What is Sectional Title?

A sectional development scheme (generally referred to as a scheme) provides for separate ownership of a single property by individuals. All sectional title schemes fall under the control of the Sectional Titles Act, No.95 of 1986, which came into effect on 01stJune 1988.

Who owns what?

When a persons purchases into a scheme, once transfer has occurred, the persons acquires a section and an undivided share of the common property.  These are collectively known as a unit, but could also be a garage or a storage room. However, in numerous schemes external rooms and garages may not be registered sections but duly form part of the common property, in which the owner generally has exclusive rights of usage. A section extends from the mid-point of outer or dividing walls, the lower part of the ceiling and upper part of the floor.

What is meant by common property?

This is referred to any part of a scheme that does not form part of a section. Some examples would be:- outer walls, foundations roofs, driveways, gardens, swimming pools, corridors, lifts, entrance foyers, parking bays, club houses, tennis courts, etc. As previously mentioned, some parts of the common property are designated as exclusive use areas.

What is an exclusive use area?

This is referred to an area which a specific owner does not own but is entitled to the exclusive use thereof. Some examples:- gardens, patios, parking bays but could also include a garage or storeroom.

Who controls the common property?

The common property is controlled by the body corporate. There are no exceptions to this rule. The practical implication of this is that even though parts of the body corporate are exclusive use areas, they are still controlled by the body corporate, and therefore subject to the rules and regulations of the scheme. An example:- prohibiting braai’s in exclusive

use areas, limitations on walling to be erected or whether plunge pools are allowed.

What is the body corporate?

The body corporate is the collective name given to all the owners of units (sections) in a scheme. The body corporate literally runs the scheme and is directed by the board of trustees. All members of a scheme are entitled to vote at all meetings provided they are not in arrears, unless under special circumstances. Unless otherwise determined by the

developer at the time the register was opened, or subsequently by the body corporate by means of a special resolution, an individual members voting power is governed by the members percentage ownership of the entire scheme. This percentage is also known as participation quota.

Who makes the rules?

At the inception of a scheme, management and conduct rules are established. These rules form Annexure 8 and 9 to section 35(2) of the 1986 Sectional Titles Act and may be amended by the developer before the registrar is opened, As the name suggests, the management rules control the running of the management of the scheme, while the conduct rules illustrate the guidelines for the conduct of owners, tenants, occupiers and their guests.

Can the rules be changes?

YES. The body corporate can change or amend the rules, provided these changes are not against the intentions or spirit of the Sectional Title Act. The procedure which must be followed before the rules can be changed is as follows:- Proposed changes must be put to the members of the body corporate at a General Meeting, at which members will be

able to discuss the proposed changes in an open format before being asked to vote for or against the changes.

Amendments to management rules require a unanimous resolution by all owners, while conduct rules can be changes by way of a special resolution. Such amendments will not become effective unless registered at the Deeds office.

All meetings are to be convened as per the Sectional Title’s Act.

What is the levy?

The costs incurred in running a scheme have to be paid by the body corporate. Some of these costs include:-

- Rates, taxes and other charges.

- Insurance premiums

- Repairs and maintenance of the common property

- Wages and salaried employees

- Water and electricity used in the common property

The above is used to illustrate the basic charges and excludes other items which are dependant on the specific requirements of a particular scheme; some of which could include but are not limited to Management Fee, Security, Meter readings, garden service, general cleaning, etc.

These costs are paid by the individual owners in the form of a levy, which is calculated in accordance with the participation quota of their respective unit, unless the developer at the time of opening the register, or the body corporate by means of a special resolution, allocated different share value to a particular unit.

Costs incurred in the upkeep of exclusive areas must be recovered from the user of the area. In addition to the above, the body corporate is obliged to establish a fund for future maintenance (i.e. painting) and unexpected expenses. Although there is no specific

rule to the value of the fund, an effectively controlled body corporate will ensure the fund is equal to the specific needs, size of the scheme. A standard guideline would allow for 2 x months of levies collectable to be set aside. Should the excess funds become excessively large the Act does not allow for monies to be disbursed to the owners but can be offset against to subsidise future levies or to improve common property.

The timeous collection of levies is critical in the effective management as well as cash-flow management of the body corporate; and generally payable by the 7^th  of each

month in advance.

How is the levy calculated?

At the inception of the body corporate and again before the AGM, the trustees have to prepare a budget for the following year. Before the AGM, the proposed budget is sent to all members of the body corporate for their review, consideration and subsequent discussion at the meeting. The body corporate can either accept the budget or can request for changes to be made. Once the budget has been approved, the total annual costs are then divided into monthly amounts and then each owner is then “levied” a monthly amount based on their participation quota of the scheme.

Can the levy be increased at other times?

YES. In an emergency, the trustees can impose a special levy to cover expenses of an unforeseen nature, in addition to which the body corporate can approve a special levy to allow for improvements to the common property.

What are managing agents?

The management and administration of Sectional Titles schemes is considerably time consuming as well have regulated in terms of the Sectional Title Act.

Occasionally, the body corporate and trustees undertakes the entire task, but unless the body corporate is unusually specialized with knowledge and expertise within this field, this is never advisable. The major of bodies corporate thereby decide to appoint a managing agent, which is usually a company or close corporation which specializes in this aspect of  sectional title administration. The managing agent are governed in terms of the Sectional Title Act 95 of 1986 and must be registered with the Estate Agents Affairs Board and hold a fidelity Fund Certificate issued by the board.

Some basic functions performed by the managing agents include: - sending out of levy statements, collection of levies and all other monies due by owners to the body corporate. They keep books, recover unpaid debts, prepare the annual budgets, arrange for quotes for repairs and maintenance, send out notices and generally assist the trustees with the numerous time consuming tasks which arise in administrating a scheme.

To protect and guide the body corporate in accordance to the Sectional Title Act 95 of 1986, which entails the managing agent have a sound knowledge of the Act and Rules. A

professional managing agent will save the body corporate a lot of trouble, time and expense. The effective management of a scheme is paramount in the in securing the maintenance of the property as well as maximizing returns for individual owners.

The managing agent will other than the basic function listed above; liaise with all owners pertaining to matters relating to the body corporate as well as their specific levy accounts. The assistance and guidance of the trustees in terms of the Sectional Titles Act as well as cash flow forecasts and performance to budgets are fundamental in the management process.

Duties and functions of the body corporate?

The Sectional Titles Act 95 of 1986 defines the functions and powers of the body corporate, which includes but limited to the following:-

* Establishment of a fund to cover all repairs, maintenance costs, rates and taxes, insurance premiums, management and administration fees.

* To require owners to contribute to the fund, usually in the form of a monthly levy in accordance with their participation quota (PQ), or value if this is different from the PQ. * * An owner who has the benefit of an exclusive use area is required to make an extra contribution to the fund which is sufficient to cover the costs applicable to the exclusive

use area.

* To open and operate a bank account or accounts in the name of the body corporate.

* To keep the scheme insured to the full replacement value of the buildings.

* To ensure the common property is kept in a good state of repair.

* In general, to control, manage and administer the body corporate for the benefit of the owners.

* Where applicable, to establish and maintain gardens on the common property.

* If so required, to borrow money to carry out the functions entrusted to the body corporate and to invest surplus or reserve funds.

* By appropriate resolutions, to amend or add additional management and conduct rules and to make sure the amendments are submitted to the Registrar for registration.

* To carry out improvements of a luxurious or non-luxurious nature by means of the appropriate resolutions.

* Appointment of an auditor, or in the case of a scheme of less than ten units, an accounting officer.

How do I become a member of the Body Corporate?

Every owner who has bought into a particular Sectional Title Scheme automatically becomes a member of the body corporate once the effective transfer has taken place of their specific unit.

Who may be a trustee and how are trustees elected?

The number of trustees is determined from time to time by the members of the body corporate in a General Meeting, but may never be less than two. The trustees are elected at the first annual general meeting and each subsequent annual general meeting and hold office as such until the next succeeding annual general meeting, but are however, eligible for re-election.

Nominations by owners for the election of trustees at an Annual General Meeting must be given in writing, accompanied by the written consent of the person being nominated, and must be received at the domicile of the body corporate not later than 48 hours (Note for Knightsbridge the House Rules stipulate five days) before the meeting.

A trustee does not have to be an owner provided that the majority of trustees are owners or spouses of owners and provided that the managing agent in that capacity may be a trustee.

Do Trustees or a Managing Agent have the right to enter my section?

Section 44 (1) reads as follows about the duties of owners:

(1) An owner shall-

(a)   permit any person authorised in writing by the body corporate, at all reasonable hours on notice (except in case of emergency, when no notice shall be required), to enter his section or exclusive use area for the purposes of inspecting it and maintaining, repairing or renewing pipes, wires, cables, and ducts existing in the section and capable of being used in connection with the enjoy of any other section or common property, or for the purposes of ensuring that the provisions of this Act and the rules are being observed.