Legal action by bodies corporate against developers of schemes

In new sectional title developments, the first purchasers of apartments in the building usually buy their properties “offplan” from the developer, as the actual buildings are not yet in existence at the time the apartments are sold.

Developers have perfected the art of marketing a new scheme using models, glossy advertising brochures and detailed plans to convince prospective purchasers that the actual buildings will be as impressive as those described. There is no problem with these marketing and sales techniques, provided that the property that it being sold is adequately defined in the contract of sale and what is ultimately built is what has been marketed..

The actual problems with buying “offplan” usually only manifest a year or two after the buildings have been completed and start to show signs of deterioration. As the buildings settle into the ground, cracks start to appear in the walls, plaster starts to fall off balconies and paint starts to peel. Inadequately sealed roof/patios start to leak and balcony railings start torust. The foundations may prove to be inadequate and can actually subside into the ground. If the foundation movements are substantial, the building may become structurally unsound and dangerous. Substantial damp problems may make residential sections unfit for habitation. On a smaller scale, electronic security gates on the common property may repeatedly fail and the promise of “around the clock security guards” may remain just a promise, never to be fulfilled.

Is there any relief available to a body corporate in these circumstances? What relief is there for individual owners? Can they take a developer to task in the courts for failing to deliver as promised?

The Sectional Titles Act of 1986 (‘the Act’) provides that the body corporate may sue the developer, but provides that the members of the body corporate must first approve such action by way of a special resolution. So this decision cannot be made unless the proposal has the support of at least 75% of all the owners, calculated both in number and value in a formal voting process. The developer obviously has a conflict of interest in considering any such proposal and may therefore not vote against it.

A decision by a body corporate to sue the scheme developer is not one that should be taken lightly, as all litigation is expensive. And to support a legal claim the body corporate will need to have reliable evidence that the building works are sub]standard and that owners are prejudiced by the inadequate design or bad workmanship. Finally, the costs of litigation will have to be funded by owners, with the hope of recovering some or all of these costs in terms of a favourable court judgment.

But the inescapable truth is that the Act requires the body corporate to maintain and repair the buildings in the scheme and to fund these works by levying contributions on the owners of units. So if the body corporate is saddled with incomplete or inadequate buildings that the developer does not complete or repair, the owners will have to pay levies to cover the body corporatefs costs of doing so.

The body corporate has three years from becoming aware of problems to institute action against the developer. The trustees should protect the interests of owners, consider all the options available to them and consult an attorney as soon as any serious design or construction problems become apparent.

Aticle by: Judith van der Walt -