SA Affordable Housing May - June 2019 // Issue: 76 | Page 34

LEGAL MATTERS
The arbitrary and incorrect interpretation of
legal principles and the current law by municipal
officials can lead to disastrous consequences.
By Gert Minnaar
I
n the affordable housing market it is important that the
policies and business rules of municipalities reflect the
correct legal position as prescribed in legislation. If not, it
introduces procedures which are not constitutional and can
be challenged in a court of law.
This also complicates the already challenging and
strained development environment unnecessarily,
with needless costs and (unwelcome) time delays,
which endanger the developers’ bottom line and
continued existence.
In the affordable housing market, with FLISP and Bonded
housing products, that focus primarily on first time
homeowners (in the price bracket between R400 000 to
R1 000 000), profit margins are already fairly tight
for developers.
The arbitrary and incorrect interpretation of legal
principles and current laws by municipal officials can lead to
disastrous consequences, firstly to the developers that are
the main stakeholders and carry the financial risk of
developments, as well as the vulnerable end-users of the
value chain.
BUSINESS RULE 001/10-03/17
On 13 March 2017 the Building Control Department of the
City of Johannesburg Metropolitan Municipality
implemented a business rule, which states that no
applications for the approval of buildings plans will be
considered for unregistered *erven with the Registrar
of Deeds.
All applications must be for registered erven and
accompanied by related title deeds. It also states that the
submission of approved surveyor general diagrams and
general plans will not be accepted because the diagrams do
not constitute registration of the erven with the Registrar
of Deeds.
This means that this department, in terms of its
interpretation of a ‘registered erf’, from that date on refuses
to receive applications for the approval of buildings plans
for any erf in a newly established township, where an erf is
still held by the township applicant under the township title
for that township, unless the township owner registered a
Certificate of Registered Title for such an erf, separate from
that township title.
It appears that the department, in formulating this rule,
relies on a ruling from the Geographic Information System
(GIS) Department of the City of Johannesburg Metropolitan
32
MAY - JUNE 2019
When is an erf regarded
as a ‘registered erf’?
Gert Minnaar, practising
conveyancer at the Illovo
branch of STBB Attorneys
and serving SAARDA
committee member.
Municipality regarding what constitutes a ‘registered erf’.
This rule apparently states that an erf in a newly proclaimed
or formalised township, which is still held by virtue of the
township title by the township applicant, is not regarded by
the GIS system as a ‘registered erf’.
* Erven – A civil engineering term meaning a South African
a plot of land, usually urban, marked off for building
purposes.
TRANSFER OF A SERVICED ERF DIRECTLY FROM THE
TOWNSHIP TITLE IS LEGAL AND GENERAL PRACTICE
In the normal course of the business of a developer in the
affordable housing market, the product on sale is a serviced
erf in a township, linked to a building package to construct a
house on that erf. A contractor can also obtain the right from
a township owner to market such a serviced erf linked to a
building package for the purchaser.
The township owner gives transfer of the serviced erf to
the purchaser in terms of section 43(5)(a) of the Deeds
Registries Act, 1937 (No47 of 1937), where it provides that
the transfer of a whole erf from the township title is
possible. Simultaneously with this transfer the end user
mortgage bond which finances the purchase of the serviced
erf and the construction of the house as set out in the
building agreement, is registered too.
FINANCIAL IMPLICATIONS OF THIS BUSINESS RULE
This rule forced the developers, instead of transferring the
serviced erf directly to the purchaser from the township
title, to first create a separate title deed for any such erf still
held under the township title, either by registering a
Certificate of Registered Title for the specific erf or one
Certificate of Registered Title for the identified batch of
erven for which building plans must be submitted for
approval.
In terms of rands and cents, the developer has to provide
for the following additional costs:
• The recommended tariff for the registration of a
Certificate of Registered Title for one erf at the time
amounts to R3 850 conveyancing fee plus R305 Deeds
Office charges.
• If separate Certificates of Registered Title for 100 stands
have to be registered it could cost the developer
R385 000 in conveyancing fees plus R30 500 Deeds
Office charges for these 100 separate Certificates of
Registered Title.
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