In the matter of Meridian Bay Restaurant (Pty) Ltd and Others v Mitchell, the Supreme Court of Appeal (SCA) recently had to decide on an appeal by a third party who had knowledge of the personal rights of prior purchasers of property in a sectional title development scheme, to which third party such property was sold by the sectional title developer contrary to the personal rights of the prior purchasers, in terms of a so-called ‘double sale’.

The developer developed under a sectional title scheme, a property in Gordon’s Bay, Western Cape which was intended to be occupied by hotel guests.

The prior purchasers purchased units in the hotel, the rentals in respect of which, are after expenses were met, would be distributed according to the individual participation quotas of each owner of a unit.
According to the sectional title plan, the common property was to include restaurants, kitchens, a parking basement, a squash court and service areas.

The sectional title developer secretly and fraudulently transferred the common properties to third parties who had knowledge of the rights of the previous owners.

The SCA held that it was sufficient if the third party subjectively foresaw the existence of the purchaser’s personal rights but proceeded with acquisition of this real right, regardless of the consequences.

Provided that this precondition was satisfied, the first purchaser was afforded what is, in effect, a limited real right against the ultimate acquirer and could recover the thing sold directly from the ultimate acquirer, despite the fact that there was no contractual privity between them.

This judgement illustrates the importance of clients calling on the assistance of their attorneys prior to concluding any agreements of sale for immovable property as attorneys are able to assist with the necessary searches to establish and confirm ownership of the seller in the particular immovable property in question. Clients are invited to contact the Property Law department of Adams & Adams for assistance in this regard.

For more information contact:
Leander Opperman, Partner, Commercial Property and Litigation Department – Adams & Adams
012 432 6000