SECTIONAL TITLES SCHEME MANAGEMENT ACT We see advertisements about training courses, costing you an arm and a leg about the so called New Act

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1 1 SECTIONAL TITLES SCHEME MANAGEMENT ACT Let us join the debate about the New Act. We see advertisements about training courses, costing you an arm and a leg about the so called New Act Most of these recent advertisements alleged that the Act will come into operation by the end of September 2012 but as we all know we are almost at the end of November 2012 and nothing has happened yet. The Department of Human Settlements recently commented that the Acts will hopefully come into operation during the first quarter of As you all probably know the Sectional Titles Scheme Management Act (STSM Act) was written at the same time as the Community Scheme Ombud Service Act (CSOS Act), and they were both signed by the President during June 2011 and come into operation on a date fixed by the President by proclamation in the Gazette. These two Acts are closely linked and it is imperative that the Ombud Service is operationally ready before the Act can come into operation. It will be another pathetic situation, like

2 2 the Gauteng Toll Road system, if another Act comes into operation but there is no infrastructure to support it. During this session the major points of the New Acts will be pointed out but there is no case law or practical examples of the interpretation of he Acts available yet. Once the Acts are operational for a while it will be necessary to present workshops / seminars in order to discuss the practical implications and interpretations. Be it as it may there are a few remarks about the STSM Act which are of interest. The Act is organised very logically and it starts at the beginning, when a Body Corporate is being established. The functions and powers follow a logical sequence and should be easy for anyone to find and follow. If one evaluates the wording it seems as though the legislator endeavored to keep the wording more user friendly. It is also interesting to note that the word shall has been replaced with must.

3 3 As always the Definitions are contained in Section 1. There are a few new definitions namely: Advisory Council Chief Ombud Competent Authority Director General Ombud Section 2 Bodies Corporate This Section will replace Section 36 in the Sectional Titles Act 95 of 1986 Subsection (11) and (12) are new. 2(11) The developer must promptly on demand pay any moneys due in terms of section 3(1)(c) to the body corporate 2(12) Any reference in any law or document to a body corporate established in terms of the Sectional Titles Act must, after the commencement of this Act, be constructed as a reference to a body corporate referred to in section 2 of this Act. Section 3 Functions of Bodies Corporate

4 4 This Section will replace Section 37 in the Sectional Titles Act 95 of 1986 Subsection 3(1)(b) is new to the Act. to establish and maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property but not less than such amounts as may be prescribed by the Minister; One of the functions includes 3(1)(o) to notify the chief ombud, the local municipality and the registrar of its domicilium The body corporate may recover contributions / levies from the owners by 3(2).an application to an ombud... as oppose to Section 37(2) it is by. action in any court of competent jurisdiction.. The same applies in terms of special contributions Section3(3). Section 3(4) which is the same as 37(2B) save for the end of the final sentence referring to current financial year as oppose to 37(2B) ensuing financial year Section 37(3) The body corporate shall, on the application of an owner has been amended to read- Section 3(5) The body corporate must, annually or whenever there is a change in levy, certify in writing. This will assist to ensure that Trustees communicate with the owners.

5 5 Section 4 Powers of bodies Corporate Section 4 is the current Section 38 Section 38(e) has been amended to read Section 4(e) upon special resolution, to borrow Section 5 Additional powers of bodies corporate Interesting about this Section is that each subsection specifies the resolution required for the particular subsection: The body corporatea) may, upon unanimous resolution. b) may, with the written consent of all the owners.. c) may, upon unanimous resolution d) may, subject to subsection (2).. if duly authorised thereto in writing by all the owners; e) may, upon unanimous resolution.. f) may, upon special resolution. g) may, upon special resolution h) must, on application by an owner and upon special resolution by the owners, approve the extension of boundaries or floor area of a section in terms of the Sectional Titles Act; and i) may generally exercise any power and perform any function..

6 6 Section 6 Meetings of bodies Corporate Meetings are currently being dealt with in the Prescribed Management Rules. 6(1) The meetings of the body corporate must take place at such time and in such form as may be determined by the body corporate. (2) The body corporate must, at least 30 days prior to a meeting of the body corporate where a special resolution or unanimous resolution will be taken, give all the members of the body corporate written notice specifying the proposed resolution, except where the rules provide for shorter notice. (3) The notice contemplated in subsection (2) must be a) delivered by hand to a member; b) sent by pre-paid registered post to the address of a member s section in the relevant scheme; or c) sent by pre-paid registered post to a physical or postal address in the Republic of South Africa that a member has chosen in writing for the purposes of such notice. (4) In addition to subsection (3), a notice contemplated in subsection (2) may also be sent to a member by fax or .. Important to note subsection 6(5) which deals with the number of proxies a person may hold.

7 7 (5) A member may be represented in person or by proxy at such meeting: Provided that a person must not act as a proxy for more than two members. This subsection may pose a threat to obtain a quorum at an AGM. Section 6(8) Where a unanimous resolution would have an unfairly adverse effect on any member, the resolution is not effective unless that member consents in writing within seven days from the date of the resolution. Section6(9) A body corporate or an owner who is unable to obtain a special or unanimous resolution may approach the chief ombud for relief. Section 7 Trustees of bodies corporate The current Act refers to Trustees in Section 39 and Section 7(1) is exactly the same as 39(1) Section 7(2)(a) states that-..the trustees..must receive and may consent to applications for subdivision.consolidation of sections and 7(2)(b) such consent must not unreasonably be withheld by the trustees This subsection is applicable if the floor area of a section is not increased In terms of Section 5(1)(h) a special resolution is required for the increase of the floor area.

8 8 If two sections are consolidated the floor area of one is increased and a special resolution is required. Section 8 Fiduciary position of trustees This is the current section 40 The wording of this Section corresponds to that of Section 40 Section 9 Proceedings on behalf of bodies corporate This is the current sections 41, 42 & 43 with no changes in the wording Section 10 Rules Sections 10(1)-(6) replace Section 35. The registrar is replaced with chief ombud 10(5)(b) The chief ombud must examine. as opposed to 35(5)(b) the registrar.is not required to examine 10(5)(c) If the chief ombud approves. of rules for filing must issue a certificate to that effect 10(5)(d).comes into operation on the date of issuing of a certificate. as opposed to 35(5)(c)..on date of filing Section 10(7) & (8) replace Section 27A- allocation of exclusive use areas Section 10(9) replaces Section 60(6)- rules decided by unanimous resolution under the 1971 Act-schedule 1

9 9 Section 10(10) replaces Section 60(7)-unaltered rules under the 1971 Act schedule 1 Section 10(11) replaces Section 60 (7)(b)-unaltered rules Schedule 2 in terms of 1071 Act Section 10(12) Any rules made under the Sectional Titles Act are deemed to have been made under this Act Section 11 Effect of quotas and variation thereof This Section is the same as Section 32(3) & (4) Section 32(3) is amended and 32(4) repealed Section 12 Expropriation of common property This Section is replacing Section 19(1) and (2). Section 13 Duties of Owners This Section is replacing Section 44(1) & (2)(a) Section 14 Insurance by owners This Section is replacing Section 45(1) & (3) Section 45(2) is repealed. Section 15 Recovery from owners of unsatisfied judgement against bodies corporate and non-liability of bodies corporate for debts and obligations of developers. This Section is replacing Section 47

10 10 Section 16 Appointment of administrators This Section is replacing Section 46 with the clear instructions what the administrator must do in Section 16(4) The administrator must a) convene and preside at the meetings required in terms of this Act and the scheme s rules; and b) lodge with the ombud i) copies of the notices and minutes of meetings; and ii) written reports on the administration process every three months or at such shorter intervals as the Magistrate s Court may direct. Section 17 Destruction of or damage to buildings This section is replacing Section 48 and is the same as Section 49(1) Section 18 Sectional Titles Schemes Management Advisory Council This is a new section describing what the council will do, how it will be compiled etc. Section 19 Regulations Section 20 Amendment of Act 95 of 1986 Section 21 Transitional arrangements Rules prescribed under the Sectional Titles Act must continue to apply to new and existing schemes until the Minister has made

11 11 regulations prescribing management rules and conduct rules referred to in section 10(2) of this Act Section 22 Short title and commencement 1) This Act is called the Sectional Titles Schemes Management Act, 2011, and comes into operation on a date fixed by the President by proclamation in the Gazette. 2) Different dates may be fixed in respect of different provisions of this Act.