We have often been posed with the question as to whether the trustees of a sectional title scheme may enter into a lease agreement with a cellphone service provider, for the installation of a cellphone mast on the common property within the scheme. The mast would serve not only the members of the scheme, but the residents of the neighbourhood.
This request of service providers may seem to be quite appealing for many schemes. It results in an additional income stream, often quite a substantial one, potentially negating the need for levy increases, and the raising of special levies. However, the trustees would be wise to consider the possible negative effects of such an installation, health risks being one such effect. Should the trustees be approached by such a service provider, they will need to ensure that the correct procedure, as set out in the Sectional Titles Act 95 of 1986 (“the Act”), to obtain approval to enter into a lease agreement, is followed.
As the lease agreement for a part of the common property will be entered into between the body corporate (represented by the trustees) and the service provider (as a third party), the trustees must, in terms of section 17 of the Act, obtain the approval of a unanimous resolution of the members of the body corporate. Either taken at a duly convened special general meeting, or via a process of round robin. Once the unanimous resolution is obtained, the trustees must ensure that a trustee resolution is prepared and signed by two trustees, as per section 17(2) of the Act.
It is important to note that the part of common property, which will be utilised for the installation of the mast, must not be subject to any right/s of exclusive use, either registered in the name of a member of the scheme, in terms of section 27 of the Act, or created and allocated to a member by the scheme’s registered management or conduct rules, in terms of section 27A of the Act.
Should a trustee have an interest in the contract to be entered into, for example, should they be a shareholder in the service provider, they will be disqualified, in terms of Prescribed Management Rule 23 of Annexure 8 of the Regulations to the Act, from signing the trustee resolution, and entering the lease agreement on behalf of the body corporate, and should further recuse themselves from any negotiations with the service provider.
Often, trustees are of the mistaken belief that they are entitled, without the approval of the members, to enter into such a lease agreement. However, in terms of section 38(i) of the Act, the trustees are only entitled to enter into a short-term (shorter than ten years) lease agreement, with a member of the body corporate, or a current occupier of a unit within the scheme. Whereas, section 17 of the Act, as set out above, applies to long term (longer than ten years) lease agreements, entered into with either members, occupiers or third parties.
Should you have any queries relating to this topic, contact us at firstname.lastname@example.org or on 021 686 3950.
Article reference: Paddocks Press: Volume 11, Issue 07, Page 01.
Zerlinda van der Merwe is an admitted Attorney of the High Court, specialist Sectional Title Attorney (BA, LLB, LLM), Zerlinda brings a wealth of experience and forms part of the Paddocks Private Consulting Division.
This article is published under the Creative Commons Attribution license.