New Trustee's or thinking about it.

Top 5 tips for first time sectional title trustees by Paddocks

By Paddocks

The trustees in sectional title schemes are elected at the annual general meeting (“AGM”) and very often the same people are elected year after year. Even if new trustees are elected there is usually someone who has been a trustee before and knows the ropes. It is possible though, that an entirely new board of trustees is elected. In this article, we will look at the basics that these new, inexperienced trustees need to know, especially if the body corporate does not employ a managing agent and is self-managed

1. Get educated

To manage a scheme effectively and legally, the trustees need to be pretty familiar with the Sectional Titles Schemes Management Act (“the STSM Act”), the scheme’s management and conduct rules and the Sectional Titles Act. Additionally, they need to know the provisions in the Community Schemes Ombud Service Act regarding dispute resolution, the Community Schemes Ombud Service “the CSOS” levy and the CSOS regulations on duties of scheme executives and fidelity insurance.

There is a host of other legislation they need to know about, some of it in detail. The local municipal by-laws, and occupational health and safety and labour legislation all spring to mind.

The trustees need to have ready access to the scheme’s records, particularly the financial and maintenance records, the sectional plans and the minutes of previous and future meetings.

2. Make sure the annual contribution is raised properly

A vitally important task the trustees must complete very soon after they are elected at the AGM is to meet, elect a chairperson and take the trustee resolution raising the annual contribution. The members must be notified in writing of their liability to pay the contribution within 14 days of the AGM. If the trustees do not take this resolution, the members are not legally liable to pay the contribution and it will not be possible for the body corporate to recover arrears from members who do not pay.

3. Your duty is to the body corporate

The STSM Act provides that the trustees have a fiduciary relationship to the body corporate. While the body corporate is made up of the owners in the scheme, it is a legal entity separate from them and it is to this entity that the trustees owe their fiduciary duties of skill, care and diligence, not to the individual members. The trustees’ test of what they do is always, “is this in the best interests of the body corporate?”

4. Do not use your position to further your own interests

As most trustees are volunteer owners, the STSM Act protects them from personal liability for ordinary mistakes and requires the body corporate to indemnify them from any loss or expense they suffer while doing their trustee duties, except for breaches of their fiduciary relationship to the body corporate.

However, if the body corporate loses money, or a trustee benefits economically because of something the trustee did that was in breach of their fiduciary relationship to the body corporate, that trustee is personally liable for the loss the body corporate suffered, or must pay to the body corporate the economic benefit they made.

5. Act only within the powers of the trustees

The trustees perform the functions and exercise the powers of the body corporate. The STSM Act lists these functions and powers – and of course also makes a catch-all “whatever else is reasonably necessary” provision, but the functions and powers of the body corporate are specific and limited to the control, management and administration of the common property for the benefit of all owners. The trustees must therefore be very careful not to do anything that is outside of these listed functions and powers or outside the spirit of those functions and powers. For example, one of the common abuses of body corporate power that trustees make is in authorising operations that constitute improvements to the common property without the input of the members.

New

Types of Owners in Sectinal Title Schemes

In the past three years the body corporate has not had a quorum at their AGM, when this happens the meeting has to be reconvened. In this case all owners are informed of the fact that there weren't enough people present at the AGM to form a quorum. It has always surprised me that there are no new faces at the second meeting - the same people that made the effort to attend the scheduled AGM are present for the reconvened meeting.

Since I have been involved in the Rietvlei Body Corporate for the past 24 years or so, it shouldn't surprise me. But three years in a row, that's got to be a record in the 56 000 sectional title schemes in South Africa.

While researching this phenomenon I came across the article below - which type of owner are you?

The engaged, the entitlement, and the apathetic sectional title owners

I addition to the four types or categories of owners Dr Sayed Iqbal Mohamed identified, there are three more, namely the engaged, the entitlement and the apathetic.
The engaged sectional title owner is involved in the affairs of the body corporate, attend meetings and demonstrates interest. They are often in the minority and often avail themselves to be nominated and elected as trustees. Those not holding office as trustees can be relied upon to support the trustees.
Those sectional title owners with an entitlement attitude often do as they please when it pleases them. They do not respect the rights of others and do not adhere to the rules. They seldom attend meetings, but are quick to squeal when what they believe they are entitled to, gets affected.
Many sectional title owners are apathetic. It is as if they believe they bought a section and that is it. They act as if the common property is none of their concern. They do not attend meetings. They expect things to run smoothly, but consider everything someone else’s responsibility.
Source: http://www.psychsoma.co.za/sectional_title_living/a_member_of_the_body_corporate/ 


Steve McDonagh
Chairman (RPBC)

Excusive Use Area's (EUA)

Exclusive use in Sectional Title Schemes – benefit or burden? by Paddocks

By Anton Kelly

The concept of exclusive use is unique to sectional title schemes. It means that although all owners own all the common property in undivided shares, they can agree that one owner (or perhaps a few owners) can use a specified portion of their co-owned property, and no other owner will use it.

So there is benefit to the owner who holds the rights. But, as the old saying goes, there are no free lunches, and the exclusive use of common property comes at a cost, which is a burden. Let's weigh up the benefits and burdens of holding exclusive use rights.

Benefits of exclusive use in sectional title schemes

The first and most obvious benefit is that the owner who holds exclusive use rights over a portion of common property can use the area and other owners can't stop that use or use the area themselves.

Secondly, exclusive use rights increase the market value of the property, particularly if the exclusive use rights are over parking areas.

An owner who has rights of exclusive use may be able to improve the area, by adding a structure or making a building improvement to the area. All that is required to authorise the alteration to the exclusive use area (EUA) is the consent of the body corporate by ordinary resolution. However, the body corporate cannot consent to the alteration if it constitutes the extension of the section or the creation of a new section. There are other processes and resolutions required for those! Click this link to find out how it’s done.

An owner can rent out the exclusive use area to another owner, if it is not needed. For example, if an owner only has one car but has a garage and an EUA parking bay.

Finally, although this is a technicality, registered exclusive use rights can be traded among owners, so they have independent value, other than the value they contribute to the property.

Burdens of exclusive use in sectional title schemes

It's worth repeating at this stage that exclusive use areas are common property, owned by all the owners together in undivided shares, and so EUAs are the responsibility of the body corporate to maintain. Owners are only obliged to keep their EUAs neat and clean.

However, the Sectional Titles Schemes Management Act (SMSTA) requires the body corporate to charge owners with exclusive use rights an additional contribution, on top of their ordinary annual levies, to cover the costs the body corporate has with respect to the area. Examples, in addition to maintenance, are insurance and supply of water and electricity.

A common issue with the additional contribution for EUAs is that calculating the amounts individual owners must pay can be very complicated, and few bodies corporate do it properly. The result is that when a big expense comes along such as water proofing a patio, replacing shade cloth parking canopies, or removing a large tree from a garden, owners can be charged substantial amounts in addition to their EUA "levies".

Exclusive use rights are definitely a benefit to sectional title owners. One can have one’s "own" garden, parking bay, store room or even swimming pool, but use is not free and one might not have any say or control over what or when maintenance is done. If you have any difficulties regarding exclusive use please contact consulting@paddocks.co.za for a no obligation quotation for advice.

Photo by Sina Khansari on Unsplash

Paddocks | February 14, 2018 at 8:16 am | Tags: benefits of EUA, exclusive use areas, exclusive use rights, improvement to exclusive use area, STSMA, who pays for exclusive use area | Categories: Exclusive Use Area, sectional title scheme management | URL: https://wp.me/p3kh9U-pp

Windows & Doors

Responsibility to repair and replace windows and doors

30/05/2018  

I often get queries on who is responsible for the maintenance (including repair or replacement) of windows and doors within sectional title schemes. In this article, I will address the financial responsibility for maintenance of the windows and doors (including garage doors).
In order to answer these questions I will examine:

• What divides a section from the common property?
• What forms part of the section and what forms part of the common property?
• Who is responsible for the maintenance?
• How is replacement authorised?
• Who is responsible for the costs?
• How can the costs be funded?
• How are these costs allocated between owner and body corporate?

A draft sectional plan must define the boundaries of each section in the building. The common boundary between two sections, or a section and common property is the median line of the dividing floor, wall or ceiling as the case may be. The boundaries of a section are defined by reference to the floors, walls, and ceilings thereof, or as may be prescribed, provided that any window, door (including garage doors) or other structure which divides a section from another section or from common property, are considered to form part of such floor wall or ceiling.
The “median line” in the context of the drafting of sectional plans, is not a physical thing. It is an imaginary vertical or horizontal line that represents the “mid-points” that are half-way between the outside surfaces and the inside surface of a wall, floor or ceiling, with one half of that wall, for example, on either side of the median line. In terms of section 5 of the Sectional Titles Act (“the ST Act”) where a door or window is set into an exterior section wall, the median line goes through the center of that door or window. The effect of this provision is that windows and doors (including garage doors) in the exterior walls of sections are always partially part of the section (the inner 50%) and partially part of the common property (the outer 50%). The intent of this provision is to make the owner and the body corporate share maintenance and repair costs equally.
In terms of section 3(1)(l) of the Sectional Titles Schemes Management Act (“the STSM Act”), the body corporate must maintain all the common property, which includes the exterior part of any wall, door or window that forms a boundary between a section and common property. In terms of section 13(1)(c) of the STSM Act, the owner must repair and maintain the interior part of any wall, door or window that forms a boundary between a section and common property. Therefore, the expenses (which could include maintenance, repair and replacement costs) in regard to any window or door (including garage doors) in an exterior section wall should be split equally between the owner and body corporate.
If the windows cannot handle the level of wind-driven rain due to its age and design and are beyond effective repair, and the only permanent solution will be a replacement, then the replacement of the windows could either fall within maintenance or be an improvement depending on the circumstances. If, for example, the wooden window frames are replaced with aluminium ones, then the replacement will be useful and necessary.
The process set out prescribed management rule (“PMR”) 29(2) must be followed to authorise the replacement of the windows. Should the trustees wish to effect reasonably necessary improvements to the common property, they must give written notice to all owners. The notice must indicate the intention to proceed with the improvement after a stated date not less than thirty days from the date of posting and provide details of the proposed improvements. The details must include:

• The costs of the proposed improvements.
• How they are to be financed, including details of any special contributions or loans by the body corporate that will be required for this purpose.
• The estimated effect on levies and the need, desirability and effect of the improvements.

On receipt of notice from the trustees, any owner may request that the trustees convene a special general meeting to deliberate upon the proposals. At this meeting, the owners may, by special resolution, approve the trustees’ proposal with or without amendments. If any owner does request a special general meeting, the trustees may not proceed with their proposals until the meeting has been held. They are bound by the terms of any special resolution taken at that meeting. If they think owners may want to meet to discuss the issues, the trustees can save time by convening the special general meeting at the same time they give owners notice. If a meeting is called and no special resolution is taken approving the proposed improvements, The trustees may not proceed with the proposed improvements. If no owner requests a meeting within the notice period, the trustees are authorised to proceed with the improvements.
The body corporate can fund the project by:

• Using reserve funds.
• Raising a special levy if it is necessary that this is done before the next annual general meeting (“the AGM”).
• The body corporate can include the expense in the next budget presented for approval at the AGM.

The cost of repair or replacement of the windows or doors (including garage doors) in the exterior section wall that forms a boundary between the sections and common property should then be split equally between the owner and body corporate.
If you require assistance with drafting the required documentation to authorise the replacement of windows then please contact us at consulting@paddocks.co.za or call 0216863950.

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Article reference: Paddocks Press: Volume 13, Issue 5.
Dr Carryn Melissa Durham is one of the most highly qualified Sectional Title Attorneys in the country (BA, LLB, LLM and LLD), Carryn forms part of the Paddocks Private Consulting Division.

If You Are Thinking of Buying Into Sectional Title - Read This

5 Questions to ask the estate agent before asking “Where do I sign?”

By Ané de Klerk
When searching for an apartment to purchase, as an investment or to call home, potential buyers are often excited by 3 things: a well-maintained unit (inside and out); a perceived “good price” and low levies. While these are indeed important aspects to consider, it is my opinion that they often lure prospective buyers into a false sense of security and discourage them from doing a proper due diligence investigation into an apartment within a scheme that appears to be “perfect”. So, here are my suggestions for five pertinent questions to ask the estate agent before signing that offer to purchase:

When is the body corporate’s financial year end?

Why is the body corporate’s financial year end relevant? While the monthly levy amount payable at the date of signing an offer to purchase (“OTP”) may be X, that levy could increase by the time the property is transferred into your name. This will, of course, have an effect on your budget and could factor into whether you can afford the ongoing monthly costs associated with the purchase.
For example, if you sign an offer to purchase on 15 June and the monthly levy at that point in time is R2 000.00, you would of course budget a monthly amount of R2 000.00 for your levies. If the body corporate has a June year end, however, there is a real possibility that the monthly levy payable could be R2 200.00 by the time the property is registered in your name. Therefore, you should in fact budget for an additional expenditure of R2 400.00 per annum (or R200.00 per month).
A potential buyer should also be mindful of whether or not the body corporate has held its Annual General Meeting (“AGM”) (which is to be held within four months of the financial year-end), as a levy increase in excess of 10% could be on the agenda for approval at the said meeting. As with the example used above, the levy payable once the property is transferred into your name may differ from the levy payable at the date you sign the OTP if the AGM is held after you have signed off the offer, but before registration has gone through at the deeds office.

What additional monthly costs are associated with the property?

First-time buyers in sectional title are often under the impression that their monthly costs will be limited to their bond costs (if applicable) and their levies. However, it is important to note that you may be liable for additional costs, including, but not limited to:

1. rates payable to the local municipality;
2. utilities such as water and electricity (if not included in your monthly levy);
3. special levies;
4. exclusive use contributions; and
5. levy payable to the Community Scheme Ombud Service.

Will you please give me a copy of the body corporate’s latest AFS?

It is of vital importance that prospective buyers ask for a copy of the body corporate’s audited financial statements (“AFS”) as at the end of the previous financial year. While this document provides a lot of important information regarding the body corporate’s financial status and wellbeing (and it is well worth asking a friend with a financial background to have a look through it on your behalf), the most important part of the AFS for prospective buyers is to note the auditor’s opinion.
The auditor will explicitly state if a body corporate’s audit is qualified, which means that the auditor encountered a situation which did not comply with generally accepted accounting principles. While a qualified audit does not necessarily mean the body corporate’s finances are in bad shape (it could simply be as a result of insufficient information provided to the auditor), the comment that you ideally want to see is that the body corporate’s finances fully comply with the following:

1. the Sectional Titles Schemes Management Act;
2. the Sectional Titles Schemes Management Regulations; and
3. the Management Rules of the Body Corporate.

Does the body corporate have an approved Maintenance Repair and Replacement Plan?

From October 2016 onwards, all bodies corporate are required to have an approved 10 year Maintenance Repair and Replacement plan (“MR&R plan”) in place. This plan will highlight major capital expenditure the body corporate needs to budget for in the upcoming 10 years. Perusing this approved plan is of vital importance as the cost of major capital items will have a direct impact on your pocket.
For example, if the 10 year MR&R plan requires that the entire building be waterproofed in the following year and a recent set of AFS shows that the body corporate does not have a reserve fund sufficient to cover the cost, you can expect a high levy increase at the beginning of your upcoming financial year and are likely to face a further increase at the AGM to cover the costs of the waterproofing.

What are the body corporate’s management and conduct rules?

It never ceases to amaze me how many owners buy apartments without first familiarising themselves with the body corporate’s rules. While prospective buyers without pets may not care about pet rules and those not owning cars be indifferent towards rules pertaining to vehicles, every potential owner should be very concerned with the rules that will inevitably affect their finances. Requesting the rules and carefully perusing same before signing an OTP will give you the opportunity to consider the financial implication of some rules.
For example, some rules provide for a fining system. If you are planning on renting out your apartment, you may want to include in your lease agreement the fact that any fine incurred as a result of the tenant’s conduct will be for his/her account.
Another example would be a rule that provides for a refundable deposit to be paid before you/your tenant is allowed to move possessions into the apartment. If the deposit to be paid is a hefty one, you may not be able to afford the cost of moving into your own apartment. Potential lessees may, in turn, find the accumulated initial cost of a rental deposit, first month’s rent payable up-front and moving-in deposit too heavy a burden to bare and may leave your apartment standing empty for extended periods of time.  
If you are in the process of purchasing an apartment within a sectional scheme and would like any assistance with the review of, or have any questions relating to, any of the above documentation, you are most welcome to contact us via email (consulting@paddocks.co.za) or telephone (021 686 3950) for an obligation free quote.
Ané de Klerk is the newest member of the Paddocks team. Ané joins us as a specialist community schemes attorney. Get to know more about her, in this video.
Image from Freepik

11 actions trustees can approve in sectional title

Before 2011, the trustees were empowered to approve many actions within sectional titles schemes. For example, the trustees were entitled to let a portion of the common property to any owner or occupier of a section for a period of less than ten years. Such a lease agreement can only be entered into now on the authority of a special resolution of the body corporate. Another example is that the trustees could consent to the placement or construction of any structure or building improvement to an exclusive use area, such as the installation of a gazebo or swimming pool. This action can only be authorised by an ordinary resolution of the body corporate, and provision is made for the imposition of conditions and the withdrawal of the consent.
Since the Sectional Titles Schemes Management Act 8 of 2011 (“the STSM Act”) came into operation on 7 October 2016, the list of actions that the trustees are entitled to consent to has been reduced to eleven actions.
1. Subdivision and consolidation of sections
The STSM Act only provides one circumstance in which the trustees consent is required. Section 7(2) of the STSM Act states that the trustees of the body corporate must receive and may consent to to applications for subdivision of a section or consolidation of two or more sections, made by the owners of sections.
2. Keeping of pets
The Prescribed Conduct Rules (“PCRs”), contained in Annexure 2 to the Regulations made under the STSM Act, contain various circumstances that require the consent of the trustees. PCR 1 states that he owner or occupier of a section must not, without the trustees’ written consent, which must not be unreasonably withheld, keep an animal, reptile or bird in a section or on the common property. The trustees may provide for any reasonable condition in this regard, and may withdraw any consent if the owner or occupier of a section breaches any condition imposed.
3. Refuse bins
PCR 2(2) gives the trustee the discretion to decide what type of dustbin for refuse is acceptable and must designate where on the common property that bin must be kept. PCR 2(3)(a) gives the trustees the power to designate the place and time that the owners or occupiers must move the dustbin.
4. Parking vehicles
The written consent of the trustees, as well as the duration of such permission, is required before an owner or occupier of a section may park a vehicle, allow a vehicle to stand or permit a visitor to park or stand a vehicle on any part of the common property other than a parking bay allocated to that section or a parking bay allocated for visitors’ parking (except in the case of an emergency) in terms of PCR 3.
5. Damage common property
In terms of PCR 4(1) the owner or occupier of a section must not, without the trustees’ written consent, mark, paint, drive nails, screws or other objects into, or otherwise damage or deface a structure that forms part of the common property.
6. Safety device and screen
In terms of PCR 4(2) the trustees have the discretion to approve, in writing, the design, colour, style and materials of a locking or safety device to protect the section against intruders, or a screen to prevent entry of animals or insects, if the device or screen is soundly built.
7. Change external appearance
The owner or occupier of a section must not, without the trustees’ written consent, make a change to the external appearance of the section or any exclusive use area allocated to it unless the change is minor and does not detract from the appearance of the section or the common property in terms of PCR 5(1).
8. Erect washing line
The owner or occupier of a section must not, without the trustees’ written consent, erect washing lines on common property in terms of PCR 5(2)(a).
9. Hang laundry
The owner or occupier of a section must not, without the trustees’ written consent hang washing, laundry or other items in a section or any exclusive use area allocated to it if the articles are visible from another section or the common property, or from outside the schemein terms of PCR 5(2)(b).
10. Signage
The owner or occupier of a section must not, without the trustees’ written consent display a sign, notice, billboard or advertisement if the article is visible from another section or the common property, or from outside the scheme in terms of PCR 5(2)(c).
11. Storage of flammable substances
The owner or occupier of a section must not, without the trustees’ written consent, store a flammable substance in a section or on the common property unless the substance is used or intended for use for domestic purposes in terms of PCR 6(1).
If you require any assistance with drafting trustee resolutions please contact us at consulting@paddocks.co.za or call 0216863950.

Article reference: Paddocks Press: Volume 13, Issue 3.
Dr Carryn Melissa Durham is one of the most highly qualified Sectional Title Attorneys in the country (BA, LLB, LLM and LLD), Carryn forms part of the Paddocks Private Consulting Division.

By-law Regarding The Use Of Tanks For Rain Water

The points below provide clarity on some of the popular misinterpretations of the content of the Water By-law.
 
‘The By-law will force you to have plans for your Jojo tanks’
Where households have Jojo or any other kind of rainwater tank installed and are only using it for irrigation or outdoor use, then no approval or notification is necessary. 

If rainwater or any other form of alternative water is being plumbed into the building and there is a chance of it connecting with the municipal drinking water supply, then this needs to be approved by the City. 

This requirement has been in place since 2010, and it is in the interest of ensuring that people install the system safely so that there is no possible contamination of the drinking water system which can impact on human health and the environment. For more information, residents can visit:  http://cct.gov.za/bC2nV