How ST Scheme rules changed in 2016

1. Introduction
Since 1973 there have been an ever-increasing number of sectional title bodies corporate, each with its own rules. The first major overhaul of body corporate rules took place in 1988 when the Sectional Titles Act of 1986 ¹(“the 1986 ST Act”) came into effect and repealed the Sectional Titles Act of 1971 ² (“the 1971 ST Act”). When the Sectional Titles Schemes Management Act of 2011 ³ (“the STSM Act”) came into operation on 7 October 2016 (“the commencement date”) its provisions again extensively changed the content of scheme rules.⁴

A body corporate’s management and conduct rules were changed on 7 October 2016 - unless it was a “subsidiary” body corporate, i.e. one whose functions and powers had been assigned to an overarching management association.⁵ This article examines the effect of the STSM Act on the rules of all non-subsidiary bodies corporate.

2. Effect of STSM Act on unaltered prescribed rules
Where on the commencement date the body corporate’s rules had never been changed, either by the developer or the body corporate, those rules ceased to apply and were entirely replaced by the management and conduct rules prescribed under the STSM Act and set out in Annexures 1 and 2 to its regulations⁶ (“the prescribed rules”).

3. Effect of STSM Act on prior amendments and additions to the rules
Where the previously prescribed rules⁷ had been changed or supplemented by additional rules, these non-prescribed rules remained in effect if they were not in conflict with any of the newly prescribed rules. These rules were deemed to have been made under the STSM Act and the body corporate’s rules then included them as well as the newly prescribed rules.⁸

By way of example, if an additional management rule allowed the body corporate to debit a financial penalty to an owner’s account without the member's prior consent or the authority of an order by a judge, adjudicator or arbitrator, that provision was irreconcilable with the newly prescribed management rules because it was in conflict with newly prescribed management rule 25(5), so it ceased to apply on the commencement date. On the other hand, a rule that allowed the trustees to impose a fine for continued refusal to comply with a conduct rule would remain valid as long as it was reasonable and complied with STSM Act’s other requirements for valid rules. The requirements for validity of all scheme rules are dealt with more extensively in an article: “Sectional Title Body Corporate Rules” published in Sectional Title Body Corporate Rules - 1 and Sectional Title Body Corporate Rules - 2.

An example of an amended conduct rule that is irreconcilable with the newly prescribed rules is one that prohibited all pets in the scheme. Such a prohibition is in conflict with the newly prescribed conduct rule 1, which therefore replaced the prior amended rule on the commencement date. By contrast, an added conduct rule requiring the use of a particular form for applications to the trustees for consent to keep a pet is not in conflict with the newly prescribed conduct rule 1, so this was added to the newly prescribed rule.

Unlike additional rules and amendments made after the commencement date, rules validly made before this date that do not conflict with the newly prescribed rules continue to apply in terms of the STSM Act. They do not need to be adopted by new body corporate resolutions or to be examined and approved in terms of the Community Schemes Ombud Service Act of 2011 ⁹ (“the CSOS Act”).

4. Compiling a set of consolidated rules
The prescribed management rules require a body corporate to prepare a consolidated set of rules whenever these are amended and the sets of rules must include an index and a prominent reference to any rules that:

1. confer exclusive use rights,
2. vary the effects of the participation quotas in regard to the value of votes or the liability for contributions, or
3. impose either a financial or a maintenance obligation on members.¹⁰

Trustees are obliged to take reasonable steps to inform and educate themselves so that they know and understand the body corporate’s consolidated rules.¹¹ These rules must also be delivered to owners and occupiers and be available at trustee and owner meetings. ¹²

If the trustees need assistance in compiling a set of revised rules, they should consult a specialist sectional title attorney with experience in drafting, assessing and interpreting rules.

5. Challenging the validity of body corporate rules
Before the commencement date, disputes in regard to the validity of body corporate rules could only be heard by the high court or a private arbitrator. Under the CSOS Act, the trustees as well as any owner or occupier can bring an application, at very low cost, for an adjudicator’s order declaring that a specified rule is invalid or unreasonable and requiring the body corporate to address the issue ¹³

Even if a rule was accepted for filing at the deeds registry before the commencement date or it has since been approved by the chief ombud of the CSOS, any person with a material interest in the administration of a scheme who believes that a body corporate rule is invalid or unreasonable can apply to the CSOS to have it removed or changed.

Graham Paddock
Cape Town
September 2020

Notes

1. Act No. 95 of 1986.
2. Act No. 66 of 1971.
3. Act No. 8 of 2011.
4. There have been two dissenting views on this issue, which I consider to be incorrect. In the December 2016 Property Law Digest Lizelle Kilbourn argued that Parliament intended that rules made under the 1986 ST Act continue to apply to bodies corporate that existed on the commencement date. In the October 2018 De Rebus Brian Agar argued that the effect of section 10(12) of the STSM Act is that an existing body corporate’s pre-existing rules remain effective and the newly prescribed rules do not apply to it.
5. Regulation 6(5) under the STSM Act read with Regulation 30 under the 1986 ST Act.
6. Section 60(7) and 60A(7) of the 1986 ST Act and sections 10(10) and 21 of the STSM Act and Regulation 6(2) made under that Act.
7. Prescribed under the 1971 ST Act or the 1986 ST Act.
8. Section 10(11) and (12) of the STSM Act.
9. Act No. 9 of 2011.
10. Prescribed management rule 27(1).
11. Regulation 14(1)(a) of the regulations under the CSOS Act.
12. Section 10(6) of the STSM Act and prescribed management rule 27(1)(b) and (c).
13. Section 39(3)(c) and (d) of the CSOS Act.