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[2011] ZASCA 239
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Body Corporate of Savannah Park v Brainwave Projects 1147 CC and Others (735/10) [2011] ZASCA 239; 2012 (2) SA 276 (SCA); [2012] 1 All SA 367 (SCA) (1 December 2011)
Links to summary
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 735/10
In
the matter between:
THE BODY CORPORATE OF SAVANNAH PARK
….....................................
Appellant
and
BRAINWAVE PROJECTS 1147 CC
…...............................................
First
Respondent
VODACOM (PTY) LIMITED
….......................................................
Second
Respondent
THE REGISTRAR OF DEEDS,
PIETERMARITZBURG
…................
Third
Respondent
THE SURVEYOR GENERAL,
PIETERMARITZBURG
…...............
Fourth
Respondent
Neutral citation:
The Body
Corporate of Savannah Park v Brainwave Projects 1147 CC
(735/2010)
[2011] ZASCA 239
(1 December 2011).
Coram:
Mthiyane, Cachalia,
Mhlantla, Leach and Majiedt JJA
Heard:
18 November 2011
Delivered: 1 December 2011
Summary:
The developer’s
right of extension in
s 25(4)
of the
Sectional Titles Act 95 of 1986
is a right to develop a section of the common property, not to
commercially exploit it. It is not a usufruct.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
KwaZulu-Natal
High Court, Durban (Griffiths AJ sitting as court of first instance).
The following order is made:
(a) The application to lead further
evidence is dismissed with costs.
(b) The appeal is upheld with costs
and the order of the high court is set aside and is substituted with
the following:
‘
1 The first
respondent is hereby directed, forthwith upon the granting of this
order:
1.2 to deliver to the applicant or
provide it with:
1.2.1 true copies of any written
contracts it has concluded with the second respondent or any other
parties in respect of a cellular
telephone mast that has been erected
on the common property of the Sectional Title Scheme known as
Savannah Park, situate at Sneezewood
Avenue, Glenanil, KwaZulu-Natal
(‘the mast’);
1.2.2 true copies of any and all
written extensions or amendments of the aforementioned written
contracts;
1.2.3 the details of any and all oral
contracts that may have been concluded between the first respondent
and the second respondent
or any other parties in respect of the
mast;
1.2.4 a detailed written breakdown of
any and all income that:
1.2.4.1 the first respondent has
already received from the second respondent or any other persons in
respect of the mast from the
19
th
day of November 2007,
being the establishment date of the Sectional Title Scheme known as
Savannah Park (‘the date of establishment’);
1.2.4.2 may have been paid in advance
to the first respondent by the second respondent or any other persons
in respect of the mast
prior to the date of establishment but which
would nevertheless pertain to the period following the date of
establishment;
1.2.4.3 has accrued to the first
respondent since the date of establishment or may accrue to the first
respondent in the future
in respect of the mast but which has yet to
be paid to the first respondent by the second respondent or any other
persons;
1.2.5 copies of any and all other
documents of whatsoever nature but excluding correspondence between
the parties’ respective
attorneys that may have passed between
the first respondent and the second respondent or any other parties
in respect of the mast.
2 The first respondent is hereby
interdicted and directed forthwith upon the granting of this order,
to pay to the applicant:
2.1 any and all income that the first
respondent has already received from the second respondent or any
other persons in respect
of the mast from the date of establishment;
2.2 any and all income that the first
respondent received from the second respondent or any other persons
in respect of the mast
prior to the date of establishment but that
pertain to the period following the date of establishment;
2.3 interest on the payment(s)
referred to in paras 3.1 and 3.2 above at the rate of 15,5 per cent
per annum from the date the first
respondent received such payment(s)
to date of final payment to the applicant;
2.4 any and all income that has
accrued to the first respondent since the date of establishment or
may accrue to the first respondent
in the future in respect of the
mast (but which have yet to be paid to the first respondent by the
second respondent or any other
persons) as and when such income is
received by the first respondent.
3 The first respondent is hereby
interdicted and restrained from concluding any further contracts,
written or oral, with the first
respondent or any other persons in
respect of the mast or any extensions of any current contracts.
4 The first respondent is directed to
pay the costs of this application.’
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA (Mthiyane, Mhlantla, Leach
and Majiedt JJA concurring):
[1] This appeal emanates from the
KwaZulu-Natal High Court, Durban (Griffiths AJ). It concerns a
dispute between a developer and
a body corporate of a sectional title
scheme over the income from a lease agreement. The outcome of this
appeal turns primarily
on a proper interpretation of
s 25(4)
of the
Sectional Titles Act 95 of 1986
.
[2] The developer, which is the first
respondent, concluded a lease agreement with a cellular telephone
company, the second respondent,
in September 2005. The agreement
allowed the second respondent to erect a cellular telephone mast on a
specified portion of the
developer’s property. In return the
company would pay a rental amount to the developer. The mast was
erected and has been
operational since early 2006, when the agreement
took effect.
[3] The developer
thereafter initiated a process to establish a sectional title scheme
on the property. This entails first submitting
a draft plan to the
Surveyor-General for approval,
1
and then applying
to the deeds registry for the plan to be registered.
2
The effect of
registration is that the buildings and land are deemed to have been
divided into sections and common property as shown
on the plan.
3
In this way,
specific sections of the building that could not be the subject of
independent rights before registration become independent
legal
entities, which may be dealt with independently after registration.
The developer then no longer owns one entity (the land
with the
buildings), but owns the individual units which may be sold to
individual owners.
4
[4] When applying
for registration of the plan, the developer may reserve a right, in
terms of
s 25(1)
of the Act, to extend the scheme by erecting,
completing or including further buildings on a specified portion of
the common property
within a stipulated period.
5
The developer
reserved this right of extension over a portion of the common
property earmarked for future development on which the
mast was
built. In terms of
s 12(1)
(e)
of
the Act the Registrar of Deeds, the third respondent, then issued a
‘Certificate of Real Right’ to the developer
certifying
‘that the Developer is the registered holder of the right to
erect and complete . . . within a period of 10 years
for his personal
account a further building or buildings . . . on a specified portion
of the common property as indicated on the
plan referred to in
s
25(2)(a)
of the Act . . ..’ The plan depicted a small building,
which housed components for the mast. The certificate was issued on
19 November 2007, together with another certificate, establishing the
‘Body Corporate of Savannah Park’ in terms of
s 36(1)
of
the Act. The body corporate, which is the appellant, consists of the
owners of individual units in the development. Its main
function is
to control, manage and administer the common property, which is
jointly owned by the owners of the units.
6
[5]
Section 25(5A)
of the Act says
that if a developer exercises the reserved right, it must, after
completing the building which is the subject of
the reserved right,
immediately apply to register the extension plan so that the
completed building is included in the sectional
title register.
Although there was some dispute in the papers as to whether the
building which houses the mast was completed when
the proceedings
were initiated in the high court, the developer’s answering
affidavit states that the building ‘is
still to be erected’.
This assertion must be accepted according to the normal rule
governing the determination of disputes
in motion proceedings. The
dispute is any event immaterial to the outcome of this appeal which
turns on an interpretation of
s 25(4)
of the Act.
[6] It is, however, common cause that
the relevant unit comprising the building which houses the mast, has
not yet been registered
in the sectional title register. It must also
be accepted that when the mast was erected the developer intended to
benefit exclusively
from the rental income from the lease agreement –
even after it had registered the sectional title plan with the
completed
unit. It believed that by reserving the extension right it
was entitled to the proceeds of the lease while the reservation was
extant, and that after the building was completed it would continue
to receive the income as the registered owner of the unit. The
developer says that as and when new owners joined the scheme, they
(and the body corporate) were aware of the purpose of the
reservation,
but nothing turns on this fact.
[7] Mr Stewart, who
appeared for the body corporate, contended that
s 25(4)
7
anc" HREF="#sdfootnote7sym">
7
of the Act merely
gives the developer the right to extend the property. It does not
entitle it to the exclusive use and enjoyment,
and to the fruits, of
the specified section of the common property. In other words, the
developer can have no usufructuary rights
over the common property
until the relevant plan is registered and the unit included in the
sectional title register. The specified
section of the common
property over which the extension right was reserved, therefore,
remained subject to the control, administration
and management of the
body corporate in the interests of all of its members. And, because
the developer had no usufruct over that
portion of the property, it
could not lease it without the consent of the body corporate. The
developer, therefore, had no right
to the income from the lease
agreement. Accordingly, it is obliged to account to the body
corporate for all remuneration and to
disgorge any profits from the
lease.
[8] Mr Rowan, who
appeared for the developer, on the other hand contended that the
extension right has a broader ambit than what
the body corporate
contended for, and confers a real right on the holder of the right
‘for all purposes’. The right
therefore, so it is
contended, entitles a developer not merely to mortgage the right and
to alienate it, but to lease the land
over which the right is
reserved. This would include providing a third party with rights
under
usus,
habitatio,
or
usufruct over the land for the duration of the right. The high court
upheld this contention.
[9] The narrow
question that must be answered in this case is whether the right of
extension includes a usufruct within its ambit.
This necessitates a
consideration of the nature of the right.
Section 25(4)
(a)
provides
that the real right reserved by the developer to extend the scheme is
deemed to be a right to immovable property capable
of being
mortgaged.
8
The right may also
be transferred by registration of a notarial deed of cession.
9
At the time when
the developer reserved the right in 2007,
s 25(5)
further stipulated
that this right may be exercised by the developer or his
successor-in-title even if neither have an interest
in the common
property.
[10] An attempt to
characterise the extension right was first made some two decades ago
in
Erlax
Properties (Pty) Ltd v Registrar of Deeds & others
.
10
At the time, the
Act precluded the developer from alienating this right. This led
Joubert JA to conclude that even though the
right is a real
right in land, which is in principle registrable, it was created in
favour of the developer as a personal servitude,
but not a usufruct,
since it did not give the developer the right to use and enjoy the
fruits of the land.
11
His view was
obiter
because the
majority judgment of Grosskopf JA (in which Joubert JA also
concurred) held that whichever way the right was characterised,
it
was not transferable.
12
The Legislature
thereafter explicitly made the right transferable.
13
However, the courts
have continued to describe the right as a personal servitude.
14
[11] Academic
writers on the other hand have been emphatic in their view that the
right is not a personal servitude, but should
be construed as a
statutory real right
sui
generis.
15
Prof C G Van der
Merwe, for example, argues persuasively that because the developer
can transfer the right to a third party or transmit
it to an heir,
this conflicts with the characteristic of inalienability inherent in
a personal servitude. Also, when a developer’s
right to extend
the scheme lapses, it does not perish, but vests automatically in the
body corporate. He stresses further that
the purpose of a personal
servitude is to entitle a person during his life-time to use and
enjoy the property (and I would add,
its fruits) of another person;
the purpose of a developer’s extension right is different: it
is to enable the developer to
obtain a mortgageable asset to finance
further phases of the development.
[12] In the face of
these compelling arguments I do not think that the characterisation
of the right as a personal servitude is
sustainable. And, considered
against its purpose, the right also cannot encompass a usufruct as
Joubert JA correctly observed
in
Erlax
.
The reserved right
only gives a developer the right to develop further phases of a
scheme. In doing so, the developer must comply
strictly with the
documentation
16
and plans
17
accompanying the
application for registration of the sectional plan.
18
Having exercised
the right, the developer must, as I have mentioned earlier,
immediately after completing the relevant unit, apply
to register the
relevant plan and the inclusion of the completed unit in the
sectional title register. It is, therefore, a
limited
real
right.
[13] Properly
construed the description of the right as ‘a right to immovable
property’ ‘for all purposes’
does not change this.
The Act clearly does not contemplate the leasing of a unit (or part
thereof) – as would be the case
with a usufruct – or give
the developer any right to exploit the unit commercially before
completion.
19
The Registrars of
the Deeds Registries took the same view when they passed a resolution
in 2007 stating that the Act did not provide
for a usufruct to be
registered over the right of extension.
20
[14] I am fortified
in my view by subsequent amendments to the Act. Section 25(5)
was amended in 2010
21
to allow the
developer to exercise the right of extension by the addition of the
rights of exclusive use over the common property,
which appears to
indicate a change of intention on the part of the legislature. This
addition was made subject to the rights of
exclusive use being ceded
either to the body corporate or to one or more registered owners in
the scheme within twelve months of
their creation. It seems that the
purpose of this amendment was to allow the developer to exercise the
right of extension by exercising
a right of exclusive use of the
section of the common property over which the extension right was
reserved, but only for the limited
period mentioned. This suggests
strongly that the legislature could not have intended, before the
amendment, an unlimited right
of use of the unit for the developer.
[15] The amended
section is to be read with s 27(6), which indicates that an exclusive
use right permits the registration not only
of a mortgage bond, but
also of a lease contract, or personal servitude of usufruct,
usus,
and
habitatio
.
So, if a developer reserves a right of extension, and chooses to
exercise that right by the addition of rights of exclusive use
specified in s 27(6), it may do so for a limited period of 12 months.
I cannot agree with the tentative suggestion in Badenhorst
22
that the right of
extension in s 25(4) should be regarded as being of a similar nature
to the rights that may be created under s
27 of the Act. Those
rights, as the amended s 25(5) now makes clear, are ‘in
addition’ to the right of extension –
they are not
integral to it.
[16] It is, therefore, clear that in
the present case the developer was mistaken in its view that the mere
reservation of an extension
right, without more, gave it the right to
lease that section of the common property over which the mast was
erected.
[17] Mr Rowan conceded on behalf of
the developer that if his interpretation of the ambit of the right
was wrong, the appeal should
be upheld and the body corporate would
be entitled to an order in its favour in the terms requested. No
orders were sought against
any of the respondents other than the
developer.
[18] One matter remains. The body
corporate sought to lead further evidence before this court regarding
how far the building had
progressed towards completion. In my view
this evidence would have had no bearing on the outcome of this
appeal, which as I mentioned
at the outset, turned on the
interpretation of s 25(4). This application must, therefore, fail.
[19] The following order is made:
(a) The application to lead further
evidence is dismissed with costs.
(b) The appeal is upheld with costs
and the order of the high court is set aside and is substituted with
the following:
‘
1 The first
respondent is hereby directed, forthwith upon the granting of this
order:
1.2 to deliver to the applicant or
provide it with:
1.2.1 true copies of any written
contracts it has concluded with the second respondent or any other
parties in respect of a cellular
telephone mast that has been erected
on the common property of the Sectional Title Scheme known as
Savannah Park, situate at Sneezewood
Avenue, Glenanil, KwaZulu-Natal
(‘the mast’);
1.2.2 true copies of any and all
written extensions or amendments of the aforementioned written
contracts;
1.2.3 the details of any and all oral
contracts that may have been concluded between the first respondent
and the second respondent
or any other parties in respect of the
mast;
1.2.4 a detailed written breakdown of
any and all income that:
1.2.4.1 the first respondent has
already received from the second respondent or any other persons in
respect of the mast from the
19
th
day of November 2007,
being the establishment date of the Sectional Title Scheme known as
Savannah Park (‘the date of establishment’);
1.2.4.2 may have been paid in advance
to the first respondent by the second respondent or any other persons
in respect of the mast
prior to the date of establishment but which
would nevertheless pertain to the period following the date of
establishment;
1.2.4.3 has accrued to the first
respondent since the date of establishment or may accrue to the first
respondent in the future
in respect of the mast but which has yet to
be paid to the first respondent by the second respondent or any other
persons;
1.2.5 copies of any and all other
documents of whatsoever nature but excluding correspondence between
the parties’ respective
attorneys that may have passed between
the first respondent and the second respondent or any other parties
in respect of the mast.
2 The first respondent is hereby
interdicted and directed forthwith upon the granting of this order,
to pay to the applicant:
2.1 any and all income that the first
respondent has already received from the second respondent or any
other persons in respect
of the mast from the date of establishment;
2.2 any and all income that the first
respondent received from the second respondent or any other persons
in respect of the mast
prior to the date of establishment but that
pertain to the period following the date of establishment;
2.3 interest on the payment(s)
referred to in paras 3.1 and 3.2 above at the rate of 15,5 per cent
per annum from the date the first
respondent received such payment(s)
to date of final payment to the applicant;
2.4 any and all income that has
accrued to the first respondent since the date of establishment or
may accrue to the first respondent
in the future in respect of the
mast (but which have yet to be paid to the first respondent by the
second respondent or any other
persons) as and when such income is
received by the first respondent.
3 The first respondent is hereby
interdicted and restrained from concluding any further contracts,
written or oral, with the first
respondent or any other persons in
respect of the mast or any extensions of any current contracts.
4 The first respondent is directed to
pay the costs of this application.’
______________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
For Appellant: M E Stewart
Instructed by:
Biccari Bollo Mariano, Durban
E G Cooper & Majiedt Inc,
Bloemfontein
For Respondents: P A C Rowan SC
Instructed by:
Mooney Ford Attorneys, Durban
Lovius Block, Bloemfontein
1
Section
4 read with s 7.
2
Section
11.
3
Section
13(1).
4
24
Lawsa
2 ed para 346, n 1.
5
See
generally
Oribel v Blue Dot
(454/2009)
[2010] ZASCA 78
paras
11 and 12.
6
Section
37(1).
7
Section
25(4) provides: ‘A right reserved in terms of subsection (1)
or vested in terms of subsection (6), and in respect
of which a
certificate of real right has been issued –
(a)
shall
for all purposes be deemed to be a right to immovable property which
admits of being mortgaged; and
(b)
may
be transferred by the registration of a notarial deed of cession in
respect of the whole, a portion or a
share in such right: Provided
that in the case of a cession affecting only a portion of the land
comprising the scheme only such
portion shall be identified to the
satisfaction of the Surveyor-General.’
8
At
the time when this dispute arose the section referred to ‘urban
immovable property’ and not to ‘immovable
property’.
The omission of the word urban was effected through s 8(d) of the
Sectional Title Amendment Act 11 of 2010.
The amendment has no
bearing on this case.
9
Section
25(2)
(b)
.
10
Erlax
Properties (Pty) Ltd v Registrar of Deeds & others
[1991] ZASCA 187
;
1992 (1) SA 879
(A).
11
Ibid
887I-888A.
12
Ibid
893B-C.
13
Croxford
Trading 7 v The Body Corporate of the Inyoni Rocks Cabanas Scheme no
ss1/1978
[2011] ZASCA 27
paras 3-5.
14
SP&C
Catering Investments (Pty) Ltd v The Body Corporate of Waterford
Mews & others
2010 (4) SA 104
(SCA) para 4.
15
P
J Badenhorst, J M Pienaar and H Mostert
Silberberg and Schoeman’s
The Law of Property
5 ed at 457-458; C G Van der Merwe
Sectional Titles
vol 1 Issue 12 at 12-30 and 12-31.
16
Section
11(3).
17
Section
25(2).
18
SP&C
Catering Investments (Pty) Ltd v Body Corporate of Waterford Mews &
others
2010 (4) SA 104
(SCA) para 8;
Oribel Properties v Blue
Dot
(454/2009)
[2010] ZASCA 78
paras 11 and 19.
19
Of
course, in terms of s 25(5A)
(b)
, once the developer has
completed the unit, but has not within 90 days of its completion for
occupation taken steps to include
the unit in the sectional title
register, it becomes liable to pay the levies due by owners of the
units pursuant to s 37(1),
even though the unit has not yet been
included in the register. The purpose of this section is to ensure
that an unscrupulous
developer does not derive an income from the
completed unit, without paying the registered levies to the body
corporate. It does
not permit the developer to delay including the
unit in the register indefinitely. And it cannot mean that the
developer has
the right of ownership in the completed unit before
registration as the learned judge in the high court thought.
20
RCR
6/2007. Van der Merwe above n 14 at p 12-31 n 123 is also of the
view that this is probably correct.
21
Section
8
(h)
of Sectional Titles Amendment Act 11 of 2010. Section
25(5) now reads: ‘(5) A right reserved in terms of subsection
(1)
may be exercised by the developer or his or her successor in
title thereto, even though the developer or his or her successor in
title, as the case may be, has no other interest in the common
property, by the addition of rights of exclusive use: Provided
that
the rights of exclusive use must be ceded within 12 months after
their creation, either to the body corporate of the scheme
or to one
or more registered owners of a section or sections in the scheme.’
22
(See
above) n 15 at 458.