A GUIDE TO SECTIONAL TITLE LIVING

This document contains important information regarding "Sectional Title Living".
As an owner of a unit in a sectional title scheme, you own the following:

1.  Your section

2. An undivided share in the common property.

WHAT IS A "SECTION"?

A section can be either a specific portion of a building (a flat in a multi storey apartment block) or a building in itself (a townhouse). A section must be shown on the sectional plan and each section is given a unique number. The section number does not need to correspond to the flat / townhouse number.
What is an "undivided share in the common property"? This includes the land on which the buildings are situated together with those parts of the building(s) which are not included in a section (e.g. roads, lifts, swimming pool area, staircases, carports). Lock-up garages may either be common property or constitute separate sections.
All the owners of the various sections are entitled to use the common property - However, parts of the common property may be set aside for the exclusive use of the owner of a particular section(e.g. garden adjacent to a section, carports, parking bays, patios). These exclusive use areas must be shown on the sectional title plan.
An owner may not sell his section and retain his exclusive use area. However he may sell and transfer the right to an exclusive use area to another owner of a section in that scheme.

PARTICIPATION QUOTA (PQ)

The participation quota of a section is a percentage expressed to four decimal places (e.g. 0.5478). It is calculated by dividing the floor area of a section by the sum of the floor areas of all the sections in the scheme, (i.e. the larger the section, the larger the PQ and vice versa). A schedule of PQ's is lodged together with the sectional plan at the deeds office and may only be changed with great difficulty.

WHY IS PQ SO IMPORTANT?

It determines the size of the owner's undivided share in the common property.

It determines the value of the vote of an owner of a section (in the case where the vote is reckoned by value).

It determines the amount of the owner's levy.

It determines the amount a particular owner can be held liable for the payment of a judgement debt of the body corporate.

THE BODY CORPORATE

A Body corporate is formed on the date the developer transfers the first section to another owner. The body corporate is made up of all owners of a section in a sectional title scheme.

DUTIES AND POWERS OF THE BODY CORPORATE.

1. The Body Corporate must establish a fund for administrative expenses which it believes will be sufficient for the repair, upkeep, control, management and administration of the common property, reasonable provision for future maintenance and repairs, for rates and taxes and the supply of electricity, water and other services to the building. You the owner have the responsibility to maintain and repair your section. The dividing line between your section and the common property is the middle of the wall surrounding your section.

2. The Body Corporate must insure the building to its replacement value against fire and other prescribed risks and pay the premiums from the fund. (It is your responsibility to insure your possessions).

3. The Body Corporate may require the owners, whenever necessary, to contribute to this fund to an amount determined by it from time to time. This is your levy, which must be paid on the first of each month in advance. The Body Corporate may charge interest on outstanding amounts.

The Body Corporate must maintain the common property.

POWERS

1. The Body Corporate may appoint such agents and employees as it may deem fit.

2. The Body Corporate may purchase, hire or otherwise acquire moveable property for the use of owners for their enjoyment or protection, or in connection with the enjoyment or protection of the common property.

3. The Body Corporate may establish and maintain on the common property suitable lawns and gardens and recreational activities.

4. The Body Corporate may borrow monies required by it in the performance of its functions or the exercise of its powers.

5. The Body Corporate may invest any moneys of the fund.

6. The Body Corporate may do all things reasonably necessary for the enforcement of the rules and for the control, management and administration of the common property.

TRUSTEES

The trustees are elected at the first general and each subsequent annual general meeting (AGM), and hold office from the one AGM to the next AGM. The members of the Body Corporate determine how many trustees will hold office for the period, but there may not be less than two trustees at any time.
A trustee does not have to be an owner provided that the majority of trustees are owners, or spouses of owners, and provided that the Managing Agent in that capacity may not be a trustee.

MANAGEMENT AND CONDUCT RULES

A sectional title scheme is controlled and managed by the Body Corporate by means of rules. The rules comprise both management rules and conduct rules.

The management rules cover the following points:-

1. Domicilium of the Body Corporate (it's legal address)

2. Trustees (all matters to do with trustees and their meetings their duties and obligations).

3. Meeting of owners.

1. Annual General Meetings are held once a year.

2. 14 days notice for each AGM must be given and must be accompanied by the following:

1. Schedule of replacement value of the building and all improvements to the common property and the replacement value of each unit.

2. Proposed budget for the forthcoming year.

3. Annual Financial Statements for the period.

4. A chairman's report.

Voting at the AGM is done on a show of hands - each owner having one vote, unless prior to the vote a request is made for a poll, in which case the PQ will be used to establish the value of the vote

The conduct rules cover the following:

• Pets - Owners must obtain the permission of the trustees in writing to keep pets. Owners of pets must have consideration for their neighbours. Barking dogs are a nuisance to everyone except for their owners.
• Refuse disposal. (Place it in the designated areas at the times decided by the trustees)
• Vehicles (Parking, speeding, washing and oil leeks)
• Damage, alterations and additions to the common property.
• Owners may not put anything on any part of the common property which in the discretion of the trustees is aesthetically displeasing or undesirable, when viewed from the outside of the section.
• Placing of Advertising signs and notices.
• Littering. (It is your complex - litter leaves a bad impression).
• Laundry - owners may not hang laundry so as to be visible from outside the buildings or from any other sections.
• Storage of inflammatory material and other dangerous acts.
• Letting of units - all tenants must abide by the management and conduct rules.
• Eradication of pests.

EXCLUSIVE USE AREAS - A COMPARISON

The following summary is not intended to be either definitive or comprehensive. It is intended to be a comparison of the main types of Exclusive Use Areas (EUA's) in Sectional Title schemes throughout South Africa. For more information, please phone the Sectional Title Helpline on 011-393-2671 or e-mail bobgauld@iafrica.com.

Exclusive Use Areas are parts of the common property within sectional schemes the use of which has been allocated to individual owners. Under the 1971 Sectional Titles Act, most EUA's were granted by means of the Rules under that Act. In this summary, they are referred to as Old Rule (OR) exclusive use. If those rules were registered at the Deeds Office, EUA's created under those rules still apply. The 1986 Act introduced a means of registering EUA's by means of a fairly complicated and expensive process. EUA's created by this method are deemed to be REGISTERABLE real rights to immovable property, capable of being bought and sold and bonded. In this summary they are referred to as Registered (R) exclusive use. In 1997, the Sectional Titles Amendment Act reintroduced a facility to create EUA's by means of the current Rules, referred to here as Current Rule (CR) exclusive use.

All three types are found in sectional schemes, often with more than one type in a scheme. Unfortunately not only are the three types created differently, but their management, control and use differ considerably. It is for these reasons that this summary has been prepared.

NB - Exclusive Use is NOT created by walls, fences, height above the ground, access or any other apparently logical reasons! Exclusive Use is a term defined by the Sectional Titles Act. In sectional schemes, nothing else matters!

OLD RULE (OR)

• Created in terms of the Rules of the 1971 Sectional Titles Act
• Are not recognised as Real Rights
• May not be bought or sold. Exchanges usually require an amendment to the Rules
• Can not be bonded
• Improvements require Body Corporate consent
• Body Corporate repairs and maintains
• Holders of rights must contribute to the levy fund to defray costs of rates, taxes, insurance and maintenance under s37(1)(b). Not subject to "Solidatus"
• Section 60 of the 1986 Act allows holders of rights to convert to registered (s27) rights at owners' expense

REGISTERED (R)

• Created and registered under section 27 of the 1986 Sectional Titles Act
• Are recognised as Real Rights
• Can be bought and sold among and between unit owners
• Can be bonded
• Improvements authorised by the trustees, and may not unreasonably be refused
• Holder repairs and maintains (Solidatus)
• Holder must contribute to the levy fund to defray costs of rates, taxes, insurance and maintenance under s37(1)(b) but is subject to "Solidatus"
• Expensive to create and to register in the names of the owners. Land surveyor and attorney required

CURRENT RULE (CR)

• Created under rules in terms of section 27(A) of the 1986 Sectional Titles Act
• Are not recognised as Real Rights
• May not be bought and sold. Exchanges require an amendment to the rules
• Can not be bonded
• Unless allowed in the Rule, improvements require Body Corporate consent
• Body Corporate repairs and maintains
• Unless specifically stated in the rule creating the use the holder is not obliged to contribute to the levy fund (NOT subject to "Solidatus")
• Relatively inexpensive and easy to create. NO land surveyor needed and attorney expenses limited to drafting the rule.

"Solidatus" refers to the "The Body Corporate of Solidatus v De Waai and others" case heard in the Witwatersrand Local Division of the Supreme Court in 1997. The case dealt with repairs and maintenance of Exclusive Use Areas.

TRUSTEES

The trustees are elected at the first general and each subsequent annual general meeting (AGM) of the body corporate, and hold office from the one AGM to the next AGM. The members of the Body Corporate determine how many trustees will hold office for the period, but there may not be less than two trustees.

Trustees do not have to be specialists in respect of Sectional Title! The best trustees are those who have a passion for their community and are willing to obtain the expert advice of professionals in respect of their obligations as trustees.

A trustee does not have to be an owner provided that the majority of trustees are owners, or spouses of owners. The Managing Agent cannot be a trustee, unless he is an owner. A person cannot act as a trustee if he/she is or becomes of unsound mind; surrenders his estate as insolvent, or if his estate is sequestrated; if he is convicted of an offence which involves dishonesty; if he is or becomes disqualified from being appointed or acting as a director of a company or if he is in arrears for more than 60 days with any levies and contributions payable by him in respect of his unit or exclusive use area (if any) and if he fails to bring such arrears up to date within 7 days of being notified in writing to do so.

DUTIES AND POWERS OF THE STAKEHOLDERS

The powers and duties of the body corporate, owners (in that capacity), members and trustees are wide ranging, interactive and are regulated by the Sectional Titles Act and the Prescribed Management rules. Once the regulations in respect of the new Sectional Titles Schemes Management Act, 2011 comes into effect we will place a guide to the duties and powers of the various stakeholders here.

HOW ARE CONDUCT RULES ESTABLISHED

In Sectional Title there are two distinct sets of rules, being the Prescribed Management Rules and the Conduct Rules. Both sets of rules have their origin as State (Government) determined rules. It is possible to change both before the body corporate is established.

Once the body corporate is established these rules can be changed by unanimous and special resolution respectively.  The rationale behind the higher hurdle of the unanimous resolution is to provide for greater consistency of rules across community schemes. In broad terms the prescribed rules deal with the management duties and responsibilities of the body corporate and the owners. The conduct rules regulate the do’s and don’ts of the scheme.

Once CSOS is empowered (when the regulations come into force) all rules will need to be approved by the Chief Ombud.

HOA – A SYNOPSIS

Home Owners’ or Residents’ association developments are gaining popularity with developers. In the simplest form a developer would purchase a tract of land, divide it into erven, separated by a road network and limited “common property” that would be donated to the HOA to be formed. The HOA is relatively easily formed with the permission of the relevant municipal authority.

The HOA would typically provide for access control, security guarding and leisure areas such as clubhouses and pools.

In an HOA development, each owner owns a property held under a title deed (and described on a registered diagram or general plan) as is the case with conventional land ownership.

Each owner is compelled to become a member of the association by operation of a condition in the title deed to the property in the estate.

The majority of associations use the NPC (Non Profit Company) provisions of the Companies Act as a vehicle. The regulatory framework of the HOA environment is less onerous despite conduct rules that regulate the aesthetics of the estate quite rigorously.

CSOS – we invite you to visit the website of CSOS by following this link.

Case law / Incidents to mention – bring attention to new decisions or articles or fun incidents

Security tips

THE BLUEGRASS TRUST

 We at BlueGrass are very excited by the community support initiative that we have launched.

 Every owner in each of the schemes we manage will soon be given the opportunity to contribute as little as R10 per month to the trust. These funds will be used to address the massive need that exists all around us.

 The NPO will be managed by a collective of one executive from each of the schemes we manage. BlueGrass will contribute the management services to the NPO free of charge and will bear the cost of annual statutory audit.

 We envisage a process whereby the NPO addresses the short, medium and long term needs of our community by, for instance, contributing to the devastation caused by flooding or fire in a nearby informal settlement as well as the establishment of a bursary scheme to assist a needy student realise his or her dream to become a professional in the property industry. Imagine, for a moment, the massive impact an architecture or engineering degree could make to the family of the poorest of the poor.

WHAT DO I OWN?

In the simplest terms possible a home owner in a HOA owns the stand and the home built thereon. The role of the HOA is to provide certain infrastructure services and address issues of communal interest. In sectional title the owner owns his section, essentially everything on the inside of his building and the body corporate owns the rest. The sectional title environment is far more regulated than the HOA.

WHAT IS A "SECTION"?

A section can be either a specific portion of a building (a flat in a multi storey apartment block) or a building in itself (a townhouse). A section must be shown on the sectional plan and each section is given a unique number. The section number does not need to correspond to the flat / townhouse number.

In order to grasp the interaction of the section and common property better one would look to the concept of the median line as set out in the Section 5 of the Sectional Titles Act, as follows:

(4)The common boundary between any section and another section or common property shall be the median line of the dividing floor, wall or ceiling, as the case may be.

(5) For the purposes of subsection (3)(d) the boundaries of a section shall be defined-

(a) by reference to the floors, walls and ceilings thereof, or as my be prescribed: Provided that any window, door or other structure which divides a section from another section or from common property, shall be considered to form part of such floor, wall or ceiling; and

(b) in respect of a part of a section (such as a stoep, porch, balcony, atrium or projection) of which the boundaries cannot be defined in terms of paragraph (a) but being appurtenant to a part of that section which can be defined in terms of that paragraph, in the manner prescribed.

In layman’s terms this means that in Sectional Title you own the inner row of bricks (all the way around your unit) and everything inside that “box”. The horizontal boundaries of the unit are the floor and the ceiling. This means that the outside walls and the roof belong form part of the common property.

In the walled townhouse environment even the garden is common property! This, does not mean that your neighbour can use your pool or braai.

WHAT IS “COMMON PROPERTY"?

The Sectional Title Act defines common property as the land included in the scheme, such parts of the building or buildings as are not included in a section and land purchased by the body corporate for the extension of the scheme. The title deed of each owner refers to an undivided share of the common property. 

Common property includes the external walls of all buildings, the garden areas of all units, the roofs (inclusive of the truss structure and the roof spaces), internal roads, lifts, swimming pool area, staircases, carports and so forth. Lock-up garages and store rooms may either be common property or constitute separate sections.

The interaction between what is owned by the owner as “his” and that which is owned by all explains why Sectional Title living is so highly regulated – to address the consequential issues of the various levels of ownership.

The ownership of common property is essentially a form of co-ownership governed by reasonable use of the property. It is clearly not reasonable for a fellow owner in your community to exercise his rights to this undivided share of the common property by having a braai alongside your pool. It is for this reason that the Sectional Title Act, the new Sectional Titles Schemes Management Act, 2011 and the Prescribed Management Rules need to regulate access, use as well as the responsibilities of such access and use. The concept of exclusive use is explained elsewhere.

Many HOA environments have “borrowed” the term common property from the Sectional Titles Act to describe the various spaces such as parks, road verges, amenities and guard houses that exist in such developments. It should be noted that there is no collective ownership in the HOA environment. The “common property” alluded to above is owned by the HOA and is managed for the benefit of the community by the HOA.  In certain cases (typically boomed suburbs) these may still belong to the municipality.

We use the analogy of the HOA as an efficient municipality when addressing the “common areas” of estates. In the conventional municipal arrangement the parks, the roads and the swimming pools are owned by the municipality for the use of the citizens; essentially the arrangement in HOA based estate living.

WHAT IS “EXCLUSIVE USE”?

In sectional title living all the owners of the various sections are entitled to use the common property. However, parts of the common property, such as gardens adjacent to a section, carports, parking bays and patios may be set aside for the exclusive use of the owner of a particular section.

Some developers go to the trouble of determining very specific areas that are to be set aside for exclusive use in terms of Section 27 of the Sectional Titles Act. These areas are shown on the Sectional Title plans filed at the Registrar of Deeds and the Chief Surveyor General. The owner of a unit acquires a real right to the use of the described area. This right can be mortgaged and even sold, albeit that the potential purchasers are limited to other owners in the scheme.

The majority of sectional title schemes have what is known as “rule based” exclusive use. In these cases the rights to the use and the enjoyment of the exclusive use area are regulated by the provisions of the Prescribed Management Rules as read with the Conduct Rules of the Scheme.

The maintenance and financial responsibilities of exclusive use areas are dealt with at a later stage.

WHAT IS THE PARTICIPATION QUOTA (PQ)?

Section 32(1) of the Sectional Titles Act 95 of 1986 describes the participation quota as follows:

The participation quota of a section shall be a percentage expressed to four decimal places, and arrived at by dividing the floor area, correct to the nearest square metre, of the section by the floor area, correct to the nearest square metre, of all the sections in the building or buildings comprised in the scheme.

The participation quota is determined by the Surveyor and forms part of the diagrams held at the Registrar of Deeds and the Chief Surveyor General. The participation quota is only amended when a section (unit) is increased in size. When that happens the particular owner will pay proportionally more. Such an increase is passed on as a benefit to the remaining owners who pays marginally less.

From the above, it is apparent that the size of the section does matter. We have come across many instances where trustees and owners alike, have embarked on the projects that increase the size of a unit by way of an extension.  Often these extensions are not properly approved and, most importantly, not reflected on a revised sectional title plan that is registered at the Registrar of Deeds.

This oversight can have disastrous consequences for the owner if one considers that the replacement value of an owner’s property is determined by the size of the unit multiplied by the agreed replacement cost per square metre. Hence, a unit that is extended will be under insured if the plan is not amended.

The concept of a participation quota does not usually apply in the HOA environment.

WHY IS PQ SO IMPORTANT?

The PQ determines a number of very important matters in respect of the relationship that exists between the owner and the body corporate. These key relationships are set out in Section 32(3) of the Sectional Titles Act, which stipulates that it determines:

• the amount of the levy and any special levy that is determined from time to time -   PMR 31(1);
• the amount a particular owner can be held liable for the payment of a judgement debt of the body corporate – PMR 31
• the undivided share in the common property of the owner of the section.
• the value of the vote of an owner of a section (in the case where the vote is reckoned by value) and contributes to the determination of the quota for general meetings in certain circumstances – PMR 63

As the concept of PQ does not follow through to the HOA environment the standard is that costs of the HOA are recovered by way contributions (levies) required from owners in equal shares.

What is the Body Corporate

Who or what the body corporate is, is an area where there is the greatest amount of uncertainty. One would be forgiven for the assumption that it is a body that “floats” somewhere between Venus and Mars. One would hear “the body corporate this”, “the body corporate must that” and “they have a lot of money” in response to daily life issues in community schemes.

The body corporate (a creature of statute) of a sectional title scheme is made up of all the owners of all the units in the scheme. When you become an owner in the scheme, you automatically become a member of the scheme. When you cease to be an owner in the scheme, you automatically cease being a member of the body corporate. A Body Corporate is formed on the date the developer transfers the first section to another owner. It exists in perpetuity due to the ongoing process of joining and leaving described above. Please consult Section 36 of the Sectional Titles Act for further information.

The only source of income for the body corporate is the levies it imposes on owners, pursuant to the budget that is approved by the members in general meeting. Hence every expense that the body corporate has is paid for by the members. The a few fortunate bodies corporate that have been able to leverage the use of unused land for the erection of mobile phone towers or billboards that generate an attractive (taxable) income stream. Please consult Section 37(1) of the Sectional Titles Act for further information.

As the body corporate is a legal person, its affairs are handled by an elected board of Trustees who do so in accordance with strict guidelines in respect of their powers and duties. Please consult Section 39 of the Sectional Titles Act for further information.