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MCS Courier - March 2013

7 March 2013

Are invalid rules valid?
By way of a fictitious example, Tertius Maree illustrates why he has misgivings about the assumed integrity/reliability of the rules of some sectional title schemes as filed at the Deeds Registries. The fictitious example reads as follows:

At a general meeting of Swan Lake body corporate a member proposes the amendment of a particular management rule. The proposal seems a sensible one and is enthusiastically supported by the other members at the meeting. The chairman puts the item to the vote and it is ‘unanimously’ resolved to adopt the proposed amendment.

Although no notice of a proposed unanimous resolution had been given and the requisite 80% quorum was not present, the trustees proceed to complete Form V and to file the ‘amended’ rule at the Deeds Registry. Subsequently the validity of the rule is questioned by a member who was not present at the general meeting. Upon considering the matter the trustees reach a conclusion that the proper procedures have in fact not been followed and distribute a notice to all members that, due to incorrect procedures, the resolution cannot be regarded as a unanimous resolution and accordingly that the proposed amendment had not been adopted and that the rule should be ignored.

Another owner, who was also not present at the meeting, objects and claims that the amendment, which affects him favourably, is valid and insists that the trustees apply the rule. The trustees refuse and the aggrieved member refers the dispute for arbitration, asking that the amendment be ratified by the arbitrator.


Permitted usage of sections and exclusive use areas
Tertius addresses the simple question as to whether the intended usage of a section changes when, for example, an owner effects building alterations to accommodate a shop in what was previously a residential section.

As regulated by Section 44(1)(g) of the Sectional Titles Act and Management Rule 68(1)(v) which expands on it, he suggests that the obvious answer is that the usage does not change, because sub-rule (b) refers to the original approved building plan of a section.  The owner will accordingly have to obtain the written consent of all the owners for the change of usage.  

Improvements to common property
A look at the difference between 'luxurious' and 'non-luxurious' improvements and the attendant requirements.  Here Tertius suggests a method for trustees to decide what - given the nature of the scheme - is considered luxurious or non-luxurious. He then discusses the case of owners who have a reasonable need to make some improvement to the common property, which can only be done with the written consent of the trustees in terms of Management Rule 68(1)(vi).  The rule unfortunately has shortcomings - for example TV aerials erected on common property (the roof) but above the sectional title area.   Air conditioners attached to the outside walls of units are another example. He suggests that in such cases the rule be changed to accommodate such instances. 

What does ' ... and shall determine the amount estimated to be required to be levied ...' mean?
This phrase in Management Rule 31(2) continues to be misinterpreted, giving rise to consistent malpractice, erroneous budgeting, cash shortages, unnecessary special levies, and, as demonstrated by The Peaks decision, causes levies to be irrecoverable in law.  Here the following two points are worth bearing in mind:

  1. The owners’ function and their only power is to determine the amount which is required to be levied and they do this by approving the budget, and
  2. the trustees also have no discretion in determining the levies, and must simply apply the participation quotas (or other admissible formula) to the nett amount of the approved budget.

MCS Courier 43 March 2013

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