (which was a common area of the development) impairing the view, of Devil’s Peak in Cape Town, of the first phase owners.

The Oribel Properties 13 (Pty) Ltd v Register of Deeds & Others judgment shows that the burden of proving prejudice on the owners in the first phase is quite onerous. The first phase owners must prove, for example, that the developer’s deviation from the plans as initially submitted either creates a fire hazard, safety hazard or would financially impact the first phase owners, before it would be considered as prejudiced.

Conclusion

The extension of a sectional title scheme is potentially prejudicial to the owners of first phase property in a phased development. However, a deviation from the originally submitted plans is allowed if there are “changed circumstances”. The owners of properties in the first phase development who feel prejudiced by a deviation, has the right to apply to court for relief.