Subdivision or sectional title - which option should you as a landowner choose?

If one takes a drive around the suburbs, you will notice that certain landowners are subdividing or sectionalising their land and property. Not only does this potentially provide a return on one's property investment, but it also meets the increasing demand for housing in the suburbs.

This article outlines in brief the processes involved in subdividing and sectionalising properties and serves as a guideline for landowners who are considering their options with an eye to developing their property.

Subdivision

Simply put, the subdivision of land involves dividing a property (referred to as an erf) into two or more portions and then registering the separate portions as individual erven.

Subdivision can be a lengthy process, and the requirements for subdivision of a property will vary depending on the location and type of erf being subdivided, as well as the proposed use of the new individual erven.

Before one commences the formal application process for subdivision, one needs to check what the minimum size requirement is for erven in the area in which one's property is situated.  It is accordingly useful to engage the services of a town planner when considering the viability and prospects of a successful application for the subdivision of property.

The services of a land surveyor and conveyancer (property attorney) are also required prior to the submission of the application, as plans and a conveyancer's certificate must be prepared and submitted as part of the supporting documents accompanying the application. An architect also often forms part of the professional team, particularly if buildings are to be erected on one or more of the vacant subdivided portions, as planning approvals will need to be obtained.

A subdivision application by the landowner is submitted to the local authority for the area in which the property is located once all the requirements for submission of such application have been complied with. The application will be considered by the local authority in accordance with the applicable legislation and municipal by-laws, and additional information can be requested prior to a final decision being furnished to the applicant or landowner.

If an application is successful, the land surveyor will prepare subdivision diagrams for submission to the office of the Surveyor General for approval in accordance with the terms of the local authority's approval. Once such diagrams are approved, the landowner will need to engage the services of a property attorney and conveyancer to prepare the necessary documents for lodgement and registration of the subdivision in the Deeds Office in the jurisdiction in which the property falls. All conditions imposed by the local authority when approving the subdivision will need to be complied with. It is important to note the time period within which at least one of the newly created portions of land must be registered before the subdivision approval lapses.

Although subdivision may be a lengthy and costly process, should your property meet the required criteria, your fixed asset, which has been subdivided with the necessary approvals for re-development, will be a more attractive investment for sale to interested purchasers.

Sectionalisation by comparison, is the process of creating and registering a sectional title scheme on freehold property. A sectional title scheme comprises sections and common property. The building or buildings in a scheme are divided into sections, and everything else is common property. When purchasing property in a sectional title scheme, an owner acquires a section and a share in the common property, as well as possibly an exclusive use area or areas, such as a garden or parking bay, if exclusive use areas are to be created in the scheme for the exclusive use of particular owners in the scheme.

In order to register a sectional title scheme on your property, there needs to be a minimum of two sections available for registration of an approved sectional title plan. Many residential properties already have a building or buildings on them that can be divided into two sections and delineated on a sectional title plan for the registration of a sectional title scheme.

As with the subdivision of property, it is important for a landowner considering a possible sectional title scheme on his or her property to engage the services of a town planner and/or land surveyor to provide the necessary professional advice and assistance. One of the first enquiries would be to ensure that the zoning of the property permits the registration of a sectional title scheme. In the event that it is the landowner's intention to sell units in a multi-storey building, the registration of a sectional title scheme would be the only option available to a landowner, so a zoning enquiry is critical, as the landowner may need to apply for the property to be re-zoned before proceeding with the sectional title scheme.

Once all the requirements for a sectional title scheme to be registered on the property have been met, a land surveyor will need to prepare the sectional plans for approval by the Surveyor General. It is important to note that a sectional plan is not the same as a building plan. A sectional plan must be prepared from actual measurements, so the building must either exist or be sufficiently complete for measurements to be taken.

Once the sectional plans are approved, the landowner will need to consult with a conveyancer to assist with the application to the Registrar of Deeds for the opening of the sectional title register, the registration of the sectional title plan, the transfer to purchasers of any units sold in the scheme, together with the cession of any exclusive use areas, where applicable. The conveyancer will also be able to assist the landowner to finalise the rules that will be applicable to the scheme and other legal requirements for the establishment of a sectional title scheme in compliance with the relevant legislation.

Conclusion

Some properties may qualify for both sectionalisation and subdivision, but one option may be more financially viable than the other. A landowner therefore needs to ensure that he or she makes an informed decision before embarking on either process or that the anticipated outcomes match the landowner's expectations. Making such a decision will be easier with the help of an experienced property attorney who understands the legal requirements involved in achieving a satisfactory result.

Extract from Property 24