Owners Guide To Community Living
What is Community living?
Owners new to sectional title living are often uncertain about their rights and responsibilities as part of a community living development, which is why Solver Property Services, as Sectional Title Experts have put together this guide for easy community living.
As South Africa’s population is increasing, the prospect of community living has become a favourable solution for many South Africans, with approximately fifty-eight thousand developments made up of Body Corporates, Share Blocks and Homeowners Associations, community living has become a significant contributor to the South African economy.
Community living is not only affordable, but also an opportune lifestyle choice, that benefits people from all walks of life. Members of a community have the opportunity to share common interest with neighbours and enjoy common area facilities, such as a play park or swimming pool, which could be too costly for an individual to maintain on their own.
Together with the many advantages of community living, certain commitments are required from an owner, which in most cases differ somewhat from that of the conventional land or home ownership, for example a Sectional Title Development, requires the input from all members when it comes to the decision making of shared responsibility matters of the community.
The information contained herein, provides a valuable guide regarding community living and the rights and obligations of owners within the community.
This guide contains general information for those owning or looking to buy into community schemes. The information contained herein is aimed to advise owners and potential buyers of what community living entails and should not be taken as legal advice.
Should you require further information, kindly contact the Solver Property Services offices on 010 822 2882 or alternatively email email@example.com. For matters that cannot be resolved internally, members may log a dispute through the Community Schemes Ombuds Service (CSOS).
Community Scheme’s Explained
A community scheme, as described by The Community Scheme Ombud Service Act of 2011 is defined as ‘’Any scheme or arrangement in terms of which there is a shared use of and responsibility for parts of land and buildings’’ examples of community schemes include:
- Sectional Titles Developments
- Share Block Developments
- Homeowners Association Developments
- Business Park Developments
These developments consist of shared common property and individually owned erfs or units.
In a community scheme, owners have the choice to either privately own a section of land (Homeowners Association) or a section of a building (Body Corporate) along with a share of the common property.
If you are considering buying into a community scheme, it is important that you understand your rights and responsibilities as an owner and not only for your property but for the shared common property as well.
For this purpose, the conduct rules of the scheme are the best place to start. Another important aspect is understanding what common property is and the costs involved on the upkeep and general maintenance of these areas.
General Common property areas include but are not limited to:
- Parking bays
- Communal lifts
- Swimming pool/s
- Tennis court/s
- Squash court/s
When buying into a Body Corporate it is recommended that you find out if there are any outstanding fees and charges still owing by the Body Corporate, as a new owner in the scheme, you will be required to honour the payments.
What is a Body Corporate?
The expression Body Corporate is a term used to define the owners within the scheme, a Body Corporate is made up of all the owners within the scheme and comes into existence when the first unit is sold and transferred by the developer and the Inaugural Meeting has been held.
A Body Corporate is a legal entity which may institute or face legal action and in order to be compliant must adhere to The Sectional Titles Schemes Management Act (STSMA), The Prescribed Management Rule (PMR), The Community Schemes Ombud Service Act and the Council By-Laws.
At an Annual General Meeting the owners or their representatives (also referred to as a proxy) decide on important matters relating to shared responsibilities. These include:
- The management of the scheme.
- Maintenance of common property.
- Approval of the budget.
What is a Share Block Development?
Plainly put, a share block development is another form of property ownership, it allows for a single company to own a development, whilst allowing individuals to purchase the right to use a specific section or space within the development.
In a Share Block development, the Directors are tasked with the management of the company and are bound in terms of the Companies Act as well as the Share Blocks Control Act. Unlike a Body Corporate, the Directors of the company may take all management decisions without the consultation of the shareholders.
What is a Homeowners Association?
In a Homeowners Association, an owner is given a registered title deed to a conventional property, in other words you own the building as well as the immediate land that it is situated on and as such you are responsible for the maintenance and upkeep of the property both inside and outside.
The Homeowners Association, however, is responsible for the general upkeep and maintenance of the common areas and is governed by the Companies Act.
A Homeowners Association is also obligated to hold an Annual General Meeting whereby important matters relating to the association is discussed and voted on, these include:
- The management of the association.
- Maintenance of common property.
- Insurance pertaining to the common areas.
- Approval of the annual budget.
Familiarise themselves with the Sectional Titles Act, or in the case of Homeowners Associations or Share Blocks, the Memorandum of Incorporation.
What is a Committee?
At the Annual General Meeting, the members of the scheme must elect a committee. The committee is made up of a chairperson, treasurer, and secretary and may also have additional serving members. It depends on the type of scheme and their rules but, generally, a community scheme must have a minimum of two or three committee members. Your Solver Property Portfolio Manager can advise you further in this regard.
What does it entail: Over and above the day to day running of the scheme a committee member must adhere to the following:
- Make sure levies are settled to date.
- Enforce the rules of the complex.
- Approve and adhere to the budget of the scheme.
- Work closely with the managing agent and estate manager to ensure matters are addressed timeously.
- Ensure that the complex is adequately insured.
- Approve maintenance projects within the complex.
All committee members must adhere to their fiduciary duty towards the scheme and must always:
- Act honestly and in good faith.
- Act in the best interest of the Body Corporate / Owners Association / Share Block.
- Avoid material conflict between their own interests and that of the scheme.
- Not receive any personal financial benefit, unless agreed upon by the members at a general meeting.
- Notify other committee members of any interests he/she may have.
Common Property Maintenance
This varies from scheme to scheme, however, the Sectional Titles Schemes Management Act 8 of 2011 states that a scheme must maintain the common property and as per the Community Schemes Ombud Service Act. Therefore, Body Corporates are obligated to also have a 10 Year Maintenance Plan in place for the purpose of maintaining major capital maintenance items such as the painting of the scheme, roof repairs, re-tilling of walkways, pool refurbishment etc...
When it comes to the maintenance of the common property, the committee members, will source the services of professionals to carry out the required maintenance. Should the required maintenance exceed the financial restriction imposed on the committee members at the annual general meeting, a special general meeting may be required to vote on their preferred course of action. Your Solver Property Portfolio Manager can advise you further in this regard.
The Annual General Meeting
An Annual General Meeting is a yearly meeting of owners or shareholders of a scheme and requires a notice period of 14 days for Body Corporates and usually 21 days for Homeowners Associations. At the annual general meeting, owners are tasked to consider the financial position and direction of the scheme.
The agenda of the AGM usually contains the following - depending on the type of scheme:
- Budget approval.
- Consideration of the Annual Financial Statements.
- Appointment of an auditor.
- Election of Committee members.
- Address all general items submitted by members 48 hours prior to the meeting.
A Special General Meeting (SGM) on the other hand may be held during the year, in the event where there are urgent matters that must be discussed and voted on by the members and usually requires a longer notice. ie. 30 days' notice. However, this is dependent on the type of scheme, and this can sometimes be shortened based on the urgency of the matter.
The Costs Involved To A Community Member?
The costs involved (levies) to a member of a community scheme is determined by the financial obligations of the scheme, which usually include items, such as:
The various financial obligations of the scheme are calculated and approved in the annual budget by the committee members and circulated to the members prior to the annual general meeting (AGM).
- The insurance premium.
- Audit and bank charges
- General upkeep of the common property.
- Garden and cleaning.
- Pool maintenance.
- Management services
- Employee expenses
- Council charges
- Association levies
- Legal costs
- Access control
- Security services and armed response
- Reserve fund contributions
- CSOS contributions and more...
The non-payment of levies ultimately results in the scheme failing to meet its financial obligations, which could result in the suspension of service from service providers or even the disconnection of utilities from council (In Body Corporates). In severe cases non-payment of levies could lead to an administrator being appointed by the court to take over from the committee members.
Consequences of late or non-payment
In a community scheme, levies are due and payable, in advance, on the 1st of the month. Any owner who pays late will be subject to additional charges such as interest and/or charges for the issuing of arrears notices.
Continually defaulting on a levy payment, may ultimately result in the account being handed over to complex attorneys for legal collection, which will result in blacklisting, negative credit records, the sheriff auctioning the defaulter’s belongings or even the property.
It is important to note, when an account has been handed over for legal collection, the defaulting owner will be liable, for the arrears on the levy account as well as any legal fees that may arise.
Buying To Invest
Buying into a community scheme as an investor, your rights and responsibilities remain the same as if you were living in the property, the property maintenance, levies and associated costs remain payable by you as the owner.
It is the responsibility of you as an owner to ensure that Solver Property Services have your correct postal address, email address and contact number.
When letting your unit, a new resident form must be completed by the tenant and returned to the Solver Property Services offices, this information is used to register the occupant on the access control system and for record purposes in case of an emergency
What Are Conduct Rules?
The conduct rules of a scheme, outline the duties and responsibilities of an owner/resident in a community development and as such set the tone for a harmonious living environment. The rules should be registered and approved by The Community Schemes Ombud Service (CSOS).
Owners and residents must ensure that they are in possession of a copy of the rules of the scheme and that they familiarise themselves with this document. The same can be said for potential buyers as the rules will allude them to what is or is not permissible within the scheme, a good example of this will be pets in a community scheme. Where some schemes permit the keeping of a pet, others adhere to a strict no pets policy, which is good to know before buying or renting within a scheme.
Get The Foundations Right
When buying into a community scheme you will need to do your homework. The more information you can obtain regarding the scheme, the better equipped you will be to make an informed decision.
It is important to investigate possible future developments in and around the scheme, as well as possible adjudication orders concerning the scheme. Another important matter to pay special attention to is the financial stability of the scheme and any possible debt owing by the complex.
As a potential investor, doing your due diligence is of the utmost importance and this will also include enquiring whether certain exterior improvements to the section, such as the enclosure of a balcony or the installation of an air conditioning unit have been approved by the committee and if so, what conditions apply to the approval. Do not be shy to request a copy of the approval given as this will save you a lot of leg work in future, if this is ever challenged.
So, You Are A New Owner, What’s Next?
Once you have signed on the dotted line and the registration has been concluded, you will need to ensure that this information is communicated to your managing agent by your transferring attorneys and that the information provided is true and accurate as it will be used for all future communication.
This information will allow the Solver Property Services, as the managing agent, to create a unit profile in your name as the unit owner and issue you with a welcome pack containing important information relating to the complex such as the banking details, your levy statement and invoice, the conduct rules (and MOI (Memorandum of Incorporation) in the case of a Homeowners Associations and Share Blocks) and a debit order form, should you wish to make use of this easy payment method.
It is important that you are in possession of all relevant documents relating to the scheme, some of which include the sectional plans and the zoning certificate. If these are not available through your managing agent, they may be obtained through the Surveyor Generals offices.
The Buyers Checklist
- By purchasing a property in a community scheme, do you know you will form part of that scheme?
- Are you aware of any contracts or debt that the scheme has entered into?
- Do you understand the conduct rules of the scheme and how the rules apply to you?
- Do you understand your financial contribution (levies) to the scheme?
- Do you understand the maintenance responsibilities you have?
- Do you understand the role of the managing agent and/or estate manager (if applicable)?
- Have you confirmed that any exterior alterations to the section have been approved?