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[2011] ZAKZDHC 86
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Body Corporate of Savannah Park v Brainwave Projects 1147 CC and Others (12257/2009) [2011] ZAKZDHC 86 (1 January 2011)
IN THE KWAZULU NATAL HIGH COURT,
DURBAN REPUBLIC OF SOUTH AFRICA
Case No.: 12257/2009
In the matter between:
THE BODY CORPORATE OF SAVANNAH
PARK
…...............................
Applicant
and
BRAINWAVE PROJECTS 1147 CC
….................................................
1
st
Respondent
VODACOM (PTY) LTD
…....................................................................
2
nd
Respondent
REGISTRAR OF DEEDS,
PIETERMARITZBURG
….........................
3
rd
Respondent
SURVEYOR GENERAL,
PIETERMARITZBURG
…..........................
4
th
Respondent
JUDGMENT
GRIFFITHS, AJ
1. This
application involves a question as to who is entitled to the fruits
flowing from a lease agreement with the second respondent
which has
erected a cell phone mast, or tower, within the precincts of a
Sectional Title Scheme known as "Savannah Park".
The
applicant is
the
duly established body corporate of Savannah Park, as defined in
section 1 of the Sectional Titles Act
1
("the Act").
2. The applicant seeks an order
directing the fust respondent to provide it,
inter
alia,
with a copy of
the contract which the first respondent admittedly holds with the
second respondent,
2
to account for fruits received
therefrom and ordering the first respondent to pay over to it all
income received from such agreement
together with interest thereon.
The first respondent is the only one of four respondents to oppose
the relief sought by the applicant.
3 Briefly stated, the facts
giving rise to the aforementioned issue are as follows: At all
material times the first respondent
was the developer of Savannah
Park as defined in section 1 of the Act. In its application for
registration of the sectional plan,
the first respondent reserved,
in terms of section 25 of the Act, the right to erect and complete
further buildings or extensions
to existing buildings as more fully
described
in section
25(1).
4.
In
terms of section 25(2), in the event of such a reservation the
developer is obliged, when making application for registration
of
the sections] plan, to deliver, in addition to the documents
referred to in section 11 (3),
inter
alia,
a plan to
scale of the building or buildings to be erected together with
particulars thereof.
3
Pursuant thereto, and when it
reserved such right, the first respondent duly ensured that
theapplication for registration of the
sectional plan was
accompanied by,
inter
alia,
scale plans
indicating the proposed future development Inamongst the documents
so filed, which were duly accepted and registered
by the third
respondent,
4
was a plan which clearly
relates to the erection of a cell phone tower as it indicates a
small building or a control room housing
the electrical and other
components which are required for the functioning of such a tower,
together with the concrete base therefor.
In addition, the plan
reflects the Vodacom logo. It does not, however, reflect the actual
mast itself
5.
According
to the first respondent, well before the sectional plan
was
registered, it had concluded an agreement of lease with the
second respondent in respect of this specified portion of the
property.
This agreement was concluded during September 2005 and the
tower had been
in
situ
since the early
part of 2006. Thus it was that the tower, together with all its
allied components, was in existence well before
the opening of the
sectional title register which was done on 17 November 2007.
6.
In
terms of section 25(5A) of the Act, when the right reserved in
terms
of subsection (1) of section 25 is exercised and the relevant unit
is complete, the developer shall immediately apply for
the
registration of the relevant plan of extension and the inclusion of
such unit in the relevant sectional title register. Although
it is
complete, the first respondent has not as yet caused the unit to be
so included or the relevant plan of extension to be
so registered in
terms of this subsection.
7. It is the contention of the
applicant, as represented in these proceedings by Mr. Stewart, that
the relevant portion of the
property falls within the "common
property" of the development and is thus subject to the control
and under the aegis
of the applicant, as the relevant body
corporate. He has submitted that until the relevant plan of
extension has been registered
and the unit included in the relevant
sectional title register, this situation prevails and, accordingly,
it is the applicant
that is entitled to lease this portion of the
property and not the first respondent. The argument is that it
follows from this
that the first respondent was not lawfully
entitled to lease the property to the second respondent as it has
done, and that all
the fruits flowing from such lease were, at all
material times, due to the applicant and not the first respondent.
8. In response to this argument
Mr. Rowan, who appeared for the first respondent, pointed to the
provisions of section 25(4)(a)
of the Act which states as follows:
"A right reserved in
terms of subsection (1) or vested in terms ofsubsection (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
urban immovable property which admits of being
mortgaged;
and
(b) "
9.
Mr.
Rowan has argued that the words as contained in section 25(4)
(a)
"shall for purposes" are indicative of the fact that the
Legislature intended that the developer was to have rights
of
alienation which are wider than the right to mortgage the property
concerned and include the right to lease the property to
a third
party. He has contended that this subsection recognizes two
categories of rights, those
for
all purposes
which
are not registrable on the one hand, and those that are, such as a
mortgage. In this regard he has contended further that
as one of the
purposes of the inclusion of section 25 in the Act was to give the
developer more flexibility to raise capital
for the further
extension of the scheme, there is no reason as to why the developer
should not have the right to rent or lease
the property in order to
raise
such capital.
*
10.
In
order to decide the issue so raised, it is necessary to have some
understanding as to the nature of the right created in terms
of
section 25. In the case of Erlax Properties (Pty) Ltd. v Registrar
of Deeds and Others
5
the Appeal Court had occasion
to deal with a registered right in favor of the appellant in terms
of which the owners of the units
in the relevant scheme and their
successors were obliged to consent to a further extension of the
scheme by the addition of new
units and to allow the appellant, as
developer "to exercise his positive rights to proceed with the
development in the manner
envisaged herein".
6
This right was registered in
terms of the earlier Sectional Titles Act
7
.
Joubert JA had, firstly, to consider whether or not this right was a
real right and, thereafter, the nature of such right. He
concluded
that it was in fact a limited real right and, furthermore, that it
was a personal servitude which was inalienable.
8
11. Van der Merwe
9
has set forth various
compelling reasons as to why. the right created under section 25
cannot be regarded as a personal servitude.
He has stated,
inter
alia,
that
"the
background, nature, purpose and field of application of personal
servitudes differ so much from the developer's rights
of extension
that the latter can hardly be classified as a personal servitude".
He has concluded
that the rights created in terms of the provisions of section 25
should rather be construed as a statutory real
right
sui
generis
which has
its own peculiar characteristics. With respect to the learned
author, I agree that this is the correct approach to the
classification of the right created by this section.
10
12. It seems therefore that it
is necessary to determine the intention of the Legislature in
enacting section 25, with particular
reference to thedeveloper's
rights to that portion of the property so reserved for future
development. In this regard, the Legislature's
intended meaning
should be derived from the ordinary meaning of the words used in the
section, with proper regard to their context
and the background and
history of the Act.
11
It seems that the purpose of
section 25 was to introduce the flexibility of developing a
sectional scheme in stages. In this regard,
the flexibility thus
given to a developer necessarily involves a reduction in the
protection previously given to the purchasers
of units in various
respects. Furthermore, there is neither justification for a
restrictive interpretation, nor for an extensive
interpretation.
12
13. Section 25 of the new
Sectional Titles Act was introduced in order to mitigate the harsh
situation in which developers found
themselves under the old Act,
which contained no similar provision. By providing for the extension
of schemes by the addition
of sections, the developer was given far
more flexibility to develop in phases and thereby to reduce his
initial capital outlay
and overall expenses. By developing and
marketing in stages, the developer is now able to ensure a steady
cash flow from the
proceeds of sales and transfer of units in the
early stages with which to finance the construction of later
stages.
13
14. As against this background,
it seems to. me that the scheme of section 25, as read with the
other relevant provisions of the
Act, is such that it allows the
developer to register the real right referred to in subsection 25(1)
as long as there has been
compliance with the relevant formalities
as set out in subsection 25(2). Section 25(1) specifically provides
that such right
is not unlimited in time and that the right to erect
and complete the further buildings and extensions is to be limited
to a
time period which is stipulated in such condition. In
casu,
the time period
stipulated is 10 years. Once the real right has been duly
registered, the developer has two real options. He may,
depending on
the market conditions or for whatever reason, sit back and do
nothing until the right expires by the effluxion of
time. In this
instance, the right to extend the scheme will become vested in the
body corporate.
14
Alternatively, should
circumstances permit, the developer may proceed to exercise the
right so reserved in terms of section 25(1)
and proceed with the
development in phases subject to the further provisions of section
25 and the further relevant provisions
of the Act.
15. It appears from the scheme
of the Act that should the developer remain supine with regard to
his aforesaid right and not develop
the property further, such of
the property which is subject to the reserved right must fall within
the common property and be
administered by the body corporate in
terms of its various powers and responsibilities relating thereto.
16. In this regard Mr. Stewart
has submitted that whilst the portion of the property subject to the
section 25(1) right remains
undeveloped and part of the common
property, the body corporate is vested with all the normal rights
which flow therefrom. He
has submitted furthermore that until the
developer exercises his aforesaid reserved right, this situation
prevails. He contends
that it is only once the planned extension is
registered, and the unit included in the relevant sectional title
register, that
the body corporate's rights with regard to that
portion of the common property subject to the right will be varied.
17. In view of these
submissions it seems to me that the pivotal question in this matter
is as to when it may be said that the
developer exercises the right
afforded to him in terms of the reservation thereof and pursuant to
section 25(1). Before he exercises
such right the relevant portion
of the property must surely remain part of the common property but,
thereafter, the developer
must, surely, be vested with the right,
inter alia,
to
lease the developed section. Is this right only exercised as at the
time when registration of the plan of extension takes place
and the
unit is included in the sectional title register, as submitted by
Mr. Stewart? Or does the developer exercise the right
at an earlier
stage?
18. It seems to me, taking into
account the history of the section, its purpose and its scheme, that
the only answer to the aforesaid
question can be that the developer
exercises his aforesaid right as at the time when he commences the
development of the particular
unit concerned and not when it is
included in the sectional title register. This approach would appear
to fit far more comfortably
with the general scheme of the Act and,
in particular, section 25, It surely cannot have been the intention
of the Legislature
that once the developer has commenced the
development of the new phase, from that time until registration the
body corporate
will retain full rights over that particular portion
of the property as if it were still common property. At best for the
applicant,
the right must have been exercised when the unit is
complete, and before registration.
19. This view is fortified by
the provisions of section 25(5A), the relevant portions of which
state as follows:
"(a) If the right
reserved in terms of subsection (1) is exercised, the developer or
his or her successor in title shall
immediately , after completion
of the relevant unit apply for the registration of the relevant plan
of extension and the inclusion
of such unit in the relevant
sectional title register.
(b) If the developer or his
or her successor in title fails to take such steps and fails to
register the relevant plan of extension
within 90 days of completion
for occupation of the unit, the developer or his or her successor in
title shall be liable to the
body corporate for the amounts payable
in terms of section 37(1) as if the unit has been included in the
relevant sectional title
register on the date of completion"
20. Section
25(5
A)
was introduced
into the Act by virtue of
section 3
of the
Sectional Titles
Amendment Act.
15
According
to the memorandum
which accompanied the Amendment Bill, the purpose of introducing
this subsection was to prevent unscrupulous
developers from letting
out the developed sections before registration thereof without
making any contribution to the levy fund
of the particular scheme.
21. It appears to be clear that
this subsection envisages that the right is, in effect, exercised as
at the time when the developer
commences the development of the next
phase pursuant to his rights so reserved in terms of
section 25.
It
is also clear from this subsection that once the developer has
completed the unit, but before registration takes place, he
may
utilize the unit
qua
owner thereof, one
of the consequences of which is that it may be leased to another.
This is so because the section clearly envisages
that the developer
is obliged to pay the levies due by owners of the units pursuant to
the provisions of
section 37(1)
, even though the unit has not yet
been included in the sectional title register.
22. It remains then to apply
the aforegoing to the present matter. As indicated above, the mast
was
in situ
as
at the time when the sectional title register was opened and when
the
section 25(1)
right was registered in favour of the first
respondent. The section was reflected on the relevant plan which was
filed pursuant
to the provisions ofsection 25(2) and which depicted
a concrete base for the mast and the separate control room. It is
with reference
to this plan that content must be given to the right
reserved.
16
It seems to me that, in the
circumstances, the first respondent's right to develop this
particular section had been duly exercised
irrespective as to
whether or not the developed section was in existence prior to the
opening of the sectional title register
and the registration of the
right of reservation. As indicated above, the fact that the section
had not as yet been included
in the sectional title register and the
fact that the relevant plan of extension had not been registered,
matters not for the
purposes of determining whether the applicant or
the first respondent had, and has, the rights to the lease with the
second respondent
23. In this regard, Mr. Stewart
has made much of the fact that the mast itself was not reflected on
the relevant plan. I do not
believe that this can make any
difference to the conclusion to which I have reached above. This is
not an application in terms
of
section 25(13)
to force the developer
to comply strictly with the documents referred to in subsection (2)
of
section 25
and, indeed, the applicant appears to have accepted
the existence of the mast and its allied equipment but seeks the
fruits therefrom.
24. In all these circumstances,
it is my view that it is the first respondent who has held, and who
continues to hold, the right
to lease the relevant section to the
second respondent and not the applicant. In these circumstances;,
the applicant is not entitled
to the order which it seeks and the
application accordingly falls to be dismissed with costs.
25. Mr. Rowan has submitted,
albeit with not much force, that should I take this view I should
order punitive costs as against
the applicant. I am not persuaded
that there is any reason whatsoever for taking such a view.
26. In the circumstances, the
order I make is that the application is dismissed with costs.
Griffiths AJ
Counsel for the Applicants:
Adv M.E Stewart
Instructed
by: BICCARIBOLLO MARIANO
c/o
MESSENGER KING
Suite
360,3
rd
Floor
Mansion
House
12
Field Street
DURBAN
Counsel
for the Respondent: Adv P.A.C Rowan S.C
Instructed
by: MOONEY FORD ATTORNEYS
7
th
Floor Permanent Building
343
Smith Street
DURBAN
1
No.
95 of 1986
2
Vodacom
(Pty.) Ltd.
3
Section
25
(2) (a)
4
">
4
The
Registrar of Deeds, Pietermaritzburg
5
[1991] ZASCA 187
;
1992
(1) SA 879
AD
6
At
883 A
7
No.
66 of 1971
8
At
887 E
9
Sectional
Titles, Share Blocks and Time-sharing, at page 12-30-32
10
See
also The Law of Property, Badenhorst, Pienaar and Mostert, (fifth
edition) at page 458
11
Knoetze
v Saddlewood CC
2001 (1) All S A
42
(SE) at' 46 - 47
12
Knoetze
v Saddlewood (supra) at 47
13
Van
der Merwe at paragraph 12 1. See also Oribe) properties 13 (PTY) LTD
and Others v Blue Dot Properties 271 (PTY) LTD and Others
(454/2009)
[2010] ZASCA 78
(28 May 2010) at para 17.
14
Section
25(6)
15
">
15
No.
7 of 2005
16
Oribel
Properties
{supra)
at para 17.