CBD property developments: be prepared before you develop

Louw Malherbe considers the pitfalls of central city property development, where developers are often confronted with the unknown and have to deal with title conditions which are not always disclosed in conventional searches.

A developer wanting to develop a building project in a CBD must first and foremost instruct its legal representatives to do an in-depth investigation into servitudes, conditions and/or endorsements registered against the titles of the properties on which the development will take place. In general, and after careful investigation and perusal of present and historic title deeds, a legal representative may feel at ease to submit a positive report to the client if no restrictions are found against such Development Land that will stand in the way of  the Development.

Jones in his book, CONVEYANCING IN SOUTH AFRICA, 4^th Edition, page 27 to 29 under the heading “REGISTRATION IS INCOMPLETE”, however states that in practise, the Deeds Office is not able to guarantee that its Registers and Deeds reflect the correct position as regards to ownership and/or conditions of title of any un-alienated state land. In summary, Jones furthermore indicates that ownership of public streets may often in accordance with certain Ordinances, vest in the Municipality without registration of transfer having being done.

Jones furthermore notes that prior to the amendment of section 31 by Act 43 of 1957, few statutes granting powers of expropriation required that the expropriation must be noted against the title of the land expropriated. He goes on to say that the Deeds Office records and titles do not necessarily reflect the true position in respect of ownership as registered ownership could have been changed by vesting or by expropriation.

He further points out that conditions affecting land are by no means all reflected in the titles of the land. He closes by indicating that the problems arising out of statutory vestings are obvious and where remainders, for instance include public roads, the local authority should be compelled to take transfer thereof so the true remainder left to the owner can be reflected in his title. Where the whole of the property held under a title deed has become vested as a road, it should be possible to evolve a procedure whereby that title can be endorsed reflecting such vesting ownership.

One such provision is found in an old Ordinance of the Cape of Good Hope, Ordinance 19/1955 published in November 1951. This Ordinance provided the following:

1. Definition of a public street means “Street which has at any time been dedicated to the public”.
2. Clause 127 of Ordinance 19/1951: “the ownership of all immovable property of which the inhabitants of the municipality shall have or acquire a common right and of all public streets shall vest in the Municipality”.

The effect of the aforementioned provisions may well be that a party could have dedicated in writing a certain piece of land to the municipality of the city of Cape Town (“the City”) as a public street as a result whereof the City may insist that in terms of clause 127 of the said Ordinance they have obtained a vested ownership in regard to the said dedicated portion of land.

Historically, if such a portion of land was dedicated to the City, the dedication may often have happened with reference to an un-surveyed and hand drawn diagram depicting such area. For the City to transfer such portion of land into its name, alternatively register an endorsement against such portion of land reflecting the vesting rights, the City would have to survey the dedicated portion and incur surveyor’s costs. The attitude of the City in many instances would have been due to surveying costs, not to survey such portion of land and not to endorse the title deeds of the erven and/or transfer such portion into its name.

The aforementioned scenario will have the effect and impact that the legal representative investigating a development site will not be able to find a record of such vested rights through the normal methods by investigating registers and deeds at the deeds office.

One can just imagine the confusion where, as an example, in 1955 the property owner of erven A dedicated a portion of erven A to the City in accordance with the Ordinance 19/1951 and the City in that instance deciding not to endorse or take transfer of the said land. Erf A is thereafter transferred on 10 different occasions to 10 new owners, the last owner who now wants to sell the piece of land to a developer. In this instance, the bona fide Seller may sell land that does not belong to it and the developer may act on such sale and incur substantial costs in preparation of the development.

We are of the opinion that there may be many valid defences by the owner of such Erf A against any claims of vesting rights or ownership that the City may insist on having, but the reality is that such dispute will be long and drawn out and will not be a battle a developer would want to face if for instance building plans have been provisionally approved for a 30 storey building in the City and after provisional approval the City realises that they have certain vesting rights. It should be remembered that any record of such vesting rights and/or dedications will be kept in paper files by the City in some office and may not necessarily be readily available or come to the knowledge of such City official.

We suggest that care be taken by legal representatives when submitting such advice to clients, that clients sign the necessary indemnity, and furthermore, the Developer should insist that the relevant planning department of the City goes on record to confirm that there are no endorsements, dedications, expropriations or any other restrictions against the development erf except for those listed in the Deeds Office. It is furthermore noteworthy that the owner of erf A in the above example, may well have since 1955 been paying rates and taxes on a portion of land to which such owner factually never had ownership.