There are two types of rules prescribed under the regulations to the Sectional Titles Act, 1986 (the Act) – management and conduct rules. These rules are generally applicable to all sectional title schemes, but do not 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, do not 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 owner’s voting rights or increase his or her liability for contributions (levies)?
• Does the rule adversely affect any owner’s proprietary rights?
• If either of these situations seems possible, you may need that person’s 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 of the meeting must specify the proposed resolution and must be sent to owners and bondholders at least thirty days prior to 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 (i.e. 80% of the actual number of owners in the scheme) and value (i.e. 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 (i.e. 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 ten 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 persons 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. The outcome of the vote must be minuted
It is important for the outcome of the vote to 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. The Form V must be filled out and the amended rule(s) initialed
If the resolution is successfully 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 obtain a copy of the latest Form V from the library section of our Sectional Titles Online website (www.sto.co.za). The trustees must also initial each page of the amended rule(s).
8. The amended rule(s) 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. Therefore, the completed Form V and the initialed rule(s) must be handed in to the Deeds Office for filing in the scheme’s file. 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.
5 Comments.
Thanks for a very informative article. I have a few questions:
1) The difference between Management & Conduct Rules – want to make sure I understand which is which.
Are Management Rules e.g. what the Managing Agent takes care of, what he needs to have in place etc, things like budgets & bookkeeping & insurance etc?
And the Conduct Rules are more like House Rules? e.g. Issues like over crowding or late night noise – do they belong in the Conduct Rules?
2) If the AGM is postponed for a week due to lack of quorum and the next week’s AGM is constituted by default – can that be seen as a quorum that can also vote on the Conduct Rules?
3) The point about written consent if there could be a financial implication – if the new rules want to prescribe penalty fines for e.g. over crowding – does that imply this consent is required? At some blocks over crowding penalties are levied even without it being in any rule.
4) Can this be done as part of the AGM, or is a special extra meeting required? (bondholders….?)
Regards
Leon
Hi Leon,
Thanks for your comment. Your questions exceed the scope of the article, kindly contact our Consulting Division on consulting@paddocks.co.za, for a no-obligation quote to assist you further.
Regards,
Paddocks
I own One of Four units in a Sectional title scheme.
because of the 75 % constituting a full quorum One owner is always in a helpless position with absolutely no voice. Our Chairman has created a new Document ( rules and conduct ) without prior advice to me and no involvement on my part ( the one Owner who received no Copy ) – it has been altered in almost everything in the favor of the other three awarding them special privileges. The scheme had previously No Exclusive use parking bays. I have been kicked out of my usual parking place which had been in effect and uncontested for 15 years and awarded to a couple who own four old cars which are parked for up to 6 months without being used. They were given exclusive use. Had I seen this New Body Corporate Rule I would under no circumstances have agreed to it.
There has been corruption to an alarming extent in that the scheme is now bankrupt but was in excellent shape at reserves of 1.5.m when I bought into it in 98. The Chairman is also the Insurance Broker – needless to say there has been over-claiming by the 3 owners to the extent that the Insurer is now stipulating a 10% excess, plus the original 2000.- I had appointed a top law firm to represent me against the Body Corporate in 2009 when a massive 8m x4m wetland pool was installed on communal common property roof ( flat ) which caused an overflow that flooded my unit. The case was heard In Jan 2013 and judgment was delayed by 2.5. years after said Law firm chased it relentlessly. Finally judgment was delivered dismissing both sides with no cost. The wetland pool stayed and my repair cost close to 500K which our in-house Broker repudiating any/and all claims.
I now find myself at 70 without parking other than my double garage and a unsaleable unit which has a municipal value of 4.5m and a market value of around 6m.
The previous Agent was spontaneously dismissed/or fled and our new Agent only has the most recent information and appears to be unwilling to listen to any precedents.
How do I ensure that out of 4 Owners I can regain my voice ? There are many 4 unit schemes in Sandton and Sect Title law has not covered this particular area of management. Please explain why no protective Law has been written to address this issue.
Thank you
C von WG
.
If the HOA is a common law association, and the constitution makes provision for the Trustees to pass laws which are reasonable, just and equitable, a special meeting is not required?
Hi T-jay
Thank you for your comment. We would love to help but unfortunately do not give free advice. Here’s how we can help:
– We offer a Free Basics of Sectional Title 1-week short course. You’ll be able to ask your course instructor any related questions. Find out more here.
– We offer consulting via telephone for R490 for 10 minutes. Please call us on +27 21 686 3950.
– We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes. Find out more here.
Kind regards
Paddocks