Western Cape Business News

Send  Share  RSS  Twitter  06 Oct 2009

THE LAW: Risks For Property Developers


Recent Western Cape Business News

The recent Supreme Court ruling upholding a High Court decision to set aside development rights granted in 1957 to Oudekraal owner Kassie Wiehahn highlights the need for developers to ensure all potential risks are taken into account when planning a development.

In 2007, the High Court in Cape Town declared the fifty year-old Oudekraal development rights as unlawful because they had been granted "in criminal disregard" for the existence of Muslim graves and kramats already on the land.

In the recent Supreme Court ruling, Judge Mahomed Navsa said that the ecology of the area was unequalled and that the entire area was regarded as sacred by a formerly marginalised section of South African society.

According to Julian Reynolds, CEO of Cape real estate and development services firm, Durr Estates, the Oudekraal case is just one example of owners valuing land for development based on assumed rights, only to subsequently discover that they are unable to proceed due to legislative, environmental or zoning issues.

Even if a site has appropriate zoning, the environmental and heritage aspects can still prevent development. In the Oudekraal case, the owner was aggressive in his attempt to enforce his historical rights rather than trying to come to an amicable solution to suit all stakeholders,” says Reynolds.

Reynolds cites a development on Seacliff Road in Bantry Bay, Cape Town, as another example where poor risk management and planning has left a developer out of pocket after being unable to proceed due to objections from interested parties.

The builder submitted plans in compliance with regulations but then altered these plans without gaining consent from neighbours for the changes. Residents in the area, supported by a premier legal team, have now forced construction to be stopped and ultimately the holding costs for the developer will be extremely high,” says Reynolds.

He says that developers must be responsible in their approach and when confronted with objectors, it is always best to find a workable solution rather than attempt to ‘bulldoze’ the objectors.

He adds that it is equally important that developers submit the right plans and stick to them.

If you deviate from zoning restrictions, then you will need the consent of your neighbours. Developers should be aware that any sites that are environmentally sensitive are unlikely to be built on regardless of zoning,” says Reynolds.

The litigation involved with land development dispute matters is expensive, time consuming and stressful. According to Julian Reynolds, stakeholders should try to find a mediator that can negotiate a settlement in the event of a dispute, as this can ultimately give the best results.

He adds that while a seller is ethically and legally obliged to disclose any known restrictions to the buyer, it is the terms of the contract that ultimately determine the seller’s obligations and thus the onus is on the purchaser to investigate the site prior to purchase.

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