By: Nicola Mawson
Buying a property is daunting. More so is purchasing a unit in a complex that falls under the Sectional Title Act, as there are strict laws that govern their day-to-day running.
The Community Schemes Ombud Service (CSOS) has several orders listed in its website that it has dealt with under its mandate of regulating the conduct of parties in community, or Sectional Title, schemes.
One dealt with an owner installing a satellite dish on the outside wall of his balcony, arguing that a precedent had been set because others had been allowed to do so. The exterior of the wall is common property: the rules required permission to make any changes, which must then generally be within a certain aesthetic style.
In this case, the Trustees could not provide proof of a resolution refusing permission. The adjudicator also said that the Trustees’ insistence that the dish be attached to the chimney instead was “possibly not have the ideal outcome, as it would be even more visible and prejudicial to the scheme in general from an aesthetical perspective”. Here, the matter was sent back to the Trustees.
Other matters end up in court. One dealt with Annual General Meetings (AGMs) being held without the quorum, an administrator appointed to deal with a financial mess because the complex was bankrupt without the owners being told, and the bank account summarily being changed. The ruling here was to reverse all these decisions.
Issues with how Trustees are running complexes, anecdotally, seem to abound.
Amended financials being sent out hours before a Special General Meeting (SGM) that was held months after it should have been. Trustees resigning and there only being one left, without owners being told.
Auditors have presented financials that were a shambles and, because the AGM was not held when it should have been, the new Trustees were expected to sign off on numbers that fell under the ambit of the old Trustees. (AGMs must be held within four months of the end of the financial year, which runs to the end of February each year.)
Fines have been willy nilly being imposed in terms of a set of rules that was plagiarised from somewhere else. According to Stonewood Property Management, rules under the Act don’t allow for fines or penalties to be charged to owners who are in breach of the body corporate rules. If a scheme’s rules do not include amendments to allow for fines and/or penalties, trustees are not allowed to charge fines or penalties to the owner’s levy account.
Fines in terms of registered rules are mostly imposed for noise disturbance, parking transgressions, storing of goods on balconies, among others. Penalties may be imposed if owners built unauthorised extensions to sections or place structures on exclusive use areas that were not approved, Stonewood said on its website.
Rules need to be registered with CSOS (if after 2016) or with the Deeds Office if before that.
Kagiso Mahlangu, Head of Real Estate and Conveyancing at CMS South Africa, told Personal Finance that owners do have recourse against Trustees that abuse their power, and there need to be at least two Trustees. Recourse includes voting to have them removed, formerly expressing their concerns in writing to the trustees to have a record of grievances, issue binding directives during a meeting that limits their powers, as well as calling an urgent SGM to address certain matters.
Trustees can also be held personally liable for certain conduct within some certain limitations, says Mahlangu. “This may include conduct which includes gross negligence, fraud convictions, or breaches of their fiduciary duties of care, diligence, impartiality, and acting in the best interests of owners.” See a lawyer if you need to, she advised.
Benita da Silva, Executive of Compliance, Risk and Project Management at ASI Financial Services, added that owners can lodge a complaint at CSOS, which can investigate the matter and order trustees to take corrective action.
Trustees should also, she said, update owners on “on all information pertaining to the scheme”. There’s no closed list, but this also includes minutes from Trustee meetings, as well as “any significant management challenges or disputes within the scheme,” Mahlangu said.
Managing agents are typically responsible for sending out levy statements, collecting levies, doing the bookkeeping, advising the trustees on matters, and assisting with maintenance issues, said Mahlangu.
Da Silva explained that, while Managing Agents handle the operational side of things, the “ultimate legal responsibility remains with the trustees who must ensure the Managing Agent’s performance is adequate”.
Yet, said Da Silva, Managing Agents are not mere executors of the Trustees’ directives. “They have a legal and ethical responsibility to ensure the proper management of the scheme, compliance with relevant laws, and the financial well-being of the Body Corporate. If trustees are abusing their powers or mismanaging funds, the managing agent must step in to advise, warn, and, if necessary, refuse to follow improper instructions. In extreme cases, they can escalate the matter to protect the body corporate from harm.”
Da Silva added that owners can appoint an administrator or Managing Agent to take over management of the scheme and ensure it runs properly, bypassing trustees. Auditors are also obliged to report on financial irregularities or mismanagement to the Body Corporate – which is everyone who owns a property in the complex, she said.
PERSONAL FINANCE