The Body Corporate of "The Avenues" v Barney Hurwitz N.O.

In 1987, a sectional title scheme called "The Avenues" was registered under the Sectional Titles Act 66 of 1971. The scheme included residential units, garages, storerooms, and domestic workers' quarters. The developers (two trusts) and the Body Corporate adopted rules in 1988, with Rule 77 purporting to reserve extension rights to the developers. The local authority imposed a condition that garages, storerooms, and "maids rooms" could only be owned by owners of residential "flat" units. The developers retained ownership of certain garage, storeroom, and domestic worker units (Units 92-103) despite no longer owning any residential units. In 2005, the Body Corporate sought to exercise extension rights under section 25 of the Sectional Titles Act 95 of 1986 by selling extension rights to a third party, but the developers refused consent, claiming they held extension rights under Rule 77. The Body Corporate launched an application declaring that extension rights vested in it and that the developers must dispose of their units.

• Whether the Body Corporate or the developers held the right to extend the sectional title scheme
• Whether Rule 77 of the scheme rules could validly confer extension rights on the developers
• Whether rules adopted by a Body Corporate can override or conflict with statutory provisions of the Sectional Titles Act
• Whether the developers' ownership of non-residential units contravened the local authority's conditions of establishment
• Whether the developers were entitled to withhold consent to the Body Corporate's proposed extension

The appeal was upheld with costs, including costs of two counsel. The order of the High Court was set aside. The Supreme Court of Appeal declared: (i) no extension rights vested in the developer trusts; (ii) all extension rights vested in the Body Corporate; (iii) the developers' consent was not required for the Body Corporate to exercise extension rights under section 25(6) of the 1986 Act; (iv) the developers were not entitled to continue ownership of Units 92-103 due to breach of the local authority's establishment condition; (b) the developers were given six months to sell these units to qualifying purchasers (residential unit owners) or the Body Corporate; (c) the Body Corporate could apply for further relief if units remained unsold after six months; (d) the developers were ordered to pay costs jointly and severally, including costs of two counsel.

Rules of a sectional title scheme adopted by a body corporate must be read subject to the provisions of the governing Sectional Titles Act. Where a rule conflicts with statutory provisions, it is ultra vires the powers of the body corporate and unenforceable. A body corporate cannot, by agreement embodied in rules, deprive individual unit owners or mortgage bond holders of their statutory rights, including the right to grant or withhold consent to scheme extensions. Under section 18(1) of the Sectional Titles Act 66 of 1971, a developer could only acquire extension rights if the developer still owned a share in common property and obtained written consent from all owners and mortgage bond holders. Rule 77 purporting to reserve extension rights to developers conflicted with section 18(1) and was therefore invalid. Local authority conditions of establishment are binding on developers and owners, and ownership of units in breach of such conditions is unlawful.

The court noted that for extension rights to be preserved under section 60(1)(b) of the 1986 Act, such rights would have to have been validly "acquired" under section 18 of the 1971 Act at the relevant time. The developers conceded they had not acquired such rights. The court also observed that while the developers could have reserved extension rights by proper registration against the sectional plan with specific terms and conditions, they failed to do so - the terms and conditions referenced in Rule 77 did not actually exist in the registered documentation. The court commented that the developers appeared to maintain unlawful ownership of the non-residential units "presumably to continue to exert influence and obtain rights of extension."

This case establishes important principles regarding the hierarchy of sectional title legislation over scheme rules. It confirms that body corporates cannot, through rules, confer rights that conflict with or circumvent statutory provisions. The judgment clarifies the relationship between the Sectional Titles Act 66 of 1971 and Act 95 of 1986, particularly regarding transitional provisions for extension rights. It reinforces that rules must be read "subject to" the governing Act and that any rule conflicting with statutory provisions is ultra vires and unenforceable. The case also addresses the enforcement of local authority conditions of establishment and confirms that such conditions are binding on developers. It provides guidance on the proper reservation and registration of extension rights in sectional title schemes and the rights of body corporates under section 25(6) of the 1986 Act.