By Ané de Klerk
With Cape Town and much of the country currently experiencing a property boom (Cape Town’s inner city alone reportedly saw a record-breaking R12.8 billion investment in property developments last year), both new and existing apartments are hitting the market at an immense pace…though you may not even have noticed as they often sell just as quickly as they’re listed. In the fast-paced excitement of it all it remains important for both private sellers and estate agents to make sure the necessary i’s are dotted and t’s crossed when concluding a sale. Before e-mailing that Agreement of Sale (also often referred to as an Offer to Purchase) to an interested party, be sure to take a quick second look to make sure it includes the following:
1. Exclusive Use Rights
If the unit is being sold together with one or more exclusive use rights as one transaction, this must be clearly stipulated in the agreement and taken into account when setting out the purchase price. For example, an apartment could be sold together with the right to use a balcony; stoep area; storeroom; garage and/or parking bay(s) exclusively.
When drafting the agreement, make sure to double-check the legal nature of the particular area as owners can be under the wrong impression – for example believing whole-heartedly that they have the right to use a particular parking bay exclusively because they have done so for several years, when in fact the parking bay turns out to be unregulated common property.
2. Right to Extend
In the Agreement of Sale, the seller must disclose whether the developer has reserved and registered a right to extend the scheme in future. This can have a significant impact on the buyer. They might enjoy a beautiful mountain view today, but the developer plans to build a high-rise blocking that view in a year or two; or it is important to the buyer that they get to walk their dog on the lovely grass area directly next to their unit when that area will be a bustling building site in a couple of months.
3. Participation Quota
If the developer is selling the unit before opening the sectional title register and the scheme is either non-residential (for example an office block) or mixed use (consisting of both residential and non-residential units), the agreement must clearly stipulate what the unit’s participation quota is. If situated within a mixed-use scheme, the agreement must also state the total quotas that the developer has allocated to the residential sections in the scheme.
Potential buyers must be clearly informed about their participation quotas as it affects members’ liability to pay levies (to fund the scheme’s expenses) and also the value of their votes (cast for matters like approving budgets and electing trustees). It can therefore have a significant impact on them if their participation quota is higher or lower than they would have expected from viewing the section at an Open House because the developer chose to allocate a different percentage of the PQs to the residential part of the scheme than they anticipated.
If any of these items are not disclosed in the Agreement of Sale, it is voidable by the purchaser – meaning the purchaser will have the option not to go forward with the purchase should it come to light that any of these facts have been omitted from their agreement with the seller. These are therefore not “nice-to-have” elements, but rather “must-have” parts of a valid, legally enforceable agreement when selling sectional title property.
Considering selling your unit and would like our team to assist you with a watertight Agreement of Sale? Reach out to us at info@theadvisory.co.za for an obligation-free quotation for help from our legal experts.
Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses.
