Sectional title: all the ins and outs

Sectional title: all the ins and outs

The moment you become an owner in a sectional title scheme, you enter into a series of interlocking relationships – largely with people you don’t even know – that will affect what you can do with your property, how you can use and enjoy your home, and the demands that can be made on your finances.

Sectional title: all the ins and outs

Personal Finance / 13 May '15, 6:09pm

Mark Bechard

This article was first published in the first-quarter 2015 edition of Personal Finance magazine.

 

Buying into a complex usually involves a trade-off between the type of home we wish we could have and what we can afford, and where we want to live and what’s available on the market. Similarly, in an ideal world, we would buy only in a scheme that was well run, financially sound, and had no major structural defects or maintenance problems. And we would buy only once we had full knowledge of what we were letting ourselves in for.

Unfortunately, many prospective purchasers have only the faintest idea what sectional title ownership involves, and the restraints and obligations it imposes. It is only after they move in that they wish they had conducted a thorough due diligence of what they were buying into.

It’s impossible to cover every aspect of sectional title ownership in this article. But the following pages should put you in the picture about the main features of sectional title and enable you to ask some intelligent questions before you sign on the dotted line.

  1. Your statutory rights and obligations

The Sectional Titles Act (STA) of 1986 defines the rights and obligations of the various stakeholders who bring a sectional title scheme into being, and who manage and live in it. These rights and obligations are also set out in the Prescribed Management Rules (PMRs) and the Prescribed Conduct Rules, which were issued under the Act. Many people do not realise the extent to which what can and cannot be done in a sectional title scheme, how it should be done and by whom it should be done, has been carefully defined.

When you take transfer of a sectional title unit, you automatically become a member of the body corporate, which consists of all the owners (whether natural or artificial persons) of units in the scheme. The body corporate is required to meet at least once a year, when it must transact certain mandatory business, including adopting a budget and electing trustees. In addition to the annual general meeting (AGM), the body corporate may, if necessary, meet at other times during the year, in what are called special general meetings.

Some body corporate decisions require only a simple majority vote, but many require a much higher level of consensus:

* Ordinary resolutions. Decisions that can be made by passing an ordinary resolution with a simple majority include approving the budget, electing or removing trustees, and imposing specific restrictions or directions on the trustees.

* Special resolutions. A special resolution requires the consent of 75 percent of the owners. Some of the decisions that must be made by special resolution are amending the conduct rules, suing the developer of the scheme, authorising “non-luxurious” improvements (see “Definitions”, below) to the common property and revoking the appointment of a managing agent.

* Unanimous resolutions. Most of the PMRs can be amended if the body corporate passes a unanimous resolution, which requires a quorum of 80 percent of the owners and no votes against the resolution (abstentions are counted as votes in favour). Other decisions that require a unanimous resolution include alienating or leasing part or all of the common property and making “luxurious” improvements to the common property.

Apart from resolutions made in a general meeting, some decisions require the written consent of each owner – for example, acquiring land to extend the common property and authorising a section or exclusive-use area to be used for a purpose other than that shown on the sectional plan.

The PMRs flesh out the rights and responsibilities of owners and the powers and functions of trustees, while the conduct rules establish norms and standards to govern how the residents will live (hope-fully, in harmony) on the property. Many bodies corporate do not make any amendments to the PMRs, but most schemes have substantially added to or changed the Prescribed Conduct Rules. It is important that you obtain a copy of the management and conduct rules before you buy into a scheme, because these rules define the constraints that you will have to live with as an owner.

The trustees are the executive of the body corporate, responsible for the day-to-day management of the scheme. Although the trustees are accountable to the body corporate, they have the authority to make a number of decisions without reference to the owners (unless a resolution restricting their powers has been passed). Examples of these decisions are: to impose a special levy, appoint a managing agent, approve the consolidation or subdivision of sections, impose fines for contraventions of the conduct rules (if the rules provide for fines), and convene a special general meeting.

Very few schemes have professional trustees – most trustees are members of the body corporate who volunteer their time and services. Although the majority of schemes contract with a managing agent, the responsibilities of trustees can be onerous and time-consuming, which is why trustees are often retired or semi-retired owners. However, you should not assume that the people who, year after year, are elected to the board of trustees will be around forever. The day might come – and it might be a lot sooner than you would like – when, if you want to safeguard your investment and lifestyle – you will have to become a trustee.

  1. Do you know what you are buying?

The defining principle of sectional title is the distinction between a section and the common property. What you can do with your property without seeking the consent of the trustees or the body corporate, and the extent of your financial liability for what has to be fixed or upgraded on the common property, is determined by the division between your section, or sections, and everything else.

A section is a part of the property that has been demarcated as such on a sectional plan and can be individually owned. Each section is defined by an imaginary line – called the median line – that runs through the middle of the walls, doors, windows, floor and ceiling that form the physical boundaries of that section. What is outside of the median line is either another section or common property. A section can be a residential flat, a garage or a storeroom. A section may include a garden or a balcony. If you, for example, buy a flat, a separate garage and a separate storeroom, you will be the owner of three sections.

When you buy into sectional title, however, what you actually own is not a section, but a unit, which always consists of a section and its undivided share in the common property.

“Undivided share” means that no owner can claim ownership of a certain part, or parts, of the common property. Your share of the common property is not, for example, the exterior wall outside your section. In a sense, your share is at once everywhere and nowhere.

Your undivided share of the common property is determined by the size of the section, or sections, that you own. This share, which is known as your participation quota, is calculated by dividing the floor area of the section (rounded off to the nearest square metre) by the total floor area of all the sections.

The result is expressed as a decimal fraction correct to four places.

Your participation quota will usually determine:

The value of your vote at general meetings of the body corporate. Votes at general meetings are usually taken by a show of hands, in which case an owner has one vote for each section registered in his or her name. However, the chairman has the discretion to change the voting method to a poll, in which case the value of each owner’s vote is reckoned by his or her total participation quota. An owner can ask the chairman of the meeting for votes to be counted in value instead of number, which request may be agreed to. Special resolutions of the body corporate must always be counted in both number and value.

Your liability for levies (including special levies). Any contribution you are required to make to the body corporate should be based on your participation quota. The exception is contributions for exclusive-use areas.

Your liability for body corporate debts.

But the participation quota does not always determine the value of votes or liability. Either the developer (when the scheme’s register is opened) or the body corporate (by taking a special resolution) can make rules that alter the effects of the participation quotas. These rules could create an entirely new basis on which the value of votes or liability is determined – such as the market value of the sections – or they could state that the participation quotas will determine the “basic” liability of all the owners, while setting a formula that will determine their liability for “additional” contributions for certain types of expenses. The scheme’s management rules will state if the effect of the participation quota has been changed.

In sectional title, it is unwise to assume that “use” equates with “ownership”. The fact that a townhouse comes with a landscaped garden and braai area, or that an enclosed balcony can be accessed only via the living room in a flat, does not automatically mean that this area forms part of its adjoining section.

The only way to know for certain where a section starts and ends is by inspecting the sectional plan. Sections are demarcated by solid lines. If the section includes an unenclosed area, such as a balcony or veranda, the division between the enclosed section and the open area will be demarcated with dashed lines. The sectional plan will be accompanied by a schedule, which will state the floor area and the participation quota of each section. Each section is allotted a number, which will probably not be the same as its door number. The sectional plan will also show if there are any registered exclusive-use areas on the common property.

The body corporate is entitled to rent out parts of the common property to owners. If the seller of a unit is renting an area that you want to be able to use, such as a parking bay, don’t assume that, as the new owner, you can automatically take over the lease. Ask for a copy of the lease agreement and find out what will happen to this area on transfer, as well as any obligations on you, as the lessee.

  1. Your exclusive-use rights

Perhaps no other aspect of sectional title gives rise to more head-scratching and mix-ups than exclusive-use rights. Many people incorrectly believe that an exclusive-use right is a type of individual ownership, akin to owning a section, whereas, as the term implies, what this right confers is the right of use and enjoyment. Exclusive-use areas (EUAs) remain part of the common property, which means that the body corporate has the final say on what can and cannot be done on and with these areas.

Exclusive-use rights do two things:

They give an owner or a group of owners the right to use a part of the common property to the exclusion of other owners and residents; and

They entitle the body corporate to recover from the holder of the exclusive-use right the costs associated with the upkeep of the EUA.

If a sectional title purchase includes an EUA, the first thing you need to establish is what type of exclusive-use right you own, because some exclusive-use rights are more secure (and valuable) than others. The two types are often known by the section of the STA under which they were created.

A section 27 right is a registered right to an area of the common property that has been surveyed and is shown on the sectional plan. Registered exclusive-use rights can be bonded, leased or made subject to servitude rights, as with any real right in immovable property. If you hold a registered exclusive-use right, you have an absolute right that can be enforced against another person by instituting legal proceedings.

Registered exclusive-use rights are transferred or ceded by notarial deed. If an exclusive-use right is shared by a number of owners, an owner wanting to transfer his or her right must obtain the written consent of the other owners.

Registered exclusive-use rights are usually created by the developer of the scheme. However, a body corporate can create registered EUAs by taking a unanimous resolution. These areas must be surveyed and shown on the sectional plan.

A section 27A exclusive-use right is created in terms of the scheme’s rules, either the PMRs or the conduct rules. Remember that the PMRs are amended by a unanimous resolution, whereas the conduct rules are amended by a special resolution; therefore an exclusive-use right created in terms of the management rules is more secure than one created under the conduct rules.

Rights created by the rules are not real rights in immovable property. This type of EUA will not appear on the sectional plan, although it should be shown on a scale plan that is included with the rules that created the EUA. A rule-created exclusive-use right is automatically transferred when the owner of the unit on which the right has been conferred sells his or her unit.

The second thing you need to check is your monthly contribution on the EUA. (Technically, the term “levy” applies only to sections, but most bodies corporate call exclusive-use contributions levies, too.) Whether you hold a section 27 or a section 27A right, you will be required to pay a contribution to the body corporate to offset the expenses associated with maintaining the EUA, including the provision of utilities and the cost of insurance. If the monthly contributions are insufficient to cover the cost of a repair, the body corporate is entitled to call on the owner to make an additional contribution. And this is where problems and ill-feeling can arise …

In theory, the exclusive-use contributions collected from owners should be ring-fenced and used only to repair and maintain their EUAs. In most cases, however, exclusive-use contributions are treated like normal levies and end up in the “pot” of funds that pay for the expenses associated with all of the common property. This may not be a problem if the EUAs consist of a number of similar, relatively low-maintenance areas, such as open parking bays. But an EUA may include a swimming pool, an electrified fence or a garage with an automatic door mechanism, in which case the costs will mount when it’s time for repairs or refurbishment.

You must find out how the body corporate determines the contribution on an EUA, whether all holders of exclusive-use rights pay the same amount, even if their EUAs include substantially different amenities, and whether or not the contribution covers every expense associated with that EUA. If the body corporate doesn’t ring-fence exclusive-use contributions, it is in your interests to keep a record of your contributions from the day you take transfer of the EUA.

The norm with EUAs is for the body corporate (meaning the trustees) to be responsible for maintaining and repairing the area, while the holder of the right is liable for the costs associated with maintaining and repairing the EUA. In sectional-title-speak, “responsible” means “whose problem it is to do the work”, while “liable” is a euphemism for “who must pay the bill”. In the world of sectional title, these two duties are sometimes conferred on different parties.

Responsibility and liability for EUAs is often dealt with in the rules, particularly if the exclusive-use rights were created by the rules. The rules may make an owner directly responsible and liable for his or her EUA, or an owner may be responsible for maintaining the area while still paying a contribution to the body corporate. The important thing is to check the rules and to ask questions of the seller.

  1. Know what you will end up paying for

It’s amazing how many prospective buyers will visit the flat they have their eye on two or three times, but never take a cursory look at the rest of the property.

The body corporate must foot the bill for all expenses associated with the common property, except for those areas of the common property where owners have been granted exclusive-use rights.

The fact that you never use a facility is irrelevant; if it’s on the common property, you – along with all the other owners – are liable for its maintenance and repair, in proportion to your participation quota (or other formula).

Some developments were built when labour, water and electricity were relatively cheap, and before multiple kitchen appliances, satellite dishes, and access-control and security systems became commonplace. The impact on levies of hefty increases in the price of utilities and the cost of maintaining high-tech equipment was not a consideration. When live-in domestic workers were the norm, many developments were built with domestics’ quarters and bathrooms on the common property.

If you are a serious buyer, you should ask to be shown around the entire property. Use this opportunity to take note of the facilities and the overall condition of the common property. If you have already obtained a copy of the sectional plan, you will be able to ask informed questions about the ownership status of garages, storerooms and “private” gardens. Even one lift will add substantially to a body corporate’s electricity bill, while you may be shocked to find out how much it costs to maintain that “lovely” landscaped garden. Incidentally, it can cost between R500 000 and R700 000 to replace a lift in a low-rise block – and where do you think the money to pay for this will come from?

Many sectional title owners have been able to limit their liability for utility costs, because the body corporate decided to install pre-paid electricity meters and, in some cases, pre-paid water meters. If pre-paid meters are not in evidence, do not simply assume that the property will have meters to measure the electricity or water consumed in each section. In the absence of meters, or a formula set out in the rules, your share of the costs of utilities will be determined by your participation quota, not your consumption.

A common problem in sectional title schemes, particularly blocks of flats, is water-related damage, often a result of leaking windows or damaged waterproofing on the roof. Look for blistered and flaking paint on the walls next to windows or on the ceilings of a top-floor apartment; mould on blinds, or stains on the back of curtains are also tell-tale signs of water ingress. An area of a wall or ceiling that has been newly painted may mean that an owner is trying to hide water damage. If it is apparent that the original window-frames have been replaced, you should ask the seller or estate agent if the building has problems with water ingress, because, unfortunately, in many cases in the past, bodies corporate accepted the lowest quote from contractors who did not know how properly to seal the gaps between the new frames and the walls.

The liability for doors and windows that straddle the median line between a section and the common property must be apportioned 50-50 between the owner of the section and the body corporate. Not every body corporate has grasped this principle, and the liability (as well as responsibility) for repairing or replacing windows may have been apportioned in an inconsistent, ad hoc manner. You should ask the seller or estate agent how the body corporate of the scheme in which you want to buy deals with the issue.

One way to find out if a scheme has persistent maintenance and repair problems is to obtain a copy of the trustees’ annual report. This report is one of the documents that must be sent to all members of the body corporate before the AGM. The law does not specify the level of disclosure required in these reports, but it is highly likely that they will reveal if a scheme has ongoing major repair problems, or if it is likely that a significant amount of money will have to be spent on maintenance in the near future. A lot can change in a sectional title scheme during a year, so you should also ask for copies of the minutes of at least the two most recent trustees’ meetings.

Another tricky issue is plumbing. Many people wrongly assume that, because the pipes and hot-water cylinders form part of the original permanent fixtures, the body corporate is automatically responsible for their repair and upkeep. In fact, unless the scheme’s management rules have been amended to the contrary, owners must repair or replace the hot-water cylinder that serves their section, even if the cylinder is located on the common property. An owner is responsible and liable for the pipes, ducts and cables that are within his or her section, unless those installations also serve other sections and/or the common property, in which case it is a body corporate problem and expense.

If damp appears, the standard procedure is for the trustees to call in a leak-detection company. The source of the leak – in a section or on the common property – will determine who is responsible and liable for the repairs, and whether a claim can be made against the body corporate’s insurance policy for resultant damage. If the leak emanates from another section, this is a matter for the owners of the affected sections; the trustees are not obliged to get involved.

  1. What will you pay on top of the levy?

When a unit changes hands, the new owner becomes liable for a pro-rata payment of the ordinary levy from the date on which the unit is transferred.

In the case of an outstanding special levy (see “Definitions”, below), liability depends on who the registered owner was on the date the trustees passed the resolution to impose the special levy. If the seller was the registered owner, he or she is liable to settle the entire special levy, even though it might have been payable in instalments over a number of months. The seller and the buyer could agree that the buyer will take over the remaining special levy instalments, but the body corporate will have to be party to this agreement.

If the buyer is the registered owner on the date on which the resolution is passed, he or she is liable for the special levy. It has been the case that new owners have found themselves hit with a special levy days or weeks after taking transfer – in addition to the huge costs associated with buying property. It is therefore in your interests to find out what it will “really” cost to live in a scheme.

A body corporate’s income from levies is supposed to be sufficient, not just for its operating expenses during the financial year, but also to enable it to build up a reserve fund for contingencies. The reality is that few bodies corporate set aside funds that will be adequate for major future expenses; in fact, the monthly levy (which may seem very reasonable) may cover only the predictable day-to-day operating expenses.

Special levies are supposed to be imposed only for unforeseen expenses that require immediate attention, but many trustees raise a special levy to pay for all major repairs and maintenance, because the ordinary levies are kept artificially low and budgets do not provide for a reserve fund. In their defence, the levies in most schemes would have to escalate massively to enable the body corporate to build up reserves to cover every expense that may come down the line.

In addition to the trustees’ report and the minutes of the latest trustees’ meetings, the body corporate’s most recent annual financial statements will enlighten you about your likely future liability. (If the scheme consists of 10 or more units, the financial statements must be prepared by an auditor.) The budget for the current financial year will probably be included with the financial statements. The financial statements and the budget will disclose what provision the body corporate has made and is making for future expenses. Whether the reserve funds (if there are any) are adequate will depend on the size and condition of the property, the nature of the facilities and amenities, and the age of the property (after 30 to 40 years, wear and tear will start to take its toll on the original fixtures and fittings).

The financial statements and the budget will itemise the scheme’s expenditure, but the breakdown is usually not as detailed as one would like, with the total next to the line item “repairs and maintenance” encompassing everything from, say, calling in a locksmith to painting the entire building; the amount next to “scheme management” will be similarly uninformative about how the money was actually spent.

The annual financial statements will tell you other things, such as:

Did the body corporate collect all its income from levies, special levies and any areas of the common property that it rented out? An under-recovery of levy income is a warning sign that the scheme may have a problem with arrear levies.

Has the body corporate taken out any loans? This may be a sign that, because of poor budgeting or unrealistically low levies over many years, the body corporate has had to borrow money to pay for essential expenses.

Does the body corporate owe money to its creditors, such as service providers and the municipality?

  1. What alterations will you be able to make?

You can extensively remodel the interior of your section without seeking the approval of the body corporate, but it is a violation of PMR 68 to carry out any alterations that will impair the structural integrity of the building, while the Act creates implied servitudes of support between each section. You need to check that the interior walls of your section are not load-bearing if you are buying with the intention of knocking them down.

Low water pressure is often a problem in older buildings where the sections on the upper floors are supplied by water tanks on the roof. Insufficient water pressure can rule out installing modern mixers in showers, baths and kitchens, and even affect the operation of washing machines and dishwashers.

What if you want to enclose your patio or veranda? The level of consent will depend on whether the area forms part of your section or the common property (which includes EUAs). You are not allowed to make improvements to, or erect a permanent structure on, an EUA without the approval of the trustees. Even if it does form part of your section, you will have to obtain the permission of the trustees, because PMR 68 also states that owners may not do anything to their sections that is likely to prejudice the harmonious appearance of the building. Therefore, if they grant permission, the trustees will set conditions for what the enclosure may look like.

If the area forms part of the common property, enclosing it will amount to increasing the floor area of your section. The body corporate has to a take a special resolution to allow a section to be extended. You will also have to submit a sectional plan of extension to the surveyor-general for approval. The participation quota of the scheme will have to be adjusted to take account of the extension. If the extension will result in the floor area of the section being increased by more than 10 percent, all bondholders of sections will have to grant their consent.

The “harmonious appearance” rule also means you cannot change the style or colour of exterior doors or windows without the trustees’ permission.

You may not make even minor changes or affix anything to the common property without the consent of the trustees. This will affect whether you are able to install an awning, satellite dish or air-conditioning unit.

  1. Will the scheme change in the future?

It is a legal requirement that you, as a buyer, are informed whether the developer has any “section 25 rights” in the scheme – in simple terms, whether the developer registered a right to add to the scheme in future. “Future” can mean in 10 or 20 years’ time. A developer has to file plans showing the extension at the same time as it takes out the extension right.

Adding to a scheme can substantially change the look and feel of a development – not to mention the value of your investment (will you still have that view?). Developing a scheme further can also have financial implications that may not necessarily be in your favour. Although extending the scheme may increase the pool of levy-paying owners, the new phase may require more maintenance and repairs. Unless rules are created to ring-fence the income and expenditure of the various phases, some owners may feel that they are unfairly subsidising the operating costs of other owners.

  1. Managing agents and fidelity cover

It’s likely that the trustees outsource the management of the scheme to a managing agent, which means that other parties have access to the body corporate’s bank accounts. Every now and again, stories appear in the media of a managing agent who has made off with body corporate funds – sometimes hundreds of thousands or millions of rands.

Theft and fraud cannot be prevented, but, if the trustees did a proper due diligence before they contracted with a managing agent, there is no reason why the owners should have to suffer loss. If you’re buying into a scheme that has a managing agent, how do you know your money will be safe?

A managing agent that collects and/or receives levies is deemed to be an estate agent, and as such, must be a member of the Estate Agency Affairs Board (EAAB). In fact, it is unlawful for someone who is not an EAAB member to collect a scheme’s money. EAAB membership means that the body corporate’s funds that are held in a trust account will be protected by the EAAB fidelity fund. The disadvantage of the EAAB fidelity fund is that a claim can proceed only once the people who stole the money have been sequestrated – and it could take as long as seven years for a claim to be finalised. Therefore, you should make sure that the managing agent has taken out its own fidelity insurance that covers every employee who handles scheme money. Better still, a managing agent that has confirmed it has professional indemnity and fidelity cover is a lower risk for a body corporate.

You should also check whether the managing agency operates a “bucket account”. Under such a system, the funds of all the schemes the agency manages are in one account, instead of each body corporate having a separate bank account in its own name. A dedicated account makes it much easier for the trustees to keep a check on inflows and outflows. With a bucket account, the trustees depend on reports from the managing agent as to the body corporate’s financial affairs.

The bucket account system is quite common. You should find out what measures the trustees have put in place to exercise control and supervision of the body corporate’s money.

Trustees and employees of the body corporate can filch scheme money, too. Most sectional title insurance policies include cover against fraud and theft by trustees and scheme employees, but the limit is usually quite low (about R50 000). The trustees should put indemnity insurance on the agenda of the AGM; but it is the responsibility of the body corporate to decide whether or not to take out such insurance and, if it does, the extent of that cover.

  1. Is the property adequately insured?

The STA requires a body corporate to take out an insurance policy that covers the buildings to their full replacement (not market) value. This policy, which will cover the risks commonly associated with a residential property, applies to the entire property, not just the common areas. Before the AGM, you should be sent a schedule setting out the replacement values of each section.

In too many cases, the trustees simply increase the level of insurance in line with inflation each year. Over time, this can result in the property being under- or over-insured.

How do you know if your sections are adequately insured? If the scheme consists of more than about 10 units, the property should be valued by a professional valuer every two to three years. A professional valuer has access to up-to-date data about the cost of building materials and labour in each province, and will be able to provide the trustees with a comprehensive report on what it would cost to rebuild the property. There’s no reason why this report should be withheld from body corporate members.

When assessing a property, the valuer will probably inspect the interior of only a few of the sections. An owner who has carried out extensive remodelling may think that his or her section is under-insured relative to most of the other sections. In this case, the owner can insure his or her section for a higher value, but will have to pay a higher premium. Insurance premiums are included in the monthly levy.

Unless the body corporate has amended the relevant management rule, owners are liable for the excess on claims for damage to their sections.

The body corporate’s insurance policy will not cover household contents.

  1. Will the scheme suit your lifestyle?

Remember that creating, amending or deleting a conduct rule requires the consent of two-thirds of the owners, so you can be sure that the rules express the norms and standards that the overwhelming majority of owners want to prevail.

They say there are “only” three sources of conflict in sectional title schemes: pets, parking and people.

* Pets. A body corporate’s policy on keeping pets – dogs, in particular – will be set out in its conduct rules. It is not unusual for the body corporate to make keeping a dog conditional on obtaining the trustees’ written permission and to place restrictions on the types of dog that can be brought onto the property. When granting permission to keep an animal, the trustees may set certain conditions with regard to cleanliness and control.

If you see animals on the property, don’t assume that the scheme is pet-friendly. A body corporate may have created a “no dogs” rule, but the rule could include a “grandfather clause” to enable residents who owned dogs before the rule was registered to keep them until their animals die.

* Parking. It is unlikely that a sectional title scheme will have sufficient parking bays to accommodate the vehicles of every resident. Trustees are under no obligation to find or create parking if there is a shortage. You buy into a scheme “as it is”, and the onus rests on you to ascertain whether there will be sufficient parking for your household’s vehicles.

It is incorrectly assumed that if a scheme has visitors’ parking, these “spare” bays can be allocated to residents. Providing visitors’ parking is a town planning requirement, and each municipality has a formula that determines the number of bays a scheme must set aside for visitors’ cars. It would be unlawful for the trustees to allocate these bays to residents, although it is not unusual for trustees to allow residents to park there during “off-peak” times if the bays are not occupied by visitors’ vehicles. If you don’t have enough permanent parking, find out if such a concession is available and if it will suit you.

* People. All sectional title schemes are governed by the same laws and regulations, but the character and living environment of each scheme depends on the type of people who live there.

It is a generalisation, but, unfortunately, one not without an element of truth, that tenants, particularly short-term renters, are less likely to play by the rules than owners who intend to remain in a scheme for a long time. The higher the ratio of resident-owners to tenants, the greater the probability that the scheme will be well run and conflict kept to a minimum. Owner-residents have a financial and personal stake in the scheme – after all, it’s their home – whereas buy-to-let owners’ only concern may be that their rental is paid on time.

The profile of the residents in a scheme is often determined by where it is located and its facilities. A building near a university campus is likely to attract students; an upmarket scheme out in the suburbs will probably have an older age profile. If a scheme has a swimming pool or recreational facilities, you will probably be the odd one out if you insist on peace and quiet on Saturday and Sunday afternoons.

DEFINITIONS

Levy. The amount an owner pays to the body corporate to cover the expenses related to the common property. Levies are normally paid in monthly instalments. They are based on the estimate of income and expenses for the financial year (the budget) adopted by the body corporate at the annual general meeting (AGM). A levy becomes payable on the passing of a resolution to that effect by the trustees. Within 14 days of the AGM, the trustees must advise each owner in writing of the amount due.

Special levy. Trustees have the authority to impose a levy over and above the normal monthly levy, if circumstances warrant. A special levy is supposed to be raised only for expenses that were not foreseen in the budget and that cannot be held over until the next budget.

Non-luxurious and luxurious improvements. Prescribed Management Rule (PMR) 33 sets out the levels of consent required for non-luxurious and luxurious improvements to the common property, but the rules do not define either of these terms. It is generally accepted that a non-luxurious improvement is an essential upgrade or addition, such as replacing rotting wooden window-frames with aluminium frames.

A luxurious improvement is an addition or replacement for purely aesthetic or recreational purposes, such as installing a swimming pool. However, to some extent, the nature of the scheme determines whether an improvement is luxurious or non-luxurious. For example, in an upmarket scheme where each unit is linked to a common satellite dish, upgrading the system so that residents can have an HD-PVR decoder may not be regarded as a luxury.

If the trustees want to effect a non-luxurious improvement, they must give all the owners written notice. This must include details of the proposed improvement, why it is desirable, what it will cost, how it will be financed, and the effect on levies. Any owner has 30 days from the date of posting of the notice to request that the trustees convene a special general meeting to discuss and vote on the improvement. If no such request is received, the trustees may proceed with the improvement. If a request is received and a special meeting is convened, the improvement can proceed only if the body corporate passes a special resolution to that effect.

The trustees can carry out a luxurious improvement only if the body corporate passes a unanimous resolution to that effect.

ACTS IN LIMBO

The Sectional Titles Act has been complemented by the Sectional Titles Scheme Management (STSM) Act and the Community Schemes Ombud Services (CSOS) Act. Both of these Acts were signed into law in 2011, but, when this article was published in January 2015, neither had come into operation, because the STSM is “twinned” with the CSOS Act, and the CSOS Act cannot take effect until the Community Schemes Ombud Service is up and running.

The STSM Act will not replace the Sectional Titles Act entirely; the Sectional Titles Act will continue to govern the development, consolidation and sub-division of the “bricks and mortar”, while the STSM Act will govern how the body corporate must manage the scheme.

The ombud service will provide a dispute resolution mechanism for residential arrangements involving shared ownership that will obviate the need to go to court or arbitration.

 

Faq Accordion

  • Why you need an Asset Valuation

    Fully motivated reports will assist you in determining the underlying value of your assets for a range of purposes
  • What does a valuation cost?

    Valuation varies depending on the type of property and it's location
  • What is the difference between SA's Council for the Property Valuers Profession & Institute of Valuers

    The Institute is a voluntary association the Council is a statutory body dealing with the compulsory registration
  • In which areas do you do valuations?

    Across South Africa and a typical valuation takes about 3 days

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