09 Nov 2012
We have realised over the past few weeks that there seems to be some confusion surrounding the use of the Sectional Titles Act and the prescribed management rules.
Firstly, the Sectional Titles Schemes Management Act, although signed into law by the State President, is not yet in operation and so provisions such as the limitation of the number of proxies one person may hold are not yet applicable. Similarly, bodies corporate are not yet obliged to operate separate reserve funds.
The second area of confusion is about special levies, and there are three points of confusion, or sub-areas, if you like.
Some people are still applying the provisions of prescribed management rule 31(4), which was deleted in the October 2011 amendments to the regulations under the Sectional Titles Act. This deletion was made in error and the rule is going to be re-instated. But until that happens, its provisions do not apply. PMR 31(4) made the provision that a special levy can be raised by trustees, but only for an expense that is necessary and was not catered for in the budget for that year. The present position – as at the middle of September 2012 - is that the trustees have greater discretion in raising a special levy. The only stipulation is that it be for an expense mentioned in section 37(1)(a), and that simply means it must be a legitimate body corporate expense. And, of course, it must be absolutely necessary that the expense is paid before it could be added to the budget for the next financial year.
The second, related, misconception is that now that PMR 31(4) has gone, trustees may no longer raise a special levy at all – that is, that special levies have been banned. Of course that is not so! The Act, in section 37(2A) and 37(2B), makes specific provision for the trustees to raise special contributions – let’s just call it “special levies” - from owners. But section 37(2B) viewed with the memory of PMR 31(4) in mind has created the third problem which is that, once again, a special levy can only be raised for an expense not in the approved budget. This is also not true.
Section 37(2B) is really a definition of a special contribution. A special contribution is any contribution that is not the contribution based on the budget approved by the owners at the AGM. So a special contribution could be raised to pay for some completely unforeseen expense or for an expense catered for in the budget, but inadequately, for whatever reason.
PMR 31(4) will be reinstated and the Schemes Management Act will become operational when notices to these effects are published in the Government Gazette. Until then, resolutions taken in sectional title schemes based on them can be challenged in court. Be careful out there. And stay in touch with Paddocks! - Anton Kelly
Anton KellyAnton Kelly is a course convener of the University of Cape Town (Law@Work) Sectional Title Scheme Management course, presented by Paddocks, a sectional title and home owners' association specialist firm - www.paddocks.co.za.
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