Michael Bauer, general manager of the property management company, IHFM, says that he frequently comes across cases where trustees or the members in a sectional title scheme do not know the difference between management and conduct rules nor the procedures necessary to change these.
Conduct rules, he says, apply to the day to day business of living together in a complex or an estate. Here every individual has his private space but the fairly close proximity of one member to another requires them to observe certain behaviour guidelines.
Conduct rules, he said, can require amendments as sectional title schemes mature and change in nature – and to achieve this, a special general meeting needs to be called for which 30 days’ written notice is required by law. At the meeting various members quora are prescribed by the Sectional Title Act and without these no special resolution can be passed.
In a scheme of ten or less units, 50% of members (in number and property value in the scheme) have to be present in person or by proxy. In a scheme of ten to 50 units, 35% of members, and in a scheme of 50 plus units a quorum of 20% of the members have to be present, again in person or by proxy.
If the body corporate then wants to pass a special resolution to amend the conduct rules, a 75% vote of the quorum is required.
If the management rules are to be changed, a quorum of 80% in number and in value has to be achieved and 80% of the members have to vote in favour of the proposed resolution.
All accepted amendments have then to be put in writing and lodged with the Registrar of Deeds and it is the trustees’ obligation to ensure that this happens.
Bauer said he had in the past come across schemes where no conduct rules were lodged with the Registrar of Deeds – even though they had changed them. This situation is quite commonly encountered, he said.
A question that often arises, says Bauer, is what are “reasonable” conduct rules. . Is it, for example, discriminatory to prevent members having children in their scheme, or to forbid children to play on common property? Can this sort of rule be seen as an encroachment on the individual’s freedom?
A restriction which is often debated concerns short-term letting.
If an owner has a unit in a recognised holiday area, e.g. on a popular beach, at certain times of the year he may well be able to earn good money on a short-term let.
“Many conduct rules forbid this because they dislike strangers having access to their sectional title scheme and frequent changes in tenants may pose a security risk. This additional risk is, however, sometimes compensated for by a higher levy paid by those who want to do short-term letting.”
“It could be argued that to restrict an owner’s ability to maximise his return on his unit is an infringement of his propriety rights. Many therefore, feel that a ban on short-term lets is unfair.”
Similarly, says Bauer, disagreements abound on the subject of fines.
“The Sectional Title Act is sometimes not enough to enforce rules. It can often only be enforced by going to court or to arbitration – but fines have proved highly effective in disciplining those who disregard rules. The difficulty is that that fines are not always legally enforceable, even if put into the conduct rules with the approval of the required number of members. In addition, the amount of the fine is quite often queried, sometimes forcing the trustees to go to arbitration or court in order to get a ruling on these matters.”