New developments of residential sectional titles schemes usually involve either the redevelopment of urban land or the subdivision and rezoning of agricultural land. In the urban situation, the land used for the new scheme is often a consolidation of a group of properties. In either case, there could be an existing building which is incorporated into the scheme – a house worth keeping, for example.
If the new scheme is one of separate townhouses, as is increasingly common, and if the existing building is made into a single section in the scheme, the chances are that it will be considerably bigger than the new sections. This, of course, means that the participation quota (PQ) allocated to that section will be correspondingly bigger than the PQs of the other sections and therefore the contribution that the owner must make to the levy fund.
This seems fair enough at first glance because, after all, the building is bigger than the others in the scheme and will require more materials and work in its maintenance. But there are two other considerations that might make the additional contribution seem less than fair.
Older buildings tend to be more solidly constructed than new ones. Once the renovation common in these situations has been completed, the building is unlikely to need more than routine attention. It won’t settle, crack, leak or get damp. New buildings often suffer all of those problems and are thus relatively more expensive to maintain.
The second point is that a considerable portion of the levy goes to service provision such as security and recreation facilities. Does the owner of the big section deserve to pay that much more for these services?
The PQ has three effects. It determines the size of the undivided share each section owner owns in the common property; it determines the value of the vote each section owners has in a poll vote or when a special or unanimous resolution is taken; and it determines the share of the levy the owner must pay.
If it does seem fair to reduce the proportion of the levy paid by the owner of the big section, how can this be achieved, since in residential schemes the participation quota must be calculated according to the floor area of the sections?
The Act provides that two of the three effects of the participation quota may be changed by making a scheme rule. It is not possible to change the undivided share in the common property allocated to each section but it is possible to change the vote values and the share of the levy that a section owners must pay.
The rule could “ring fence” expenses such as maintenance of the common property portions of a particular building, effectively removing them from the central maintenance fund and making them the sole responsibility of the section owner. Likewise, the rule could make the share of the facilities expenses payable by each section owner different to the proportions of the PQ.
Such a rule is really neither a management rule nor a conduct rule, but a rule specific to this situation. The developer can include the rule when opening the register for the scheme. If the developer has not made the rule, the body corporate may do so. It then requires the authorisation of a special resolution of owners, plus the written consent of any owner adversely affected by the terms of the rule.
Anton Kelly is a course conveners of the University of Cape Town ([email protected]) Sectional Title Scheme Management course. Next course starts, 18 June 2012. For more information please visit www.Paddocks.co.za or contact Emma on [email protected].