- What is a phased development?
A phased development is one in which the developer registers a sectional title scheme in stages as opposed to registering the entire scheme at once.
The procedure and requirements for a phased development are set out in section 25 of the Sectional Titles Act 1986. What follows below is a general overview of the concept and its implementation.
Phased development has distinct commercial advantages for a developer. He might decide to register the scheme with just two units. Having sold and transferred the two units, he uses the income generated from the sales to fund the next stage of the development and further stages thereafter.
- How does a developer acquire the right to register a scheme in phases?
When the developer applies to the registrar of a deed, with the assistance of his conveyancer, s for the registration of the sectional plan showing the first phase of his development, he also reserves to himself the right to extend the scheme by the erection of buildings on designated parts of the common property. This is generally referred to as a right to extend.
As part of his reservation, he submits a plan drawn to scale showing the buildings he intends to erect, their position on the common property, all relevant dimensions, and in particular how these buildings will be divided into sections.
The developer is obliged to erect further buildings in accordance with the plans submitted at the time the right is reserved. The general rule is that no deviation from these plans is permitted. Deviations from these plans have however been permitted where developers have shown that market conditions have changed and that the deviation is necessary for commercial reasons.
The developer’s right to extend his scheme is recorded by the issue to him by the registrar of deeds of a certificate of real right at the time the sectional plan is registered. This certificate will contain details of the period within which the right is to be exercised.
- Failure to reserve or exercise the right.
If a developer does not reserve the right to extend, the body corporate may apply to the registrar for the issue to it of a certificate of real right entitling it to extend the scheme. The body corporate may exercise that right or transfer it to a third party, if all members of the body corporate and banks who hold bonds over the various units comprising the scheme have given their consent.
If the developer has reserved the right to extend to himself and fails to exercise it within the time period specified in his certificate of real right, the right to lapses. The right to extend then vests in the body corporate of the scheme.
- How is the right to extend exercised?
The developer applies to the registrar of deeds for the registration of a plan of extension and the issue of title deeds to him in respect of the sections shown on the plan of extension. The developer’s bankers are required to consent to this registration if the right to extend is mortgaged.
- Sale agreements
A developer is obliged to disclose the existence of a right to extend or his intention to apply for the right, as the case may be, in any sale agreement relating to a unit in the scheme. Failure to make the disclosure will entitle the purchaser to withdraw from the sale with obvious negative consequences for the developer. A purchaser may however elect to continue with the transaction despite the developer’s failure to make the disclosure.
- Can a right to extend be mortgaged?
The Sectional Titles Act specifically provides that a right to extend is immovable property. It may therefore be used as mortgage security.
- Can a developer transfer his right to extend to a third party?
The right to extend may be transferred to a third party. This is done by way of a cession executed before a notary and registered in the deeds office.