Picture: ISTOCK
Picture: ISTOCK

A judgment terminating the lease of a shareblock scheme operating a timeshare resort in Mpumalanga means the 600-odd owners of shares in the resort will lose their investment unless there is a successful appeal against the judgment.

Burchell's Bush Lodge, which is on the banks of the Sabie River, adjoining the western boundary of Kruger National Park, has been ordered to vacate the property that the scheme has rented since 2003. This is in terms of a judgment handed down in the High Court in Johannesburg late last month.

The judgment states that the shareblock company's failure to submit a project plan in 2015, in respect of maintenance and repair work, constituted a breach of the lease agreement and that the landlord, Meercathoryx Property, was therefore entitled to cancel the lease.

In terms of the judgment, Burchell's had to vacate the property within 14 days; this deadline expired on Friday.

Nick Dickson, the chairman of Burchell's Bush Lodge, said the shareblock company would not be vacating the premises as it would apply for leave to appeal against the judgment.

"If we vacate, it's the end of the scheme," he said. "The primary purpose [of the scheme] is to operate on that erf."

Lost their rights

The judgment meant that owners of shares in the scheme had lost their rights of occupation, even though they still owned shares, he said.

If the scheme were to be liquidated, the board would have to declare a liquidation dividend, he said, which was "the worst-case scenario".

Owners had been notified of the judgment and were invited to an information session in Woodmead, Johannesburg, this week, said Dickson, who is also a director of Leisure Options, the company that is the managing agent for Burchell's.

Dream Vacation Club, which is also managed by Leisure Options, owns about 300 weeks in the scheme and had made future bookings at the resort, Dickson said. "This [the order to vacate the property] means we have a shortfall in our portfolio."

Who owns the asset?

In South Africa, one of the ways to own timeshare is to buy shares in a shareblock company. When a timeshare scheme is established in terms of the Share Blocks Control Act, a share owner has the right to use and occupy a particular unit in a particular property for a particular number of days or weeks each year. Usually, the property is owned by the shareblock company, but it can be leased, as in the case of Burchell's Bush Lodge. Share owners pay a levy for their week/s of occupation, which must be used to maintain timeshare resort property.

The judgment, by Judge BA Mashile, is scathing of the shareblock company and by implication its directors, who are ultimately responsible for the scheme.

Burchell's assertion that since it was responsible for the maintenance and repair of the property, it alone had the right to determine the project plan, was "farcical and unsustainable" in view of the property being owned by another party. According to the lease, the owner would delegate what had to be maintained and repaired, the judgment said.

Agreed with landlord

The judge agreed with the landlord that, otherwise, it was possible for the scheme to run down the property without the landlord having a say. "Given the lengthy duration that the lease is still to endure [85 years], the landlord may have no property to be restored to it at the end of the lease," the judgment said.

The judgment highlights the tenuous rights of owners of shares in schemes in which a lease agreement is the shareblock company's main asset, as opposed to the land on which the resort is built and the buildings themselves.

It was important to the timeshare industry because it illustrated what could happen when a timeshare resort or its managing agents violated the terms of its lease, said a source who asked not to be named. The directors of the scheme could be exposed to a claim for personal liabil-ity by shareblock owners for allowing a transgression of this nature and for failing to use the levy for the purpose contemplated by the Share Blocks Control Act, the source said.

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