A Sectional Title Development Scheme (usually referred to as a “SCHEME”) is a community scheme in which individuals own their properties exclusively and also own a share in property owned by all the owners together.
These schemes are managed in terms of the Sectional Title Schemes Management Act (STSMA). The Sectional Titles Act (STA) also applies when changes to the scheme requiring the approval of the Surveyor General and registration by the Registrar of Deeds are made.
The Community Schemes Ombud Service Act (CSOSA) makes provision for dispute resolution in community schemes and has some application to aspects of their administrative and financial management.
The STSMA and CSOSA came into operation on 7 October 2016.
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.
The section is the space measured to the mid-point, or median line, of the surrounding walls, floor and ceiling. You must maintain and repair the section and are entitled to paint or decorate or undertake alterations as desired without asking permission, providing those alterations do not infringe on municipal by-laws or alter the common property.
A section is usually a flat or townhouse, office or shop, which are known as primary sections, but may also be a garage, domestic staff room, parking bay or external storeroom. These are referred to as utility sections. Please note that in many Schemes, the garage and external rooms may NOT be sections, but may be part of the common property over which you may hold EXCLUSIVE USE rights.
Everything that is not a section is common property, owned by all the owners. Owners may make minor changes to the common property with the written consent of the trustees. This includes small external changes, i.e. aerials, satellite dishes, awnings, enclosures, etc. Any major structural changes must be done in accordance with government and municipal approval and with the prior consent of the Body Corporate as these alterations may change the look and value of the property, add to the common property or increase the insurance.
Exclusive use means that specific owners have the right to use specific parts of the common property to the exclusion of all the other owners. These rights can be granted by registration of a notarial deed at the Deeds Office, or by the body corporate making a rule granting the rights. It’s important to remember that one does not own the area, one only has the use of the area. Common examples are gardens, parking bays, store rooms. The body corporate must maintain exclusive use areas but the owner who holds the rights must pay all the costs.
Areas subject to registered exclusive use rights are shown on the sectional plan. Areas subject to rule based exclusive use rights are shown on a scale drawing that forms part of the rule. Exclusive use areas may not be altered without the consent of the body corporate and the rights may not be taken away without the consent of the owner concerned.
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 someone else. All registered owners of units in the scheme are members of the body corporate, but the body corporate exists as a legal entity independently of its members.
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 (SGM). At these meetings matters that affect the scheme are discussed, the 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 where an order of the Court or CSOS in this regard has been granted. Members in default can only vote on special and unanimous resolutions.
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 and referred to as the value of the vote.
The Common Property is all the parts of a scheme that are not sections. Roofs, driveways, gardens, swimming pools, corridors, lifts and entrance foyers are good examples of common property. As mentioned above, the common property is owned in shares by all the owners of sections but some parts of the common property may be designated as Exclusive Use Areas (EUAs).
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 can be designated as 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 and drying laundry in view of others.
Any proposed alterations to or placement of large structures on EUA’s that are not considered extensions of sections require the authority of an ordinary resolution by the members at a general meeting. Examples are lapas, fences and walls, plunge pools or spa baths.
The trustees are usually owners in the scheme who have been entrusted with the task of looking after the scheme on a day-to-day basis. The trustees are elected by the body corporate at the AGM. 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.
Ideally, a trustee should possess skills or qualities which will be of benefit to the scheme. Accounting or legal knowledge, organisational abilities, knowledge of electrical or mechanical matters, the ability to type or bookkeeping skills are much in demand and can save the Body Corporate a lot of time and trouble!
The 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 chairperson who usually holds office until the next AGM. The chairperson controls meetings but has no more power than any other trustee.
All trustee decisions must be made by formal trustee resolution unless a specific task has been formally delegated to an individual.
The developer of the scheme sets the rules. Annexures to the regulations under the Act set out, or “prescribe”, management and conduct rules that apply to all schemes, but the developer can change certain management rules and any conduct rules and can add management and conduct rules. This allows the rules to be tailored to suit the scheme. As their names imply, the management rules control the running or management of the Scheme, while the conduct rules regulate the conduct of owners and their guests or tenants.
The prescribed rules were Annexures 8 and 9 to the regulations under the 1986 Sectional Titles Act regulations and are now Annexures 1 and 2 under the STSMA regulations. Where a Scheme was established under the 1971 Sectional Titles Act, the rules were made in accordance with the provisions of that Act.
In schemes where the body corporate did not amend the prescribed rules under the 1971 or 1986 Acts, those rules were automatically replaced by the management and conduct rules of the new Act. In cases where these or Annexure 8 & 9 rules were amended, these amendments still apply as long as they are not irreconcilable with the Annexure 1 Management Rules.
Any rules that granted exclusive use rights under any of the previously applicable Acts still apply.
Yes. The body corporate can change the rules and add new rules, providing that these changes are not against the spirit of the STSMA. 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, usually at a general meeting. The members will be able to discuss the proposed changes before being asked to vote for or against them. Changes to the management rules require a UNANIMOUS RESOLUTION, while changes to the conduct rules require a SPECIAL RESOLUTION to authorise.
The new or amended rules must be submitted to the CSOS for approval. The amendments only become enforceable once the CSOS has issued a certificate of approval.
An ordinary resolution is passed by a simple majority of the votes cast at a meeting. Ordinary resolutions are required for the routine operations of the body corporate such as approving the budgets and insurance schedules and electing the trustees at the AGM. The votes for an ordinary resolution are counted in vote value, i.e. according to the PQs of the members’ sections.
A special resolution is passed by 75% of the votes represented at a meeting. The vote is counted in number as well as in vote value. Each member has one vote in number, irrespective of how many sections that member owns. The notice period for this meeting is at least 30 days, rather than the 14 days required for a meeting where no special resolution is to be considered.
A special resolution can also be taken by signing a document circulated amongst the members. In that case 75% of all the members in the scheme must agree. The vote is counted in number as well as in vote value.
Special resolutions are required for the more important body corporate decisions, such as changing or making a conduct rule, approving the extension of a section or approving a necessary alteration or improvement to the common property.
A unanimous resolution is one passed if all the votes cast at a meeting are in favour. Even one vote against the proposal defeats the resolution. There must be at least 80% of the members present or represented at the meeting. This percentage must be counted in number as well as in vote value, and the notice of the meeting is at least 30 days, as it is for a meeting at which a special resolution is to be considered.
A unanimous resolution can also be taken by signing a document circulated amongst the members. In that case all the members in the scheme must agree.
Unanimous resolutions are required for the most important body corporate decisions, such as to change or make a management rule, create registered exclusive use rights or approve an alteration or improvement to the common property that is not necessary.
The costs incurred by the body corporate in running a scheme have to be paid by the owners. These costs include:
Water and electricity used on the Common Property
Insurance premiums for the Common Property
Repairs and maintenance of the Common Property
Wages and salaries of the cleaners and other staff
Administration costs such as bank charges, legal fees, hiring meeting venues, etc.
These costs are paid by individual owners in the form of a monthly levy, calculated in accordance with the participation quota for their unit.
The body corporate must charge owners who hold exclusive use rights an additional contribution to cover its costs with respect to that specific part of the common property.
The body corporate must have an administrative fund from which to pay day to day costs and a reserve fund from which to pay maintenance and repair costs. The trustees must prepare a budget for each fund for the following year. These budgets are then presented to the members of the body corporate for their approval at the AGM. The members can either accept the budgets or can ask for changes to be made before approving them.
The body corporate must establish a reserve fund for the future maintenance, repair and replacement of capital items of common property. The size of this fund is determined according to the prescribed management rules and the STSMA regulations further specify minimum amounts that must be budgeted for the reserve fund.
Once the budgets have been approved, the total annual cost is divided into a monthly amount. Each owner is then “levied” a monthly amount, which is his or her share of the total required. The amount is calculated in accordance with the participation quota (PQ) of that owner’s section. The PQ is determined by the floor area of the section, so larger sections have a higher PQ than smaller sections and the amounts paid by each owner will vary accordingly.
The body corporate must estimate as closely as possible its costs for each separate exclusive use area. The owner who holds the rights to that area must pay an additional contribution to cover those costs.
Yes. In an emergency, the Trustees can impose a SPECIAL LEVY to cover expenses of an unforeseen nature.
If necessary, the trustees can also increase the levy by up to 10% for the period between the scheme’s financial year end and the next AGM.
Managing and administering a Scheme, particularly a large Scheme, is complicated and time consuming. Occasionally, the Body Corporate and Trustees undertake the entire task. Unless the Body Corporate is unusually well endowed with specialised knowledge and talents, this is seldom successful. Most Bodies Corporate decide to appoint MANAGING AGENTS, usually a company or close corporation that specialises in this aspect of Sectional Title administration. The Managing Agents collect the monthly levies and all other moneys due by owners to the Body Corporate. They keep the books, recover unpaid debts, prepare the annual budgets, arrange for quotations for repairs and maintenance, send out notices and generally assist the Trustees with the numerous time consuming tasks that arise in administering a Scheme.
A good Managing Agent can save the Body Corporate a lot of time, trouble and expense.
The Community Schemes Ombud Service (CSOS) mainly deals with disputes in community schemes. The dispute must have to do with scheme administration and can only be between persons with a material interest in the scheme.
The CSOS also approves and takes custody of sectional title scheme rules. The regulations under the CSOS Act set out general duties for scheme executives, such as the trustees in sectional title schemes, to promote good governance, and provide minimum amounts for fidelity insurance to protect the scheme’s money.
All community schemes must pay a levy to the CSOS and must submit an annual return.
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