“In our sectional title scheme, it seems there are no trustees, no meetings, and no input by the owners in its management. How can this be?”
A question like this usually indicates serious problems but if the scheme is in a larger estate the situation could be quite normal, and the scheme well managed by the estate executives.
Sectional title schemes must be managed by trustees in accordance with the Sectional Titles Schemes Management Act, 8 of 2011 “the Act” and the scheme’s rules. However, if the scheme is a subsidiary of an association, typically a large home or property owners’ association, the functions and powers of the body corporate – which would normally be exercised by trustees elected by the members – can be assigned to that association.
The regulations under the Act allow the developer, when opening the sectional title register, to register a condition, which becomes a title deed condition of all the units in the scheme, that an association must approve the transfer of any unit in the scheme, and if the constitution of that association provides that the owners of units in the sectional title scheme are members of the association, and that the powers and functions of the body corporate are assigned to that association, the developer can substitute any management rules for the prescribed management rules. It is this condition that has a critical effect in the management of the sectional title scheme.
Larger property developments are frequently made up of a “master” property owners’ association (MPOA) containing a number of subsidiary schemes – schemes within a scheme – and in such a “layered” development, it often makes sense for the MPOA to take on some, or even all, of the management functions of the subsidiary schemes. The extent of this assignation of management functions depends on what would be most sensible for that specific development.
While the requirement that trustees perform the functions and exercise the powers of the body corporate is a provision of the Act, the provision describes the trustees as those holding office in terms of the rules. The provisions setting out who may be trustees and how they get to hold office are contained in the scheme management rules, which, remember, the developer can change. So, it is possible that the executives of the MPOA are the trustees of the subsidiary sectional title scheme or schemes without them being elected by the members.
Furthermore, the nuts and bolts of the financial, administrative and physical management of a sectional title scheme are almost all provisions of the management rules, and in the kind of layered scheme described in this article, it is entirely possible that the developer substituted rules assigning all those functions to the executive committee of the MPOA. The owners, who comprise the members of the body corporate of the sectional title scheme, may therefore have no say at all in the management of their scheme, and that includes setting the levies.
Setting up the management structures of schemes in layered developments can be very complex, and it is unfortunately true that developers do not always appoint community scheme specialist attorneys to attend to these matters, many times resulting in management problems that are very difficult, if not practically impossible, to solve once the various sectional title schemes are registered.
Figuring out exactly how a sectional title scheme that is a subsidiary in a MPOA should be managed demands an expert analysis of both the rules of the scheme and the constitution or Memorandum of Incorporation of the MPOA. If you live in a scheme that is a subsidiary of a MPOA, and you have doubts about whether your scheme is managed legally, please contact email@example.com for a no obligation quote for a specialist opinion.