New to Community Schemes - The Ultimate Guide to Understanding Sectional Title Schemes – Part Three

Administrative Management, Sectional Title Management

By Ané de Klerk

In this final installment of our three part series, we will take a closer look at finances and dispute resolution in the sectional title context. Missed parts one and two of this series? I suggest reading those here and here before continuing.

Finances

Raising 5 types of levies

A sectional title scheme’s expenses are covered by the members of the body corporate. Unit-owners are required to pay contributions commonly referred to as “levies” to the body corporate to fund approved budgets for administrative expenses such as insurance and security as well as current and future maintenance of the common property, which will be based on the scheme’s approved maintenance, repairs and replacement plan. Once the budgets have been approved by the majority of members present or represented at the body corporate’s Annual General Meeting and the trustees have signed resolutions accordingly, these levies are raised from the individual owners based on their participation quota (the size of their section relative to the size of the entire scheme).

The third type of levy that bodies corporate raise is so-called exclusive use levies, but unlike the administrative and reserve fund levies, these levies are not raised in accordance with anyone’s participation quota. Instead, the holder of each exclusive use right must pay levies in the amount estimated sufficient to cover the costs of the maintenance, insurance, rates, taxes, supply of water and electricity to and of the specific exclusive use area.

The fourth type of levy that bodies corporate raise is CSOS levies. These are raised by the body corporate and then paid over to the Community Schemes Ombud Service (“the CSOS”) on a quarterly basis. Each member’s CSOS levy is calculated as follows:

• 2% of (Administrative levy payable – R500)
• *The amount payable is further capped at R40. So anyone paying a monthly administrative levy of R2 500 or more must pay a CSOS levy of R40.

The fifth and final type of levy that bodies corporate may raise from time to time is commonly referred to as a special levy. This type of levy may only be raised by the trustees when additional income is required to pay for an expense that is necessary and that must be paid urgently. If the expense is not necessary and/or if spending the money can wait until the funds are provided for in the scheme’s budget for the following financial year, it may not be raised as a special levy.

Of course raising the body corporate’s funds is only half the story. Let’s now turn our attention to spending it.

Paying for body corporate expenses

The body corporate may spend money on administrative expenses, such as rates and taxes, insurance, managing agency services, legal fees, security and the like if the expense is provided for in its member-approved budget and authorised by trustee resolution. Funds held in the reserve fund may be spent either in accordance with the scheme’s approved maintenance, repair and replacement plan and a trustee resolution authorising the plan-based expense or alternatively in accordance with a trustee confirming that the expenditure is necessary to attend to urgent maintenance, repair and/or replacement of property.

Dispute resolution in sectional title schemes

It is not at all surprising that disputes can and often do arise in sectional title schemes as in these schemes people are both living in close proximity to one another and forced to share resources, including financial ones. It is therefore important for bodies corporate to properly set out their internal dispute resolution process in their rules. If an issue cannot be resolved between disputing parties directly (despite their best efforts), the next step in the internal dispute resolution process is normally to complete the Complaint Form, included in the regulations to the Sectional Titles Schemes Management Act (“the Act”) and to submit it to the body corporate. The trustees are then likely to call an internal dispute resolution meeting to try to resolve the dispute and, if they do, should record their decision on the Record of Body Corporate Decision Form, also included in the regulations to the Act.

Any party to the dispute that is unhappy with the decision reached then has the option of submitting an Application for Dispute Resolution to the CSOS. Provided that the dispute falls within its jurisdiction, the CSOS will likely first refer the matter for Conciliation and, if Conciliation fails, ultimately to an Adjudicator for Adjudication. An adjudicator’s order, aimed at resolving the dispute, can also be made an order of court and be enforced as such.

If a matter does not fall within the CSOS’s jurisdiction, the parties can and often do use a mediator or appoint an arbitrator to resolve the dispute. While litigation is also an option in these circumstances, it is most often in all parties’ best interest to try to resolve disputes amicably and avoid court action wherever possible, as this can be very time-consuming and expensive.

If you have been burdened by a dispute and are unsure of how to best handle the matter, you are welcome to send an email to [email protected] for an obligation-free quotation. Let us take care of the stressful situation for you so you can focus on work, life and leisure with peace of mind.

Courtesy: The Advisory - Community Schemes Specialists

Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses.

FOR FUTHER INFORMATION:

Visit: www.theadvisory.co.za, or 

Email: [email protected]