Which option is better – EUAs created ito the plans or EUAs created ito the Management Rules?

As we know there are different ways of creating exclusive use areas in accordance with the STSM Act.  They can be created in terms of the sectional plans or they can be created in terms of the schemes rules.  If created in the rules it must be decided which rules will be used – the Conduct rules or the Management rules.

Lets look at what type of resolution is needed to create the EUA’s in terms of the STSM Act :

1. In the plans – unanimous resolution
Section 5

(1) In addition to the body corporate’s main functions and powers under sections 3 and 4, the body corporate—

  • may, upon unanimous resolution by the owners, request the delineation and cession of exclusive use rights to particular owners in terms of section 27(2) of the Sectional Titles Act;

Section 27(2) of the Sectional Titles Act refers to EUAs ito the sectional plans

 

2. In the management rules – unanimous resolution

Section 10

(7) A developer or a body corporate may make management or conduct rules which confer rights of exclusive use and enjoyment of parts of the common property upon members of the body corporate.

Section 10

(2) The rules must provide for the regulation, management, administration, use and enjoyment of sections and common property, and comprise—

  • management rules, as prescribed, which rules may subject to the approval of the chief ombud be substituted, added to, amended or repealed by the developer when submitting an application for the opening of a sectional title register, to the extent prescribed by regulation, and which rules may be substituted, added to, amended or repealed by unanimous resolution of the body corporate as prescribed; and

3. In the conduct rules – special resolution

Section 10

(2) The rules must provide for the regulation, management, administration, use and enjoyment of sections and common property, and comprise—

  • conduct rules, as prescribed, which rules may, subject to the approval of the chief ombud, be substituted, added to, amended or repealed by the developer when submitting an application for the opening of a sectional title register, and which rules may be substituted, added to, amended or repealed by special resolution of the body corporate, as prescribed: Provided that such conduct rules may not be irreconcilable with any prescribed management rule contemplated in paragraph (a).

EUA’s created in terms of the plans can be sold, bought, donated, left to someone in a will, mortgaged, let, because it is a registered real right.  EUA’s created in the rules cannot be sold, let or mortgaged as it is not a registered real right and “ownership” of the rights can only be changed by amending the rules.

So in summary an EUA created in terms of the plans is more tangible and worth more, but here is the curveball:

You need a unanimous resolution to take away the EUA rights to a unit that was created in terms of the Management rules, but you only need a special resolution to take away the EUA rights to a unit that was created in terms of the plans!

Section 5

  1. (1) In addition to the body corporate’s main functions and powers under sections 3 and 4, the body corporate—
  • may, upon special resolution by owners, enter into a notarial deed of cancellation of an exclusive use right in terms of section 27(5) of the Sectional Titles Act;