After a number of years of deliberation and delay, the Sectional Titles Schemes Management Act 2011 has been promulgated and subsequently signed into law. The Act contains a number of far reaching changes in the relationship between the scheme, developers and the members of the body corporate of which every owner of a unit in a scheme will need to become familiar with.

General Changes

While sectional title schemes specifically forecast and budget for the future (if managed correctly), there has not been, until now an obligation as to a prescribed minimum amount that must be set aside for this purpose. Issues surrounding the lack of obligation have led to one of most acutely identifiable changes in the rules being the establishment of a reserve fund for all schemes.

The reserve is to be funded by an increase in levies (the current suggested figure being 25% of the current levy of the scheme) and will be kept by the body corporate for the future maintenance of the scheme. The idea behind this is to keep consistency of the levy payments by reducing the need for schemes to raise special levies when faced with an emergency or unexpected major cost and should be seen as a positive step, provided the scheme can effectively manage these funds.

Rules surrounding proxies at meetings have been tightened and a person will now no longer be allowed to proxy for more than two other members at a meeting. The Act has formalised the obligations of the scheme to keep track of any changes in ownership of a unit and places the obligation on the scheme to ensure that the rules are presented to any new owners or tenants entering the scheme.

Schemes will now in addition be required to formulate a ten year plan for the scheme and developers who deviate from original plans may find themselves facing the wrath of a body corporate with new powers to oppose such deviations.

Dispute Resolution

In the past, the only realistic avenue for the settlement of disputes in sectional schemes has been through costly and time consuming litigation. This has often placed effective remedies out of the reach of the common unit owner often resulting in injustices.  The Act deals with the question of disputes in schemes through the use of the Community Schemes Ombud Service (CSOS). Any person may now apply to the ombud to assist them in disputes whether between unit owners or the scheme as a whole. The ombud’s powers are limited to some extent but currently encompass matters concerning financial issues, behavioural problems, governance as well as the relationships with managing agents and disputes regarding construction work on the private or common areas of the scheme.

The ombud will in addition to the resolution of disputes be responsible for general monitoring of the level of governance and quality of management in schemes as well as provide updates and education to members of the public informing them of their rights and duties in terms of the Act.

Pro Rata Levies

The new Act allows for the provision of a pro rata payment of special levies which provides for the situation where a special levy has been raised and is being paid off by the unit owner in instalments. When the unit is transferred, the pro rata amount of the levy not paid off may now be transferred to the purchaser who would then be obliged to pay off the remainder of the levy. The effect of this is certainly important in that it will be incumbent on sellers and estate agents to ensure they are up to date with the special levy arrangements between the scheme and members as well as ensuring that all prospective purchasers are informed in full about the situation. Since this provision is brand new, it remains to be seen exactly how it will be played out but, as in all cases, it is best to address the matter with all prospective purchasers before an agreement is concluded in order to avoid disputes during and after transfer.

Conclusion

The changes are certainly important and far reaching but with proper due process and management body corporates are now armed with a structured framework to manage their schemes and should in fact experience fewer problems going forward once the new rules have become routine. Further uniformity should bring more certainty to the general public as to functioning of schemes and provide a boost to good governance.

B. White – ESI Attorneys

THE SECTIONAL TITLES SCHEMES MANAGEMENT ACT A GAME CHANGER