Last month, the Supreme Court of Appeal (‘the SCA’) partially upheld an appeal by a body corporate seeking to force various owners in a sectional title scheme to consent to it obtaining a certificate of real right concerning the scheme’s extension – and to cede this right, which vested in it, to a third party.
In The Body Corporate of San Sydney v Shivani Singh and Others, the San Sydney body corporate (‘the Appellant’) sought to implement an agreement it concluded with HF Property Investments (‘HFP’) in May 2018. In terms of this agreement, HFP would, inter alia, acquire the right to extend the scheme by the addition of three proposed units, which were constructed by the developer on the common property, and procure the registration of a sectional plan of extension for R500 000.00.
Crucially, the developer – which has since been liquidated – had no legal right to extend the scheme after the right of extension it reserved for itself lapsed in March 2013. Despite this irregularity, the buildings were completed and occupancy certificates were issued by the local municipality in December 2014. Although the units were sold and have been occupied for years, the transfer of ownership of the properties cannot be formally registered absent the registration of the extension of the scheme.
According to section 25(6) of the Sectional Titles Act (‘STA’), if a developer’s right to extend a scheme lapses, the right of extension vests in the body corporate. To formalise the extension of the scheme and enable the registration of the additional units, the Appellant resolved to sell and cede its right to HFP. To accomplish this, the Appellant is required to obtain a CRR in respect of the scheme’s extension pursuant to section 25(6) of STA, which it may then cede to HFP via a notarial deed of cession.
Under section 5(1)(b) of the Sectional Titles Schemes Management Act (‘the STSMA’), obtaining a CRR and ceding the right both require the written consent of all owners and mortgagees. Notably, section 5(1)(b) provides that an owner or mortgagee may not withhold their consent ‘without good cause in law’.
An owner, Ms Singh (‘the Respondent’), refused to furnish her approval. Maintaining that her decision to withhold her consent was reasonable, the Respondent argued that the disposal of the right of extension involves alienating a portion of the scheme’s common property, which mandated a unanimous resolution by all members of the body corporate per section 5(1)(a) of STSMA. This resolution was never concluded. Moreover, the Respondent reasoned that she had not received sufficient information to make an informed decision. As such, her refusal to consent did not contravene section 5(1)(b) of the STSMA.
While the Respondent was successful in the High Court, the SCA rejected her contention that disposing of the right to extend involves an alienation of common property. The SCA emphasised that the nature of sectional title ownership, which is comprised of the separate ownership of a section in a building and joint ownership of common property, differs from conventional land ownership. As such, the principle of accession – buildings accede to the land and are owned by the landowner(s) – does not apply to sectional title ownership.
Indisputably, the construction of additional buildings on common property impacts the participation quotas held by all owners in a scheme and invariably dilutes their undivided share of ownership of the common property. The addition of new sections, however, does not impact the extent of the common property. Accordingly, a unanimous resolution is not required.
Still, the SCA agreed that the Respondent was not presented with sufficient particulars to reach an informed decision. Examining the concept of ‘good cause in law’, the SCA noted that the phrase must be interpreted in accordance with its context and purpose, absent a legislative definition. In this regard, section 5(1)(b) permits an owner to prevent a body corporate from alienating – or exercising or ceding – a right of extension, which may diminish the value of the owner’s unit, in instances where good cause exists. To that end, ‘good cause’ is determined by reference to the factual matrix and encompasses anything which may objectively undermine the best interests of the owner, scheme, or body corporate. On the facts, the SCA agreed that the Respondent’s decision to withhold her consent was reasonable in light of the Appellant’s failure to furnish the scheme’s owners with sufficient information.
Nevertheless, the SCA directed the Respondent(s) to sign any consents required to facilitate the registration of the extension of the scheme within seven days of request by the appointed conveyancers, failing which the Sheriff is authorised to sign the written consents on their behalf.
Significantly, the SCA bemoaned the parties’ failure to uphold the ‘spirit of communal ownership’ and ‘engage constructively’ to facilitate a mutually beneficially resolution. It accordingly highlighted the importance of Rule 41A of the Uniform Rules of Court, which mandates parties to consider mediation before initiating litigation, and the alternative dispute resolution mechanisms incorporated under the Community Schemes Ombud Services Act.
For expert legal guidance in matters involving sectional title disputes, contact our litigation attorneys at litigation@stbb.co.za.
