Sectional Title Units

One of the biggest investments ever made by a person is buying a property. It is the duty of every owner buying a unit in a scheme to ensure that their Trustees and their Managing Agent are running the complex in a professional manner so that their investment can grow and prosper.

What is Sectional Title?

Sectional Title is a lifestyle that has become increasingly popular in South Africa for reasons of convenience, ease of maintenance and security. It brings people from diverse backgrounds, cultures, age groups and interests together into a stable and hopefully harmonious environment. This is all governed by the Sectional Title Act No 95 of 1986 (“Act”) , which lays the framework for running such a scheme.

Who is the Body Corporate?

The Body Corporate comprises of all the registered owners of units in a scheme and they are members of the Body Corporate.

Who are the Trustees?

The members of the Body Corporate, usually at an Annual General Meeting (“AGM”) or a Special Meeting if necessary, appoint trustees. As per the Act a minimum of 2 Trustees must be appointed and the members of the Body Corporate at the AGM determine the maximum number of Trustees. Work undertaken by Trustees is voluntary and there is no remuneration to them for running the scheme daily. Any person, including individuals who are not owners, may become Trustees, provided that the number of Trustees, who are owners, exceed the number of Trustees who are not owners.

The Trustees elect a Chairperson, who holds office until the next Annual General Meeting.

What do you own?

Each owner owns and is responsible for the inside of their unit. You can paint, decorate and alter the inside, providing that some alterations may require the consent of the municipality and the Body Corporate. The outside of the complex is owned by the Body Corporate and that is why permission has to be obtained from the Trustees in order to erect awnings, satellite dishes, TV aerials or any other exterior alterations.

What is Common property?

When buying into a Sectional Title Scheme you are buying a section, known as a unit, and a share of the common property. Common Property is part of the scheme that does not form part of any particular section such as gardens, pools, driveways, corridors, lifts and entrance foyers etc.

The Common Property is controlled and maintained by the Body Corporate and some parts of the Common Property are designated as Exclusive Use Areas.

What are Exclusive Use Areas?

Exclusive use areas are part of the common property designated for the exclusive use of an owner. This means that you do not own the area but have the right to use and enjoy the area, such as carports, patios, gardens etc. for as long as you own that unit.  

What are Levies?

There are costs involved in running a complex such as municipal accounts and services which include electricity, water, refuse and sewerage, insurance, maintenance and cleaner’s salaries to mentioned a few. A budget is prepared comprising of all the annual expenses for the complex. The participation quota (an owner’s portion of the scheme) is applied to the expenses and levies are determined. These are payable by all owners at the beginning of each month to the Body Corporate.

What are Special Levies?

Special levies are raised by the Trustees to improve the property or for emergency repairs only if the Body Corporate not have enough funds. A special levy for an improvement is discussed at the AGM or at a general meeting and needs the approval of the members of the Body Corporate. It is calculated as per the participation quota of the individual units and is payable monthly over a period agreed upon at the meeting.

What are Conduct Rules?

Conduct rules should be registered with the Registrar of Deeds; otherwise they are not enforceable by law. It comprises of a set of rules and regulations, which is enforceable. Everyone in the complex must abide by these rules. Conduct rules are important as they lay down guidelines for the conduct of the occupiers of units or their guests. Well-written rules will enforce a well-run complex, harmonious and a complex which owner are proud to be a part of and therefore increase the value of your investment.

Managing Agent

Managing and administering a complex is a specialised and time-consuming business, therefore the Trustees could entrust a Managing Agent to undertake this task. There are many functions, which a Managing Agent must undertake. An example of a few tasks is to prepare budgets, ensure collection monthly levies, , keep accounting records, arrange for quotations for repairs and maintenance, send out notices and generally assist the Trustees with tasks to ensure the smooth running of the scheme.

A good Managing Agent should have a vast knowledge of the Sectional Title Act so that they can assist the Trustees with rules and regulations and ensure that the complex keeps a sound financial bank balance. This in turn will ensure a well-maintained complex.

Owners should support, assist and value the effort of Trustees, as many hours of hard work and planning are spent ensuring the smooth running of the complex.

TRUSTEES

The members of the body corporate determine the number of trustees at the Annual General Meeting. This may be any number except 1 trustee.

If more than 50% of the trustees are owners in the sectional title scheme, any person may be a trustee, except for the managing agent or its employees.

To become a trustee another owner must nominate the trustee in writing. This written nomination and the written consent of the person to become a trustee must be delivered to the domicilium (as agreed at the previous Annual General Meeting) 48 hours before the Annual General Meeting.

If insufficient nominations and consent for trustees is received 48 hours prior to the Annual General Meeting, then the trustees may be nominated and provide their consent at the Annual General Meeting.

An owner who is a trustee may not be remunerated for being a trustee, unless the body corporate passes a special resolution to remunerate the owner-trustee.

A trustee that is not an owner, may be remunerated as the trustees agree. No special resolution is required for this.

Trustees are not personally liable for any acts as trustees other than acts that are performed male fide or are grossly negligent. This also includes omission of acts.

Duties

Statutory and General Duties

The trustees are responsible for:

The establishment of a fund for:

  1. The Repair, the upkeep, control, management and the administration of the common property. This also includes a reasonable provision for future maintenance and in addition repairs to the common property);
  2. Payment of rates and taxes and other local authority charges (such as refuse, water, electricity, gas, fuel etc);
  3. Payment of premiums of insurance;
  4. Any other obligation of the body corporate
  5. The calculation, raising and charging of the above in the form of levies and special levies (if the levies are inadequate)
  6. To open and operate a bank account;
  7. To arrange the insure for the buildings and to keep them insured at replacement value;
  8. To use any insurance money received to rebuild, reinstate or repair the damaged buildings
  9. To pay insurance premiums
  10. To maintain common property
  11. To comply with notices and orders from any competent authority
  12. To provide a list of names and addresses of the trustees of the body corporate
  13. To determine the domicilium citandi et executandi of the body corporate
  14. May appoint agents and employees
  15. May invest moneys received

The trustees must insure the building or buildings and all improvements to the common property at full replacement value against the following risks:

fire, lightning and explosion;

•  riot, civil commotion, strikes, lock-outs, labour disturbances or malicious persons acting on behalf of or in connection with political organization;
•  storm, tempest and flood;
•  earthquake;
•  aircraft and other aerial devices or articles dropped therefrom;
•  the bursting or the overflowing of water tanks, apparatus or pipes;
•  impact with any of the schemes buildings or improvements by any road vehicle, horses or cattle;
•  housebreaking or any attempt thereat; and
•  the loss of occupation or loss of rent in respect of any of the above risks;

The trustees must prepare an estimate of income and expenditure and estimate the Rand amount of levies for the following financial year. This schedule must be approved at the Annual General Meeting.

After 14 days of the Annual General Meeting the trustees must advise each owner in writing of the levies to be paid for the following financial year.

The trustees may charge owners interest on amounts that are in arrears.

Rules

The trustees must have a copy of all the rules in force

The trustees must provide a copy to the following if they request it:

  1. an owner;
  2. an occupant of a unit;
  3. a prospective purchaser of a unit;
  4. a holder of any registered sectional mortgage bond;
  5. the managing agent; and
  6. the auditor or the accounting officer.

The trustees may charge a reasonable fee for a copy of the conduct rules.

The trustees may effect luxurious improvements to the common property. These improvements must be authorized by a special resolution.

The trustees may effect non-luxurious improvements to the common property. 30 days written notice must be given to all the owners within a sectional title scheme before the improvements are to be done. The following details of the improvements must be included in the notice:

  1. the costs thereof;
  2. the way they will be financed and the effect on the levies; and
  3. the need desirability and effect thereof.

One exception to this is the installation of individual water, electricity and gas meters. This requires the written request of the majority of the owners of a sectional title scheme.

Minutes  

The trustees shall ensure that minutes are kept of all the meetings of the body corporate. The minute books must be kept from the first meeting of the body corporate to the current date. The minutes of the body corporate must include all the unanimous resolutions, special resolutions and other resolutions taken by the body corporate.

The trustees must also make the minutes available to any owner on written request:

Minute books must be retained if the scheme remains registered.

Books of account and records  

The trustees must ensure that proper books of accounts and records are maintained to explain the transactions and financial position of the body corporate. These must include:

  1. a record of assets and liabilities (a balance sheet)
  2. a record of all monies received and expended (cash book)
  3. a register of owners and their addresses, and registered mortgagees of units.
  4. individual ledger accounts in respect of each owner.

These books of accounts and records must be retained for six years.

The trustees must make any or all the books of accounts available to the following on request:

  1. any owner
  2. registered mortgagee
  3. managing agent

Annual financial estimate, financial statement and report

The trustees must ensure that the following is prepared, delivered to the owners 14 days prior to the Annual General Meeting and presented at the Annual General Meeting:

  1. a budget. This budget should include a reasonable provision for contingencies;
  2. Annual Financial Statements; and
  3. Signed Chairman’s report. The Chairman’s report should include a review of the affairs of the body corporate for the past year.

Audit  

The trustees should ensure that the body corporate appoints an auditor at every Annual General Meeting.

For any sectional title scheme of less than 10 units an accounting officer may be appointed instead of an auditor.

Deposit and investment of funds  

The trustees must ensure that all money received by the body corporate are deposited into a bank account with the body’s corporate name. Money may only be paid from this account for the purposes of paying the expenses of the body corporate.

The trustees may authorize the managing agent to utilize a trust account instead of opening a separate bank account for the body corporate.

Any funds that are not required for the immediate payment of body corporate expenses may be invested with a bank. Any interest arising from this investment may only be used for the body’s corporate expenses.

No refunds or distribution of profits or assets

The trustees may not refund any levy that has been lawfully raised and paid, except in the destruction or deemed destruction of the scheme.

 

More Articles About Sectional Title

The Difference Between Freehold Property and Sectional Title
Common and Exclusive Use Property in Sectional Title

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