Property Conversion

1|P a g e 2020 MOD 2 EDPF LARE Material
LEGAL ASPECTS OF
REAL ESTATE
2020 : MODULE 2
PROPERTY CONVERSION
THE ENTERPRISE PROPERTY DEVELOPMENT

FUND
Photo by Paweł. from Pexels
Nicole S Norval and Meyer de Waal
ASSIGNMENT DUE :
JUN 30
training overview
I. SIX MODULES
MODULE 1 : BASIC LEGAL CONCEPTS
MODULE 2 : PROPERTY CONVERSION
MODULE 3 : TRANSFERS
MODULE 4 : PROPERTY DEVELOPMENT
MODULE 5 : ESTATE PLANNING & TAX
MODULE 6 : CONSTRUCTING A GOOD TEAM
2. FOUR ASSIGNMENTS
30 June 2020: MODULES 1 & 2
20 July 2020: MODULE 3
21 September 2020: MODULE 4
23 November 2020: MODULES 5 & 6
“The best investment on earth is earth”

- Louis Glickman
This course is not legal advice.
index
conversion types : an overview
1. immovable property types
1.1 erf
1.2 sectional title unit
1.3 farm
1.4 agricultural holding
2. zoning types
2.1 town planning schemes (now land use schemes)
2.2 not quite rezoning : consent use
3. special mentions
3.1 townships
3.2 lease v leasehold
3.3 shareblock
4. SPLUMA
4.1 purpose
4.2 when SPLUMA applies
4.3 procedure & process
4.4 timing
assignment instructions
assignment
resources
contact details
conversion types
an overview
• Immovable property can be converted from one type of immovable property to another, for example, from an
agricultural holding to a farm using a process called excision, or from a farm to a township using a process called
township establishment.
• Immovable property can also be converted from one type of zoning to another, for example, from Residential 1
zoning, which typically allows only one house on the property, to Commercial zoning, which allows business
buildings on the property.
• The conversion of immovable property from one type to another, and from one zoning to another are often related
processes. A property might be very attractive for a commercial development because of its size and location, but
is zoned for agricultural use only.
• A town planner would investigate whether the local municipality would support a rezoning of that property from
agricultural use to commercial use, and what the local municipality would require of the property owner to approve
such a rezoning.
• To approve such a rezoning, a municipality would typically require that the property owner establish a township,
pay significant bulk contributions (for installation of proper services such as water and electricity), and register
servitudes for roads and municipal services.
• The application for rezoning, and the implementation of the municipality’s conditions for approval typically take
between 18 months and 3 years, and sometimes longer. The costs of this process are also high and need to be
budgeted properly before committing to the process.
• The Spatial Planning and Land Use Management Act No 16 of 2013 (“SPLUMA”) regulates the conversion of
property from one type to another, including the process of rezoning, and many of the conditional processes a
municipality may require.
• The report from a conveyancer will also be required that a deeds office search was conducted and no onerous
conditions were found in the title deeds and pivot deeds* that may prevent the proposed land conversion or
development.
• Outcomes : when you complete this module, you should have a good grasp of the types of immovable property,
zoning matters, and SPLUMA at a high level.
_____________________________
* pivot deed – in the Western Cape title deed conditions were not carried forward with the transfer to a new owner up to 1937. It is thus important
that a conveyancing attorney does a thorough search behind each older title deed (prior to 1937) to check for onerous title deed conditions that might
still apply to a property.

1.1 e r f
An erf is a piece of property that is part of a township (suburb).
Advantages :
An erf, once registered on its own title deed, is already serviced by the municipality and other service providers for utilities
such as water, electricity, gas, sewage removal, and waste collection, which means you do not have to pay bulk contributions
to the municipality and wait for the installation of these services before the property can be used to generate an income.
Disadvantages :
An erf is generally not very large, and, depending on your goal with the property, may be too small for the purpose you
require. If an erf is in an established estate or business park and subject to an association (for example, a home owners
association), it may be expensive and time-consuming to obtain necessary approvals in addition to any approvals required
from government, as well as approvals required in terms of the rules and regulations of that home owners association.

1.2 s e c t i o n a l t i t l e u n i t
A sectional title unit is a share (called a section) in a building or set of buildings, together with a share in property used by
all the sections (common property). Such a unit can also include exclusive use areas such as a garden area or parking.
Advantages :
A sectional title unit is clearly defined, serviced already, and typically ownership is not expensive on a monthly/annual basis.
Nonetheless, when purchasing a unit, it is a good idea to check first how much the levies for a sectional title unit will be, as
well as whether the budget set by the governing body (called the body corporate) for future management expenses in terms
of the Sectional Titles Schemes Management Act is realistic.
When developing a sectional scheme, multiple units are allowed on a single portion of land, which maximises the benefit
of land per individual unit constructed. Also, a property developer can retain a right to extend the sectional scheme by
adding more units, in terms of section 25 of the Sectional Titles Act.
Disadvantages :
Subject to a body corporate and highly regulated, owning this type of property can become bogged down in technicalities
and inefficient meetings. Approvals for alterations, expansions and renovations can be difficult to obtain, and, depending
on your goal with the property, a section may be too small for the purpose you require.

1.3 f a r m
A farm is agricultural land that is either operational as a producing farm, or is typically a larger piece of land within urban
areas, but, in either case, not yet converted into a township.
Advantages :
A farm is flexible in that it can be used for any purpose supported by the relevant municipal and provincial government
authorities (and sometimes national government as well). Where it is not a producing farm, a farm property is typically
located at the outer limit of developing urban edges of cities, and a well-selected farm property of this sort can increase in
value significantly given the right circumstances and development.
Disadvantages :
Developing a farm property requires considerable funds and time, as well as the right professional team, with skills,
diplomacy, and patience, in order to obtain all the approvals necessary for development of the property. The Subdivision of
Land Act 70 of 1970 is a major hurdle to overcome in the subdivision of agricultural land. A portion of agricultural land cannot
be sold or optioned to a third party before the subdivision of such land is formally approved in terms of this legislation.

1.4 a g r i c u l t u r a l h o l d i n g
An agricultural holding can be termed “pre-farm” agricultural property, since it can only be converted into farm property.
Advantages :
Agricultural holdings are often located on the edge of developed urban areas, and as such, it is typically not difficult to
obtain approvals for development, given the right circumstances. The same advantages as for a farm property then apply.
Disadvantages :
An agricultural holding is extremely restricted by the conditions imposed by the Agricultural Holdings Act 22 of 1919. Before
an agricultural holding can be developed to realise significant value, both time and money must be spent on ensuring that
the necessary approvals can be obtained for development. The same disadvantages as for a farm property then apply.
2. zoning types
2.1 t o w n p l a n n i n g s c h e m e s ( n o w land use
schemes)
A town planning scheme sets out the rights of property owners have for a defined area (typically a township or several
townships) to develop their property and build structures. These schemes specify the zoning of every property within the
area, and they are managed by the relevant municipality in terms of provincial laws known as ordinances (for example, the
Town-planning and Townships Ordinance No 15 of 1986 in Gauteng, and in the Western Cape, the Land Use Planning
Ordinance No 15 of 1985).
Town planning schemes will be replaced by land use schemes in terms of the Spatial Planning and Land Use Management
Act No 16 of 2013. For example, the City of Johannesburg Land Use Scheme of 2018, published on 2 January 2019, came into
effect on 1 February 2019, replacing sixteen town planning schemes in the jurisdiction of the City of Johannesburg
municipality. Transitional arrangements apply until 31 January 2021.
10 | P a g e 2020 MOD 2 EDPF LARE Material
2. zoning types
2.2 n o t q u i t e r e z o n i n g :
consent use
A consent use is a special dispensation granted to a property owner by a municipality, allowing the owner to use property
with certain rights without changing the zoning of the property, for example, a second dwelling approval.
This type of approval is useful when a rezoning is not possible, or not commercially viable, or would be temporary. The
consent use must be implemented by the property owner, or it will lapse.
3. special mentions
3.1 t o w n s h i p
A township is the division of a farm property into two or more erven, measured up by a land surveyor and shown on a
general plan, which is approved by the Surveyor-General’s Office for the area in which the property is located.
The purpose of a township can be residential, business, or industrial, and if it differs from the original zoning of the farm
property, this purpose must be approved as part of a rezoning process, which includes the establishment of the township.
Application for the township is made to the relevant municipality, and, if approved, the township’s establishment
conditions are given to the property owner by the municipality. Once these conditions have been met and the municipality
issues a Section 28(11) certificate (previously known as a Section 101 certificate), the township can be opened at the Deeds
Office by recordal of the new township in a Township Register.
After this, the township is proclaimed by publication in the Government Gazette, bulk contributions payments are made to
the municipality, and the municipality issues a Section 29 certificate (previously known as a Section 82 certificate).
Construction of buildings on the individual erven can then begin. In the Western Cape, the same certificate is a Section 137
certificate (previously a Section 31 certificate).
An example of a township establishment process :

3. special mentions
3.2 l e a s e v l e a s e h o l d
A lease is an agreement between a landlord and a tenant which gives the tenant the landlord’s rights to use and enjoy (to
occupy) a property, and in return for which, the tenant pays the landlord a rental, and other expenses related to the tenant’s
occupation of the property.
For leases of residential property, the Rental Housing Act No 50 of 1999 is an important piece of legislation.
A leasehold is a type of long lease where the government typically owns property, and the leaseholder has nearly all the
rights of a property owner, except that any building built on the property will stay on the property at the end of the leasehold
period, and the leaseholder will have no right to it.
A leasehold can usually be used to raise finance (a mortgage bond), while a lease cannot, unless it is registered against the
property.
While leasehold is still used, all leasehold rights resulting from apartheid legislation have been automatically converted to
freehold (full ownership rights), in terms of the Upgrading of Land Tenure Rights Act No 112 of 1991.
3. special mentions
3.3 s h a r e b l o c k
A shareblock scheme is no longer used as much as in the past, before the Sectional Titles Act of 1971 (now replaced by the
Sectional Titles Act 95 of 1986) came into effect. Shareblocks, like sectional title schemes, allow for communal ownership
with certain individual rights.
A shareblock company owns a property with a building or buildings constructed on it. Every owner owns a share in the
company, and signs an agreement for the rights of occupation of certain areas of the building or buildings.
Shareblocks are highly regulated, however, it is wise to adhere to the regulation, since all owners are essentially conducting
a property business together as shareholders of a property-owning company.
A shareblock cannot be used for agricultural land (without Act 70 of 1970 permission) to create rights of use and occupation
for the shareholders.
4. SPLUMA
4.1 p u r p o s e ( W H Y )
• The Spatial Planning and Land Use Management Act No 16 of 2013 (SPLUMA) is umbrella legislation that applies at
a national level, but requires each municipality to pass bylaws in line with its framework for obtaining development
and land use approvals in a consistent and effective manner.
• The objectives of SPLUMA include the promotion of social and economic inclusion, redressing past imbalances, and
ensuring that the application of spatial development planning and land use management systems is equitable, for
example, addressing segregation and unsustainable settlement patterns.
• In essence, SPLUMA should assist in extracting value from property, as it provides clear guidelines on processes
and procedures to be followed in obtaining the necessary development and land use approvals typical of converting
the zoning and type of property.
• SPLUMA applies when a property owner wishes to change the nature of property or the rights to property or both.
4. SPLUMA
4.2 w h e n S P L U M A a p p l i e s (W H A T )
SPLUMA applies to the following :
• Consent use applications
• Building line relaxations
• Township establishments
• Extensions of township boundaries
• New sectional title schemes
• Amending or cancelling a general plan
• Subdivision of property
• Consolidation of property
• Rezoning applications
• Permanent closing of public places or streets
• Removing, amending or suspending restrictive conditions in a title deed

4. SPLUMA
4.3 p r o c e d u r e & p r o c e s s ( H O W )
This is the procedure and process required by SPLUMA to change land use and/or rights :
Land Dev Officer

Land Use (Tribunal
/ Tribunal
application Hearing)
Decision
Commencement Time Period 21 days OR

Advisory Expires appeal decided
Objection
Notification of Change Land
and/or
Registration Use / Rights
Comments
Application is made
• 7 days : the Administrator must notify the applicant if information needs to be provided
• 14 days : such information must be provided
• If the applicant fails to provide the information then the application is considered abandoned and is withdrawn
Complete application : Administrator issues an advisory of commencement process

• 7 days : the land development application is registered
• 14 days : applicant is notified of registration and the application is circulated to other departments / service providers
and organs of state for comment
Notification of Registration
• 14 days : applicant must issue a notice of a category
• 30 days : applicant must provide the Administrator with proof of publication of the first notice
• 30 days : interested parties may lodge an objection
• 60 days : government departments may comment
Objection and/or Comments

• 30 days : applicant may comment on any objection or waiver the right to reply
Comment time period expires

• 7 days : application given to the Tribunal
• 60 days : Land Development Officer considers and makes a determination (for Category 2 applications, if no objection
is received)
• 7 days : Tribunal must set hearing date
• 60 – 90 days : hearing must take place
Before Tribunal hearing
• 28 days : applicant must supply a summary of expert evidence to the Tribunal
• 21 days : applicant must provide expert evidence to other parties
• 14 days : applicant must notify the Tribunal of intention to appear at the hearing
Tribunal hearing
• 30 days : Tribunal must make a decision and give reasons for the decision, taking into account:
o Environmental concerns;
o Heritage and cultural factors;
o Mining impacts;
o Issues of urgency; and
o Any other matter the tribunal may deem necessary to consider.
Tribunal decision
• 21 days : Administrator notifies parties of decision
• 21 days : parties may lodge an appeal
Regulation 94 :
Land Development Officer / Tribunal decision ineffective until :
o 21 days appeal time period expired and no appeals have been lodged; or
o Appeal decided
4. SPLUMA
4.4 t i m i n g
It is vital to understand the processes and procedures timeline as it relates to your application in terms of SPLUMA, as well as
whether the relevant municipality is experiencing any delays that will lengthen that timeline.
“In the real estate business you learn more about

people, and you learn more about community issues,
you learn more about life, you learn more about the
impact of government, probably than any other
profession that I know of.”
- Johnny Isakson
assignment instructions
submitting assignments:
• You are encouraged to do your own additional research and reading, provided that you refer to these sources
if you use them in your assignments. Read more on the next page how to do this.
• The assignments consist of two parts :
o Online Assignment : you can access the online portal here : EDPF Academy. This assignment must be
completed on or before the due date set out on the cover page of each module. Your results will be
available via the portal.
o Peer Review Assignment : you will be split into groups to consider, discuss, and rate one another’s
assignments.
• Peer Review Assignments must also be submitted to [email protected] on or before the due date set out on the
cover page of each module. Ensure that your delivery and read receipt functionality is enabled on your email
software.
• The cover page of each assignment must state the following :
2020
MODULE [NUMBER],
EDPF LEGAL ASPECTS OF REAL ESTATE
[YOUR FULL NAME]
Harvard citations & plagiarism:

You are expected to give credit when you use someone else’s ideas or words, or both, in your
assignments. Every assignment will be checked for plagiarism, and either marks will not be awarded at
all, or will be deducted, if an assignment or part of an assignment has been plagiarised.
• Harvard c i t a t i o n s – this is a particular style of referring to someone else’s work in your assignment,
and then entering the full reference to their work at the end of your assignment. You will find an example of the
“within work” style at the end of the plagiarism definition below, and the full reference style in the subsection
below headed “References” (at the end of this section “Assignment Instructions”). The website
www.citethisforme.com will help you with citations.
• plagiarism d e f i n i t i o n – this is when you use someone else’s work as yours, or copy words/ideas
without giving them credit, or refer to the incorrect source for information you use (or you don’t refer to a source
at all eg. you don’t place a quote in quotation marks : “”), or you copy words/ideas so that they make up most
of your work (Plagiarism.org, 2017).
References :
Plagiarism.org. (2017). What is Plagiarism? - Plagiarism.org. [online] Available at:

https://www.plagiarism.org/article/what-is-plagiarism [Accessed 14 Apr. 2019].
assignment
Online Assignment:
Access this assignment at EDPF Academy :
1. What is the governing body for a sectional title scheme called? (2)
2. What types of immovable property are reflected on a land register? (4)
3. What types of immovable property are typically located at an urban edge? (4)
4. What type of immovable property do you get when you establish a township? (2)
5. When does SPLUMA apply? (11)
6. Can you appeal a decision made in terms of SPLUMA? (2)
[25]
Peer Review Assignment:
1. Obtain and submit a copy of the zoning certificate for the property you have identified for your PIP project.
(5)
2. Read SPLUMA (copy here), and carefully compile an essay on the legislation, answering the following questions:
2.1 Assuming an unlimited budget, how would you convert your PIP property to extract the maximum value?
Would any property conversion be necessary?
2.2 What processes and procedures in terms of SPLUMA, if any, would be necessary to realise your dream
property from your PIP property?
2.3 Attach a copy of the municipal SPLUMA bylaw applicable to your PIP property to your assignment : what
processes and procedures are required for your property conversion in addition to those in SPLUMA?
2.4 How long does the municipality with jurisdiction over your PIP property tell you that the municipal part of
your conversion process will take?
(20)
[25]
TOTAL MARKS : [50]

resources
Agricultural Holdings Act No 22 of 1919
Land Use Planning Ordinance 15 of 1985 (Western Cape)
Rental Housing Act No 50 of 1999
Sectional Titles Act No 95 of 1986
Sectional Title Schemes Management Act No 8 of 2011
Share Blocks Control Act No 50 of 1980
Shepstone & Wylie. (2015). Overview of the Spatial Planning and Land Use Management Act, 2013 ("SPLUMA") and its
Regulations - Shepstone & Wylie. [online] Available at: http://www.wylie.co.za/articles/overview-of-the-spatial-planning-
and-land-use-management-act-2013-spluma-and-its-regulations/ [Accessed 15 Apr. 2019].
Spatial Planning and Land Use Management Act No 16 of 2013
Subdivision of Land Act 70 of 1970
Town-planning and Townships Ordinance No 15 of 1986 (Gauteng)
Upgrading of Land Tenure Rights Act No 112 of 1991
“In a crowded marketplace, fitting in is a failure. In a

busy marketplace, not standing out is the same as
being invisible.”
- Seth Godin
contact details
Johannesburg candidates:
e m a i l : [email protected]
tel : +27 11 803 0288
Cape Town candidates:

e m a i l : [email protected]
tel : +27 21 461 0065
“There have been few things in my life which have had a more
genial effect on my mind than the possession of a piece of land.”
- Harriet Martineau

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1|P a g e 2020 MOD 2 EDPF LARE Material

THE ENTERPRISE PROPERTY DEVELOPMENT

MODULE 1 : BASIC LEGAL CONCEPTS

MODULE 2 : PROPERTY CONVERSION

MODULE 4 : PROPERTY DEVELOPMENT

MODULE 5 : ESTATE PLANNING & TAX

MODULE 6 : CONSTRUCTING A GOOD TEAM

30 June 2020: MODULES 1 & 2

20 July 2020: MODULE 3

21 September 2020: MODULE 4

23 November 2020: MODULES 5 & 6

“The best investment on earth is earth”

This course is not legal advice.

1. immovable property types

1.2 sectional title unit

1.4 agricultural holding

2.1 town planning schemes (now land use schemes)

2.2 not quite rezoning : consent use

3.2 lease v leasehold

4.2 when SPLUMA applies

4.3 procedure & process

1. immovable property types

1. immovable property types

1. immovable property types

1. immovable property types

An example of a township establishment process :

SPLUMA applies to the following :

• Consent use applications

• Building line relaxations

• Extensions of township boundaries

• New sectional title schemes

• Amending or cancelling a general plan

• Permanent closing of public places or streets

• Removing, amending or suspending restrictive conditions in a title deed

Land Dev Officer

Commencement Time Period 21 days OR

Complete application : Administrator issues an advisory of commencement process

• 60 days : government departments may comment

Objection and/or Comments

Comment time period expires

“In the real estate business you learn more about

• The assignments consist of two parts :

• The cover page of each assignment must state the following :

EDPF LEGAL ASPECTS OF REAL ESTATE

[YOUR FULL NAME]

Harvard citations & plagiarism:

Plagiarism.org. (2017). What is Plagiarism? - Plagiarism.org. [online] Available at:

Access this assignment at EDPF Academy :

2. What types of immovable property are reflected on a land register? (4)

5. When does SPLUMA apply? (11)

6. Can you appeal a decision made in terms of SPLUMA? (2)

Peer Review Assignment:

TOTAL MARKS : [50]

Land Use Planning Ordinance 15 of 1985 (Western Cape)

Rental Housing Act No 50 of 1999

Sectional Titles Act No 95 of 1986

Sectional Title Schemes Management Act No 8 of 2011

Share Blocks Control Act No 50 of 1980

Spatial Planning and Land Use Management Act No 16 of 2013

Subdivision of Land Act 70 of 1970