By Ané de Klerk
As I was attending an Annual General Meeting (“AGM’) on behalf of a client last night, I noted a couple of actions and procedures that did not comply with sectional title legislation. This, despite the trustees of the particular body corporate having years of experience in their roles and the fact that they had employed a prominent managing agency who called and chaired the meeting on their behalf. It was clear to me that the non-compliance was certainly not done on purpose, but rather that there was an understanding in the industry that this was just the “normal” way of doing things, which motivated me to bring these to our readers’ attention to shed light on how these matters are meant to be dealt with in compliance with relevant legislation:
1. Not issuing voting slips
Despite the Prescribed Management Rules clearly stipulating that voting slips must be distributed to all members at the start of the AGM, many chairpersons still fail and/or neglect to do so and instead have members vote by show of hands. The matters bodies corporate are legally obliged to consider at a scheme’s AGM must be decided by ordinary resolution, which is entirely based on the members’ participation quotas (“PQs), rather than the number of votes cast. Therefore the number of hands in the air is irrelevant. While it may be possible, in very small schemes, for the chairperson to look up, see a hand in the air, look back down at a PQ sheet and add together the PQs of the hands counted, this still does not negate the other negative consequences of voting by show of hands, rather than by voting slip, namely:
- Members are less likely to vote objectively as they may feel pressure from others to raise their hands, especially if, for example, the chairperson of the board of trustees, all trustees, or the majority of owners have already raised their hands. Worse yet, in practice I have found most chairpersons ask members to raise their hands if they object to (rather than agree with) the proposed resolution, which basically amounts to asking members “who wants to go against the grain?” and puts those who wish to oppose a resolution in a very difficult social position – often leading to members choosing not to vote in accordance with their own wishes, desires or best interest.
- There is no accurate written record of how specific members voted. If the outcome of a vote is later disputed, any member could claim that their hand was or was not in fact raised when the votes were counted. A voting slip, on the other hand, provides written proof of members’ convictions at the time of casting their vote. A well drafted voting slip will also provide for members voting against a resolution to state why they chose to do so. This way, if an application is later lodged with the Community Schemes Ombud Service (“CSOS”) to declare a failed resolution deemed passed, the body corporate already has these reasons in writing and on hand, ready to submit to the CSOS together with the ST1 form. Such voting slips providing for members to state their reasons for opposing a proposed resolution will also serve as valuable evidence in any later application to the CSOS for an adjudication order declaring that a motion for resolution considered by a general meeting was not passed because the opposition to the motion was unreasonable under the circumstances, and giving effect to the motion as was originally proposed, or a variation of the motion proposed.
2. Not implementing the scheme’s 10 year Maintenance, Repair and Replacement Plan correctly
While most bodies corporate appear to be aware of, and know how to implement, the requirements of Sectional Titles Schemes Regulation 2, setting out the prescribed minimum amounts bodies corporate are required to keep in their reserve funds, some still seem to be misinterpreting or misunderstanding the legal requirements set by Prescribed Management Rule 22. In accordance with this rule, the scheme’s ten year plan is not an arbitrary document to be drafted once every ten years, but instead a “living” document to be updated and approved annually. It is a vital tool which trustees are legally obliged to use to determine the reserve fund contributions (often referred to as “reserve fund levies”) to be raised every year. The plan forms the foundation of, and must directly feed into, the reserve fund budget. These two documents must be in lockstep with one another.
3. Not using the agenda item “Give directions or impose restrictions referred to in section 7(1) of the Act” to its full potential
At most AGMs, when this mandatory agenda item comes up, the chairperson simply asks members “what is the maximum amount you agree trustees may spend on any one expense without first consulting the owners”, leading most owners to believe that this is the legal basis of section 7(1), when in fact section 7(1) does not mention a spending limit at all and instead has a far broader ambit. It states:
“The functions and the powers of the body corporate must, subject to the provisions of this Act (referring to the Sectional Titles Schemes Management Act), the rules and any restriction imposed or direction given at a general meeting of the owners of sections, be performed and exercised by the trustees of the body corporate holding office in terms of the rules.”
This means that the AGM agenda item in question gives owners the opportunity to, by ordinary resolution, impose any restriction(s) and give any direction(s) of their choosing to the trustees related to their performance of the body corporate’s functions and powers. For example, these could relate to the maintenance of common property; the control, management and administration of the common property, the appointment of agents and employees; the purchase or hiring of movable property; the establishment of lawns, gardens and recreation facilities; investment of funds; the enforcement of rules; the raising of contributions (or “levies”) and the operation of the scheme’s bank account (without limitation). When used to its full potential it can be used to guide trustees and prevent member frustration with the board, often occurring when members feel the trustees are not acting in accordance with the wishes and desires of members generally.
By avoiding these three mistakes you will not only be working toward legal compliance but also be taking steps toward effective, responsible sectional title scheme management. To discuss any elements of this article with the writer, don’t hesitate to reach out to us at info@theadvisory.co.za to obtain an obligation-free quotation for a consultation with Ané.
Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses. You can reach out to her via email at info@theadvisory.co.za to request an obligation-free quotation for assistance with correctly running community scheme meetings.
