By Jennifer Paddock
There are two types of rules prescribed under the regulations to the Sectional Titles Act, 1986 – management and conduct rules. These are generally applicable to all sectional title schemes, but don’t cater for the peculiarities of every scheme and therefore the act makes provision for their amendment.
Many developers amend the prescribed rules on opening a scheme’s register and many bodies corporate find it necessary to amend the rules at a later date. This article sets out, step by step, the correct legal procedure to follow when amending scheme rules by taking a resolution at a meeting.
1. The amendment/proposed resolution must be drafted. This may either entail drafting a new rule or changing the wording of an existing rule. Things to remember:
• In terms of section 35(3) of the act, all rules must be reasonable and must apply equally to all owners of units put to substantially the same purpose.
• A conduct rule may not conflict with a prescribed management rule or a provision of the act, and a management rule may not conflict with a provision of the act.
• A rule designed to confer exclusive use rights must have an allocation schedule and scale plan attached.
• Make sure that the rule is very clearly drafted. It must be an unambiguous statement of a specified person’s right or obligation to do or not to do a particular thing.
• The requirement that rules must be reasonable means you need to ask: “Is this provision sensible in all cases?” So, for example, don’t say: “A person must not make any noise…” because babies will cry and people will play pianos. Rather say: “A person must not make any noise that unreasonably disturbs an occupant of any section…”.
• You may want to employ the services of an attorney who is well versed in sectional title law to assist in drafting the wording of the amendment or proposed resolution.
2. Check if the written consent of any owner is required.
• Does the rule adversely affect any owners’ voting rights or increase their liability for contributions (levies)?
• Does the rule adversely affect any owners’ proprietary rights?
• If either of these situations seems possible, you may need those owners’ written consent and may want to get specific advice from an attorney experienced in sectional title law.
3. Send out notice of the meeting at which the proposed resolution will be considered. The notice must specify the proposed resolution and must be sent to owners and bondholders at least 30 days before the meeting date.
4. At the meeting, check that the required quorum is present. The quorum requirement will differ depending on whether the proposed amendment is to the management or conduct rules.
Amendment of the management rules requires a unanimous resolution. For a unanimous resolution to be taken at a meeting, a quorum of 80% of owners in number (80% of the actual number of owners in the scheme) and value (owners representing 80% of the participation quotas) must be present or represented.
Amendment of the conduct rules requires a special resolution. For a special resolution to be taken at a meeting, only an ordinary quorum must be present (there is no raised quorum requirement as there is for the taking of a unanimous resolution). The ordinary quorum requirement differs depending on the size of the scheme:
• If there are 10 or fewer units, the number of owners holding at least 50% of the votes forms a quorum;
• If there are 11 – 49 units, the number of owners holding at least 35% of the votes forms a quorum, and
• If there are 50 or more units, the number of owners holding at least 20% of the votes forms a quorum.
5. The required number of people must vote in favour of the resolution. Again, this will depend on whether a unanimous or special resolution is being taken.
For a unanimous resolution to be passed, every person present or represented at the meeting must vote in favour of the resolution, with abstentions being counted as votes in favour. Even one vote against the resolution effectively defeats it.
For a special resolution to be passed, 75% in number and value of those present or represented at the meeting must vote in favour of it. Abstentions are not counted as votes in favour, and votes against do not defeat the resolution.
6. It is important that the outcome of the vote must be minuted, as the minutes of this meeting will serve as a permanent record in the body corporate’s minute book of the decision made.
7. If the resolution is passed, two trustees must then fill out a Form V, which is a form prescribed under the regulations to the act and required by the deeds office administration, to file the changes in the scheme’s file at the deeds registry. You can get a copy of the latest Form V from the library section of Paddocks’ Sectional Titles Online website (www.sto.co.za). The trustees must also initial each page of the amended rules.
8. The amended rules must be handed in to the deeds office for filing in the scheme’s file. In terms of section 35(5)(c) of the act, the amendment only becomes effective on the date of filing in the scheme’s file held at the deeds office. It is a good idea to take a copy of the Form V and initialed rules when you hand the originals in for filing so that you can get your copy date-stamped as proof of the date on which the amendment was received by the deeds office, and as proof of what should now be in the scheme’s file.
Jennifer Paddock is a sectional title specialist. Visit www.paddocks.co.za or email kate@paddocks.co.za.