If an erf is zoned single residential- SR1- , since July of 2016, one can, for properties which fall under the municipality of the City of Cape Town , have a 2nd dwelling on the property by automatic right bestowed on property owners by council- no zoning departures or consents from council are needed, provided there is no title deed restriction against more than one dwelling and /or the additional build intended, which incorporates things like side and street set backs, land coverage , etc. The intended build needs to comply with the zoning scheme limitations like height , bulk coverage, building lines etc. to avoid neighbours’ comments and or public participation.
If there is a restriction to only 1 dwelling and if it is council imposed- relatively easy to deal with and a “rubber stamping” of sorts to get it removed ; however , it adds on time to the process of the intended “development”- 6 months to a year.
If neighbour imposed conditions – far more tricky and a major obstacle, naturally.
An architect and townplanner would need to advise the property owner on the prospects of success for the intended build and especially given any title deed restrictions impacting thereon.
As of February of this year, one can now have a 3rd dwelling on single residential zoned erven. Will come back to that further on, below.
What development can one do to maximise on this second and 3rd dwelling opportunity?
Would one Subdivide?
Not if one cannot given minimum erf size restrictions applicable to the property, imposed by zoning laws and regulations in play.
And, even if the erf is big enough, sub division takes time and time means money! Subdivision requires public participation.
What about Sectional Title?
To get around the more cumbersome, costly and not guaranteed subdivision process, one can create a Sectional Title Scheme on the erf (regardless of erf size).
IE , Convert it from conventional to sectional title property and have 2 (or 3 sections )in a Scheme, with , typically , common property and exclusive use areas. Obviously and to restate the point, one needs to observe the building regulations that apply to the erf.
A two or three unit sectional title Scheme that is 100% compliant with the zoning scheme will be approved without third party comment. The only requirements to open a register are two dwellings constructed that have approved building plans.
There are some important procedural, timing and practical aspects which come into play, making it more or less attractive for some:
The Second Dwelling Scenario:
- The second dwelling must be built to at least wall plate height before the Scheme can be opened;
- One cannot transfer one of the dwellings to a buyer before one has opened the Scheme and created two sections to start with. Until the Scheme is formally registered and opened at the deeds office, the (whole) property remains an erf which cannot be “split” obviously;
- Therefore, the horse and cart and a cashflow issue: you need to have the funds to build the second dwelling first;
- Once built or partially built, a landsurveyor can be contracted to survey the 2 proposed sections , common property and exclusive use areas and prepare a sectional title plan. Sometimes there may be no common property or exclusive use areas. It all depends on the configuration of the property and development- buildings thereon, access to street /driveway (s) , etc;
- The plan is then sent to the Surveyor General for approval;
- Once to hand, the Scheme can be opened, provided there are body corporate Rules in place and agreed to or a homeowners’ association Constitution regulating the Scheme, either of which must be approved by the sectional titles Ombud (policing authority);
- There are some important aspects to bear in mind for the sectional title scheme option and the most notable thereof is that one of the dwellings must be smaller than the other and similar architecture to that of the main dwelling;
- The use of a Home Owners Association structure to set a Constitution to a two or three unit Scheme allows a deviation from the prescribed sectional title Rules which do not make practical sense with two free standing structures , which a two unit Scheme can be on a large property.
The 3rd Dwelling Option
- This is a very new dispensation having just become a by –law in February of this year;
- Plans for the 3rd dwelling can only be submitted to council once there are already 2 built dwellings and it may be approved if there are sufficient municipal services available. This creates an important timing issue;
- One can have a right to extend when registering /opening the Scheme for the 2 sections, identifying that there may be an extension of the Scheme per a roughly depicted plan and this right can be sold to a 3rd party who then builds that section in due course or buys the potential to build that section i.e. the land it will be situate on.
Summary and Comments
- The advantage of a subdivision is the opportunity of selling a development opportunity as opposed to a developer having to build before transfer as sectional title requires , so the possibility of accelerated cash flow if the subdivision is approved quicker than the building can be completed – realizing a land value without having to build and giving buyers more freedom to choose what to build.
- Having said that, properties have been subdivided into often more than 2 erven in order that one can create 2 dwellings on each newly –created subdivided portion and there have been a number of such developments in the Cape. A subdivision of a parent property into two portions could mean 6 units – 3 on each portion , as opposed to only two houses for sale in the case of no subdivision but using a two unit Scheme approach.
- The converse is the seller / developer not controlling what gets built.
- Other positives of subdivision are that freehold properties are arguably better understood by purchasers and therefore easier to sell.
- What’s more, the developer being able to afford to develop a subdivided portion for sale but not a built unit for sale , either only selling the land or selling the land and receiving the sale proceeds to use to fund the building works and offering the built house/unit on a turn key basis.
Contact STBB for further information about these exciting property development prospects.
Attorney, Conveyancer , Notary Public
O: 021 673 4700