FAQ

The common property is that part of a sectional title scheme which does not form part of any section. Examples of common property are driveways, parking bays and garages, private gardens and gardens, swimming pools, corridors, lifts and entrance foyers to name a few.

Some parts of the common property can be designated as exclusive use areas under section 27 or section 27a and allocated to a owner for exclusive use

The common property is owned by owners of a section jointly in undivided shares proportionate to the quotas of their respective sections.

Any insurance of a section will also insure the undivided share in the common property of the owner of the section, even if no express reference is made to such share in the insurance policy document.

• -a resolution passed
• -by a majority of not less than three-fourths of the votes (reckoned in value)
• -and not less than three-fourths of the votes (reckoned in number)
• -of members of a body corporate who are present or represented by proxy or by a representative recognized by law
• -at a general meeting
• -of which at least 30 days' written notice,
• -specifying the proposed resolution, has been given,

OR

• -a resolution agreed to in writing (“round robin”)
• -by at least 75% of all the members of a body corporate personally or by proxy or by a representative of any such member recognized by law
• -(reckoned in number and in value)
• -and at least 75% of all such members (reckoned in value) personally or by proxy or by a representative of any such member recognized by law:
• -Provided that in circumstances determined in the rules, a meeting of the body corporate may be convened for a date 30 days or less after notice of the proposed resolution has been given to all the members of the body corporate

A “Special Resolution”, a notice contemplated in that definition, shall be deemed adequate if-

It Has Been Delivered

• -by hand to a member
• -not less than 30 days prior to the relevant meeting; or

It Was Dispatched

• -by prepaid registered post
• -not less than 30 days prior to such meeting
• -to the address of a member’s unit in the relevant scheme, or
• -such other address as a member may have indicted in writing for the purposes of such notice

WHAT ARE SPECIAL RESOLUTIONS REQUIRED FOR?

• Non-luxurious improvements
• Changes to conduct rules
• Extensions of sections
• Cancellation of an exclusive use area
• Creation of servitudes
• Alteration of the value of an owner’s vote or the liability to make contributions to the Levy Fund
• “such other risks” to be insured
• Claims against the developer
• Termination of managing agent’s contract
• Payment to Trustees who are owners to act as Trustees

The participation quota is expressed as a percentage with 4 decimal places and determines the following:

(a) The value of the vote of the owner of the section.

b) The undivided share in the common property of the owner of the section.

The proportion in which the owner of the section shall make contributions for purposes of running costs of a body corporate.

An owner shall -

• (a) Keeping the unit clean and the maintaining of the interior of the unit, including the full maintenance of the doors, windows, lights and light fittings, paint (interior) and built in cupboards.
• (b) The Insuring of all movables in the unit (fixtures are covered under the buildings combined insurance of the Body Corporate).
• (c) Payment of the levy amount determined for the unit.
• (d) Complying with the Conduct Rules, including all members of the family, invitees and servants and contractors.
• (e) Repair and maintain his section in a state of good repair and, in respect of an exclusive use area, keep it in clean and neat condition.
• (f) Use and enjoy the common property in such a manner as not unreasonably to interfere with the use and enjoyment by other owners or other persons lawfully on the premises.
• (g) Not use his section or exclusive use area, or permit it to be used, in such a manner or for such purposes as shall cause nuisance to any occupier of a section.
• (h) Notify the Body Corporate forthwith of any change in ownership in his section and of any mortgage or other dealing in connection with his section.
• (i) When the purpose for which a section is intended to be used is shown expressly or by implication on or by a registered sectional plan, not use or permit such section to be used for any other purpose: Provided that with the written consent of all owners such section may be used for another purpose.

The following items are compulsory items to be discussed at an AGM:

(a) The consideration of the financial statement and report.

(b) The approval with or without amendment of:

(b-i) The schedules of replacement values;

(b-ii) The estimate of income and expenditure;

(c) The appointment of an auditor or accounting officer.

(d) The determination of the number of trustees of the ensuing year.

(e) The election of trustees for the ensuing year.

(f) Any special business of which due notice has been given.

(g) The giving of directions or the imposing of restrictions upon the powers of the trustees.

(h) The determination of the domicilium citandi et executandi of the body corporate.

(i) The confirmation by the auditor or accounting officer that any amendment, substitution, addition or repeal of the rules has been submitted to the Registrar of Deeds.

Once the levy budget has been approved by the owners at the AGM, the total levy budget for the year is divided among all the owners of a section using the participation quota. This determines the owner’s share of his contribution. Each owner’s share is then divided by 12 and paid monthly. This is known as general levy.

You can calculate your levy contribution as follows

Total levy budget x your PQ= your annual share of the levy budget

Your annual share of the levy budget/ 12= your monthly levy

Members may not decide at the AGM what their levies must be. They may only approve the levy budget with or without amendments. This is a very important concept.

Once the trustees have established the amount at their first meeting after the AGM, they must notify each owner of their new levy contribution.

You might have noted the time delay. The financial year end was about 4 months prior to the AGM and the first trustee meeting after the AGM is 7 days later, at which the trustees are determining the levies for the current year. This is common problem, and 2 practical solutions come to mind:

(a) Trustees need to raise a special levy to recover the difference in levy over the period of 4 months; or

(b) The trustees call a special general meeting prior to the end of the financial year to get the levy budget approved by the owners.

The trustees may whenever they think fit and shall upon written request of either owners holding 25% of the total quotas of all sections or by any bank holding mortgage bonds not less than 25% in number of units, convene a special general meeting.

If the trustees fail to call a meeting if so requested in writing within fourteen days of the request, the owners or the bond holders concerned shall be entitled to call the meeting.

Section 37(1)(f) of the Sectional Titles Act of 1986 compels the body corporate to insure the buildings in a sectional title scheme "to the replacement value thereof against fire and such other risks as may be prescribed".

Even though the Body Corporate should insure the building comprehensively, the minimum requirement for that insurance is against fire damage. It is for this reason that sectional title unit owners must request an inspection of the bodies corporate insurance policy terms, from time to time.

Levies are proportionate of costs incurred in running or operating a body corporate, which have to be paid by the body corporate to its creditors. These costs typically include:

Water, sewerage, refuse, and electricity consumed by the body corporate.

Insurance premiums for the common property.

Managing agent fees.

Accounting and audit fees.

Repairs and maintenance of the common property.

Wages and salaries of the cleaners and other staff.

Security.

Landscaping.

These costs are paid by individual owners in the form of a monthly levy, calculated in accordance with the participation quota for their section. Some costs incurred in the upkeep of Exclusive Use areas can be recovered from the user of that area. In addition to the above, the body corporate is obliged to establish a reserve fund for future maintenance and unexpected expenses. The size of this fund is not specified in the Act, but a wise body corporate will make sure that the fund is adequate for the size of the complex and present condition of the property.

If the fund becomes excessively large, the Act does not allow any part of the excess to be refunded. However, the excess could be used to subsidize future levies or to improve the common property.

The Body Corporate is a legal entity made up of all the owners in a scheme. Membership of the Body Corporate is compulsory and occurs automatically when a section is transferred into a buyer's name. It continues until that person is no longer the owner of a section in the scheme. The Body Corporate exists to manage and control the scheme by ensuring that its financial, administrative and physical needs are attended to.

The functions of the Body Corporate include:

running the ‘levy fund’;

operating the scheme's bank accounts;

insuring the buildings for full replacement value;

maintaining the common property;

keeping owner records;

providing various types of information;

ensuring that there is an address where the scheme’s correspondence can be received;

lodging notifications of rule changes with the Registrar of Deeds; and

enforcing the scheme's rules.

The way in which a Body Corporate makes decisions is by owner resolutions at duly convened meetings. The Annual General Meeting (“AGM”) is the principal meeting at which the Body Corporate makes important decisions such as electing Trustees, appointing an Auditor or Accounting officer, approving the budget of expenditure for the following year and any other decisions that may be necessary because of the inclusion of items of special business on the agenda.

In the time between AGM’s, Special General Meetings of owners may be called by the Trustees, or by the Owners themselves in certain circumstances. These meetings arise if or when business needs to be considered and/or decided upon before the next AGM. Instead of calling a Special General Meeting, owners can also make certain decisions using the ‘round robin’ process, in which they sign a circulated text setting out the text of the resolution.

The Sectional Titles Act, of 1986 (“the Act”), is the legislation providing for and governing sectional title schemes in South Africa. It deals with scheme management including the following: the composition of the body corporate and its functions and powers, the trustees and their functions and powers, rules applicable to schemes, and the duties of owners. Every owner, trustee, chairperson and managing agent should have a copy of the Act and try to familiarise themselves with its management provisions.

The prescribed management and conduct rules are annexed to the Act and are automatically applicable to a scheme, unless they are amended, substituted, added or deleted. Where this is the case, the scheme operates according to its amended rules.

The Estate Agency Affairs Act, of 1976, governs managing agents, and, according to its regulations, managing agents are required to be in possession of a valid Fidelity Fund Certificate(“FFC”) at all times when collecting or receiving levies from sectional title schemes.

The National Building Regulations and Standards Act, of 1977, is also relevant to sectional title schemes, as it prescribes that all building plans must be approved by the local council before any building may commence.

The town planning scheme regulations govern and restrict the manner in which an occupier may use the sections in a scheme.

The Occupational Health and Safety Act 85 of 1993 (‘OHSA’), and the various regulations issued under it, govern issues of workplace health and safety in South Africa and is particular relevant if larger sectional title schemes or Home Owners’ Association have direct employees. OHSA adds to, and in some cases clarifies, the common-law duty of care that has traditionally rested on employers.

National Credit Act of 2005 provides for the control and regulation of ALL credit transactions - mortgages, credit cards, overdrafts, micro loans, pawn broking and contract loans such as hire purchase of assets. The Act also regulates ALL institutions that provide consumer credit including banks, furniture companies, clothing, other retailers, micro lenders, pawnbrokers, and levy finance companies and managing agents provided they offer a levy finance product. The Act also regulates credit bureaux and consumer credit information, providing for free access to the information kept at the credit bureaux, and for a process by which any errors on the credit records of consumers can be corrected. In addition, the Act makes provision for the registration of debt counsellors and debt restructuring for over-indebted consumers.National Credit Act of 2005 provides for the control and regulation of ALL credit transactions - mortgages, credit cards, overdrafts, micro loans, pawn broking and contract loans such as hire purchase of assets. The Act also regulates ALL institutions that provide consumer credit including banks, furniture companies, clothing, other retailers, micro lenders, pawnbrokers, and levy finance companies and managing agents provided they offer a levy finance product. The Act also regulates credit bureaux and consumer credit information, providing for free access to the information kept at the credit bureaux, and for a process by which any errors on the credit records of consumers can be corrected. In addition, the Act makes provision for the registration of debt counsellors and debt restructuring for over-indebted consumers.

The Debt Collectors Act of 1998 provides for the exercise of control over the occupation of debt collectors and legalizes the recovery of fees or remuneration by registered debt collectors. The overall goal with the Act is to transform the debt collection system in South Africa by monitoring the conduct and professionalism of debt collectors and promoting a culture of good governance within the profession, thus contributing to protecting the public at large, as well as creditors. The Council for Debt Collectors will exercise control over the occupation of debt collectors.

In terms of the provisions of the Sectional Titles Act 95 of 1986, the act defines the following principles relating to pipes in sectional title schemes:

If the pipe is part of your section it is your responsibility unless the pipe serves a number of sections of the sectional title scheme (i.e. more than one section), then it is the body corporate's responsibility to maintain the pipes in good state of repair.

If the pipe is outside your section (i.e. on the common property) the body corporate must maintain and repair it even if it only serves your section.

Based on the principles set out in 1 and 2 above, it needs to be determined whether this pipe forms part of your section or it forms part of the common property, the body corporate is responsible to maintain it as it serves more than one section.

Geysers in sectional title schemes

Problems with geysers are very common in the day to day running of sectional title schemes. But who is responsible to pay for the repairs and maintenance of geysers?

Section 5(4) of the Sectional Titles Act 95 of 1986 states that the common boundary of any section and another section or the common property is the median line of the dividing floor, wall, or ceiling. Geysers are often situated above the median line of the ceiling in a section. An object or structure built or placed on common property becomes common property and therefore it is the duty of the body corporate as per section 37 to repair and maintain such object.

However, geysers are an exception to the above rule. Prescribed management rule 68 (vii) states that an owner in addition to section 44 of the Act “shall maintain the hot water installation which serves his section, or, where such installation serves more than one section, the owners concerned shall maintain such installations pro-rata, notwithstanding that such appliance is situated in part of the common property and is insured in terms of the policy taken out by the body corporate.”

The owner of a section is therefore responsible for repairs and maintenance (including replacement) irrespective where the geyser is situated.

In practice, geysers are insured through the general building insurance cover of the body corporate. Since November 2008, the owner must pay the excess to the body corporate or the insurance company will deduct the excess from the insurance claim before the claim will be paid out.

Most insurance companies have call centers which have been set up to deal with for instance geyser claims. In most cases, no or a reduced excess is payable if the owner contacts the call center and reports the claim directly through their hotline.

It is advisable for sectional title trustees to circulate the information of the insurance policy including the name of insurance, policy number, information about the excess, and contact no of the call center to all owners.

Default Listings for Defaults on Levies

Section 37 (2) of the Sectional Titles Act, No 95 of 1986 states: “Any contributions levied under any provision of subsection (1), shall be due and payable on the passing of a resolution to that effect by the trustees of the body corporate, and may be recovered by the body corporate by action in any court (including any magistrate's court) of competent jurisdiction from the persons who were owners of units at the time when such resolution was passed.”

Section 37(2) of the Sectional Titles Act 95 of 1985, enables the body corporate to sue members for not paying their levies, apply for judgment and then execute against their assets.

It seems, therefore, that the trustees are precluded from acting against defaulters of Sectional Titles levies by the above. It looks as though the Sectional Titles Act, 1986 prescribes Magistrates Court Action to be instituted for the recovery of levies and does not allow for alternative action, e.g. action in terms of the National Credit Act.

However, and here is the crux of the matter, in an Appeal before the KwaZulu Natal High Court Case No 611/09, the Judge held, inter alia:

1. A body corporate does not supply goods or services to its members, nor does it advance money, or credit to its members.

2. Levies charged by a body corporate to its members, do not constitute an incidental agreement because the levies do not constitute an “account tendered for goods or services provided by the body corporate to the consumer”.

3. Levies are not payable by members of a body corporate to an agreement, as defined in the Act, but are payable by virtue of the provisions of the Sectional Titles Act No. 95 of 1986.

Accountability, therefore, cannot institute action in terms of the National Credit Act, No 34 of 2005 against defaulters and Bodies Corporate are therefore obliged to pursue levies defaulters in terms of the Magistrates Courts Act, No 32 of 1944.