SA Property Ownership - Latest proposed amendments to the Sectional Titles Act
SECTIONAL TITLE
Often the only common factor of a Sectional Title life-style is ownership of a Unit in the Scheme in which they live. The Sectional Title Act No. 95 of 1986 prescribed Management and Conduct rules that apply to every Sectional Title Scheme and laid down the framework for running such a Scheme. The Act allows some rules to be changed, providing none of the changes go against the spirit of the Act. The procedures to effect these changes are prescribed in the Act and must be carefully followed.
The role of a Trustee is not an easy one. The Trustees are for the most part responsible for the success or failure of most schemes. A Trustee needs to understand the Act and must be able to interpret the Rules and guide the Body Corporate. A Trustee must be able to understand and control budgets and accounts.
WHAT IS “SECTIONAL TITLE”?
A Sectional Title Development Scheme (usually referred to as a “SCHEME”), provides for separate ownership of a property by individuals. These schemes fall under the control of the Sectional Titles Act, No. 95 of 1986 (and its amendments), which came into force on 1 June 1988.This Act replaced an earlier Act (No.66 of 1971).
WHAT PART OF THE SECTIONAL TITLE SCHEME DO I OWN?
In buying into a scheme you will acquire a Section (or Sections), and a share of the Common Property. These are collectively known as a Unit. In practical terms, a Section is usually a flat or townhouse.
You own the inside of the property i.e. the space contained by the inner walls, ceilings & floors of the unit. You are entitled to paint or decorate or undertake alterations as desired, providing such alterations do not infringe on municipal bylaws. The outside of the building is owned by the Body Corporate. In the interest of keeping uniformity, therefore, minor changes may be approved (in writing) by the trustees. This includes all external changes, i.e. aerials, satellite dishes, awnings, enclosures, changing of exterior colour schemes, etc.
Any major structural changes must be done in accordance with government and municipal approval and before proceeding, with the Body Corporate’s approval, as any alterations may change the look of the property, or increase the insurance. No reasonable request may be refused.
As regards common property, allocated for individuals sole use, such areas as indicated on the original plans or subsequently in writing, from the Body Corporate, may not be altered or reclaimed without the owners consent.
WHAT IS “COMMON PROPERTY”?
The Common Property is part of a scheme which does not form part of any section. Driveways, gardens, swimming pools, corridors, lifts and entrance foyers are good examples of Common Property. Some parts of the Common Property are designated as Exclusive Use areas.
WHAT IS MEANT BY “EXCLUSIVE USE”?
Often this will be a garden or patio attached to a section, in which case you do not own the garden or patio, but you have Exclusive Use” of those areas for as long as you are an owner in the scheme. A balcony attached to a flat is sometimes designated as an exclusive use area, although in most cases, the balcony forms part of the section.
The 1986 Act allows an owner to sell the exclusive use of an area to any other owner in a scheme, but not to an outsider. The practical implication is that owners who have exclusive use of a garage, storeroom or parking bay which they do not require, can sell the exclusive area to another owner in the Scheme. This benefit does not apply to owners of units registered under the 197I Act, as under that Act, exclusive use areas were allocated under the rules of the scheme, whereas under the 1986 Act they are registered at the Deeds Office.
WHO CONTROLS THE COMMON PROPERTY?
The Common Property is controlled by the Body Corporate. There are no exceptions to this rule. This means that even though parts of the Common Property are designated exclusive use areas, these areas are still controlled by the body corporate and therefore subject to the rules of the scheme. These rules might prohibit “braaing” in an exclusive use garden or balcony, control the type of fence or wall erected around a garden, or prevent the installation of a plunge pool or spa bath without first obtaining the consent of the trustees.
WHAT IS “THE BODY CORPORATE”?
The Body Corporate is the collective name given to all the owners of Units in a Scheme. It comes into existence as soon as the developer of the Scheme transfers a Unit to a new owner All registered owners of Units in a Scheme are members of the Body Corporate. The Body Corporate controls and runs the Scheme. Day-to-day administration of the Scheme is vested in Trustees who are appointed by the Body Corporate. Major decisions regarding the Scheme are made by the Body Corporate, usually at the Annual General Meeting (AGM), or at a Special General Meeting. At these meetings, matters which affect the Scheme are discussed, Budgets are approved, rules can be changed and Trustees are appointed, often accompanied by lively discussions.
Each member of a Body Corporate is entitled to vote at these meetings, providing that the member is not in arrears with levy payments or in serious breach of the rules. Members in default can only vote in certain circumstances. An individual member’s voting power is governed by the member’s percentage ownership of the Common Property. This percentage is known as the “Participation Quota”.
WHO ARE THE TRUSTEES?
A Sectional Title Scheme or Complex, as it is often called, is controlled and managed by a Body Corporate. Trustees are persons who are appointed to look after the finances and running of the Sectional Title scheme on behalf of the Body Corporate. A developer or any other person may not, amongst other things, advertise for sale, or sell any unit in respect of any building or and land unless a sectional title register has been opened.
The Trustees are usually owners in a Scheme who have been entrusted with the task of looking after the scheme on a day- to-day basis. Trustees are appointed by the Body Corporate. The minimum number of Trustees for a scheme is two. The Act does not specify the maximum number. It is permissible to appoint as Trustee someone who does not own a unit in the scheme, although this is not common practice. At all times, the majority of Trustees must be owners in the Scheme. Trustees work on a voluntary, unpaid basis, although a Trustee who is not an owner in a scheme may receive payment for acting as a Trustee. At the first meeting after being appointed, the Trustees elect a chairman who usually holds office until the next AGM.
WHO MAKES THE RULES?
At the inception of a Scheme, Management and Conduct Rules are established. These rules form Annexures 8 and 9 to section 35 of the 1986 Sectional Titles Act. As their names imply, the management rules control the running or management of the Scheme, while the conduct rules lay down guidelines for the conduct of owners and their guests or tenants.
Where a Scheme was established under the 1971 Act, the Rules were made in accordance with the provisions of that Act. In Schemes where the Body Corporate did not amend the standard rules under the 1971 Act, those rules were automatically replaced by the Management and Conduct Rules of the new Act.
CAN THE RULES BE CHANGED?
Yes, the Body Corporate can change the rules, providing that these changes are not against the spirit of the Sectional Titles Act. The procedure which must be followed before rules can be changed is clearly defined in the Act. Proposed changes must be put to the members of the Body Corporate at a General Meeting, at which members will be able to discuss the proposed changes before being asked to vote for or against them. Some changes require an Unanimous Resolution, while others require a Special Resolution.
WHAT IS “THE LEVY”?
The costs incurred in running a scheme have to be paid by the body corporate. These costs include:
• Rates and taxes;
• Water and electricity used on the Common Property;
• Sewerage;
• Insurance premiums for the Common Property;
• Repairs and maintenance of the Common Property;
• Wages and salaries of the cleaners and other staff;
• Security.
These costs are paid by individual owners in the form of a monthly levy, calculated in accordance with the participation quota for their unit. Some costs incurred in the upkeep of ‘Exclusive Use” areas can be recovered from the user of that area.
In addition to the above, the body corporate is obliged to establish a fund for future maintenance and unexpected expenses.
CAN THE LEVY BE CHANGED AT OTHER TIMES?
Yes, in an emergency, the Trustees can impose a Special Levy to cover expenses of an unforeseen nature.
LATEST PROPOSED AMENDMENTS TO THE SECTIONAL TITLES ACT
Proposed amendments to the Sectional Titles Act were published on 17 August 2009. The amendments eliminate many problems and clarify uncertain aspects. Some of the most important amendments relate to:
COURT ORDER TO RATIFY UNANIMOUS RESOLUTION CLARIFIED
Under the present act, and order of the High Court may be obtained to ratify a unanimous resolution where the body corporate is unable to obtain one on an important matter This provision is, however effectively nullified by the requirement of Section (3) (c) requesting that where the proprietary right or powers of any member as an owner” are adversely affected, the written consent of such member must first be obtained.
The latter qualification has now been removed leaving the entire matter and the balancing of the various interests in the discretion of the court.
EXISTENCE OF DOORS AND WINDOWS RECOGNISED
The maintenance responsibilities in respect of doors and windows located in boundary walls of sections has long been a contentious. An amendment to section 5(5) (a) of the Act prescribes that any feature situated in a boundary wall (or floor, or ceiling) of a section, shall be considered to form part of such floor wall or ceiling. The effect is that such features are regarded as private property inside the unit and as common property outside the unit.
EXTENSIONS OF SECTIONS FACILITATED
To extend a section in terms of section 24 of the act, the consent of the bondholder over all units in the scheme was necessary in respect of deviations of more than 10%. This resulted in costly delays. The amendment requires that bondholders be notified in writing of the proposed extension’s and, if the notice is not responded to within 30 days, such bondholders are deemed to have no objections.
RIGHTS TO EXTEND EXTENDED
The proposed amendment to section 25 of the act allows a developer to lengthen the time during which a real right to extend may be exercised by agreement with the body corporate. The agreement must be recorded in a bilateral notarial deed concluded before the expiry of the real right to extend, as recorded in the section I I (3) (b) certificate.
The provision does not indicate the form of resolution required by the body corporate to sanction such agreement, in terms of section 29 (I) of the act a special resolution is required to execute” a servitude or restrictive agreement burdening the land shown on the relevant sectional plan.” In the absence of any provision to the contrary it should be accepted that the execution of the required deed must be authorized by means of a special resolution of the members.
DEVELOPER TO PAY EXPENSES RELATING TO EXTENSION AREAS
Developers previously had no obligation to contribute to the expenses such as municipal rates and maintenance for areas of the common property reserved for future extensions. This situation has been addressed by proposed amendments to sections 25 and 38 of the act so that a developer who is entitled to extend the scheme must make a reasonable contribution to the body corporate to defray rates and taxes, insurance, and maintenance of the affected parts of the common property, including the use of “electricity and water and other expenses and costs in respect of and attributable to the relevant part of parts.”
The determination which, must be reasonable, is not necessarily dependent upon an agreement being reached between the developer and body corporate. Contributions are determined in an ordinary manner by approval of a budget by the members at the annual general meeting, followed by a trustees resolution.
An amendment to section 25 requires that the Registrar may not register a cession of a real right to extend without having received a certificate that all monies due to the body corporate in respect thereof have been paid.
SPECIAL LEVIES RECEIVE ATTENTION
Section 37 of the act will be amended to provide that ordinary levies, rather than becoming due and payable on the passing of a trustees resolution, accrue from the date of the resolution, in such installments as are determined by the resolution.
NEED FOR TRI-PARTITE AGREEMENTS ELIMINATED
A further amendment to section 37 eliminates the need to enter into a tri-partite agreement at the time of change of ownership to ensure the continued flow of levies.
In terms of the proposed amendment the new owner automatically becomes liable for his/her share of the annual levies as from the date of registration of transfer into the new owner’s name.
USE OF USE AREA RESTRICTED
The purpose for which a section may be used is currently restricted to the purpose indicated on the sectional plan of a scheme. Usage of exclusive use areas was however, not similarly restricted. This has now been rectified with an adjustment to section 44 (I) (g).
Courtesy: Agent – The Official Publication of the Estate Agency Affairs Board
“Redressing the Past, Building the Future and Guiding the Real Estate Business towards Professionalism”
