Maintenance of common property in sectional title schemes

October 1st, 2018

By Brian Agar

This article takes a critical look at recent legislation regarding the maintenance of common property in sectional title schemes. It draws attention to some faults and offers practical solutions. The words ‘maintenance’ and ‘maintain’ will be used for ‘maintenance, repair and replacement’ and the equivalent verbs. The article also takes a brief look at ‘safety’.

The Sectional Titles Schemes Management Act 

The Sectional Titles Schemes Management Act 8 of 2011 (the Act) took effect on 7 October 2016. This legislation repealed previous laws, which required a body corporate to maintain common property, essentially the land and all improvements other than the owners’ sections shown on the sectional plans. At the same time it introduced a new provision, which required a body corporate to establish a reserve fund in addition to the administrative fund ‘to cover the cost of future maintenance and repair of common property’ (see s 3(1)(b) of the Act).

Major maintenance and maintenance plan

The Act gives no further details of the reserve fund. It was left to the regulations, which includes a new set of Management Rules to work out. Management r 22 requires a body corporate to prepare a maintenance plan for ‘major capital items’ over the next ten years. The plan is to be tabled at each annual general meeting (AGM) and owners are required to approve contributions to the reserve fund.

Prescribed contributions to reserve fund

Section 3(1)(b) of the Act provides for minimum amounts to be paid to the reserve fund as prescribed by the Minister of Human Settlements. Regulation 2 sets up a formula for this but this formula is immediately contradicted by another formula in Management r 22.2. The first formula will be referred to as ‘formula A’ and, the second, as ‘formula B’. Which formula applies?

Formula A is complicated, starting with a contribution of 15% of the total budget for the administrative fund for the current financial year. Thereafter, it depends solely on the amount of money held in the reserve fund at the end of the previous financial year. Contributions vary between zero and top out at the equivalent to be spent on ordinary maintenance as budgeted for the administrative fund. Formula A takes no account of the estimated costs of major capital items and can have no relevance whatsoever to budgeted amounts for the administrative fund. The formula is arbitrary, impracticable, vague and embarrassing.

Formula B, in contrast, is unduly cryptic. It bases the minimum annual contributions on ‘(estimated cost minus past contributions) divided by expected life’. This is simple to apply and provides a business-like result. This should be the preferred formula employed.

Constraints on imposition of contributions

Attention must be given to two constraints against the imposition of prescribed contributions.

Firstly, the proposed annual contributions to the reserve fund are voted on by owners at the AGM. If the majority of the owners do not accept or cannot afford the amounts to be contributed there is nothing that can be done to enforce payment. Trustees who have done their best to introduce a budget will have discharged their fiduciary responsibility. As Schutz JA in Wimbledon Lodge (Pty) Ltd v Gore NO and Others [2003] 2 All SA 179 (SCA) noted:

‘Again ignoring the legal technicalities of how a sectional title scheme is structured, the substance of the matter is that the body corporate is little more than the aggregation of all the individual owners. Their good is its good. Their ill is its ill. The body corporate is not an island, whatever the law of persons may say.’

Secondly, while schemes registered after 7 October 2016 must observe the Act and its Regulations, schemes registered under the Sectional Tiles Act 95 of 1986 retain most of their Management Rules and these do not require a maintenance plan. See s 10(12) of the Act, which states:

‘Any rules made under the Sectional Titles Act are deemed to have been made under this Act’.

It is noteworthy that the Act did not attempt to integrate old and new Management Rules, as was the case in s 60(8) of the Sectional Tiles Act. There is, however, an alternative view in the legal profession that the old rules remain in force except to the extent that they are irreconcilable with the new, and that old rules are also supplemented by new rules not previously existing. This clashes head on with s 10(12) of the Act.

Trustees dilemma

Schemes registered under the Sectional Tiles Act (and these probably make up by far the majority) are thus not legally obliged to prepare a maintenance plan. At the same time their trustees are faced with a dilemma by the commands of the Act to establish a reserve fund for future maintenance. I submit that trustees should establish a reserve fund and draw up an inventory of major capital items, which may require maintenance within a ten-year cycle. This should be submitted with an approximate estimate of costs at each AGM and it should be left to the owners to decide if and how much funds should be set aside. If they do not do so the ill of the body corporate will be their ill.

Major capital items

‘Major capital item’ is defined in Management r 2(l)(i) of the Act. It mentions 20 items and also includes ‘any other community and recreational facilities’. The definition applies to almost everything that may need to be maintained. It makes each of these items a ‘major capital item’, whereas that may not be the case. An example is ‘carpeting and furnishings’. The definition is unduly ambitious and misleading. There is also one glaring omission, namely, the replacement of external doors and windows. This is discussed below.

The demands of Management r 22(1) are also unduly onerous on trustee responsibility and on the pockets of the owners. Trustees must report on the present condition and state of repair of those items, the time when those repairs or replacements will take place, the estimated costs, and the expected life of repaired or replaced items. Much of this information will require professional assistance and will come at a cost, which certain schemes will not be able to afford. When these laws were drawn up the South African economy was in better shape than it is now. A lot of first entry owners bought into sectional title schemes. It is now self-evident that many of these buyers had not anticipated tougher times and escalating maintenance costs. Levy payments fall into arrears, buildings fall into disrepair and administration is no panacea. The unusually idealistic and unrealistic provisions in the Act should be administered sympathetically and circumspectly. In practice major capital items in the report should be restricted and estimated costs approximated. The most important aspect of this legislation is to bring to the attention of owners the need to make provision for the future.

Maintenance of closures

External doors, windows and other closures of sections, present borderline responsibility for maintenance between owners and a body corporate. Are they common property, owners’ property or both? The issues have never been clearly dealt with. A half-baked amendment to s 5(5)(a) of the Sectional Titles Act 95 of 1986 (pertaining to the boundaries of a section) left questions unanswered.

The Act needs to be repaired. Whether the owners or the body corporate does the maintenance is irrelevant, because the owners end up paying. On balance it would be preferable for the body corporate to do so. Prejudice creeps into this maintenance, where it benefits only a segment of owners, such as the 50% or so who own lock up garages, the doors of which need maintenance. The answer is to allow the body corporate to impose selective special levies where the maintenance or any expense, for that matter, does not apply universally.

Safety of common property

The horrific fire in Grenfell Tower in London a year ago gutted a high rise residential building, which was apparently well maintained. It seems the fire was caused accidentally and that it spread to external cladding on the building that was unsafe. This illustrates that while safety is usually bound up with maintenance, there are occasions where this is not so. The subject is broad and I have only dealt with it incidentally and briefly.

The often-overlooked s 3(1)(p) of the Act obliges a body corporate ‘to ensure compliance with any law relating to the common property or to any improvement of land comprised in the common property.’

This does not go far enough. The word ‘safety’ should find a way into the Act either in this section or in s 3(1)(l) in conjunction with ‘maintenance’. It is also disturbing to note that prescribed conduct in r 6, which regulates the storage of flammable materials, does not apply to gas kept for domestic purposes. This is not consistent with current safety regulations, which limit the capacity of a gas cylinder stored in residences.

Brian Agar BA (UCT) LLB (UKZN) is an attorney and consultant to John Hudson & Company in Durban.

This article was first published in De Rebus in 2018 (Oct) DR 19.