The STSMA, which has come into operation requires certain changes to the deed of sales. The most important change to the deed of sale, relates to special levies. The new act stipulates that a Purchaser will take over the pro rata payment of the special levies from date of registration. This has thus changed the practice of a Seller being liable for the payment of all outstanding special levies, prior to date of registration, even though the seller will not be enjoying the benefit thereof. As this has a significant impact on Purchasers, this must be declared to them and included in the deed of sale. A proposed amendment to a deed of sale is to include an addendum, which includes the following conditions:
Section 3(3) of the Sectional Title Schemes Management Act, 8 of 2011 (“STSMA”) stipulates that upon change of ownership of a unit, the successor in title becomes liable for the pro rata payment of a special levy, from date of change of ownership.
The parties therefore hereby agree that the Seller will be liable for payment of pro rata special levies up and until date of registration of the property into the name of the Purchaser and the Purchaser will be liable for payment of residual pro rata special levies from date of registration of the property into his or her name, notwithstanding anything to the contrary stipulated in the deed of sale. The parties further agree that where same is applicable and necessary, any incorrect reference in the deed of sale to the Sectional Titles Act No 95 of 1986, shall be deemed to be amended and to refer to the applicable corresponding Sections in the Sectional Titles Schemes Management Act No 8 of 2011.
Therefore every Purchaser needs to be made aware of the change in legislation as well as acquaint him or herself with whether there is a special levy raised or the possibility of a special levy being raised in the future.
Summary of further levies imposed by the Sectional Titles Management Act:
Community Scheme Ombud Services levy:
Purpose: to address dispute resolutions
Schemes with a levy of less than R500.00 will be exempt from paying the monthly CSOS Levy. Schemes with a levy of more than R 500.00 will pay the monthly CSOS levy of 2 % of the amount by which the monthly levy exceeds R 500.00 calculated as per the following example:
Reserve fund levy:
The body corporate must have a reserve fund which must be sufficient to cover future maintenance and the amount must not be less than the amount prescribed, being:
If they do not have a reserve fund they need to provide for 15% of your New Year levy budget and raise same. If they have a reserve fund they must increase it to 25% of the previous year’s levy. The aim is to have a reserve fund of 100% of the previous year’s levy.
The legislation governing the Sectional Title industry has recently been updated.
Parts of the old Sectional Title Act 95 of 1986 are still in force, but two new acts were promulgated on 7 October 2016 - namely the Sectional Title Schemes Management Act (STSMA) and the Community Services Ombuds Service Act (CSOSA).
The STSMA will deal with the operational requirements around the management of Body Corporate schemes, while the CSOSA will assist with any disputes which may arise. The CSOS (the Ombud offices) will also act in a compliance capacity for other communal residential complexes, such as security estates (where a Home Owners Association manages the complex), retirement villages and share block schemes.
Below is an outline of what this new legislation means for you, whether you own a sectional title unit or a property in an estate/complex (governed by a Home Owners Association):
1. Registration of the complex
Body Corporates and Home Owners Associations need to register the complex with the Ombud’s offices. They also need to ensure that all complex management and conduct rules, together with any changes which have historically been made to these rules, are filed with the Ombud.
In addition, complexes need to provide their domicilium address to the Ombud, the local municipality and local registrar of deeds so that in the event of cases being brought against a Body Corporate or Home Owners Association, there is one address at which to serve notices.
2. Assistance with conduct rules
The office of the Ombud must approve and certify all Body Corporate rules which have been substituted, added or changed.
3. Annual audited financials
All complexes need to file their audited financials with the Ombud’s offices together with their budget for the following year.
The following rule changes apply only to sectional title units:
4. Reserve Fund
Body Corporates are now required by law to establish a reserve fund to cover the cost of future maintenance and repairs to common property. The suggested amount for the reserve fund is 25% of the annual levy. So, for example, if the levies total R150 000 for the year, then the additional reserve amount to be collected from owners would be R37 500.
5. Decisions require special resolutions
In future, Body Corporates will need a special resolution to make decisions such as the purchase, transfer, sale or letting of units. In cases where a special or unanimous resolution can’t be reached, the chief Ombud can be approached to provide assistance.
6. Assistance in recovering arrear levies
Body Corporates can now request assistance from the regional Ombud where trustees are struggling to recover payments from Sectional Title owners.
7. Additional levy to fund the Ombud’s offices
In order to properly serve the sectional title community, the Ombud’s offices will be funded with an additional levy which each owner will have to pay. The regulated amount is the lesser of R40.00 or 2% of levies in excess of R500.00.
8. Limited proxies
No more multiple proxies per person. This new legislation limits the number of proxies held by a single Body Corporate member, to two.
9. Counting of votes
The way in which votes are counted at meetings has now been amended. Quorums and resolutions are now reached by counting the percentages required by number and value and each owner gets to vote only once in order to reach the required number as opposed to having multiple votes if more units are owned.
10. Building extensions in sectional complexes
Developers, who still own a unit and/or Body Corporates (where the developer has sold all the units) could request that the Ombud allow an extension to their right to build on in the complex. This was previously not allowed.
All Body Corporates now need to review their all-risk insurance policy every three years. Moreover, sectional title owners may now take out additional insurance for their unit, in addition to the complex all-risk policy.
12. New complexes
In order to register a new sectional title development, a certificate must be obtained from the Ombud’s office in which the Ombud confirms that the new complex is registered with the Ombud and that changes to the standard management and conduct rules are reasonable and acceptable.
In order to be compliant with the above changes, your Body Corporate needs to register the scheme with the CSOSA within 30 days after 7 October and submit the scheme’s governance documentation to the Ombud Service within 90 days.
This new legislation aims to improve and streamline the governance of your Body Corporate. A positive move forward for trustees, owners and tenants alike.