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Monday Jul 11, 2016

'Silent expropriation' practices in sectional title properties

A Cape Town property lawyer has warned of the potentially disastrous consequences for buyers of sectional title properties who risk losing their garages, parking bays and gardens if they assume these exclusive use areas are automatically transferred to them on purchase.

Aidan Kenny, a director at Werksmans Attorneys, said sectional title schemes provided for exclusive use areas such as gardens, parking bays and garages.

"The Sectional Title Act provides for two mechanisms in terms of which an owner of a unit can become entitled to an exclusive use area. The first mechanism is by virtue of a title deed registered at the Deeds Office.

"The second mechanism is by virtue of the rules of the body corporate, where the exclusive use area is allocated to a specific owner in terms of the rules."

He said that in terms of the second mechanism, the owner of a unit cannot transfer the exclusive use area by virtue of registration at the Deeds Office. When the owner transfers the unit, the new owner becomes entitled to the use and enjoyment of the exclusive use area.

The first mechanism of ownership of an exclusive use area has an inherent pitfall, which is regulated in terms of the Sectional Titles Act 95 of 1986. This is demonstrated by section 27(4)(b), which reads as follows:

"If an owner ceases to be a member of a body corporate as contemplated in section 36(2) of the Sectional Titles Act (namely ceases to be the owner of a unit), any right to an exclusive unit area still registered in his or her name vest in the body corporate."

"The owner loses out. We've seen this happen often," Kenny says.

This has the effect that an exclusive use area such as a garage, a parking bay or a garden will vest in the body corporate if the owner of a unit sells the unit, without the exclusive use area.

"Failure to attend to a diligence can lead to disastrous consequences, if the unit is transferred without the exclusive use area, which will, if the owner has no further units in the scheme, ultimately vest in the body corporate without compensation to the owner."

The owner of an exclusive use area has no right of recourse against the body corporate and if an appeal to the moral being of the body corporate fails, a High Court application can probably be brought to test the constitutionality of the Sectional Titles Act.

"The relevant section of the Act (95 of 1986) operates and is akin to an expropriation provision, without compensation, as the section does not mention any right of recourse against the body corporate.

"This is despite the fact that section 25 of the constitution provides for compensation to be paid if property is expropriated with section 27(4), being the wolf dressed in sheep clothing."

Said Kenny: "The legislator must intervene and amend the act to bring the same in line with the spirit, purport and object of the constitution."

However, prior to legislative intervention, alternatively the testing of the constitutionality of section 27(4) of the act, prospective sellers of properties in sectional title schemes must request their attorneys, to attend to a diligent search, to ascertain if they are the owners of exclusive use areas by virtue of title deeds, which must be sold with the unit, as certain owners are not aware that they are the owners of areas, such as garages, by virtue of a title deed.

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