1. INTRODUCTION
1.1. A conundrum at times faced by sectional title developers or body corporates is whether common property, in existing sectional title schemes, can legally be converted into sections and sections into common property? There is no question that common property can be incorporated into a section in terms of section 24 of the Sectional Titles Act 95 of 1986 (“the Act”) and as such the nature of the rights thereof changes from being the object of common ownership to exclusive ownership.
1.2. The typical facts that would present themselves in an instance where a developer would want to change a section into common property is usually driven by setting out to achieve a sharing of maintenance costs, i.e., in one instance a large section spread over a number levels had an elevator incorporated in its initial design to facilitate access between the various levels. The developer then wanted to maximize its returns by subdividing that section into a number of smaller sections with one section created to house the elevator. Of course, the other subdivided sections retained their access to the section housing the elevator. The developer sold all the other newly-created sections but retained the section with the elevator with a view to converting the section housing the elevator to common property and thereby transferring the burden of the costs of maintaining the elevator to the body corporate. The developer purported to do this by the mere consent of the trustees of the scheme.
1.3. The second example of such an attempted conversion concerned the sale by the developer prior to the opening of the sectional title register and the registration of the sectional title plan in the relevant Deeds Registry to another company of certain sections, common areas indicated on the sectional plan as exclusive use areas and common property and the extension rights it had reserved in terms of section 25 of the Act. In this instance the new owner set about incorporating the common areas into the new sections the owner created in terms of section 25 of the Act.
1.4. Both of the scenarios described above assumed that:
1.4.1. the rights in respect of common property and sections respectively are interchangeable;
1.4.2. instances where the Act do not prescribe a method of authorising actions to be taken often is an indication that such actions are not capable of being authorised and therefore could not legally be implemented, even if supported by resolutions taken by the body corporate.
2. CONVERSION FROM A SECTION TO COMMON PROPERTY
2.1. The subdivision of a section in terms of section 21 of the Sectional Titles Act 1986 (“the Act”) does not create new common property. The results of such a subdivision in the form of further sections retain its nature as sections. Should one of the newly-created sections serve the other newly-created sections because it houses a facility such as an elevator in this instance, it is clear that the owner in creating such a situation would be required to establish an arrangement with the owners of the newly-created sections that would entitle such owners to have access to such a facility. Such an arrangement would not include those owners of sections who do not require access to the facility in question, because it does not affect them.
2.2. It is clear that if a section is subdivided, no extra common property is created additional to the undivided share in the common property to which the owner of the section being subdivided was entitled prior to such subdivision. In fact, the participation quotas of the newly-created sections derive from the participation quota of the section being subdivided. So, upon completion of the subdivision of a section, the extent of the common property in the whole of the sectional title development remains the same.
2.3. The first question to consider is whether the Act allows or even prescribes a procedure to give effect to such an intention of converting a section into common property. Such a procedure is not expressly authorized in terms of the Sectional Titles Act 1986 (“the Act”). The following procedures in terms of the Act relate to changing sections after the registration of the original sectional plan:
2.3.1. Section 14 deals with the amendment and cancellation of sectional plans where mistakes have been made and such plans may have to be amended to rectify such mistakes. It also deals with closing the sectional title register completely and having the registered sectional plan cancelled, provided that the developer holds all the rights in such a development.
2.3.2. Section 17 deals with the alienation and letting of common property where the registration of a section may be cancelled if such a section is situated on the portion of the common property to be alienated or let. The reason for such cancellation is clear that that portion of land so affected will pass from the sectional title register to the land register and as such the nature of the rights to such property should accord with the register in which it is registered.
2.3.3. Section 21 deals with the subdivision and consolidation of sections which would require amending the registered sectional plans to give effect to such change in the relevant section/s but the sections concerned retain their nature as sections and no common property is created by such procedure.
2.4. So, if no express provisions in the Act authorize such a conversion to take place, the question is whether such a conversion can legally take place? It may be helpful to start by comparing the definitions of common property and sections. Common property is defined as including the land and such parts of a building on such land as fall outside of sections. Sections are defined as whatever is shown as such on a sectional plan. So, once a sectional plan is registered and persons other than the developer have acquired rights to the sectional title property represented on such registered sectional plan, then to change sections into common property, or common property into sections clearly will affect the vested rights of such other persons. How would such conversion from sections to common property take place if not expressly authorized in terms of the Act? One way would be to cancel the registered sectional plan and redraw it to reflect the change. However, in terms of section 14(8) of the Act such cancellation can only be done by order of the Court.
2.5. The instances where consents by either the trustees or the body corporate are required in terms of the Act or the rules follow expressly prescribed procedures which gives it the power of law. These instances are known, but none of those instances feature insofar as the conversion from sections to common property is concerned. Wherever the rights of the members of the body corporate are affected by changes in the structures making up the sectional title development processes are required to be followed to safeguard such rights. In the absence of such express provisions in the Act dealing with such conversion from sections to common property it is likely that such a process is not possible in terms of the Act. It is almost inconceivable that the legislature would have failed to provide a mechanism in the Act where the exclusive ownership rights in a section vesting in the registered owner of that section could be converted into and accrue as common property to the members of the body corporate, together with the obligations attaching to such ownership rights.
2.6. The location of the lift and lift lobby has been designed to serve the needs of the owner of section 1 initially and then the owners of the subdivided sections of section 1. It is not accessible to the other members of the body corporate. In addition, if it is possible to cancel the section containing the lift and lift lobby, then the participation quotas of the subdivided sections will be diminished, while the participation quotas of the other sections will be increased. A swing of almost 11% is created by a 7,41% reduction in the participation quota of section 1 and an increase in the participation quota of section 6 of 4,13%, as an example. It would be almost inconceivable that such a change could take place with the mere consent of the Trustees as has been conveyed to the CC and to the exclusion of the other members of the body corporate, whose interests are prejudiced in the process.
2.7. There is a notion in certain circles that the deeming provisions of section 48(1) of the Act could be used to change the nature of a section and change it to that of common property. Section 48(1) of the Act provides that the members of a body corporate may by unanimous resolution, together with all the mortgagees and persons with registered real rights agree in writing thereto, that the building comprised in a scheme can be deemed to be destroyed. Apparently, such deemed destruction need not be based on a measure of destruction of the building to place it within the ambit of this provision. According to Prof. Van der Merwe (The Law of South Africa, vol 24, p. 257, foot note 4) Section 48(1) may also be used to deem the notional destruction of a building where a building may have become entirely unsuitable for its original purpose through the physical deterioration of the structure, or because of functional obsolescence, or that the required majority for a major overhaul of the building cannot be obtained, or an outsider makes an attractive offer to purchase the whole project. As can be seen from both the provisions of Section 48(1) and the examples mentioned by Prof. Van der Merwe, deemed destruction, whether physical or notional, must apply to the building and clearly not to a section only.
2.8. The other aspect of the law as it applies to sectional title property, centres around the nature of exclusive ownership of sections and joint ownership of common property and the difference in the legal obligations vested in the various owners for the charges which are recoverable by way of the levies. The rights are also differently vested when the sectional plans are registered. Exclusive ownership rights are exercise in a 3-dimensional space defined in the Act as “a section …..defined (a) by reference to the floors, walls and ceilings thereof (section 5(5)(a) of the Act. Common property, on the other hand, is exercised in a 2-dimensional space and is defined as the land included in the scheme, such parts of the building as are not included in a section and other land acquired later (section 26). The scheme of the Act is such that these categories of rights are not mixed or interchangeable once the sectional plans are registered. There are no express provisions in the Act that allows for the conversion of one category of rights to the other. The only way in which sections can be converted to common property is to cancel the sectional plan, the property then reverts to conventional property and a new sectional plan be framed and registered, which will complete such conversion.
2.9. Another example of how specifically the Act deals with the transformation of rights from one category to another can be seen by considering the nature of the rights of extension vesting in the body corporate in terms of section 25(6) of the Act. Although such extension rights vest in the body corporate they can’t deal with it until it is quantified and title thereto is obtained in the form of a Certificate of Real Rights together with the plans referred to in section 25(2)(a) and (b). The plans referred to in section 25(2)(b) of the Act must be to scale showing the manner in which the building is to be divided into sections and exclusive use areas. Even then these extension rights cannot be said to have transformed into sections and common property because this plan is not a sectional plan and at this stage the rights of the existing members of the body corporate are not affected as yet. For instance, their share in the common property will remain the same until the sectional plan of extension is registered, when, in terms of section 25(12)(a) of the Act the owners of sections in the building in the scheme that is being extended, the mortgagees of sectional mortgage bonds and the holders of any real rights registered over such sections, shall be divested of their share or interest in the common property to the extent that the common property is vested in the developer (body corporate). The point of this example is that the transformation of the extension rights into sections and common property are finally quantified and delivered by the registration of the sectional plan of extension.
2.10.The process of the transformation of extension rights into sections and common property are clearly defined in the Act. There seems to be no provisions in the Act that deal with the transformation of a section into common property. This is strange because in the transformation of extension rights no direct effect on their undivided share in the common property is effective in respect of the members of the body corporate until the registration of the sectional plan of extension takes place, albeit that these rights have either been reserved by the developer or conferred on the body corporate by the provisions of the Act (section 25(6)). The other instance in the Act where a conversion of rights takes place is in terms of section 24(1) of the Act where common property is converted into a section. The important aspect is that in this instance the burden of the other members of the body corporate is alleviated in that the member of the body corporate assumes a more onerous burden in respect of the levies payable. If, in such an instance, the legislature deemed it important to prescribed an express procedure to regulate such a conversion of rights, the failure to do so where the reverse is attempted (from section to common property) is compelling evidence that such a conversion is not authorized. Contrasting that situation with a scenario where the burden of the members of the body corporate is increased raises the question why the legislature would not be more concerned with the latter scenario by providing for express provisions to regulate such a situation. The answer surely must be that such a transformation is not possible.
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