30 March 2009

Is a notarial agreement concluded between the body corporate and the owners of neighbouring properties valid?

This is the issue that came before the SCA in Seascapes v Ford (639107) [2008] ZA SCA 109 (23 September 2008). The central issue before the SCA revolved around the question of the validity of a notarial agreement concluded between the body corporate and the owners of neighbouring properties.

The construction of the Seascapes Sectional Title Scheme required a departure from the existing town planning scheme. The owners of neighbouring properties objected to this departure. This resulted in the developer undertaking to register servitudes over parking bays in the sectional scheme in favour of the neighbouring property owners, in return for the withdrawal of their objections. The neighbouring owners agreed to this compromise.

Prior to the formal establishment of the body corporate, the developer of the Seascapes scheme obtained the signatures of the purchasers of the units within the scheme in favour of the notarial agreement granting the servitudes.

In examining these facts, the Court referred to the provisions of the Sectional Title Act (the Act). The Act stipulates that from the date that any person other than the developer becomes an owner of a unit in the scheme, a body corporate is deemed to have been established. The body corporate thereafter expands to include the developer and every person who becomes an owner of a unit in the sectional scheme.

The Act provides further that the owners (members) may direct the body corporate to enter into a notarial agreement, in terms of which land may be encumbered by servitudes. A special resolution is, however, needed to authorise the proposed action.

To achieve this special resolution, the body corporate requires a 75% vote in favour of the proposed action, both in number of individuals present at the general meeting and in value of their participation quota. It was therefore evident upon the opening of the sectional title register that the developer had obtained the requisite number of signatures. The register indicated that the signatories of the resolution constituted more than 75% of all members of the body corporate - both in number and in value of participation rights.

However, the body corporate contested the validity of the resolution. It argued that:

  • The developer did not have authority to enter into an agreement on behalf of itself; and
  • The resolution signed by the owners prior to the opening of register constituted an agreement by non-members. It considered the owners non-members due to the fact that the body corporate was not in existence yet.

The SCA dismissed these arguments on the ground that, even though the resolution was adopted by non-members, it was signed with the idea that the body corporate would enter into the agreement upon its establishment. It stated further that when the properties were transferred into the names of the signatories (resulting in them becoming owners within the scheme), a body corporate was established. The SCA held that an agreement in writing of the signatories became an agreement in writing of the members of the body corporate. Therefore, in order not to be bound, the body corporate should have expressly revoked the agreement.

The body corporate raised the issue that the developer had entered into a notarial agreement which varied from the draft agreement annexed to the resolution signed by the purchasers. Accordingly, the notarial agreement invalid in that it was out of the scope of the authorised action.

The SCA held that, from a reading of the agreement, it was evident that the intention of the signatories was not that the notarial agreement should be based on the precise terms stated in the draft agreement, but rather that a notarial agreement of that nature should be concluded.

The application of the body corporate was accordingly dismissed and the notarial agreements validity remained untainted.

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