When buying a sectional title unit, there are a few things to take into account. One of them is a development right that a developer may have to further extend a scheme. A developer does have the right to extend and build onto or add new sections onto the sectional scheme within a stated period if he has reserved the right to do so in the initial agreement with the body corporate. The extensions might comprise construction of additional buildings or horizontal or vertical extensions of the existing buildings.
The practical implication of this is that a developer may decide to develop the first phase of a scheme and leave the other phase or phases to be developed within a specific time in the future.. A simple way to explain this would be, if a developer has decided to build 80 sections in 4 phases, he will build 20 sections at a time and sell them before he continues onto the next phase of 20 sections.
The developer can plan all 80 sections, build 20 of them and then reserve a right under section 25 to return to the site months or years later to develop the remaining sections. Once this is done it becomes a Real Right that the developer can sell or otherwise transfer to a third party.
In allowing this the Act sets out stick and ridged conditions that must be followed. Prior to establishment of the body corporate, the developer must state the following; A developer must outline the time for which the rights will be reserved, meaning how many months or years will it be before the next phase starts. The developer must provide plans and descriptions of what the next phase will look like. How many sections will be added and what it will look like. It must also outline what effect it will have on the participation quotas of each section.
Body corporates and developers must always remember that the land over which the right has been registered forms part of the common property and is subject to the developers reserved right, is under the control of the body corporate. Although the developer can exercise his right to develop, he has no control over the common property and is not obliged to pay any portion of the costs of its upkeep, although many developers volunteer to pay part of these costs.
If the time period passes and the developer does not exercise his right to develop, the right then falls to the body corporate which can let the rights lapse. They will need to have a unanimous resolution to formally reserve the right in its own favour, sell the right to another developer or cancel it out right. If the part of the common property over which the right was registered is sub-divisible, the body corporate can with the consent of all its members and bondholders decide to sub-divide the land to be distributed among members according to participation quotas of the members’ sections. The body corporate also reserves the right to develop the property if they so choose and generate a profit.
This being said when buying into or renting a section, it is in your best interest to investigate and inquire with the body corporate who has the rights to further development with in the scheme.