Fractional Ownership News

A blow for resort developers in South Africa

Date: 06/10/2009
Article source: www.servicepublication.co.za

A judgment delivered by the Supreme Court of Appeal (SCA) in Bloemfontein during the last week of September is sending shockwaves through the property development industry. The use of the Development Facilitation Act (DFA) as a relatively rapid means of obtaining development approval, particularly for large-scale projects such as shopping centres, golf estates and sectional title complexes, was put under a cloud of doubt.

One of the main advantages perceived by property developers was the power conferred in the Act on the development tribunal to suspend-and, in effect, overrule-the provisions of the Subdivision of Agricultural Land Act of 1970, which requires that approval from the Department of Agriculture be obtained for the subdivision of land that is classified as agricultural.

Now the SCA has set a course for future development along which this will no longer be possible. The DFA was perceived and used by a number of developers as a convenient means of bypassing this requirement, for which they can hardly be blamed, given the desperately poor record of the department in processing applications, and its inflexibility in refusing the majority of applications, no matter how well motivated.

In an appeal brought against a judgment given last year by Judge Antonie Gildenhuys in the High Court in Gauteng, the Court unanimously concluded that Chapters V & VI of the DFA were constitutionally invalid.

These Chapters contain all the provisions relating to the submission of development approval applications and the powers that can be exercised by the development tribunals in each province.

In the main judgment, Judge Robert Nugent analysed the constitutional powers of national provincial and particularly local government. He found that the Constitution expressly reserved the function of 'municipal planning' for application and administration by the local government sphere. In a carefully reasoned judgment, he reached the conclusion that if a tribunal, acting under the DFA, could effectively override a town planning or zoning scheme and grant approvals not in conformity with what the municipality had in mind for the area, both in terms of the scheme and in terms of its Integrated Development Plan, it was venturing into an area of constitutional function where it had no legal business to be.

Judge Nugent made it clear that there were other 'legitimate functions' to be performed by the tribunals and in his view, concurred by the other judges, they should confine themselves to those functions. He did not expressly state what those remaining functions may be, but in a separate judgment, Judge Carole Lewis gave some insight into this aspect. 'The long title tells us that the Act is meant not for municipal planning in the strict sense. Its purpose is to redress inequalities left by a policy of separate development, when people of different races were physically divided and whose housing and property were vastly unequal. Hence the need for reconstruction and development at a pace that might not be accommodated within the framework of ordinances regulating normal municipal planning.

The purpose, it seems to me, was not to supplant the existing procedures for town planning, but to provide alternative means for developing land so as to make provision for low-cost housing and facilities for those previously impoverished,' said Judge Lewis. These comments seem to be directed specifically at defining the proper functions and what the Court considered to be the constitutionally legitimate powers of the tribunals.

The decision has shaken the property development industry to its foundations, and the form in which the order has been issued has caused uncertainty. This is because the Court suspended the effect of the order declaring the relevant provisions of the Act invalid for 18 months, but added two qualifications to the effect that development tribunals could not accept or consider land development applications for property within any municipal area nor may they of their own initiative take any steps to amend any of the controls contained in a municipal planning scheme.

To those who do not have access to the full judgment, this has caused confusion. However, Judge Nugent was careful to point out in the course of his judgment that the order had no effect until it had been reviewed and confirmed by the Constitutional Court. This is in line with sections 167 (5) and 172(2) (a) of the Constitution, which confer on the Constitutional Court the final say as to whether legislation is invalid or not. In short, until the Constitutional Court gives judgment on the matter, it is business as usual for the development tribunals.

The problem faced by developers now is whether to submit an application and hope that it will be dealt with prior to a decision confirming the views of the SCA being issued by the Constitutional Court. The guesswork that this entails is made more difficult by the possibility that the Constitutional Court may not agree with the SCA, in which case anyone who has taken the safer route of applying to the municipality for a zoning change or permission, and accepting the risk of the massive delays and difficulties experienced in obtaining permission to subdivide from the Department of Agriculture, may regret the choice he or she has made. All these difficulties aside, the judgments, in my view, are thorough and correct and not, as contended by some critics, as “technical”.

It grapples successfully with fundamental constitutional issues of the separation of responsibility and function among the three spheres of government, and defends the constitutionally assigned duty of local government to deal with “municipal planning”. The issue is one that requires not only careful review by the Constitutional Court, but deserves Cabinet attention.

It highlights the inconsistency of government policy which, on the one hand, encourages development, and on the other, attempts to conserve vital resources that our country needs to sustain itself. This article was prepared by Michael Hands, an attorney specialising in town planning and property development work. He is a consultant to Garlicke & Bousfield Inc. For more information contact him on (031) 570 5300.