Sectional Titles

Courier – April 2010

These include:
Much ado about Nothing?
About a dispute between the owner of an improved erf within a scheme over a wire fence which he had erected around his property which the executive committee regarded as being, "in clear contravention of the Kenrock Architectural and Landscape Design Manual".

Notwithstanding the pedantic behaviour of the parties, the following lessons can be learnt from the judgment:

Firstly, constitutions, rules and architectural guidelines should be drafted with great care and expertise.

Secondly, elected officers seeking to enforce provisions of their founding documents should make sure that they understand the material properly and should obtain legal advice in the case of any uncertainty. In the Kenrock case the committee probably did obtain legal advice to the effect that they had a sound case. And this brings us to the third lesson:

A private residential township or sectional title scheme is not a military compound and management should resist an impulse to blindly suppress all forms of individualism to the tiniest detail.

Levies and the National Credit Act
An unreported Kwazulu-Natal High Court case of Dlamini v the Body Corporate of Frenoleen takes a realistic view on the matter by upholding the following arguments:

  1. A body corporate does not supply goods or services to its members, nor does it advance money or extend credit as envisaged by the NCA.
  2. Levies charged by a body corporate to its members do not constitute an 'incidental credit agreement' because the levies do not constitute an 'account tendered for goods or services provided by the body corporate to a consumer.'
  3. Levies are not payable by members by virtue of an agreement as defined in the NCA, but by virtue of the provisions of the Sectional Titles Act.

Accordingly the court held that the NCA does not apply to sectional title levies, irrespective of whether interest is raised on arrears or not.

Boundary walls on exclusive use areas
A look at who is responsible for their maintenance and the general rules applicable thereto.

Subsidence and landslide
A body corporate is not obliged to insure against the risk of subsidence and landslide, but is nevertheless responsible for the maintenance of common property and will not be automatically liable for damages suffered by an owner to his section due to such subsidence or landslide. Generally though it will be responsible for the bulk of repairs of the common property only. To be delictually liable for damages the owner of a section will have to prove all the elements of a delict.

What are the determinants of value for sectional title homes
An interesting discussion of the importance of the quality of management when assessing unit values for the purposes of mortgage finance. In short the value of a sectional title unit is closely related to the quality of scheme management, and banks are starting to realise this when considering bond applications. The most important indicators include:

  • Are levies sufficient to defray expenses of the body corporate, including maintenance, in other words do the owners adopt realistic budgets?
  • Is provision being made to build reserves to defray future and incidental expenses?
  • Are annual general meetings held regularly and timeously? Are the agenda requirements being complied with?
  • Is the arrears ratio within acceptable limits and are effective steps in place for recovery of arrears?
  • Does the scheme have adequate insurance and are the premiums up to date?
  • Are the financial statements up to date and duly audited?

These indicators will probably be applied by all the banks in assessing bond applications.

Rapid urbanisation
The importance of home ownership to the formation of capital and the consequent ability to lift people out of poverty is looked at.

Watter vereistes geld vir structure op gebruiksbebiede?
About the building of braai rooms - closed and partially open - on exclusive use areas - and the legal implications thereof.

Appointment of alternate trustees - an alternate view.
The Standard Management Rules provide for the owner to appoint another person as his proxy to attend general meetings, but trustees cannot appoint proxies. Yet maybe it should be regarded as the same as appointing an alternate, as the writer illustrates.

MCS Courier 36


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