SPLUMA
Category Property News
In the City of Cape Town and various other municipalities in South Africa, the construction of two to three dwellings on a property (erf) and the subsequent sale of these units have become feasible without the necessity of applying for subdivision or rezoning, provided that the building plans are approved by the Local Authority. This is made possible by the language in SPLUMA and corresponding By-Laws aligned with the government's Higher Densification Policies. The implications for the Property Industry are significant, translating to the creation of more homes with reduced bureaucratic processes. Estate agents are increasingly being approached by property owners to market these units. However, navigating this process is more intricate than a standard Offer to Purchase, involving statutory and financing considerations that require attention. It is strongly recommended to seek assistance from a qualified conveyancer for the contract and the entire process.
It's important to note that these units will be sold and transferred on a Sectional Title Basis, following the stipulations in the Sectional Titles Act and the Sectional Title Schemes Management Act (STSMA). Registering these units involves drawing and registering Sectional Plans in the Deeds Office, along with the opening of a Sectional Title Register.
The initial step includes reviewing the property's title deed, removing any conditions prohibiting multiple dwelling units. If the property is part of a Home Owner's Association, the constitution and rules must be examined to confirm no restrictions on opening a Sectional Title Register or constructing more than one dwelling unit.
Conduct Rules need to be agreed upon or, in their absence, the standard Management Rules and Conduct Rules prescribed by the STSMA will apply. Once transferred, a body corporate is automatically formed, and the units must be managed according to the STSMA.
An additional consideration for owner-developers is that Sectional Plans cannot be drawn until a building reaches roof height, posing financing challenges as units need completion before transfer. If construction financing requires progress payments, the facility must cover the entire scheme's cost rather than individual units. No real right of extension can be registered until at least two units are constructed, making bonding for this purpose complex. Although banks may develop financing products, initially, the entire scheme might need construction before transfer, and vacant plot transfers may not be possible.
In conclusion, all the mentioned issues should be addressed in a specialized deed of sale for a sectional title unit from the developer to the first third-party end-user, utilizing a contract tailored for these purposes instead of a standard offer to purchase used by estate agencies.
Author: Elana Hopkins