For those who own sectional title property, or are thinking of becoming a sectional title owner, it’s worthwhile having a basic understanding of how a sectional title scheme is developed.
The process begins when the developer acquires a portion of land or a suitable building. The developer must have a sectional plan prepared, approved and registered. It’s important to note that a sectional plan is not the same as a building plan, indeed the two are very different and serve completely different purposes.
The purpose of the sectional plan is to show how the building or buildings are divided into sections and common property. It’s vital to understand the distinction between sections and common property because the sections are individually owned but the common property is owned by all the owners in shares. The significant point is that owners pay all the costs of maintaining their own sections but share all the costs relating to the common property.
The sectional plan must be prepared from actual measurements, so the building must either exist or be sufficiently complete for measurement to be taken. The completed draft sectional plan is sent to the local Surveyor General for approval. Once approved, the developer applies to the local Registrar of Deeds for the registration of the sectional plan and the opening of a sectional title register for the new scheme. It’s useful to know that included in this application is a certificate that says what rules apply to the scheme. The effect of the opening of the register for the scheme is that the property ceases to be conventional land and becomes sectional title property.
The next step is for the developer to transfer the units to the new owners. The transfer of the first unit from the developer to a third person is the legal act that establishes the body corporate of the scheme. Usually all the units are transferred at the same time but the developer could retain some for later sale. If that happens, the developer becomes one of the owners in the scheme, a member of the body corporate (as are all owners), bound by the rules, entitled to vote, and liable to pay levies for the unit or units they own.
The final step in the development process is the first meeting of the body corporate. From the date the body corporate comes into existence until this first meeting, all owners are trustees – so there could be many, all of whom have a fiduciary duty to the body corporate – and the developer is the chairperson.
The developer must convene the first meeting within 60 days of the establishment of the body corporate. At the first meeting the developer hands over control of the scheme to the body corporate, the members approve a budget, elect trustees, and assume control of the scheme. The persons elected as trustees must then meet, elect a chairperson, and most important really, raise the first levy so that the scheme can function independently of the developer.
A well planned scheme adequately managed and with appropriate rules should function well and be a pleasure to live in.
Article reference: Paddocks Press: Volume 12, Issue 01, Page 02.
Anton Kelly is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the lead teacher on all the Paddocks courses for the last 7 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.
This article is published under the Creative Commons Attribution license.