Sectional Title: Look out for Any Right to Extend
Category Buyer Advice
When a new sectional title (ST) complex is launched, the developer can elect to build fewer units than may be allowed on the site, and reserve the right to develop the rest at a later stage.
This is known as a "Section 25 right to extend", and those buying homes in both new and established sectional title schemes should always check, before signing an agreement of sale, to see if such a right is noted says Berry Everitt, MD of the Chas Everitt International property group.
The Sectional Titles Act does set out very strict conditions under which a developer can exercise a Section 25 right. Among other requirements the developer must:
- Reserve the right to extend at the same time as making application to register the original sectional plan;
- Specify the timeframe within which the extra sections could be built;
- State exactly how many extra sections will be built;
- Show where and how they will be built;
- Show the size of those sections and the effect that they will have on the existing participation quotas; and
- Show the external appearance of the new sections.
The Act also stipulates that after the original body corporate has been established, the developer cannot alter any of the above specifications without the consent of every single member of that body corporate.
To further protect buyers and owners, the Act also requires that for as long as the right to extend lasts, every newpurchaser must be made aware, in writing, of that right, failing which the buyer is entitled at any time to cancel the sale.
The reason for this is that the effects of a developer deciding to exercise his right to extend could be very significant for existing owners in both personal and financial terms.
Imagine, for example, the building dust and mess that a well-settled community might have to endure if builders were to move back on site. Or the shock when you realise that a new building is about to obscure the lovely view that is one of your home's best features. Or the distress when you realise that a new floor of units is about to be added above your top-floor flat.
Meanwhile, it is worth noting that reserving the right to extend a scheme on an undeveloped portion of land does not confer ownership of that land on a developer. Rather, the land forms part of the common property and is owned in undivided shares by the members of the body corporate.
Author: Barry Davies