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MCS Courier - April 2013

4 April 2013

Latest Rule Amendments

A range of amendments to the Regulations under the Sectional Titles Act was published on 14th March, coming into effect on 14th April. The amendments deal mostly with registration aspects, but include some amendments to the standard Management Rules.

The technical preparation of this set of amendments is of the worst quality seen since the introduction of sectional titles in South Africa in 1971. It seems that these amendments were rushed into print without having been properly checked for technical accuracy and unfortunately also without proper consideration of their suitability and substantive consequences.

The first amendment relates to a long-standing problem, namely the appointment and continuing in office of trustees who are levy defaulters. Until now there have been no restrictions in this regard and in practice it happens from time to time that levy defaulters gain control of the trustees, manipulate decision-making and even manage to block resolutions to institute levy recovery actions against themselves. This is clearly not a desirable situation and the amendments to Management Rules 7 and 13 seek to address this.

MR 7 deals with nominations and a proviso is now introduced to prohibit the nomination or appointment as trustee of a person in breach of MR 64(1) or 64(2) - actually 64(a) and 64(b). Here two inherent defects in MR 64 are noted.

The next amendment is a 'substitution' of MR 13(g) (actually an addition) and seeks to complement voting embargoes by disqualifying and automatically dismissing serving trustees if they are in arrears for more than 60 days with any levies and contributions. In what is seen as an oversight, breaching a conduct rule will not have the same sanction. More thought should have been given to this. For example with regard to a developer who serves on and dominates a trustee board, yet does not hold units in his own name.

MR 31(4A) which served to 'bridge the levies gap' and increase levies by up to 10% between the financial year-end and the date when the levies are determined after the annual general meeting was deleted. Why? As it amounts to a seriously retrogressive step which could amount to levies not being legally recoverable in respect of the interim period.
MCS Courier 44 April 2013

 

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