By Auren Freitas dos Santos
In my experience, some of the most costly and antagonistic disputes have involved sectional title schemes consisting of less than four members.
The reason why small sectional title schemes are more susceptible to unpleasant confrontations is due to the fact that depending on the relationship between the members, most of the important collective body corporate decisions end up in a deadlock.
For example, should an owner in a sectional title scheme consisting of three members wish to extend the boundaries or floor area of her section, she will need to obtain a special resolution, which means that all three members would need to support the special resolution. Should there be any animosity between one or more of the members, it is clear that this will have a direct impact on the owner’s ability to extend her section. However, there are other examples of more mundane decisions, such as the approval of budgets, which have led to nasty disputes.
Individual owners in smaller schemes have far more influence on collective body corporate decisions and it is for this reason why, in my experience, the vast majority of schemes that are placed under administration are schemes consisting of less than four members.
Placing a small scheme under administration allows the administrator to remove control of the affairs of the body corporate from those in whom it should be vested and leaves the collective body corporate decisions in the hands of an unbiased individual. However, the appointment of an administrator deprives the body corporate of its powers and functions, and therefore this option should only be considered in exceptional circumstances.
The notion that good fences make good neighbours couldn’t be more true in small sectional title schemes. I believe that the only way to guarantee the continued functionality of small schemes is to put into place at the very outset a clear set of management and conduct rules containing certain preemptive provisions.
These provisions could contain, for example, pre-approvals of certain collective body corporate decisions such as the extension of sections, creating and conferring rights of exclusive use and enjoyment and the appointment of executive management agents. By agreeing to pre-approve certain decisions while relations are good, members can ensure that when things inevitably turn ugly, the body corporate can continue to function in an orderly fashion. I often equate this approach to an antenuptial agreement signed between partners before marriage.
So whether you are currently a member of a small body corporate or whether you are considering purchasing a unit in a small sectional title scheme, I strongly suggest that you consider inserting preemptive provisions into the scheme’s rules while this is still a realistic option. Not only will this ensure the smooth running of the affairs of your body corporate, but it will also greatly minimise the possibility of costly litigation.
Specialist Community Scheme Attorney (LLB, LLM), Auren Freitas dos Santos, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law.