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Share Block Ownership

Share block schemes are a means whereby people can get to own, say, an apartment in a high-rise building. Technically, you own a share in a company, which owns the building, but your share is linked to a particular apartment, perhaps with particular additional amenities – an undercover garage, for example.

The Share Blocks Control Act 19801 falls under the authority of the Minister of Trade and Industry, but it is really the Registrar of Companies who is responsible for the administration of the Act.

A. Restricted operations

  1. It is an offence to operate a share block scheme on agricultural land.2 3

  2. It is an offence to operate a share block scheme in respect of immovable property erected in conflict with an approved (or proposed) town planning scheme.4

  3. If a share block scheme is to be brought into operation in respect of a building of which part is let for residential purposes, it is an offence to bring it into operation without:5
    • every lessee being notified in writing of a meeting at which information will be provided; and
    • the meeting being held.
  4. If a share relating to part of a building is already let for residential purposes and is being sold for the first time, it must be first offered to the lessee and he must have refused (or not accepted) the offer within a period of 90 days.6 It is an offence to (purport to) conclude a sale in contravention of this provision.7

  5. If the lessee has not so accepted the offer, it may not be offered for sale to anyone else at a lower price (unless, again, it is first offered to the lessee, for a period of 60 days). It is an offence to (purport to) conclude a sale in contravention of this provision.8

  6. If the share which is to be sold relates to a part of the building which constitutes ‘controlled premises’, in terms of the Rent Control Act 1976, and the lessee is 65 years or older with an income less than the maximum proclaimed in terms of that Act, it must just be offered to that lessee – or, to another person subject to the lessee’s right to remain in occupation (for as long as his income does not exceed the maximum amount). It is an offence to (purport to) conclude a transaction in contravention of this provision.9

  7. This provision just mentioned also applies to the surviving spouse of that lessee, or a spouse who has been divorced or deserted by the lessee, if:10
    • they lived there together at the time of the death/divorce/desertion; and
    • he/she is 65 years or older and has less than that maximum monthly income.
  8. When a building is to be converted into a share block scheme, all residential lessees must be notified of a meeting to be held where a representative of the share block company will provide particulars of the scheme and other information regarding the lessee’s rights. After a lessee has been notified of the meeting, and has (either) not been offered a share or has declined, it is an offence to require him to vacate the premises unless:
    • he has failed to pay rental;
    • he has inflicted material damage to his part of the building; or
    • he has been guilty of conduct which is a nuisance to other occupiers of the building.11
  9. It is also an offence to require a lessee who has refused or not accepted the offer to purchase to pay a higher rental than he was paying when he refused the offer, or as at the date when the period to accept the offer expired.12

B. The agreements

A ‘use agreement’ is set up for each share block scheme, and it is this agreement which confers the right to, or interest in the use of the immovable property in question.

  1. The company commits an offence if it does not keep a copy of every signed use agreement at the property in question, or at a place of which the Registrar was notified.13

  2. It is also an offence if the company fails to lodge a copy of the use agreement (to be implemented by it) with the Registrar before it is signed.14

  3. A copy of the contract for the acquisition of a share in a share block company must be sent by the seller to the purchaser within 14 days of its conclusion. It is an offence to fail to do so.15

  4. It is an offence to receive any money (or other consideration) in respect of any right to a share in a share block company which is still to be formed, except from the share block developer.16 17

C. The Company

  1. It is an offence for a company to operate a share block scheme if the expression ‘share block’ (or ‘aandeleblok’) is not part of its name.18

  2. It is an offence for a Share Block Company to carry on business under any name, title or description other than its incorporated or registered name.19

  3. The Share Block Company must maintain a sufficient levy fund for repair, maintenance, rates, taxes, etc. and commits an offence if it fails to do so.20

D. General

The Act provides that it is an offence to contravene any of its sections in addition to those specifically dealt with above.21 There are some nebulous provisions which make it difficult to do justice to the exercise here; best be vigilant.

  1. As amended; the latest amendment was effected by Act 71 of 2008. 

  2. Unless the Minister of Agriculture consents in writing. 

  3. Section 21(a) read with section 5(1)(a). 

  4. Section 21(a) read with section 5(1)(b). 

  5. Section 21(b) read with section 11A(1). 

  6. If the premises are ‘controlled premises’ in terms of the Rent Control Act 1976, the period is 365 days. 

  7. Section 11B(6) read with section 11B(1). 

  8. Section 11B(6) read with section 11B(2). 

  9. Section 11B(6) read with section 11B(4)(a). 

  10. Section 11B(6) read with section 11B(4)(b). 

  11. Section 11(b)(6) read with section 11B(3)(a). 

  12. Section 11B(6) read with section 11B(3)(b). 

  13. Section 21(a) read with section 7(3). 

  14. Section 21(a) read with section 7(5). 

  15. Section 21(a) read with section 17(3). 

  16. There are certain exceptions – for example, if it is paid to a legal practitioner or estate agent in trust. See section 5A(2). 

  17. Section 21(b) read with section 5A(1). 

  18. Section 21(b) read with section 9(1). 

  19. Section 21(b) read with section 9(2). 

  20. Section 21(b) read with section 13(1). 

  21. Section 21(c).