With the recent floods in KZN it was highlighted again that it is possible for sectional title schemes to have units that are completely destroyed (as in people not able to live in them) and we also had an example in Knysna with the fires a couple of years ago where the whole complex was deemed to be destroyed. What to do in such a case?
The answer to the procedures to be followed lies in Section 17 of the STSM Act.
The owners need to get together (at a meeting or on a round robin basis) and decide by unanimous resolution if the units / buildings that were destroyed will be rebuilt. If they decide not to rebuild them then those sectional plans need be amended to remove those sections from the scheme. If the whole scheme is deemed to be destroyed and they do not wish to rebuild the scheme then they can close the sectional title register and sell the land.
Proper insurance is important to have in place for such instances.
If the owners are unable to agree as to the procedure to follow then the court can be approached for an order.
Owner of units that have been destroyed will have to continue to pay their levies – as levies are used to pay the common property expenses not unit expenses. It is only when the budget is affected (certain costs are no longer applicable) that a new budget can be approved and the levies reduced.
Section 17. (1) The building comprised in a scheme is, for the purpose of this Act, deemed to be destroyed—
- upon the physical destruction of the building;
- when the owners by unanimous resolution so determine and all holders of registered sectional mortgage bonds and the persons with registered real rights concerned, agree thereto in writing; or
- when the Court is satisfied that, having regard to all the circumstances, it is just and equitable that the building must be considered to have been destroyed, and makes an order to that effect.
(2) In any case where an order is made under subsection (1)(c), the Court may impose such conditions and give such directions as it considers fit for the purpose of adjusting the effect of the order between the body corporate and the owners and mutually among the owners, the holders of registered sectional mortgage bonds and persons with registered real rights.
(3) (a) Where the building is damaged or destroyed within the meaning of subsection (1), the owners may by unanimous resolution, or the Court may by order, authorise a scheme—
- for the rebuilding and reinstatement in whole or in part of the building;
- for the transfer of the interests of owners of sections which have been wholly or partially destroyed, to other owners.
(b) In the exercise of their powers under this subsection, the owners may pass such resolution as they may consider fit or the Court may make such order as it may consider necessary or expedient to give effect to the scheme, in connection with amongst other things—
- the application of insurance moneys received by the body corporate in respect of damage to or the destruction of the building;
- the payment of money by or to the body corporate or by or to the owners or by or to one or more of the owners;
- an amendment of the sectional plan so as to include an addition to or a subtraction from the common property;
- the variation of the quota of any section; or
- the imposition of conditions.
(4) An application may, for the purposes of this section, be made to the Court, by the body corporate or by any owner or by any holder of a registered sectional mortgage bond or a registered lease or by any insurer of the building or buildings or any section therein, or by the local municipality.
(5) Any insurer of the building or buildings or any part thereof, has the right to intervene in the proceedings on any application to the Court under this section.
(6) (a) The Court may, on the application of a body corporate or any member thereof or administrator or any holder of a registered real right concerned, or any judgment creditor, by order make provision for the winding-up of the affairs of the body corporate.
(b) The Court may, by the same or any subsequent order, declare the body corporate dissolved as from a date specified in the order.
(7) The Court may, with regard to any application under this section, make such order for the payment of costs as it considers fit.
(8) Where two or more buildings are comprised in a scheme, and only one or part of one of the said buildings is damaged or destroyed, the provisions of this section apply, with the necessary changes required by the context, as if the said buildings were one building and part of such building has been damaged or destroyed.
(9) When in terms of subsection (1) the building comprised in a scheme is considered to be destroyed and the owners have by unanimous resolution resolved not to rebuild the building, the body corporate must lodge with the registrar of deeds a notification in the form and with such supporting documents, as may be prescribed in terms of the Sectional Titles Act.