THOUGHTS

SECTIONAL TITLE SCHEMES




	This page contains short opinions on different aspects of South African law as it pertains to Sectional Title Schemes and is not presented as, nor intended to be legal advice. Readers are requested to contact an attorney of their choice for professional legal advice. All references to the Act mean the Sectional Titles Act, 95 of 1986, as amended.
	MANAGING SECTIONAL TITLE SCHEMES
	In those cases where Bodies Corporate do not function properly the standard of the development as a whole eventually deteriorates which causes the value of individual units to decrease, to the detriment of owners of units and also bondholders. Due to the many problems Bodies Corporate experience in maintaining their developments, which include absentee landlords, lack of management skills on the part of trustees and a general low level of involvement by residents, banks are not prepared to grant loans where units in certain developments are offered as security. Obviously the lack of loans for units in such schemes force property prices down, undermining the investment value of the development and increasing the downward trend of the negative spiral. It is in the interest of each Body Corporate as well as the individual unit owners, the bondholders and the larger community in general that Bodies Corporate act against levy defaulters as quickly as possible. Not only will the standard of the development and the market value of the units be best protected in this way, but it must also be done at a time when the defaulter can possibly still make a plan to pay the arrears. If the delay is too long, or the outstanding amount is too big, that is impossible. This is based on and confirmed in the judgment by Judge Hartzenberg in The Body Corporate of Geovy Villa v Sheriff, Pretoria Central Magistrate's Court, and Another 2003 (1) SA 69 (T), page 73. Back to top
	THE MANAGEMENT STRUCTURE OF SECTIONAL TITLE SCHEMES
	With the sale of the first unit to a private owner by the developer, the body corporate is created. By statute all owners are automatically members of the body corporate of the Sectional Title Scheme in which they own property. Some Sectional Title Schemes consist of only a few private units, while others can have in excess of one hundred units. Due to the large number of individual units which may compose the body corporate, an executive body tasked with the day to day management of the Sectional Title Scheme is created, known as the Board of Trustees. With few exceptions any person may be elected or co-opted to serve as a Trustee. Except for those matters which are the prerogative of the body corporate at an Annual General Meeting (AGM) or Special General Meeting (SGM) the Trustees exercise full control over the affairs of the Sectional Title Scheme. Accordingly it is imperative to ensure a high level of commitment by and skill of persons elected as Trustees. Note that Sectional Title implies a combination of two components, these being 'units' which belong to private owners and 'common property' which belongs indirectly, through the Body Corporate, to each owner of a 'unit.' It is possible, with the creation of 'exclusive use areas' to allocate the 'right to use' a portion of the 'common property' to the owner of a specific 'unit.' Ownership, the stronger right, however remains in the hands of the Body Corporate. Back to top
	THE ORIGIN OF SECTIONAL TITLE SCHEME RULES
	Section 35 of the Act clearly envisages that the owner or occupant of a unit, which is private property, shall be compelled to adhere to the stipulations of the applicable Rules - a minimal and default set of rules is prescribed by the Act. It must be noted that all Rules applicable must be registered at the Deeds Office, creating a kind of semi-legislative, quasi-servitude over the individual units in the development. Two sets of Rules are in use, namely the statutorily prescribed Management Rules, which regulate the management aspects of Sectional Title Schemes, and the Conduct Rules which are open to amendment and customisation by the Body Corporate to conform to its own unique requirements. Back to top
	COMPLIANCE AND ENFORCEMENT
	Due to the high population density of urban Sectional Title Schemes, one may expect a higher incidence of contravention and compliance with the Rules than less densely populated suburban areas with for instance Municipal Regulations. Based on Section 35(4) of the Act, it is clear that individual owners are not allowed to avenge their grievances personally, and that the Trustees of a Sectional Title Scheme are tasked with the enforcement of the Rules. Further and based on Management Rule 70 it may be inappropriate for the Trustees to follow any course of action which may affect the rights of any owner without prior written notice. Enforcement of the Rules by the bodies corporate is facilitated by Management Rule 64 and specifically Management Rule 31(5) which stipulates that the legal costs must be borne by the non-compliant owner individually and not the body corporate. The only exceptions to prior written notice may be matters of urgency or a direct infringement of another owner's rights. Back to top
	APPOINTING A MANAGING AGENT
	The Act does not require that a Managing Agent be appointed for a Sectional Title Scheme and in fact some developments are well administered by their Trustees alone. The duties and responsibilities of Managing Agents also vary from development to development but in general Managing Agents provide administrative and secretarial services to the developments. The procedure to appoint a Managing Agent is fairly simple, and to terminate a Managing Agent's contract is also a fairly simple, though technical procedure, which requires a special resolution by the members of the Body Corporate in terms of the prescribed Management Rules [Rule 47(iii)]. Back to top
	BUSINESS ADDRESSES AT SECTIONAL TITLE SCHEMES
	Town Planning schemes allow for the use of land in certain categories. Residential Sectional Schemes force the Body Corporate to pay land tax in the residential land category. Using a residential Sectional Title scheme for business purposes deprives the State of an income it would otherwise have been entitled to. It is acceptable to 'work' from a Residential Sectional Title Scheme, but it would not be acceptable to use an address at such a scheme for business purposes. The terms to 'work at home' and to 'work from home' in this case illustrate the point clearly enough, as we all take home work at some time, but it must never become one's business address. Back to top
	THE RISK OF SECTION 74 ADMINISTRATION ORDERS TO SECTIONAL TITLE SCHEMES
	The debtor rescue scheme which exists in terms of Section 74 of the Magistrates' Courts Act (32 of 1944) allows for the debtor's income to be split into three basic categories: (i) a portion to be retained by the debtor for personal monthly expeses; (ii) a portion to cover all new debts which the debtor is already bound to, such as Sectional Title levies; and (iii) the 'free residue' which the Administrtor must distribute to creditors at three monthly intervals. That portion of the debtor's levy account which is already in arrears should be settled by three monthly distributions. Every month which the debtor remains under the Administration Order the new month's levies should be settled immediately by the Administrator as an in futuro (future debt). Once the Court Order is granted, only the taxable costs of the Adminstrator and the monthly collection commission at 12.5% takes precedence over future debts such as these. In the event that the new monthly levies are not settled regularly the debtor will fall further and further behind and will prejudice the market values of the all the units in the scheme, as a greater burden falls on the non-defaulting owners. Back to top
	RIGHTS AND DUTIES LIMITED BY THE ACT AND RULES
	Much has been written about the South African Magistrates' Courts being creatures of statute, these being created in terms of the Magistrates' Courts Act (32 of 1944). However, other such 'creatures of statute' exist of which Sectional Title schemes are a prime example. The reciprocal rights of the individual owners and the Body Corportate are expounded in the Act and Rules. These documents not only allow for the creation of the Sectional Title scheme in question but also define the complex reciprocal rights and duties of the unit owners and the Body Corporate; the various unit owners; In order to ensure the effective functioning of Sectional Titles schemes as concrete entities, it is necessary that certainty shall exist concerning these rights and duties. Accordingly it is inappropriate to change, amend or add to these rights and duties through 'soft' rules. With 'soft' rules the meaning of a rule not found on 'hard' paper is to be conveyed. Partially, this is intended to prevent over-zealous Trustees from making up rules to suit a specific circumstance. In this regard also the Act lays down specific procedures for the amendment of the Rules, which is a possibility open to the Body Corporate, but not the jurisdiction of the Trustees. With specific reference to the appointment of a Managing Agent (see above) it serves to be pointed out that the Managing Agent is not in a position to make or change rules in any circumstances. By definition, the Managing Agent is appointed to 'assist' the Trustees in the execution of their duties. In the same way as the Trustees are empowered and limited by the Act and Rules, so by extention is the Managing Agent limited to assisting the Trustees. By allowing the Managing Agent to make up rules, serious violations of the rights, duties and obligations of owners, and/or the Body Corporate may occur. Therefore it is imperative to guard against any rules of any nature being made by the Managing Agent, even if these ostensibly appear to the benefit of the scheme. Finally, being a creature of statute, the only rules which a court of law will enforce, will be the 'hard' rules to be found in the Act and Management and Conduct Rules. Back to top

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