Advice and Opinion

Update: The Sectional Schemes Management Act & Community Schemes Service Act

By now many owners in joint property ownership schemes such as sectional title and home owners’ associations are aware that certain regulations have been changed.

Martin Bester, Managing Director of Intersect Sectional Title Services, says that since 2011 we have been notified that two new Acts will be promulgated – the Sectional Titles Schemes Management Act 8 of 2011 (STSMA) and the Community Schemes Ombud Service Act 9 of 2011 (CSOSA).

These have now been signed into law by the President, and have been effective since early October 2016.

So what changes and what stays the same?

According to Bester, from a sectional title point of view the current statute (Sectional Titles Act, No.95 of 1986 (STA) remains, but will be primarily focused on the establishment, registration, surveying and technical aspects of sectional title schemes. “Whereas the management aspects, hitherto included in the STA, have been removed and placed exclusively in the STSMA.”

Bester states that in essence the STSMA seeks to deal with the management aspects only, and streamline certain processes, and while it retains the nature of these aspects from the STA it does contain a few notable changes:

1. Maintenance reserves:

The body corporate will now be required to establish and maintain a reserve fund sufficient to cover the cost of future maintenance and repair of the common property. Of course no one knows what these future costs will be, so the STSMA sets out the following formula based on total levy income per annum:

a) Less than 25%:

If the amount of money in the reserve fund at the end of the previous financial year is less than 25% of the total contributions to the administrative fund for that previous financial year, the budgeted contribution to the reserve fund must be at least 15% of the total budgeted contribution to the administrative fund;

b) Greater than 25% but less than 100%:

if the amount of money in the reserve fund at the end of the previous financial year is more than 25% but less than 100% of the total contributions to the administrative fund for that previous financial year, the budgeted contribution to the reserve fund must be at least the amount budgeted to be spent from the administrative fund on repairs and maintenance to the common property in the financial year being budgeted for;

c) Greater than 100%:
if the amount of money in the reserve fund at the end of the previous financial year is equal to or greater than 100% of the total contributions to the administrative fund for that previous financial year, there is no minimum contribution to the reserve fund.

2. Proxies & Voting:

“Whereas before a person could hold numerous proxies, as of the date of implementation of the STSMA a person may not act as proxy for more than two members,” says Bester.

“Further, when voting by means of a show of hands, the STSMA now provides for each member to only be entitled to one vote, regardless of the number of sections he/she owns in the scheme.”

3. Rights of extension by the Developer:

“The STSMA now provides for the body corporate to extend the time limit of a developer’s right of extension, by means of passing a unanimous resolution, in the form of a notarial agreement.”

4. Extensions of a section by an owner:

“The STSMA seeks to tidy up the old provisions of the STA in this regard by ensuring that the duty rests on the owner to obtain the consent of the members (by way of a special resolution) before proceeding with the extension and to have same surveyed and registered,” advises Bester.

“It further provides that the members are not compelled to grant their consent (some ambiguous wording exists in the current statute in this regard).”

5. Subdivision and consolidation of sections:

“The STSMA now specifically provides for an application procedure should owners wish to subdivide or consolidate sections, whereas in the STA no such application procedure is provided for.”

6. Community Schemes Ombud Act 9 of 2011:

Bester goes on to explain that this new Act affects all joint property ownership schemes and seeks to provide a mechanism (an Ombud service), to tackle all disputes in sectional title, home owners’ associations and share block developments etc., in accordance with a prescribed procedure.

“Moreover, from a sectional title point of view, the CSOSA provides for the examination, approval (or otherwise), and filing of rules and rule amendments, hitherto registered and kept at the Deeds Registry.”

“The managing agent and/or trustees will have to furnish the Chief Omdud with certain information (Community Schemes Governance Documentation) within a prescribed period of time. There will also be a levy, payable by every member of every scheme, of up to R40.00 per unit per month, which will have to be collected by the body corporate and paid over to the Chief Ombud, as prescribed. So expect an additional levy within the next few months!” warns Bester.