Buying into a sectional title scheme requires more than understanding just your own finances.
You’re ready to buy your first home, you’ve saved up the deposit, got financing approval and done your homework on the area where you want to live. The perfect home comes up in a sectional title development and you’re ready to make an offer – but your homework is not yet complete.
What many new homeowners don’t realise is that when they buy into a sectional title scheme such as a flat, townhouse or cluster development, they are obliged to live by a set of rules and voting decisions by the majority of owners or members; moreover, they are obliged to comply with decisions taken by the trustees of the body corporate who represent all owners. These trustees set the levies and determine the conduct rules by which everyone has to live, which makes them fairly powerful. Although there are provisions contained in the Sectional Titles Act which deal with the conduct of trustees, a powerful group can become untouchable.
Deon Botha of Rentmaster which deals with managing credit and legal risk for residential property investors, says structures can get hijacked by a small group of insiders who manipulate it according to their own agenda and stonewall owners. “I see frequently the developer retaining some units for his own investment, making him the king-pin,” says Botha.
Mervyn wrote to me to complain that the trustees of his sectional title development do not implement processes and procedures according to the Sectional Titles Act.
“The main culprits are businessmen with their own modus operandi and agenda who are corrupt and are intimidating owners with litigation using body corporate funds. They have now become untouchable and are continually being voted in through proxies from their friends and associates and have been since 2010,” says Mervyn, who adds that under their stewardship, levies have mounted to approximately R4,000 per month and special levies have been implemented since 2010, the latest being for the replacement of the lifts in the building.
Removing trustees can be tough
David Warmback of Shepstone & Wylie Attorneys says that while there are procedures that one can follow under the Sectional Titles Act to remove trustees, this can be practically difficult to implement with larger developments.
“The mechanics of meetings, quorums and voting is a bigger challenge than in a much smaller body corporate with much fewer members,” says Warmback. The only way to get rid of a trustee, in between Annual General Meetings, is to call a general meeting of members of the body corporate and obtain a majority vote in favour of such removal.
“An owner cannot merely convene a meeting of owners on his own, and the trustees will presumably be quite reluctant to agree to the meeting when they realise its purpose,” says Warmback. He advises Mervyn to create a platform in which to discuss the matter with fellow owners and to get owners to vote by resolution.
Under management rule 53 of the management rules applicable to all bodies corporate, the trustees are required to call a special general meeting if supported by owners of 25% of the units. In this case, where the scheme comprises 208 units, Mervyn would need about 52 owners to support a request for a special general meeting. This could be a challenge if the trustees together own a significant number of units and other owners are not particularly interested.
Warmback says one also has to consider the issue of a quorum, as no business may be conducted at a general meeting unless there is a quorum of owners holding at least 20% of the votes present. “This would be about 42 people, based merely on numbers, not votes. This could also be difficult to achieve, particularly if many owners are apathetic,” says Warmback.
Rules to live byLiving in a sectional title complex means that you and your neighbours have to live by a set of rules. When you buy into the complex, you effectively agree to stick to these rules. Deon Botha of Rentmaster says much of their work is around addressing sectional title disputes. “The bulk of disputes are unpaid levies, which is a tricky area. Just because someone isn’t paying doesn’t mean there’s a dispute. They could just be delinquent in honouring their financial obligations or they could be in financial trouble,” says Botha. Apart from levy issues, much of Botha’s work arises from the usual disputes of people living on top of one another, like loud parties at 2am, barking dogs and people taking your parking bay. “We call this the “triple-P” – pets, people and parking,” says Botha. Other common disputes are around infringements on common areas, for example, where your neighbour has planted a huge tree in the common area blocking your view. Disputes also arise out of illegal extensions to units as well as running illegal businesses from home. Other examples include damage to property caused by a neighbour’s failure to maintain his property, such as a leaking water pipe that drips through to the flat below causing damage to cupboards and carpets. “The list is endless but it is important to distinguish between “disputes” and “issues”. Issues left unattended become disputes. The managing agents are supposed to deal with issues, but much like rental agents, their management capabilities are frequently very thin. They are part of the problem by allowing issues to ferment,” says Botha. |
Considering the arduous task of calling a general meeting with the correct quorum, and obtaining a positive vote, Warmback says an easier route to get rid of trustees would be at the next Annual General Meeting of the body corporate when new trustees will be appointed.
“Mervyn will have to do a lot of work to canvas his own candidates. He will also have to ensure that other owners are not apathetic but in fact vote or provide proxies so that there is a good chance of voting in the “good” trustees,” says Warmback.
Botha says compulsory arbitration could also apply under management rule 71 that provides that when there is a dispute between the body corporate and an owner, or between owners, arising from the Act or the rules, it must be determined by arbitration, unless an interdict or other form of urgent relief is required.
“The steps are to formally put them to notice and refer the dispute to arbitration if there’s no performance,” says Botha who adds that possible obstacles include the trustees refusing to attend the hearing, or frustrating the process by not agreeing to the choice of arbitrator which must be by consent.
The deeds office can however appoint an arbitrator if parties cannot agree. “This is not ideal, but the Department of Human Settlements is busy putting the new Community Schemes Ombud in place to provide structural support,” says Botha.
Botha recommends that when starting a process against the trustees one needs to remove the anger and emotion. “Broad sweeping statements of corruption and misconduct needs to be distilled down to clear breaches with solid substantiation,” Botha recommends narrowing it down to the most important topics and to put the trustees to terms on very specific failures in their duties. “Mervyn should start creating a proper paper trail if not already done,” says Botha.
How to assess your body corporate
Considering how difficult it is to remove trustees on a body corporate, it is best to do your homework before you buy into the complex.
Do they stick to the rules?
Scrutinise the constitution of the complex and the quality of management in place. See if they apply good governance by how often they hold trustee meetings and the quality of the minutes of these meetings. Also find out if trustees are rotated and if the nomination/election processes are in line with the Sectional Titles Act.
Are they solvent?
The continual use of special levies each year should raise a red flag. Also look at the history of levy increases to see if they are excessive. Establish the situation with bad debts in terms of arrear levies –unpaid levies can put a sectional title scheme into financial difficulty.
Who is running the complex?
Ask to see the financials of the body corporate and find out who is running it – is it the residents themselves or are they assisted by a third-party managing agent? Try and speak to current owners to find out if they’re satisfied with the running of the complex. If it’s being managed by a management agent, do some homework on that company – do a quick Internet search, or check out a site like HelloPeter.com to try find out if there are any problems.
Once you buy, get involved
Make sure you read all correspondence forwarded by the trustees or the managing agent, and attend and participate at all general meetings, including AGMs . Your vote can only count if you participate. Make sure you understand the financial health of the body corporate and request to see the financial statements of the complex. Become familiar with the Sectional Titles Act and body corporate rules which can be done through various publications which are aimed at sectional title owners and trustees. Remember that you’re allowed to attend any of the meetings of the trustees.
Hello. How can a board of trustees go about removing a trustee? we are the developer and hold the majority vote but this trustee is causing issues with residents who are now unhappy with her. appreciate a response .
This should be in the rules of the body corporate. They would contain provisions as how to remove a trustee.
There is no generic answer as each body corporate or homeowners’ association has its own set of rules.
As per the Sectional Titles Management Act (STMA) regulations, my viewpoint aligns with the stipulation that a trustee or trustees can be removed from office through an ordinary resolution at a general meeting. This process requires the specific intention to vote on the proposed removal, and such intention must be explicitly stated in the notice convening the meeting. The STMA regulations provide a clear framework for the removal of trustees, emphasizing the importance of transparency and prior notification to ensure a fair and informed decision-making process within the community scheme.
Hi, our body corporate is raising a special levy for installing individual water meters to each unit. A special general meeting was held for the discussion of this project and funding thereof. We could unfortunately not attend this meeting and waited for the minutes of the meeting to find out what the resolution was. According to PMR 29(e), they are required to distribute SGM minutes within 7 days, however these were only distributed a month later. Would the failure to comply with this rule render the resolution invalid? The late distribution also leaves us in a situation of very short notice of paying this special levy. If rules were followed, we would have had at least a month to make provision of such levy. I am not disputing the fact that the levy is raised, but rather the manner in which this is communicated. What actions can be taken? I will appreciate your guidance. Thank you.
I’m not an expert in body corporate law – but check out the Ombud https://www.csos.org.za/
Please assist. We are a block consisting of 9 apartments which has been abandoned for over 10years until we decided to appoint a new body corporate, now it has been 2 years since it has been functioning yet out of nine apartments on 5 of us are paying levies which turn to change the flat to better. Our flat used to be called a dumb by real estates but now it has been improved in many ways possible. We went to small claims and they couldn’t assist us, we can’t afford a private lawyer to who will charge the body corporate. even simple thing as to change old trustees and register new ones is an issue. We been doing up and downs at deeds offices and master office yet nothing
legal fees are an issue. Have you tried the Ombud https://www.csos.org.za/
Good day Maya
I need help I have been handed over to lawyers by the body corporate for all the statement of which I have never received of my water &lights for the past 8months ,no any form of communication was done to me the body corporate says it has been sending letters on my postbox eversince but each letter is logged into the security book before instilled into the post boxes for every one but there is non for my unit .How do I go about as I have spoken to the lady from the corporate and she refuse to listen to me?
I am really desperate as I am s first time home owner .I have went to the chairman of the board and he said he will look into the matter and involve me in communication with the body corporate but nothing .
Unfortunately not receiving the bills would not be a reason for non-payment – they will argue that you should have requested one if you were not receiving it.
Try come to a repayment agreement with them
I have gone to the body corporate on my first month staying at my new home and they spoken to the chairman of the board .He told me I will not pay may levies for the next couple of months but only pay for municipality until they give me my statement as I bought the unit not renting it .
Hi,
I just recently bought a house in a complex. My paperwork did not even reached the deeds office as yet. Then the transfer attorney sent me a statement for the month of June in the previous owners name and demanded payment from me is this even right? Also I have discovered that the body corporate is in arrears and they also demanded extra money which is completely shocking as I need to suddenly also pay a levy clearance certificate which doesn’t state in any of my documents that I am liable for the levy clearance certificate also I have nothing to clear on my name as this is the first property that I will own in my life.
Urgently require assistance / guidance as they demanding more money and the property is not registered in my name. As now they want to take me on for terms and conditions which I’m not even breaking the contracy. I also have reached out to the transfer attoneys, and they avoid my questions and keep sending me final demands.
This does sound odd as transfer has not taken place. The owner should be the one to pay for the clearance certificate. Did you purchase through an estate agent?
Morning I just yr article and this what we a having problem with.we trading to take out manergenig agent as a busy corporate is being years this problem happening of this agent charging us amount money and the nothing to show.
Can come to me that I can explain pls
I would suggest you contact the Ombud that handles this https://nationalgovernment.co.za/units/view/207/community-schemes-ombud-service-csos
Body Corporate refuses to give me annual financial statement. It’s this legal.
Absolutely NOT!!!! Lodge a complaint with the Ombud https://www.csos.org.za/
Please assist when I bought my property in September 2018 the advertised levy was around R1600 but when the statement came through the statement showed an amount of R2700 instead. I sent 2 emails the first one immediately after receiving my 1st statement to get clarity on the levies but no one got back to me. Year 2019 levy was now R3000 & I sent another email in December on how the levy is calculated but still there was no reply. Its year R2020 the levy is now R3500, I have received a letter from body corporate stating my account will be handed over to lawyers. Please note I haven’t paid my levies since September 2019. Please advise 1. Is the BC allowed to do this even though no one has taken the liberty to explain the cost to me even after endless attempts? 2. The apartments are going for R650k is it even allowed that we have to pay a levy of R3500 even though there is pool, garden services for not more than 15 ground floor units? There is an amount of R1000 from the R3500 for water even though we still municipal rates? The remaining R2500 amounts don’t even make sense. 3. The apartments when advertised for sale even now, still shoe the levy as R1600 in their ad. is this allowed? 4. Whenever there is an AGM the chairperson always has “proxy” of more than 3 people but its never written is this even allowed?
I suggest you contact the Ombud for community schemes https://www.csos.org.za/
Unfortunately the trustees can’t be held responsible for the agent and or owner not sharing correct info with you as the buyer. I’m an estate agent and know a lot of owners tell the agent what the basic levy is as they want this lower amount to be advertised. It’s unethical I feel as it misrepresents the property to an extent. Unfortunately it’s not illegal because they usually will just civer themselves by saying yes that’s the basics levy and it will be in the statement as such however these costs can some times double when you add on the extras such as effluent, maintenance levy, water, communal electricity, garden service etc etc etc.
As an agent I always ask my sellers for a copy of their levy statement so that I can make sure the amount they have told me is correct (and it’s usually not they usually do only tell you the basic levy amount).
Unfortunately though this can’t be layed at the feet of the trustees.
Thanks Debbie for adding to that. It is a great tip for potential home owners to ask for the actual levy statement
I am the chairman of our BC, we have an owner who is demanding we remove a tree and prune other trees, to within an inch of there life. We have a long term plan to remove and replace the trees, as and when fund allow. However the tree she wants removing is no within this plan. Also it is an expensive business removing a tree, my question is can she insist on the removal, when it would mean an increase in levy for the other owners? Regards Jilly
I really don’t know the rules of body corporates but you could try https://www.csos.org.za/
High electricity bills.
Hi, our statements are not accurate,when amounts are questioned we are told to sell and move out or we do not get a response from the body corporate, as far as we can tell these are amounts are extremely high. Electricity for a working couple who is hardly at home can amount to R3900.00 per month, we also questioned putting in prepaid meters and we were told we cannot, as far as we know the trustees do not pay levies for their servi es rendered as well. Please provide me with guidance on how to handle this matter.
The article does explain your options and processes. The Community Scheme Ombud is also an option https://csos.org.za/
A complex that is run by one person called the chairperson of the trustees, other trustees are not known and not residing in the complex, majority of owners do not reside in the complex and those present request meetings to address issues and risks which are imposed on the complex but the chairperson refuses to address or meet with resident owners. Levy too high but no services, managing agent not giving explanation/breakdown, complex has no security, no order, property and residents are at risk and break ins happen every now and then, the chairman refuses to heed calls for need of security. How to deal with this?
This is not an uncommon issue. Unfortunately it seems the only option is to get legal help
Managing agent and chairman refusing to supply owners the sectional title complex access to the bank statements. Is this legal?
No, it would be against the access to public information act
Please help, I am being refused access to the bank statements, I am an owner and trustee. Is this legal and correct.
As owner and trustee you should be given access