Changes to the new Sectional Title Legislation will drive up monthly Levies substantially! However, these changes have been implemented to better streamline the management process, and will assist trustees and managing agents in dispute resolution and scheme governance.
Establishing a Reserve Fund
Among these, the most notable change to the Sectional Title Schemes Management Act (STSMA) and the Community Services Ombuds Services Act (CSOSA) stipulates that each sectional title scheme is required to establish a reserve fund.
The aim of this reserve fund is to ensure that future maintenance, repairs and replacement to the common property and facilities therein are covered. The suggested amount required is 25% of the budgeted levy amount for that financial year. Sectional title schemes that have not previously adhered to this and at present have little or no reserves will have no choice but to impose a minimum of 25% levy increase for the next 12 months.
The Trustees and Managing Agents had until the 7th of October 2016 to make the required changes. The Trustees are obligated to provide members of the scheme with written notice of the amended levy contributions and amounts owed and payable to the Body Corporate after the budget approval date.
Establishing a reserve fund is a necessary change in the sectional title sector as too many schemes run into disrepair and financial ruin due to improper budgeting and financial planning. As a result, there is often insufficient funds to effect necessary repairs and maintenance to the scheme and unit owners risk losing substantial amounts of money as the value of their properties decrease.
In addition, financial institutions – such as banks – closely consider the financial standing of a sectional title scheme before lending money to a potential buyer. If the scheme is not financially sound the banks are less likely to provide the necessary funding to aspirant homeowners, significantly reducing the potential pool of buyers into that scheme and further prejudicing the value of the individual units.
Trustees and home owners should see the amendments to the Act as a positive change that will significantly improve sectional title management in the long term. Body Corporates are encouraged to utilise these services and adhere to the STSMA changes to ensure a smoother governance process.
Dispute Resolution | Community Services Ombuds Services (CSOS)
As stipulated in the new ST legislation, the CSOS is available to fairly and transparently assist any person in a scheme in matters that call for resolution. Examples of these are financial and goverance issues such as disputes in levy collection and recovery or difficulty in members reaching a unanimous resolution. The CSOS provides a cost-effective and time-efficient alternative in resolving a conflict outside of the courts. The Ombud may appoint an independent conciliator or adjudicator where an agreeable solution is not easily reached.
Click on the PDF icon to view the full Sectional Title Schemes Management Act
This article was written with the assistance of our number one choice in Attorney & Conveyancer – Marie van Coller Incorporated
Marie Van Coller Incorporated is a fast-growing boutique law firm in Johannesburg with over 25 years of experience in the practice. complement of professional staff enables the firm to cover the entire spectrum of practice in property law, civil litigation, and criminal law and labour law ensuring exceptional services to all clients.
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