One of the biggest challenges managing agents and trustees often face is how to deal with a significant expense that no one anticipated. The requirement for a 10 year maintenance, repair and replacement plan (“MR&R plan”) has forced trustees to think and plan ahead, however some expenses remain quite simply unforeseeable. A practical example of such unforeseeable expenses is as follows:

After receiving huge water bills, a body corporate finds that it has a massive water leak. Following an investigation, it employs the services of a plumber who fixes the leak on the main communal water line. The cost for the repairs amounts to R15,000.00, while the debt to Council amounts to R75,000.00. Neither the body corporate administrative fund nor the money in its operational account provide for expenditure of this kind so the trustees pass a resolution to withdraw funds form the MR&R reserve fund. They intend to use the funds to cover the cost of the plumber and to settle the council debt.

It is not unusual for trustees to get creative with the body corporate’s finances in an attempt to do what they believe is not only reasonable, but also to the benefit of the members of the body corporate. With that being said, I’ve heard that the pathway to hell is paved with good intentions and fear that the scenario set out above provides a perfect example of this age old saying.

Let’s consider what powers the Sectional Title Schemes Management Act (‘the Act”) gives trustees when it comes to spending body corporate funds raised in accordance with the scheme’s MR&R plan. Prescribed Management Rule (“PMR”) 24(2), contained in Annexure 1 of the Regulations to the Act, limits the trustees’ use of these funds as follows:

The reserve fund maintained in terms of section 3(1)(b) of the Act (which section requires the establishment and maintenance of a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property) must be used for the implementation of the maintenance, repair and replacement plan of the body corporate referred to in rule 22 (which requires the preparation of a detailed, written MR&R plan for the common property by the body corporate).

As neither the repair of the main communal line, nor the debt to council would have been included in the body corporate’s MR&R plan, the trustees’ hands would appear to be tied. Thankfully, the Act makes provision for some exceptional circumstances in which the trustees are given some slack with regards to the strict constraints mentioned above. PMR 24(5)(b) sets out the circumstances in which trustees may utilise funds from the reserve fund for expenses not included in the MR&R plan, namely:

If the trustees resolve that such a payment is necessary for the purpose of an urgent maintenance, repair or replacement expense, which purposes includes, without limitation-
(i) to comply with an order of a court or an adjudicator;
(ii) to repair, maintain or replace any property for which the body corporate is responsible where there are reasonable grounds to believe that an immediate expenditure is necessary to ensure safety or prevent significant loss or damage to persons or property;
(iii) to repair any property for which the body corporate is responsible where the need for the repairs could not have been reasonably foreseen in preparing the maintenance, repair and replacement plan; or
(iv) to enable the body corporate to obtain adequate insurance for property that the body corporate is required to insure;
provided that the trustees must report to the members on any such expenditure as soon as possible after it is made.

The trustees are therefore within their rights to utilise funds from the reserve fund to settle the plumber’s account for repairing the water line as this certainly qualifies as a repair of property for which the body corporate is responsible where there are reasonable grounds to believe that immediate expenditure is necessary to prevent significant financial loss to the members of the body corporate and the repair could not have been reasonably foreseen when the MR&R plan was being prepared.

It is important to note however, that the trustees can only utilise money from the reserve fund to pay the plumber if , as per PMR 24(6), the amount payable falls within the perimeters of any restrictions imposed or directions given by the members and further does not exceed:

(i) the amount necessary for the purpose for which it is expended; or
(ii) any limitation imposed by the body corporate on expenditure.

While the trustees are therefore authorised to use funds from the reserve fund to pay the plumber, they remain unauthorised to settle the body corporate’s debt by diving into the reserve fund.

So what can the trustees to do in the circumstances?

Practically, there are 2 ways of recovering the cost of the council debt from the owners. The first is to incorporate the cost into the body corporate’s administrative budget and therefore include same in the monthly contributions levied to owners. However, such budget can only be considered and approved at the body corporate’s next Annual General Meeting (“AGM”) and this method can therefore not be utilised immediately (unless the AGM is imminent).

The second possibility is for the trustees to raise a special contribution in terms of section 3(3) of the Act and PMR 21(3)(a) to cover this necessary expense that was not, and could not reasonably have been, budgeted for in the estimated expenditure approved at the last AGM. These special contributions may be payable in one lump sum or by such instalments as the trustees deem fit.

My recommendation to the trustees would be to pay the debt owing to the council as soon as reasonably possible in order to prevent having to pay interest on the overdue amount. As such, the trustees should ideally recover the cost by implementing special contributions payable by members in one lump sum. This would be reasonable if the scheme has a large number of members (for instance 50 members would only have to pay R1,500.00 each), but if the scheme has a small number of members it may be unreasonable not to give them the opportunity to make payment in numerous installments. In the meantime, the trustees should withdraw money from the reserve fund to pay the plumber, report the expenditure to the members as soon as possible thereafter and amend the MR&R plan and proposed reserve fund budget, to be presented for approval at the next AGM, accordingly.

Should you have any queries with regard to this article, or other types of votes in sectional title schemes, please contact Paddocks on 021 686 3950 or at

Article reference: Paddocks Press: Volume 13, Issue 8.

Specialist Community Scheme Attorney (BA (Law) LLB), Ané de Klerk, combines her work experience as a Portfolio Manager with knowledge of conveyancing and community scheme law.

This article is published under the Creative Commons Attribution license.

Back to Paddocks Press – August 2018 Edition.


  • Ben Venter
    21/09/2018 22:51

    Hi Ane, if I may add. Specifically to the specific example used, burst common property water pipe and loss of water. The managing agent and trustees need to check their specific insurance policy. For example, our insurer covers burst pipes (burst only, not leaking) and also loss of water due to burst pipe. Usually loss of water have a specific limit claimable and the insurer requires for example 12 months water accounts prior in order to calculate the average water consumption and then work out the difference on the one high month’s water account. Best to double check the insurance policy cover, terms and conditions. Just a matter of interest.

    • Ben Venter
      21/09/2018 23:18

      Oh, forgot to mention. The body corporate can also try to approach the relevant authority, my example, City of Cape Town water & sanitary, explaining what transpired at the specific property. They in turn require documention for example plumber report and plumber invoice, but not limited to as mentioned as examples. Another thought, should either the specific body corporate insurance not cover loss of water or the policy limit is fully claimed and there is a large balance still outstanding. And caution not be naughty and try to claim from both for the same amounts…

  • Abbey Artico
    25/11/2019 10:09

    Hi Ane.
    Thank you so much for this article. We have just been through this at our estate. We used funds from the yearly MR&R budget and held off on the other budgetary items.

  • Alf Boardman
    24/02/2020 20:16

    Hi Ane, I have a question and that is, can the trustees take the special reserve monies and put that into separate accounts for owners to use to repair the inside of their units.

    • Paddocks
      28/02/2020 08:58

      Hi Alf,

      Thank you for engaging.

      That’s a great question. This is something our attorneys would be able to assist with. Please email us on with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.

      Kind regards,