Sectional Title Owner FAQ’s
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IMPORTANT DEFINITIONS:
This is the legal entity name for the sectional title complex made up of all owners collectively.
A section is the legal name for a unit in the body corporate which is shown on the sectional title plan, owned together with an undivided share in the common property and typically extends from the midline of the ceilings, walls and flooring.
These are parts of the common property reserved for use by specified owners only. EUA’s are either shown on the sectional title plans in which case they may be sold, transferred and bonded, or alternatively defined in the rules in which case they may not be sold, transferred and bonded.
LEVIES
If you are the owner of a sectional title complex unit (section is the corresponding legal term) you must pay a levy to the Body Corporate to cover shared monthly body corporate expenses (e.g. security, cleaning, insurance, annual audit fee, management fees etc) . Trafalgar as the Managing Agent invoices and collects levies on behalf of the Body Corporate. The breakdown of the costs which levies cover is given in the approved budget for the body corporate presented and approved at the AGM.
The levy amounts are determined by the approved budget of the complex for the financial year. To draw up a budget the Trustees look at all the expenses that the complex incurs and then determine what income is needed to cover those expenses. The budget then needs to be approved by the owners, typically at an Annual General Meeting before it can be implemented. The levies are worked out by splitting the required annual income monthly and then pro rata, usually based on the relative floor area of the sections which is shown in the sectional title plans. (e.g. participation quota or PQ)
As an owner of the unit in the complex you have a say in approving the budget and therefore the levy amounts; but if the majority of the owners have approved the budget; and with it a levy increase; then you will have to abide by the majority decision.
The Municipal Property Rates Act in 2004 stipulated that all sectional title owners should become responsible for their own assessment rates (rates and taxes) so it is billed directly to owners by the local Municipality and no longer to the Body Corporate to be covered by the levies.
Each complex has a Debt Collection policy or plan. The norm is that if levies are not paid by the 7th of the month then interest will be raised on the levy account in line with an interest resolution which the Trustees sign. Other charges can also be incurred when levies remain unpaid – like Debt Collection charges and even legal fees if the account is handed to attorneys for legal collection. Eventually if the arrear levies remain unpaid the unit can be sold on auction to recover the debt. Non-payment of levies places service delivery at the complex at risk and stresses cash flow for the body corporate. Your unit cannot be sold with arrear levies which will need to be cleared to get a clearance certificate for the conveyancing and transfer of the property.
We have an acknowledgement of debt form (AOD) that you can complete – stipulating what you undertake to pay per month to settle the arrears. Current levies will need to be paid together with a portion of the arrears over a period of typically 6 to 12 months. We can then get the Trustees to approve this, if not provided for in the debt collection policy. The debt collector reflected top right of your monthly levy account will be able to assist.
PQ stands for participation quota and is the relative floor area of your section compared to the total floor area of all sections (a few complexes have exceptions based on weighted PQ’s nominated by the developer which is different to the relative floor area). The bigger your unit the bigger your PQ and the higher your levy, but the weight of your vote is also determined by PQ so the bigger your unit the bigger your vote at general meetings and for resolutions presented for approval. The PQ’s are shown in a table on the signed sectional title plans with each section number and floor area.
Unfortunately you do not have a choice in paying levies – the minute you become the registered owner of a unit in the complex you become a member of the Body Corporate and liable for levies and will need to continue to pay them until the day you sell your unit. This is also because you own an undivided share of the common property which requires maintenance, insurance and management with associated costs which the levies cover.
Each complex has their own Debt Collection policy or plan. This is implemented when owners do not pay their levies timeously. The first step is normally that interest is raised on arrear levies when payments are made after the 7th of the month because levies are typically due by the 1st in advance as defined in a Trustee signed levy resolution. This interest goes into the Body Corporate funds; it does not go to the Managing Agent. The Trustees can also instruct Trafalgar to take further action – i.e. send debt collection demand letters and make phone calls to collect arrear levies – this is where the Debt Collector fees come in – Trafalgar is required to register as a Debt Collector and can charge fees for these services as specified by the Council for Debt Collectors in their Annexure B schedule of fees. It is also possible that we can be instructed to hand overdue accounts to attorneys for collection – these legal fees will be for the account of the owner of the unit.
The Council for Debt Collectors offers a dispute resolution service and will conduct a binding external review. Forms and instructions are available on www.cfdc.org.za
Refer initial queries to the debt collector reflected top right of your levy account and ask for an account statement which will give a breakdown of all charges and payments. Check the approved budget details in the AGM minutes. If you are not satisfied you can escalate your concerns in writing to the Trustees and thereafter to the CSOS Ombud for a binding external review if internal remedies have failed to resolve the dispute.
The reserve fund levies are raised for planned maintenance, but it is still possible for the Trustees to raise special levies for unforeseen, unbudgeted expenses. A Trustees resolution is required to authorise a special levy to be raised and special levies are also based on the PQ for each section.
The Sectional Title Schemes Management Act (‘STSM Act”) gives the Trustees the right to increase the levies only at the financial yearend and by up to 10% – without having to ask the owners’ permission at an AGM / SGM. After the financial yearend the Trustees will have to get the budget approved by ordinary resolution of the Body Corporate, usually at an AGM / SGM or by round robin if they need to increase the levies further (or where they need to increase it by more than 10%)
You need to ask for a printout of your levy account (e,g, a levy account statement) going back as far as necessary, so that you can see if there are any payments that you made that are not reflecting on the account and to make sure you agree with all the charges raised. Discuss any queries with the assigned debt collector whose details reflect top right of your monthly levy account.
That will depend on the Trustee resolution passed with regards to the payment of levies. The STSM Act does not stipulate when levies are due but it stipulates that it only becomes due after the Trustees have passed a resolution to that effect. The standard practice in the industry is that levies are payable monthly in advance before the 7th of the month – whereafter debt collection action is taken – but this can be customized for any complex by their Trustees
The STSM Act gives Trustees the right to charge interest on arrear levies. They need to pass a Trustee resolution (we call it the Interest resolution) to determine what the interest rate for their specific complex will be. The Act only states that this interest rate may not exceed the annual rate prescribed by the National Credit Act. Interest is charged on arrear levy balances daily in arrears and is allocated to the levy account at statement cut-off around the 24th of the month when the levy statements for the next month are sent out. 15% is a commonly applied interest rate.
When a unit is sold the transfer cannot be registered unless a clearance certificate is given – the clearance certificate stipulates that all levies due to the Body Corporate has been paid. The conveyancing attorneys may be able to assist with settling the arrear levies to achieve a clearance certificate from the deposit paid by the purchaser by agreement between the parties.
The Trustees have the right to raise special levies for unforeseen, unbudgeted expenses that the Body Corporate has to pay. They do not need to get authorisation from the owners to raise a special levy; but it is good practice to give the owners advance notice of this and to be transparent with regards to what it is raised for. It is good practice to notify owners in advance of the amount of the special levy and the duration of the special levy (will it be a once off or raised over a number of months). Approach your levy account debt collector for assistance if you are battling to keep up with special levy payments and to make a payment plan / arrangement.
With the new Sectional Titles Schemes Management Act (STSM Act) there is a differentiation between two levy categories. Previously only one levy was payable – effectively the admin fund levy. Since 7 October 2016 there is another levy payable – the reserve fund levy – this is to cover planned maintenance in the scheme which should be mapped out in a 10 year maintenance plan which must be presented at the AGM for approval. All owners are obliged to pay both these levies.
You do not have to receive statements to make the payment of levies due. If you are not receiving statements, rather contact us and we will send you the statements. You can also register on our website to view your statements online. Ask for a levy account statement to see a breakdown of historic charges to catch up.
Check your levy statement for the opening and closing meter readings and meter reading date. Your utility charge is derived by multiplying the number of units consumed by the applicable tariff for the service and your property type. If you have any queries please email the meter reader whose details should appear on the levy statement.
MANAGING AGENT
Trafalgar gets appointed as the Managing Agent of a complex when a management agreement is signed by 2 Trustees with the approval of a Trustee Resolution. Our services are stipulated in the Management Agreement that is signed between Trafalgar and the Body Corporate. An important function of Trafalgar is the billing, collection and debt collection of levies and the payment of expenses of the complex to make sure that services are consistently delivered. We circulate monthly financial reports to the Trustees on what monies were collected and what accounts were paid. We also assist the owners and Trustees with advice regarding the Sectional Title legislation, payroll, tax returns, audit file preparation and arranging the AGM and trustee meetings
Trafalgar is a Managing Agent – appointed by either the Trustees or the Body Corporate to provide certain functions (mostly administrative and financial) as stipulated in terms of the management Agreement. The Trustees are elected at an AGM / SGM and are responsible for the day to day running of the complex and are typically assisted by the managing agent. The Managing Agent acts on instructions from the Trustees. The Caretaker is an employee of the Body Corporate and also acts on instructions from the Trustees often relayed by the managing agent. It is important that all roles work and communicate well together for best results.
TRUSTEES & BODY CORPORATE
It is not something that you subscribe to or can resign from. The minute you become the registered owner of a unit in the scheme you automatically become a member of the Body Corporate with ownership of your section and an unidivided share in the common property. The only way out is to sell your unit – when the transfer goes through to the new owner, you will no longer be a member of the Body Corporate.
The Trustees are in a committee that is elected by the owners typically at the AGM to deal with the day to day management of the complex. Certain decisions can only be made by the Trustees and certain decisions the Trustees have to refer back to the owners to make. The Sectional Title legislation determines what resolutions are needed when. New trustees can be elected at the next AGM or at an SGM which 25% of the owners are entitled to call.
In terms of the Act the Trustees are responsible for the functions and powers of the Body Corporate. And the Trustees have certain powers vested by the applicable legislation – where they do not have to ask permission from the owners first. For instance to appoint a Managing Agent or to raise a special levy. There are however certain things that the Trustees cannot do – the Act stipulates where they need permission from the owners (either an ordinary / special / unanimous resolution). It is better to always ask the Trustees to show you in terms of which portion of the Act they made their decision.
The Chairperson does not have more power than any of the other Trustees. The only thing that the Chairperson can do that the other Trustees cannot do is that he/she has a casting vote – but only at a Trustee meeting – where there is a deadlock in the voting. That is why we always suggest that our complexes have an uneven number of Trustees instead of an even number – to try and prevent a deadlock in the voting. The Chairperson also has duties provided by the Act in terms of chairing a meeting. The chairperson is usually elected at the first trustee meeting after the AGM.
There is a general misconception that the Trustees are the Body Corporate. The Body Corporate is actually all owners of units in the complex together. They then elect a committee called the Trustees who deal with the day to day management of the complex.
COMMON PROPERTY
The Trustees do not have this authority. The correct resolutions need to be passed by the owners. It will depend on who will rent the area and for how long. And there must always be a signed lease agreement in place. Trafalgar will be able to advise on the necessary resolutions and approval required.
IMPROVEMENTS OR ALTERATIONS
You will first have to determine the status of the garden. If it is common property then you will need permission from all owners – as the common property belongs to all owners. If it is an exclusive use area then you would need to get an ordinary resolution passed by the Body Corporate.
You first have to investigate what the status of the balcony is – if it is part of the section already then it will not be an extension of the section and you only need to involve the Trustees in the sense that they need to ensure that you do not impair the structural integrity of the building and that you do not add anything that will negatively impact on the complex or other owners or occupiers. If it is not already part of the section, then it will be an extension of the section and you will have to follow the procedures set out by the Act – this is not a simple answer to give and we suggest you speak to your Portfolio Manager on the steps to follow
MAINTENANCE AND INSURANCE
Trafalgar is not a developer – Trafalgar does not build houses or units. We are only the Managing Agents that gets appointed by either the Developer (if it is a new development) or the Trustees or owners, if it is an existing complex.
The answer to this is not simple – it will depend on the status of the balcony. You will need to check the sectional plans and rules of your complex to determine this. Should the balcony be part of the section then the owner is responsible for maintenance thereof. Should the balcony be common property then the Body Corporate will be responsible for maintenance thereof. Should the balcony be an exclusive use area it needs to be determined what type of eua it is – if it is eua ito the plans then the Body Corporate is responsible for maintenance of the area – if it is eua ito the rules then the rules can state that the owner is responsible for maintenance – if the rules do not state this then the Body Corporate will be responsible for maintenance
In terms of the Sectional Title Legislation the owner of a unit is responsible for the hot water installation (meaning the geyser) and it does not matter where the geyser is situated for this to be the case. The body corporate insurance policy generally covers burst geyser or thermostat related repairs
This will depend on the insurance policy that your complex has, but it normally only covers the common property and related improvements, not your household contents. Body corporate insurance cover often also includes Trustee indemnity and public liability insurance cover. You will have to get your own insurance for your household content. An example often used if you turn your unit upside down, everything which falls to the floor would not be covered by the body corporate insurance and would need to be covered by personal short term insurance you need to arrange.
Trustee indemnity insurance may be incorporated with the body corporate insurance policy and covers the Trustees in the event of losses arising from Trustee negligence. Fidelity insurance protects the body corporate trust funds from fraud.
This is not an easy question – you will have to check where the window or door is situated on the sectional plans (your Portfolio Manager can assist you with this) If the window or door is situated on the perimeter of the section (outside wall) then the split will be 50/50 with the body corporate– the inside of the window or door is the responsibility of the owner and the outside the responsibility of the Body Corporate. That is the simple answer – it will be better to speak to your Portfolio Manager to assist you in assessing the responsibility
The median line that runs in the middle of two units separate them from each other – from the median line upward is the top section and from the median line downwards is the bottom section. There is no common property involved between two sections. Each owner is responsible for his own maintenance up to the median line.
It depends where the meter is situated. If it is situated on common property it will be the Body Corporate’s responsibility. If it is situated inside the section it will be the owner’s responsibility. If it is situated in an exclusive use area it depends on what type of exclusive use area (“eua “) it is. If it is eua shown on the plans then the Body Corporate will be responsible. If it is eua defined in the rules you will have to check what the rules say about maintenance to the area.
In terms of the Act the Body Corporate is only responsible for the common property and exclusive use areas shown on the sectional title plans – which is the outside of units and everything else that is not part of the sections. The owner is responsible for the inside of the unit. If there was however damage to the inside of the unit due to a problem from the outside – for instance a roof leak causing resultant damage to the unit inside – then the Body Corporate or its insurer will be responsible for the maintenance of the resultant damage.
In terms of the STSM Act the person responsible for the maintenance of the area is responsible for the excess for an insurance claim. So if there is an insurance claim on a geyser the owner will be responsible for the excess as the owner is responsible for maintenance to the geyser.
If there is a leak in the roof of your unit you need to contact the Managing Agent or Trustees as the Body Corporate is normally responsible for maintenance to the roof and should also fix the resultant damage. If you have a unit above you and there is a leak through to your unit, you should contact the unit above as there are no common property involved between units (Trafalgar will provide the contact details). It could however be that the unit above has a balcony that is common property and the water is coming from their balcony into your unit – then the Body Corporate will be responsible for maintenance. In all instances the Managing Agent or Trustees should also find out if it is not covered by the Body Corporate insurance
The Body Corporate is obliged by the STSM Act to maintain the common property in a complex. The Trustees must ensure that this happens. It is also prescribed that maintenance is properly planned by setting up a 10 year maintenance plan. That is why the Body Corporate raise reserve fund levies (to cover these expenses) It sometimes happens that the Body Corporate has cashflow problems – as not all owners are paying their levies in full. When this happens it can also slow down maintenance of the common property. The Trustees should do everything in their power to collect all the levies and if the levies are not adequate to cover the expenses, then they need to get the levies increased or raise special levies for specific projects. You can suggest a direction to the Trustees at the AGM which will be adopted if other owners agree, to give instructions to the Trustees to take specified actions concerning maintenance or other issues.
Trafalgar is only the Managing Agent and the levies are paid to the Body Corporate – Trafalgar only collects on behalf of the Body Corporate on the instructions of the Trustees. It is not Trafalgar’s responsibility to do maintenance. Trafalgar only assists the Trustees in getting quotes for maintenance and facilitating work orders the Trustees authorise.
EXCLUSIVE USE AREAS
Exclusive use rights can only be determined in two ways – either on the sectional plans or in the complex rules. Access availability has nothing to do with it. It is possible to have a balcony on the 10th floor of a block of flats that is only accessible through the unit but it could still be shown as common property. Exclusive use rights defined in the plans are a registered real right and you can do a deeds search to determine who was allocated these rights. Exclusive use rights in terms of the rules can be taken away by simply amending the rules by special (conduct rules) or unanimous (management rules) resolutions.
If the storeroom is an exclusive use area shown in the sectional plans then the STSM Act stipulates that the owners of these eua rights MUST pay an exclusive use levy for the maintenance and other related costs of these areas. When the storeroom is an exclusive use area defined in the rules, then you will have to check what the rules stipulate for maintenance responsibility – if the rules stipulate that the owner is responsible for maintenance of the area then the Body Corporate cannot also charge an exclusive use levy; but if the rules do not make the owner responsible for maintenance then the Body Corporate MUST charge an exclusive use levy as per the STSM Act
CSOS
CSOS is the Community Schemes Ombud Service and in terms of the CSOS Act every community scheme (which includes bodies corporate and HOA complexes) must register with CSOS and units in a community scheme must pay a monthly CSOS levy. The CSOS levy goes toward the expenses incurred to operate CSOS and keeps the costs for CSOS services very low. For instance there is no cost to get Rules approved by CSOS and only R50 for a conciliation done by CSOS. An adjudication done by CSOS costs only R100. The main function of CSOS is dispute resolution done in a cheap and effective manor to avoid high legal costs.
The CSOS Act stipulates the formula for the calculation of the CSOS levy. You basically take your monthly admin fund levy and deduct R500 (as the first R500 is exempt) then you work out what 2% of that amounts to, and that will be your unit’s CSOS levy (to a maximum of R40 per unit per month)
GENERAL MEETINGS
The STSM Act gives the Trustees the right to call an electronic meeting but one of the conditions is that it must be accessible to all owners. It is very easy to access electronic meetings like Zoom for instance – you can even access it on your cell phone if you do not have a computer or Internet connectivity.
SCHEME RULES AND CONTRAVENTIONS THEREOF
There are three boxes that needs to be ticked before a Body Corporate may raise fines or penalties for transgressions of rules.
- The Rules must allow for fines to be raised
- The owner must be given the opportunity to state his/her case before the fine is raised
- The fine must be reasonable