L5. Fractional Ownership
Fractional Ownership is based on the ownership of undivided shares in a property, as opposed to shares in a company or member’s interest in a CC (which may be in contravention of the Share Blocks Act). This can be bonded in the Deeds Office, as the share in the property is a registered real right for which a separate Deed of Transfer can be created for each fractional owner in the property, as opposed to one Deed of Transfer containing the percentage share of each owner of the property in the Deed.
In essence, it is a normal standard transfer, but the purchaser is always more than one person or entity. Should there be only one Title Deed, you can register only one Bond, but should there be numerous Deeds, each one can be bonded separately. The challenge is to sell the concept to the Banks, as they are not willing at this stage to bond them separately, feeling that it is difficult to sell a share in a property in execution. This problem should hopefully be overcome by the management of the use of the property by a Property Association in terms of a use agreement, as explained below.
Property Association
The owners govern the use of the property in terms of a separate use agreement, which is agreed upon when the Deed of Sale is concluded and is similar to a Home Owner’s Association regarding the maintenance of the common areas in cluster developments. The management is, however, more involved, as the whole property and not only portions thereof are managed.
The use agreement establishes a Property Association to fulfil this management role, and the owners pay levies towards the maintenance of the property to the Association. The use agreements stipulate the periods in which the owners can occupy the property, and it is suggested that two weeks be kept aside for maintenance.
Every owner can deal with their share as they please, and when they sell their share, the share is transferred into the name of the next purchaser, which transfer is again registered in the Deeds Office. The next owner will become a member of the Property Association and will be required to sign the use agreement.
