Have you ever wanted to build your own home but needed the security of your traditional sectional title living? Look at Real Rights developments.
What is a Real Right to Extend?
The “Extension of Real Right” was introduced into the development of a sectional title complexes in terms of an amendment to the Sectional Title Act 95 of 1986.
In terms of this change to the Act, provision is made for the transfer of a portion of the right to extend, reserved by the developer in terms of Section 25(6), to a third party. This approach and process differs from conventional sectional title dev elopement finance but is quite similar to the conventional “plot & plan” approach, applicable to ordinary building loans in new suburbs or cluster developments.
The main difference is that the sub-division is initially referred to as a real right and on completion of individual buildings. on this “real right” site, the developer and the client are contractually obliged to convert the Real Right into a conventional section number which is included in the sectional title register of that complex.
Real Rights is a concept that came into South Africa some 10 years ago. It’s become an increasingly popular option allowing people to be actively involved in the design of their property within the sectional title development they’ve bought into.
Part of the loan is going to pay the developer for the land and the remainder will pay for the builder in a series of progress payments, kind of like a building bond. The purchaser then has to arrange a guarantee for the balance, usually from a bond over the rights. The process is completed once the buyers rights to the site had been converted to a sectional title deed, the developer’s attorney’s handle the legalities at his expense, which means that the purchaser only has to pay the deposit, and make sure that he can establish a home loan, which of course is our job!
Real Rights to Extend even though the purchaser does not, in reality, own the site, his rights to the site are the legal equivalent. Once the right is converted to sectional title, the purchaser then becomes a member of the body corporate, and normal sectional ownership is resumed.
What advantage does Real Rights give to developers?
1. Real Rights allows the developer to focus more freely on developing the property and services such as water and electricity
2. For developers, it offers a reduced holding cost and improved cash flow.
What advantage does Real Rights give to the consumer?
1. Consumers can enter into an owner/builder scenario with confidence, knowing that the builder had been carefully chosen by the developer on the basis of ability and integrity. The builder must be NHBRC certified.
2. The purchaser has a certain period of time after taking possession to “snag” the dwelling for faults, which the developer is obliged to repair.
3. The buildings, if the developer is NHBRC recognized, will carry a five year National Home Builders Registration Council guarantee against structural defects and certain other warranties against defects