Understanding Sectional Title - Who are the Body Corporate & Trustees?
Sectional title has become a common form of property ownership in South Africa, and it is imperative that property owners know their rights and obligations in relation to the sectional title development.
Ownership of property governed by a homeowners' association in accordance with the common law is often confused with that falling under a body corporate which is governed by the Sectional Titles Act of 1986 (STA).
A sectional title unit consists of a part of a building or a separate building on a piece of land that has been converted into a sectional title scheme. The owner's ownership of the unit includes ownership of an undivided share in the common property. All the sections together with the common property comprise "the scheme".
Who or what controls the scheme?
The body corporate is responsible for the control, administration, and management of the Scheme. All the owners of sections in the scheme automatically constitute the body corporate. At an Annual General Meeting of all the owners, trustees are elected to act on behalf of the body corporate and to carry out the day to day running of the scheme. In many instances and especially with bigger schemes, the trustees utilize the services of a managing agent to assist them. Ultimately however, the control lies with owners who make decisions on the administration of the scheme at a general meeting.
A sectional title scheme is governed by the Regulations of the STA and the Management and Conduct Rules of the development as registered in the Deeds Office. The trustees are not entitled to make any decisions or rules which conflict with these registered rules unless the rules are changed with the appropriate authority of the body corporate. Once a body corporate has been established in respect of a sectional title scheme, owners can only change the management rules by means of a unanimous resolution which has more stringent notice time, quorum and voting requirements to achieve than changes to the conduct rules which can be done by means of a special resolution. Trustees are not entitled to make unilateral changes to any of these rules.
A body corporate must appoint trustees to carry out the functions prescribed by the Act and Regulations on its behalf and owners should therefore ensure that general meetings are held annually to appoint the necessary trustees.
The STA requires the appointment of a minimum of two trustees and the maximum number of trustees is determined by the owners in the general meeting.
Is ownership required for the office of trustee in sectional title schemes?
For sectional title owners, being part of the body corporate is merely incidental to ownership and many members do not have the motivation to be trustees.
Sometimes, motivated owners serve as trustees, but the body corporate still faces a gap in some areas of management or administration. A management rule that is often overlooked, which is prescribed by the Sectional Title Schemes Management Act 8 of 2011, is Rule 7 in conjunction with Rule 17. According to their broad wording, these rules allow for the appointment of a non-member as a professional trustee.
A professional trustee is subject to the same fiduciary duties as regular body corporate trustees, whilst also being afforded similar powers and functions. It is, however, a position based on professional skill, knowledge, and expertise. As a result, the appointment should be limited in capacity, aimed at serving specific required functions and subject to the Rules of the Act.
The relevant consideration for such appointment is a comparison between financial feasibility and necessity. Should a body corporate find that the benefits of appointing a professional trustee can be financially justified, a non-member may be nominated for the office of trustee. The remuneration for this service is subsequently approved by way of ordinary resolution of the members and subject to the annual corporate budget. Given an adequate evaluation of the comparative elements, the appointment of a non-member could be highly beneficial to the management of a scheme and is a noteworthy tool for effective and more specialised administration, where required.
Conclusion
The quality of management can make a huge difference in the value of your investment in a sectional title scheme. A well-managed scheme can save you hundreds of thousands of rand, while a poorly managed one can cost you dearly. Managing a sectional title scheme requires skill, knowledge, and active participation from all the stakeholders, including owners, trustees, the chairperson, and possibly a managing agent. To protect your investment, you should learn more about sectional title scheme management and get involved in the decision-making process of your scheme. Do not just complain about the trustees; attend their meetings or even volunteer to serve as one!