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Sale of a Sectional Title Unit - Fundamental disclosure of a real right to extend
Category Advice
A real right of extension allows a developer, or body corporate, to extend a sectional title scheme by erecting further buildings, extending existing buildings horizontally and/or vertically and creating additional exclusive use areas.
The intended extensions of a scheme must be specified on a sectional plan and registered in the Deeds Office. In addition, a time period in which this right must be exercised will be recorded in the Deeds Office.
Section 25(14) of the Sectional title Act, 1986, requires that the existence of a right to extend must be disclosed to every purchaser of a section in that the extension will result in the decrease of the common property and consequently, the relative value of the owner of a unit’s vote. Furthermore, the erection of additional buildings could impede an owner’s view or cause disturbance to all owners during construction. If a right of extension has not been disclosed, the purchaser may avoid the sale.
Thus, where a real right of extension is brought to a purchaser’s attention after entering into a sale agreement, the purchaser may elect either to cancel the sale agreement and recover any monies paid pursuant to the agreement, or to consent in writing to the real right of extension.
The conveyancer attending to the transfer of a sectional unit is accordingly required to ensure that the existence of the real right of extension has been disclosed in the sale agreement or that the purchaser has subsequently consented to it in writing.
It is prudent for a seller, before going through the time and expense of negotiating and entering into a contract of sale, to establish whether a real right of extension over the scheme exists and if so to include a clause to this affect in the sale agreement.
Importantly, purchasers, before concluding the purchase of a unit in a sectional scheme where there is a real right of extension, should establish the nature of the proposed extension and how it may affect the unit they intend buying.
This article was written by Dylan Bradford.
Author: Dylan Bradford
