In the past 10 years, the number of sectional title schemes in SA has risen exponentially, and the latest figures show that there are currently well over 700 000 sectional title homesin the country, estimated to house more than 6-million people.
“What is more,” says Bill Rawson, chairman of the Rawson Property Group, “property data company Lightstone puts the total value of sectional title property at around R665-billion, so it is increasingly important for the owners of sectional title units, and the banks that hold the mortgages on 58% of them, to understand how sectional title schemes are supposed to be set up and run.
“However, there is still widespread misunderstanding of even the basics, starting with the Body Corporate and how it is established, as well as what its functions and powers are. And this often gives rise to many problems and disputes in sectional title schemes which could quite easily have been avoided.
Quite simply, he says, the Body Corporate of each sectional title scheme is made up of all the unit owners in that development, and it is legally responsible for the day-to-day and financial management of the scheme.
“It is established - automatically - when the first unit transfer from the developer of a sectional title scheme to a new owner is registered, and then it steadily gains more members until the last unit is sold and transferred, at which point the developer or development company ceases to be a member.”
The designated tasks of the Body Corporate, Rawson notes, include the following:
- To ensure the payment of any levies and other contributions owed to the scheme and any interest payable on arrears;
- To set up bank accounts for the scheme and ensure that its finances are properly managed;
- To arrange insurance for the scheme and ensure that the annual or monthly premiums are paid;
- To arrange with the local authority for the bulk supply of services such as electricity, water and rubbish removal and ensure that the accounts for such services are paid;
- To establish and maintain the scheme’s common property, including gardens, passageways, lifts, security equipment and recreational facilities, for the benefit and use of all residents;
- To select, hire, oversee and pay any suppliers, service providers and contractors who may be needed to perform work for the scheme;
- To appoint agents and employees to assist in the running of the scheme if necessary;
- To borrow money if necessary to improve the scheme or put it on a sound financial footing;
- To do all that is necessary to enforce the rules of the scheme;
- To establish a reserve fund as stipulated by the Sectional Titles Amendment Act and invest any surplus funds on behalf of the scheme; and
- To ensure that the scheme meets its obligations as regards registration and payment of the required fees to the office of the Community Schemes Ombud.
“However, this is by no means an exhaustive list and in bigger sectional title schemes especially, it would be very impractical for every owner to be involved in day-to-day operations and decisions, so the Body Corporate will usually elect a smaller group of owners as Trustees to act on its behalf.
“Sectional title legislation makes provision for this and gives Trustees the power to make certain decisions without always having to revert back to the Body Corporate for a mandate.”
And by and large, he says, Trustees work very hard on behalf of their fellow-owners and try their best to protect and enhance the value of everyone’s investment. “But the fact remains that most are amateurs when it comes to real estate. It is also becoming difficult to comply with all the requirements of the increasingly complex Sectional Title legislation, so most Trustees (and Bodies Corporate) could really do with the help of a professional managing agent.
“Time and again it has been shown that sectional title schemes that employ competent managing agents have fewer problems with levy arrears, for example, and are also cleaner, more secure and better maintained – and this should please even those members of the BodyCorporate who are not interested in serving as Trustees themselves.
“However, Trustees do need to check the credentials and references of managing agents very carefully before making any appointment, and must ensure that their agent is a member of the National Association of Managing Agents with a valid and current Fidelity Fund Certificate.”