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Published on 01 Mar 2023
Initially adopted by the development sector as a practical solution to the diminishing vacant land in prime areas, more and more private owners have now begun to portion off their properties for a number of compelling reasons.
The financial incentives include: a cash injection to ease financial burden, an additional source of income, reduced maintenance costs, lower rates and taxes and the potential to achieve a higher return on investment when the time comes to sell.
But, although both options offer multiple financial and practical benefits, there are distinct differences which should be carefully considered.
Furthermore, subdivision and zoning are strictly regulated by a multitude of laws, regulations and bylaws so it’s vital that property owners do their homework, preferably in consultation with an experienced town planner, before making a final decision.
Understanding the difference
When you purchase a portion of a subdivided property, it’s no different to buying any other erf. You acquire the full rights and title of an owner over the subdivided segment which you have bought.
However, when you buy into sectionalised property, the new portion remains part of the original erf with the acquired section being identified by a number on a sectional title plan, whether it be the unit numbers in an apartment block or, in the case of a large erf, it could be a or b of the existing address and erf number.
Essentially, you are buying an undivided share in the communal property which is determined by what is known as the ‘participation quota’. And, although it is possible to own an exclusive use area of a sectionalised property, only a portion of the common property will be designated for your sole use,
Each form of ownership has unique pros and cons which should be carefully weighed up:
Subdivided Property:
Pros:
1. Normal Common Law Neighbour Laws would be applicable to manage the relationships between neighbours;
2. The new owner is entitled to manage their property as they see fit without having to consult a managing entity such as a Body Corporate or adhere to a set of rules and regulations.
Cons:
1. With no collective responsibility for the maintenance of the property, the full cost of upkeep and repairs would be for your account;
2. Subdividing property is an expensive and lengthy process which involves reams of documentation and considerable red tape to be navigated with your local authority;
3. You would have no say in, and no control over, what your neighbour does with the subdivided portion you’ve sold to them.
Sectional Title Ownership:
Pros:
1. The relationship between each owner is governed by the Sectional Titles Act 95 of 1986, Sectional Titles Scheme Management Act 8 of 2011 and the Conduct and Management Rules enforced by the Body Corporate which minimises the likelihood of disagreements and discord;
2. The Scheme is subject to the oversight of the Community Schemes Ombud Service (CSOS);
3. It’s less expensive and laborious to establish a Sectional Title Scheme than to formally subdivide your property;
4. There is a collective responsibility for the maintenance of the common property of the Scheme.
Cons:
1. Each owner is required to pay a monthly levy to the Body Corporate’s administrative fund which used for the maintenance and necessary repairs of the common property;
2. In smaller Schemes, the costs of the more complex administration and management procedures can be more of a financial burden than if were shared between multiple owners in a larger scheme;
3. Owners must adhere to the uniform image of the scheme and would have to get permission before making any visible changes such as enclosing a balcony.
Changing landscape
Densification has been transforming some of Johannesburg’s oldest suburbs for a number of years already with traditionally freehold suburbs now few and far between. However, until very recently, sectionalising and subdivision remained restricted in Cape Town, especially in the more upmarket nodes.
But, as the saying goes, ‘needs must’ and with further limitation to development imposed by a mountain range and the ocean, it’s become more prevalent in the Mother City, especially since the 2020 amendment to the Municipal Planning By-Law (MPBL) which allows for the construction of a third dwelling on properties zoned Single Residential.
And, like Johannesburg’s more established suburbs, many of the larger properties in certain suburbs do lend themselves well to subdivision. However, owners must bear in mind that every suburb has its own set of regulations and set minimum subdivision sizes so it would be a costly mistake to assume one size fits all.
For instance, in Bishopscourt, most plots cannot be subdivided to less than an acre (4 046sqm), whereas in neighbouring Constantia, you can often split a stand half that size and, in nearby Claremont, the same size erf can be divided into multiple plots.
Additional factors to consider
One consideration often overlooked is the fact that bonded properties cannot be subdivided without the bond holder’s consent, so approval from the lending institution as well as the local authorities is required.
It’s also important to scrutinise your title deed before jumping in because it’s not uncommon for properties to have conditions in their title deeds which state that no more than one dwelling is allowed, despite the common municipal zoning allowance of two dwellings per single residential stand. This condition would first have to be uplifted before the application can be made.
At the end of the day, subdivision and sectionalisation offer numerous compelling benefits and can yield excellent returns, both in the short and long-term.
However, neither option is without potentially costly pitfalls, especially if undertaken without thorough research and consultation with the relevant property professionals, so property owners must ensure they are well-informed and properly prepared before they commence.
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