The devil in the detail of Exclusive use areas in Sectional title Property Transfers
Exclusive use areas (EUAs) are integral to the value, financing and transfer of sectional title property, requiring vigilance from conveyancing legal practices.
EUAs take various guises from real rights either separately registered to personal rights granted by body corporates. The former is effected in the form of a notarial deed and the latter requires written confirmation by the Body Corporate.
Failure to heed EUAs, will invariably have the undesirable effect of requiring an amendment of a mortgage bond and/or a rejection by the deeds office, either or both of which play out in protracting transfer process, much to the displeasure of buyers, sellers and not least of which, property practitioners (aka Real Estate Agents). And we all know how much they love delays in transfers, not!
Since the introduction of rates clearance certificates (RCCs) for sectional title property transfers in 2008, deeds offices approaches to EUAs vary markedly, for example, the Pretoria Deeds office requires an EUA endorsement on the RCC while the Johannesburg deeds office simply does not.
While it is the Property practitioners responsibility to ascertain whether an EAU applies, and to ensure its inclusion in the offer to purchase or agreement of sale, conveyancing legal practices must remain vigilant of EUAs in sectional title transfers and be intimately au fait with the approach of the applicable deeds office, or else all hell may break loose.
Areas which fall outside the interior of the sectional title unit or do not form part of the area granted to a specific person for their exclusive use, are seen as common property and include areas such as roads, shared gardens, entertainment and lapa areas, swimming pools, outside and boundary walls and external plumbing etc. These areas are for the use and benefit of all residents of the complex.
The clearance figures furnished by the Municipality to the conveyancing firm attending to the transfer of a sectional title unit, include any arrear rates and taxes, electricity, water, sewerage and refuse applicable in respect of the property, for a period of two years preceding the date of application for the figures, as well as an estimate average amount calculated in order to make provision for consumption and charges, 4 months in advance. Payment of the clearance amount will be arranged at the appropriate time of the transfer and in a way best suited to the needs of the Seller and in turn, on receipt of payment, the Municipality will issue a rates clearance certificate (RCC), which certificate forms part of the documentation lodged in the relevant Deeds Office.
When entering into an agreement of sale it is imperative that the agent concerned ensures that the sectional title property description is clear and completed correctly. This is important for two reasons:
- The Alienation of Land Act requires that the property in question be identifiable;
- A copy of the agreement of sale is sent to a bond originator when a bond is required to finance the property. The bond originator then applies for a bond on the property described as set out in the agreement of sale. If, for example, the sectional scheme number is incorrect or an exclusive use area is omitted, it results ultimately in an amendment to the bond which causes a delay.
From 1 August 2008 sectional title properties were treated the same as freehold properties and each sectional title property owner began to receive an account from the Local Municipality, in which the property is situated, in respect of their sectional title unit. This means that from 1 August 2008, in the same way that clearance figures were to be obtained and paid in order to obtain a clearance certificate for a freehold property, the same became a requirement before sectional title property transfers could be lodged and registered in the Deeds Office.