Sectional Title Living

Sectional Titles Amendment Bill signed off

The Sectional Titles Amendment Bill has now been signed off by the Portfolio Committee for the Department of Rural Development and Land Reform and would soon become law (25 August 2010).

Deadline for submissions: Friday 13 August 2010, no later than 17:00.

Public hearings at parliament: Tuesday 17 and Wednesday 18 August 2010.

The Sectional Titles Amendment Bill (Download SectinalTitlesAmendmendBill2010) involves changes to three definitions and sections 5, 11, 12, 14, 15, 24, 25, 27, 29, 37, 44, 54 and 60 of the Sectional Titles Act. Download Memorandum_on_the_Objects_of_STAB

Levy increase to fund Sectional Titles and Community Ombud

Wondering how the Ombud Service will be funded? Section 22(1) of the Community Scheme Ombud Services Bill [B21-2010] states among others:

(b) levies collected from community schemes with the approval of the Minister;

(c) fees for services rendered based on cost recovery;

What is meant by a ''community scheme''? Section 1 of the same Bill, among the definitions (emphasis added):

any scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings, including but not limited to a sectional titles development scheme, a share block company, a home or property owner's association, however constituted, established to administer a property development, and a housing scheme for retired persons

Written comment is invited about both the Sectional Titles Scheme Management Bill [B20-2010] Download Sectional Titles Schemes Management Bill and the Community Scheme Ombud Services Bill [B21-2010] Download Community Services Ombud Service Bill. Deadline 12:00 on Friday 3 September 2010 (Casual Day) and public hearings about the Bills will be held in Parliament on 8 and 10 September 2010.

The Sectional Titles Scheme Management Bill [B20-2010] will amendment or repeal (pp. 16-22) parts of the Sectional Titles Act, No 95 of 1986.

Purchasing life rights

Entering into a life rights agreement is entirely different from buying in a sectional title scheme.

The Housing Development Schemes for Retired Persons Act 65 of 1988 serves to protect elderly people when investing in a retirement village that is not a sectional title scheme. The Act specifies what the offer to purchase life rights must contain. By signing a life right agreement one commits to pay the purchase price and consent to having the right to live in the property for the remainder of life, or until you leaving the village. In the case of death or leaving the retirement village a percentage of the original contribution is retained. [Biccari Bollo Mariano Attorneys, October 2010 SS 7/10] In contrast to ownership of part of a sectional title retirement village, there is no purchase of actual real estate — life right entails only the right to live in a specific unit, the ownership is retained by the management company — the basic concept is that an individual pays a sum of money in respect of a specific unit and receives the right to live in that unit for the remainder of their life [Sifiso Msomi of Shepstone & Wylie's property department]. Life Rights assume the form of a lease, not a form of property ownership — the occupant (the agreement holder) has no rights to the title in land, only the right of use. The right to life is the fundamental right and property rights are an extension thereof.

There SHALL be reasonable provision for maintenance

Owners of a sectional title scheme have a collective duty to maintain the common property. It is not a matter of owners could if they have the financial means. Unlike freehold property, the maintenance of the collectively owned property is a collective obligation.

Section 37(1)(a) of the Sectional Titles Act (95 of 1986) is quite clear in this regard. The prescribed management rules appended to this act, Rule 36 on the annual financial estimate, states “(1) Before every annual general meeting, the trustees shall cause to be prepared an itemised estimate of the anticipated income and expenses of the body corporate during the ensuing financial year, which estimate shall be laid before the annual general meeting for consideration in terms of rule 56 hereof. (2) The estimate of expenses referred to in sub‐rule (1) shall include a reasonable provision for contingencies and the maintenance of the common property.” (emphasis added).

The Sectional Titles Schemes Management Act, No. 8 of 2011, repeals section 37 of the Sectional Titles Act, and replaces (section 3) it with, the functions of bodies corporate, which include interalia:

• (1) A body corporate must …

• (a) to establish and maintain an administrative fund which is reasonably sufficient to cover the estimated annual operating costs—
• (i) for the repair, maintenance, management and administration of the common property (including reasonable provision for future maintenance and repairs);
• (b) 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;

The exisitng prescribed management rules are retained as per Section 10(12) of the Sectional Titles Scheme Management Act, No 8 of 2011: http://www.info.gov.za/view/DownloadFileAction?id=147401

Local authority billing deviates from naming protocol of sectional titles schemes

Why does the City of Johannesburg billing and adminstration not adhere to section 36(3) of the Sectional Titles Act, 95 of 1986 (as amended), which states:

The body corporate shall be designated as 'the Body Corporate of the ...............................(name)............................Scheme, No ..............., such name and number to be inserted being the name and number referred to in sections 5 (3) (b) and 12 (1) (a), respectively.

The Roodepoort Record reports [Download Roodepoort Record 1 July 2011 pp1+2 CoJ Billing Mess] on billing drama pertaining to, among others, misnaming a specific sectional title scheme. Section 12(1)(a) of the Sectional Titles Act indicates that the Deeds Registrar shall "register the sectional plan and allot a distinctive number to it", which is the subsequent number to the last registered in a particular year at the Deeds Office concerned. For example, the first scheme registered in 2011 would have been Name XXX (SS 1 / 2011).

Section 2(4) of the new Sectional Titles Scheme Management Act, No 8 of 2011, reiterate the above by stating: “The body corporate must be designated as the ‘‘Body Corporate’’ and must have the name and number contemplated in sections 5(3)(b) and 12(1)(a) of the Sectional Titles Act, respectively”.

Surely the local authory billing management ought to know this. Simple liaison with the Deeds Office would ensure correct billing.

My neighbour causes nuisance

Smoke, noise, vibrations, dust, odours, light, blockage, animals, children, noxious fumes ... whatever the nuisance, what may you do; or expect the trustees of a sectional scheme to do regarding unreasonable interference?

The Sectional Titles Act (STA), No 95 of 1986, §44(1)(d+e), as well as the Sectional Titles Schemes Management Act, No 8 of 2011—that would repeal sections 37 to 48 of the STA—§13(1)(d+e) reads "an owner must":

• (d) use and enjoy the common property in such a manner as not to interfere unreasonably with the use and enjoyment thereof by other owners or other persons lawfully on the premises;
• (e) not use his or her section or exclusive use area, or permit it to be used, in a manner or for a purpose which may cause a nuisance to any occupier of a section;

There is both a duty not to cause a nuisance and a right not to be unnecessary disturbed.

But what consitutes unreasonable interferance? There are no definitions, the common law applies, namely material interference an ordinary person would have reason to object about. It does not make provision for unusual aversion or a medical condition of intollerance. Professor Graham Paddock elaborates on this matter as it pertains to smoke nuisance and the Tabacco Product Control Act in a video on smoking in sectional title schemes. Download Paddock_Smoking

The trustees of a sectional title scheme can only be expected to intervene if a rule exists that they are obliged to enforce. If a rule does not apply to a particular situation considered a nuisance, an owner or occupier has to tke the matter up with the source of the perceived nuisance. The complainant may pursue prescribed managment rule 71 if the other party is not willing to accommodate.

However, in high density residential schemes occupants ought to have robustness and be prepared to tolerate. Quite interesting, the word robust originates from the Latin robustus, meaning "strong and hardy," originally "oaken," from robur, robus "hard timber, strength," also "a special kind of oak," named for its reddish heartwood.

Sharing costs through sectional title ownership

A substantial advantage of owning property in a sectional title scheme, in contrast to free-hold property where everything belongs to the owner, is that ownership of everything other than the your personal section is shared ownership. The title deeds usually reads something to the effect of:

A unit consists of: (a) ...; and (b) an undivided share in the common property apportioned to the said section in accordance with the participation quota as endorsed on the said section plan.

This reality is possibly the biggest problem of sectional title ownership, in that owners appear to perceive that some entity other than themselves are responsible. This 'b' part of the title deed encompass membership of the body corporate of the scheme. The Sectional Titles Act (STA), No 95 of 1986, §36(1), as well as the Sectional Titles Schemes Management Act, No 8 of 2011—that would amend section 36 of the STA—§2(1) reads:

With effect from the date on which any person other than the developer becomes an owner of a unit in a scheme, there shall be deemed to be established for that scheme a body corporate of which the developer and such person are members, and any person who thereafter becomes an owner of a unit in that scheme is a member of that body corporate.

This is an important issue that Andrew Buttress fails to address in his message to the Roodepoort Record (Download Is_threre_a_loophole_in_the_law-loss_of_financial_control_Rdp_Record_22July2011). The abovementioned acts outline the responsibilities of the body corporate, which is elaborated upon in the prescribed management rules (PMRs). It is important to note that a body corporate may make use of the services of a managing agent, but is not obliged to, they owners may self administer. PMR 46 outlines what the appointment, powers and duties of a managing agent (MA) should entail. In my opinion MA is a misnomer, it should be administrative agent.

The biggest 'loophole' in sectional title is owner apathy. There are many checks and balances in place to preserve the rights of owners, but few owners show any real interest. What Constantia Sectional Title Management did is criminal, but it does not absolve the trustees and owners of schemes affected from their responsibility.

Sectional Titles Amendment Regulation 2011

Government Gazette No 34639, Notice No R 805, 28 September 2011: Download Gg34639_nn805

Amendments to the following Regulations:

• 5 - common boundary between an exclusive use area
• 6 - boundaries of the sections and common property
• 10 - substitution of the land under a mortgage bond
• 13 - Insertion 13A: replacement schedule for lost or destroyed schedule of servitudes
• 15 - changes whenever the registration of a sectional plan is cancelled
• 16 - issue and replacement of certificates
• 25 - Insertion 25A: replacement of documentation
• 28 - transfer of exclusive use areas
• 30 - management rules may only be amended once there are 30% owners other than the developer
• 34 - sectional morgage bond forms

Amendment of Annexure 8 - Rules: 

• 31 - Insertion of 2A: budget shall coincide with the financial year of the scheme
• 31 - subrule 4 deleted (special levies)
• 36 - itemised estimate of income and expenditure for approval of AGM
• 39(2) - transmitted by facsimile or electronic mail
• 54(5) - inadverted ommision not invalidate supplemented
• 68(v) - purpose for which an exclusive use area elaborated (a-d)
• 71(4) - chief registrar of deeds shall upon written application and subject to payment of the prescribed fee appoint an arbitrator in writing

May a business be based in a residential sectional title section?

The running of a business from home appears to be a recurring issue in sectional title communities. Section 44(1)(g) and 2(a+b) of the Sectional Titles Act, 95 of 1986—quoted below for convenience—states clearly that a section may not be used for business purposes if it is registered for residential purposes. However, it also states that with the written consent of all owners a business may indeed be run from a section. It further adds that if the refusal is deemed unfairly prejudicial, unjust or inequitable the owner may approach the Court for a ruling.

People raise arguments such as security risks; traffic congestion; abuse of common property and/or collective resources; an owner not personally having granted consent; and being illegal to oppose or question the running of a business within a sectional title scheme. A more appropriate argument would be compatibility of permitted uses allowable. The occupants of a section may, for example, through the rules of the scheme be permitted to conduct one or more home accessory activities with certain provisions specified. With regard to compatibility, it is considered important to consider local authority zoning.

The Wikipedia states that the primary purpose of zoning is to segregate uses of property. Zoning is controlled by local governments and used for town planning to preserve the "character" of an area and to prevent new developments from contrasting. The emphasis of zoning land use, for example of the Buffalo City Municipality, is on the coordinated and harmonious development of the city in such a way that it will effectively contribute to the health, safety, order, beauty and general well-being of the city. The Wikipedia identifies five major zoning categories, namely: residential, mixed residential-commercial, commercial, industrial and special. Each zoning category may have a number of sub-categories. A commercial category may physically sub-divide zones for small-retail, large retail, office parks, etc. An industrial area may be separated warehousing, light assembly and heavy manufacturing; and each area may have designated limit for noise emissions.

With regard to the issue of legality of conducting a business from a residentially zoned dwelling three variations exists:

1. No permission is required from the local authority for legally conducting a micro business, such as a one-person show or part-time business. Most South African town planning schemes makes provision for the conducting of a profession or occupation from home; however, it is necessary to differentiate between a free standing property and a sectional title section. Certain criteria exist with regard to a “home enterprise”, of which some would not apply to a sectional title scheme.
2. If a business owner wishes to exceed the basic requirements the owner must in addition to obtaining consent apply from all owner of the sectional title scheme concerned also apply to the local authority for consent, permission or its discretion.
3. Where an owner wants to convert the existing residence to a business building, the owner is prohibited from demolishing the structure without first obtaining permission from the local authority. This kind of business would not be permitted in a sectional title scheme. However, a “dwelling office”—where the section is converted 100 percent internally, without the external appearance being changed—might with the necessary approval and satisfying certain pre-determined conditions, be permitted.

Extract from the Sectional Titles Act, 95 of 1986

Section 44(1)(g) 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 nor 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.

Section 44 (2)(a) Any owner who is of the opinion that any refusal of consent of another owner in terms of the proviso to subsection (1)(g) is unfairly prejudicial, unjust or inequitable to him, may within six weeks after the date of such a refusal make an application in terms of this subsection to the Court.

Section 44 (2)(b) If on any such application it appears to the Court that the refusal in question is unfairly prejudicial, unjust or inequitable to the applicant, and if the Court considers it just and equitable, the Court may with a view to bringing the dispute to an end make such order as it deems fit, including an order that it shall be deemed that the requirement stated in the proviso to subsection (1)(g) is met, an order that the provisions of section 14 of this Act which the Court deems appropriate, shall be applied with reference to the amendment of the registered sectional plan in question, any other supplementary order as the Court deems fit, and an order concerning costs as it deems appropriate.