Understanding proposed changes to the Sectional Titles Act

By March 15, 2021April 9th, 2021Administrative Management, Physical Management

Listen to Auren’s interview on Early Breakfast with Africa Melane, discussing what you need to know about the Sectional Titles Amendment Bill and its application to the management of sectional titles schemes in South Africa.

Africa Melane: The Sectional Titles Amendment Bill for 2020 was recently published. The Bill primarily is aimed at giving additional protections to tenants and other people who hold the lease of a property.

To help us understand with is contained in this amendment in this Amendment Bill is the Director of the The Advisory, Auren Freitas dos Santos. Auren, lovely to have you back on the show. Good morning.

Auren Freitas dos Santos: Good morning Africa, how are you doing?

Africa Melane: Good thank you very much, how are you this morning?

Auren Freitas dos Santos: I am very well, thanks.

Africa Melane: What are the main objectives, do you think, from this Amendment Bill as far as you’ve read it?

Auren Freitas dos Santos: I think the most important takeaway should be that this Bill only impacts the Sectional Titles Act, and has no impact on the Sectional Titles Management Act, which is the piece of legislation that you and I as owners in Sectional Title Schemes have an interest in.

The Sectional Titles Act and this Amendment Bill will deal mostly with technical conveyancing and registration aspects, and will have no impact on the day-to-day management of established Bodies Corporates.

All this Bill aims to do is to add some useful changes aimed at providing some flexibility for developers at the pre-establishment stages of the Body Corporate. So, if I heard the previous interview correctly, you were talking about sleeping. If someone is struggling to sleep, they can go and read the Sectional Titles Act, but it really won’t be of any interest to the average person on the street.

Africa Melane: What are some of those useful changes and flexibilities that have been introduced by the Amendment Bill?

Auren Freitas dos Santos: Things like the need for developers to have a meeting with a tenant in a building before he/she decides on sectionalising that building; he/she is now required to have a full discussion with the tenants, and to give them the Offer to Purchase the units that are going to be sectionalized, and that type of thing. Then, other issues are further amendments to make changes to sectional plans in respect of exclusive use areas, and issues regarding the Spatial Planning and Land Use Management Act that needs to comply with your certificate, etc. It is very high-level, technical things.

While we have each other on the line, I would rather highlight things in the current Sectional Title Schemes Management Act that owners should be aware of, and pay attention to, that I see get overlooked quite often.

Things like the requirement to have your Annual General Meeting (AGM) within 4 months after your financial year end is something that I see often overlooked. Also the ability to have Annual General Meetings via ZOOM, which you are entitled to do in terms of the Prescribed Management Rules under that act. I am sure that you have heard a lot of people struggling or arguing that they cannot have their Annual General Meetings because of lockdown or what have you. There is provision to cater for something like that in the Act, and if you look closely you will find that, which is quite useful.

Very important is the need to have a reserve fund and your written maintainence repair and replacement plan, which is something you and I discussed in December. Things like these are very important for owners to understand and apply.

And lastly, I think one of the most important things is the role that the Community Schemes Ombud Service (CSOS) has in levied debt collection, which is a very cost effective process that has been introduced, and allows Body Corporates to actually follow that route via the CSOS to recover outstanding levies, as opposed to spending a lot of money in court.

Africa Melane: When it comes to that Annual General Meeting, I am sure as we are all meeting via ZOOM, Microsoft Teams, and applications of that nature – that would suffice, right? Legally, if I chair a Body Corporate for example, or a Sectional Titles Scheme, I can then call for an AGM and ask for it to happen on a virtual basis. That should suffice, it should meet all the legal requirements I imagine?

Auren Freitas dos Santos: Correct. The question that needs to be asked is: is the method of the meeting available to everyone, and does it enable everyone to participate in the meeting? Those are your two most important questions. So if everyone accessibility to internet, and everyone is able to participate in the meeting, you can have it over the phone, WhatsApp, ZOOM – whatever works for you – even email, as long as it is practical and allows for participation by the owners.

Africa Melane: We cannot stress enough the importance of this meeting. I have a friend of mine who has bought into a Scheme of such a nature, and she had to fork out R36,000 in special levies because the Body Corporate had not done what is legally required of them, which is to keep up an amount – obviously a reserve – which will allow them to attend to emergencies. There was a new committee of people that were elected, and they realised: “Wait a minute, we are down to R0, so we need to find some money!” And all of a sudden R36,000 had to be found by her.

Auren Freitas dos Santos: That, again, is one of the most important things of the Sectional Title Schemes Management Act that has been introduced, is to avoid special levies going forward. If a Scheme is run correctly and they follow the prescribed minimums for their reserve fund as prescribed in the Act, and have a well prepared maintenance plan, they should never have the need for special levies going forward. That’s why it is important that owners rather look at those provisions in the current Act, as opposed to worrying about the Sectional Titles Bill that we have discussed in the beginning of this meeting.

Africa Melane: Indeed. But having said that, there are some useful changes and flexibilities being introcued in the Sectional Titles Amendment Bill, which hopefully the minister will then be able to present to parliament before the end of the year.

Auren, thank you very much, as always, for your wonderful insight.

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