SUBDIVISION v SECTIONAL TITLE: THE PROPERTY-OWNERS GUIDE

SUBDIVISION v SECTIONAL TITLE: THE PROPERTY-OWNERS GUIDE

Most Cape Town property owners will be aware of the fact that an amendment to the Municipal Planning By-Law (MPBL) in 2020 now allows for the construction of a third dwelling on properties zoned Single Residential (DENSE JUST BECAME DENSER [Jan 2020]). 

In light of the new opportunities that this amendment has created, many of our clients have been asking how best to take advantage; should they subdivide their property, or rather establish a sectional title scheme to allow for separate registration of an additional dwelling or portion. So here follows a quick guide setting out the fundamental differences and pros and cons of each:

SUBDIVISION is the term that refers to the creation of two or more portions of land from the “parent property”. This involves an application to the Local Authority for the division of the property, which will culminate in the creation of the new portion or portions in the land register, complete with their own new erf number/s. 

SUBDIVISION PROS:

  • Completely separate property ownership on a freehold basis;
  • Financial advantages – cash injection on a sale / additional source of income;
  • Potential to downsize an existing property and reduce rates and taxes;

SUBDIVISION CONS:

  • A lengthy process which involves a great deal of engagement with the Local Authority;
  • Costly professional fees and Local Authority charges make subdivision expensive;
  • May not be possible where minimum erf sizes are prescribed;
  • Requires surrounding neighbours approval;

SECTIONAL TITLE refers to the establishment of a sectional title scheme consisting of two or more units which will move the property from the Land Register to the Sectional Register in the Deeds Office. 

There are some important points to consider when developing a property as a sectional title scheme, the most notable of which is that the new sectional scheme will be subject to the Sectional Titles Act (STA) and the Sectional Titles Schemes Management Act, 8 of 2011 (STSMA) with its prescribed rules. The essential problem is that sectional title schemes and the management provisions in the legislation are designed for shared use, shared responsibility, and democratic decision making by many owners, but the two or three owners in smaller schemes invariably want to be independent of each other. Fortunately, many of these issues can be dealt with in the management rules of the scheme, which can be adapted to suit the nature of the smaller sectional title development. In contrast to a subdivision, it must be borne in mind that a sectional plan can only be prepared by your appointed land surveyor once the building is in existence and capable of survey.

SECTIONAL TITLE PROS

  • Provided that the buildings in the scheme are constructed in accordance with building plans approved by the Local Authority, there is no further Local Authority involvement in the establishment of a sectional title scheme. This makes the process potentially less expensive, and a good deal less time consuming than a subdivision application.
  • Neighbouring properties are not required to consent to the establishment of a sectional title scheme.
  • The relationship between the owners of units in the scheme is governed by the STA and STSMA, and the scheme itself is subject to the oversight of the Community Schemes Ombud Service (CSOS), which can be useful in settling disputes between owners.

SECTIONAL TITLE CONS

  • A body corporate is formed upon the first transfer of a unit in a sectional title scheme, and each owner would be required to pay a monthly levy to the body corporate which would be used for things like repairing and maintaining the common property/gate etc.
  • There are some provisions of the STSMA, such as the requirement that the body corporate insure the building, and some practical realities, such as municipal supply of only one water and sewerage connection per property, that are unavoidable restrictions on separating the management processes of smaller schemes so that the individual owners can take care of their own affairs, but a suitably tailored set of management rules can take care of most potential problem issues.

The above guide sets out the simplest distinctions between subdivision and sectional title to create additional property portions capable of separate registration. We hope that you will find this guide useful, but urge you to engage with one of our attorneys prior to embarking on either course for more comprehensive advice and guidance. This professional assistance will help you ensure that the required steps are followed correctly and that you have the best chance of success with your chosen option.

 

  • On September 22, 2021
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