IN THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA

In the matter between:

PROSPECT SA INVESTMENTS 42 (PTY) LTD                            APPLICANT

and

LANARCO HOME OWNER ASSOCIATION

JUDGMENT
								       Delivered on 30 June 2014

KRUGER J

[1]	The Applicant seeks a declaratory order that, as developer of the Lanarco Estate, it is not a member of the Respondent and is consequently not liable to the Respondent for the payment of levies.  Allied to this, the Applicant seeks an order compelling the Respondent to furnish the necessary clearance certificates and/or consents as required by the transferring attorneys.

[2]	In contrast, the Respondent, in a counter application, seeks a declaratory order that the applicant be declared liable for the payment of all levies imposed in respect of each immovable property owned by the Respondent within the boundaries of the Lanarco development, during the period in which the Applicant was the owner thereof.

BACKGROUND

[4]	The Applicant applied for a Certificate of Registered Title in respect of Portion 4 of the said property.  This certificate was duly issued under Certificate of Registered Title No. T10743/06.  The property was described as “Portion 4 of Erf 137 Kingsburgh, Registration Division ET, Province of KwaZulu-Natal, in extent 12,5574 (twelve comma five five seven four) hectares.”

[6]	Other important conditions of establishment of the private township are 

the following:

Prior to the transfer of erven 3371-3461, erven 3462-3465, which comprises the common property, are to be transferred to a Homeowners' Association and each owner of a lot shall become a member of that association.”

“C.1(b)	Home Owners' Association
Neither the lot, nor any further sub-division, nor any unit thereon as defined in the Sectional Titles Act No.95 of 1986, shall be transferred to any person until he has bound himself to become and remain a member of “Home Owners' Association” for the duration of his ownership and a clearance certificate has been issued by such Association to the effect that its Articles of Association have been complied with.”

[8]	Clauses 3 and 4 of the Articles of Association provide:

“3.	MEMBERSHIP
Membership to the association shall be open to all qualified and interested parties who shall be individuals with professional or other interests in the operational areas of the association.
4.	APPLICATION FOR MEMBERSHIP OF THE ASSOCIATION

Application for membership shall be made in writing, directed to the management committee of the association.  Each application for membership shall be accompanied by an entrance fee as is agreed upon by the members in general meetings from time to time. In the event of the application for membership being refused, the entrance fee shall be refunded to the applicant.”

[9]	The conduct rules which are, in my opinion, relevant, are the following:

“1.3.2“ESTATE” shall mean the Lanarco Estate, a residential estate developed on Portion 4 of Erf 137 Kingsburgh;
1.3.3	“OWNER” shall mean the registered owner of any erf or sectional title unit within the estate
1.3.4	“RESIDENT” shall mean any person occupying a property, whether by lease, sub-lease, membership or shareholding in or of the owner of the property, or any other right bestowing the right to use and occupy the dwelling;
1.3.5	“PROPETY” shall mean any erf or Sectional Title unit situated within the estate.
2.	MEMBERSHIP
2.1	Owners are members of the association by virtue of ownership of a property ...”

ISSUES THAT REQUIRE DETERMINATION
[10]	The sole issue that requires determination is whether the Applicant is a member of the Respondent and accordingly is obliged to pay levies raised by the Respondent in respect of the development known as Lanarco.

[11]	On the papers before me, in brief, the Applicant contends that it is not a 

member of the Respondent and accordingly not obliged to pay levies for the following reasons:-
(a)	It did not automatically become a member of the Respondent as the Articles of the Respondent requires a written application.
(b)	There is no contractual nexus between it and the Respondent requiring it to be a member of the Respondent;
(c)	The individual erven do not yet exist for the purposes of membership of the Respondent and
(d)	It is the registered owner of the whole of the remainder of the township and not each individual erf.

[12]	The Respondent contends that in terms of the conditions of the establishment of the township as well as the Respondents conduct rules, the Applicant is a member of the Respondent and as such is liable for the payment of levies in respect of the properties that it owns.  The Respondent further contends that in as much as the Applicant's directors were also directors of the Respondent; the Applicant exercised rights of a member by attending meetings of the Respondent and voting thereat; the Applicants are estopped from denying that it is obliged to make payment of levies in respect of those immovable properties which it holds.

[14]	During the course of argument, the parties agreed that, if necessary, it 

is the Respondent’s contentions of estoppel which will require evidence as there are mutually inconsistent statements/averments relating thereto.

DEEDS REGISTRIES ACT NO.47/1937
[15]	Before considering the merits and/or demerits of the Applicant’s and Respondent’s contentions, it is necessary to identify the relevant provisions of the Deeds Registries Act which are applicable.  Section 102 of the Act defines “erf” as “means every piece of land registered as an erf, Lot, or stand in a Deeds Registry, and includes every defined portion, not intended to be a public place, of a piece of land laid out as a township, whether or not it has been formally recognised, approved or proclaimed as such”

“Owner” “means, in relation to-
(a)	Immovable property, …, the person registered as the owner or holder thereof ...”
“Registered” is defined as “registered in a Deeds Registry”.

[16]	Chapter iv of the Act relates to townships and settlements.  Section 46(1) provides:

“If land has been sub-divided into lots or erven shown on a general plan, the owner of the land sub-divided shall furnish a copy of the general plan to the Registrar, who shall, subject to compliance with the requirements of this section and of any other law, register the plan and open a register in which all registerable transactions affecting the respective lots or erven shown on the plan shall be registered.”

Section 46(3) provides:

“If the land sub-divided as shown on the general plan form the whole of any registered piece of land held by the title deed, the Registrar shall make upon the title deed and the registry duplicate thereof an endorsement indicating that the land has been laid out as a township or settlement, as the case maybe, in accordance with the plan, and that the lots or erven shown on the plan are to be registered in the relative register.”

[17]	The Act further provides that if the township is laid out on only a portion of the land concerned, the owner is to obtain a Certificate of Registered Title in respect of the said portion. In this regard the provisions of Section 43 of the Act are applicable.  Section 43(5)(a) provides:

“Save in the case of a transfer of a whole erf, no owner of a township or settlement in whose title deed the individual erven are not separately described, shall deal separately in any way with an individual erf in such township or settlement or any portion thereof or share therein until he has obtained a certificate of registered title of such erf in the prescribed form.”

DELIBERATION

the land description as depicted on the general plan.  This simply means that erven 3371 to 3465, as depicted on general plan SG No. 226/2006 belong to the owner of the land which was described as portion 4 of Erf 137 Kingsburgh. This, it is common cause, is the Applicant.  The essential differences being that the Applicant was no longer the owner of a farmland but of various erven in a proclaimed private township.  The conditions of establishment of a private township further compel the Applicant to deal with the erven in accordance with the registered general plan.

[19]	It follows that if one has regard for the definitions of “erf” and “registered” as outlined earlier in this judgment, the individual erven do exist and in fact came into existence upon registration of General Plan SG No. 226/2006.  The Applicant’s contentions that the individual erven do not yet exist is therefore without merit.

[21]	The remaining two contentions of the Applicant can be considered together. In the Heads of Argument submitted on behalf of the Applicants, it is submitted that the original title deed as well as the certificate of registered title 

contain no provisions which require that the Applicant should be a member of the Respondent.  A perusal of these two title deeds indeed confirm the correctness of this submission.  However the endorsement on the certificate of registered title (referred to in paragraph 5 supra) confirm that the erven form part of a registered general plan.  This being so, one must have regard for the conditions relating to the approval of the private township.

[22]	It will be noted that condition A14 (supra) requires (a) the transfer of the common property to a Home Owners Association and (b) the owner of each lot or erf is to become a member of the Home Owners Association.  These two conditions are to be fulfilled prior to the transfer of any of the remaining erven or lots.  The language is clear and unambiguous and is couched in peremptory   terms.  As owner of all the remaining lots/erven, (erven/lots 3462/3465 being the common property) the Applicant, upon transfer of the common property was obliged to become a member of the Respondent.

[23]	Mr Hunt has submitted that the aforesaid conditions, at most, imposed obligations upon owners to become members of the Respondent.  They could not as a matter of law actually constitute anybody a member of the Respondent, which is a company.  He has submitted that in terms of the Respondent’s Articles of Association, an application for membership shall be made in writing.  This application is to be accompanied by payment of an entrance fee.  The Applicant, it is submitted, did not make such an application nor did it pay or tender to pay an entrance fee.  Accordingly he has submitted, that regardless of what the conditions of establishment might say, the Applicant could not become a member of the Respondent other than by a contractual nexus and in accordance with the Articles of Association of the Respondent. 

[25]	The provisions in the Articles of Association that membership be open “to all qualified and interested parties who shall be individuals with professional or other interests in the operational areas of the association” may, in my view, apply to non-property owners who wish to be associated with the Respondent.  The applicant and all further property owners within the development are compelled, by virtue of the conditions of establishment of the private township, to be members of the Respondent (See Clause c(1)(b)supra).

[26]	The nexus between the Applicant and Respondent has therefore been created and established by the conditions of establishment (approval) of the private township.  The conduct rules clearly define the members of the Respondent “by virtue of the ownership of a property”.  The definitions of “estate”; “owner”; and “property”, in the conduct rules all apply to the 

Applicant.

 “... the very idea of the formation of the Plaintiff is to create a structure for the benefit of all owners of the land in the township, all of whom automatically become members on account of their ownership of land and all of whom are entitled on account of their membership to participate directly in the decision making processes of the plaintiff with regard to the imposition of levies and the use to which such revenue is to be put.”

[28]	At paragraph 39 and 40 he elaborated further and held:

“[39]...when one has regard to the Articles of Association and indeed to the purposes to be achieved by the imposition of levies, then it is clear ….. that levies are ultimately utilised for the benefit of the township. In this regard such benefits would accrue to the developer as owner of the individual erven. The developer’s ability to market such erven would in large measure be linked to the manner in which the township is administered and the manner in which different issues such as security, aesthetics, lighting, etc are dealt with.  To the extent that levies ultimately impact on the ability of the plaintiff to provide such services, the defendant could hardly be said to be prejudiced if it were required to pay such levies, as such levies ultimately redound to its benefit.
[40]	  On the contrary, if the defendant could argue that it was exempt 

from paying such levies then the consequence of such a stance would be inequitable, in that it would disproportionately place the burden for the services in the township that are to be funded from levies, on those individual property owners who have taken transfer from the developer and not the developer. Having regard to the fact that such services as are to be provided from the levies ultimately accrue to the benefit of all property owners in the township, the defendant would be in an unduly advantageous position if such a stance was sustainable.”

[29]	I fully align myself with the sentiments expressed by the said learned Judge.

[30]	I am accordingly of the view that the Applicant is a member of the Respondent and is consequently liable to the Respondent for the payment of levies in respect of each immovable property owned by it within the boundaries of the Lanarco Development.
 
[31]	Given the conclusion that I have arrived at, I do not deem it necessary to refer the matter to evidence as submitted on behalf of the Applicants.

[32]	In the circumstances I make the following order:

1.	The Applicant’s application is dismissed with costs.
2.	An order is granted in terms of prayers 1 and 2 of the Respondent’s counter application.

DATE OF CAV						20 JUNE 2014

DATE OF JUDGMENT					30 JUNE 2014

COUNSEL FOR THE APPLICANTS		Hunt SC with L Combrink
INSTRUCTED BY					Edward Nathan Sonenbergs
								c/o Venns Attorneys

COUNSEL FOR THE RESPONDENTS		A J Boulle
INSTRUCTED BY					Coenraad Kukkuk Attorneys