THE GOVERNANCE OF BODIES CORPORATE

Units within Sectional Title Housing Schemes are very much part of the South African property ownership experience, but so few of us know how and why schemes, and the communal interests of the owners, are governed or regulated.

The Sectional Titles Act brought a new concept into South African  Property Law.  Previously the old Roman Dutch Law  provided that everything which was build into or planted into the land acceded to the land and therefore to the owner of the land.

Sectional Title Legislation introduced the concept of vertical ownership into South African Property Law.  In other words, if vertical layers one, two and three were built onto the land, different persons could acquire ownership of each layer.

Sectional Title in its original format was designed to provide for vertical ownership of sections within a high rise building.  Accordingly, the statutory rules for the governance of Sectional Title Schemes, and regulation of the conduct of its members, had this high rise building model in mind.

However, in no time at all, developers, estate agents and the property owning public very  clearly saw that Sectional Title Legislation provided an ideal legal basis for the development and disposal of simplex/duplex housing units.  Such developments proliferated, far more so than the original multi-tiered schemes originally envisaged.

It was found that the original statutory rules, designed to govern and regulate high rise buildings and the owners of units therein, were grossly inadequate for the new breed of simplex/duplex housing developments which were becoming so popular.  Accordingly, the South African Property Owners (SAPOA), which comprised representatives of all those organisations within the overall property industry, devised a set of management and conduct rules for Sectional Schemes, known as the SAPOA Rules.  These were quickly seized upon by Sectional Title Schemes, and in almost every instance of a scheme registered under the original 1973 Sectional Title Legislation, the SAPOA Rules were adopted.

Government saw the light.  A new Sectional Titles Act, No. 95 of 1986, was brought into existence, and it became effective on 1st June 1988.  The new Sectional Titles Act, as it became known, provided that a Scheme Body Corporate came into being immediately any person other than the Developer became an owner of a unit with a scheme.

In terms of Section 35 of this new Act, the Body Corporate was to be managed, controlled and governed by Management Rules, and Conduct Rules modelled largely on the SAPOA version. The new Act also specified what the Body Corporate powers and duties were, as well as the Powers and Duties of the Trustees.  The Management and Conduct Rules were prescribed by regulation, although mechanics were put in place to have a Management or Conduct Rule substituted, added to, amended or replaced.  The Act made it quite clear that no change of whatever description to the Management or Conduct Rules was valid and enforceable, until the Registrar of Deeds had been notified of such change in the prescribed form.

The issue here is that the Body Corporate is a creation of the Legislature, and its powers and obligations, and those of the Trustees, are derived from the new Act, the new Regulations to the Act, the statutory Management and Conduct Rules (as may have been legitimately amended), and, in some instances, a carryover of some of the SAPOA Rules which  might have been adopted by the Bodies Corporate under the old 1973 Sectional Titles Act.  Bodies Corporate and Trustees may not act beyond the confines of the powers and duties conferred by those documents.

It was previously fashionable for Trustees to impose so called “House Rules”, which dealt with such Conduct Rules as keeping pets, hanging washing, mowing lawns and so on.  There is no provision in the Act for such informal rules to be established by the Trustees on their own accord from time to time, and any house rule so established is invalid and of no force or effect.

Trustees in a scheme often impose penalties in the form of interest or fines on members who transgress rules.  This power is not one of those conferred upon Trustees in terms of the Act nor by any of the ancillary documents referred to above.

As neither the new Act, Regulations or Rules permit the Trustees to impose penalties and fines in the event of member’s transgressions, any attempt by them to do so is invalid and unenforceable.  In order to render such action valid and enforceable a change to the statutory Management Rules will be required (Bodies Corporate cannot change the Act nor the Regulations, only Parliament may).

In terms of Section 34(2) of the New Act, if there is to be any proposed change to a Rule whereby an owner is to be adversely affected by such change, such owner must furnish his written consent to the change.  As the change to the Rule in the circumstances outlined above, will expose every owner to the possibility of a financial liability he/she was not previously exposed to, it cannot be doubted that the notional proposed change designed to introduce fines and penalties for certain transgressions of the Rules do adversely affect every owner.  Accordingly, it is submitted, the Trustees do not have the powers to validly impose fines and penalties should there be a transgression of a Rule, unless the appropriate change to the Management Rule has been validly changed or added to, and has the written consent of every members.

For all your property queries and for more information contact Randles Attorneys.

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