PQ-Effect Adjustment Rules in Sectional Title Schemes: When Lawful Becomes Unfair
By Jennifer Paddock
My December 2025 article on repealing equal levies and returning to participation quota (PQ) generated significant engagement, particularly around the concern that section 11(2) rules are frequently used to advantage developers at the expense of long-term owner governance.
In the feedback, however, one point came through clearly: Section 11(2) rules are rarely the only mechanism through which developers entrench advantage and control.
This article takes the discussion a step further by examining how section 11(2) rules often form part of a broader architecture of developer-imposed control, introduced at the opening of the sectional title register and left in place long after the scheme should have transitioned to owner-led governance.
Section 11(2) Rules Are Rarely Used in Isolation
As previously discussed, section 11(2) of the Sectional Titles Schemes Management Act, 2011 (STSMA) allows rules that alter the default PQ-based allocation of levy contributions and voting values.
In practice, these rules are most often imposed by developers at registration, before meaningful owner participation exists. While lawful – provided they are disclosed in sale agreements [section 11(2)(a)(d) STSMA] – they frequently operate to the financial advantage of developers who retain multiple or large units during the development phase. But section 11(2) rules are only one piece of the puzzle.
Mandatory Developer Representation on the Board of Trustees
A common feature of developer-drafted rules is a provision that:
- Requires one or more developer nominees to sit on the board of trustees during the development period; and
- Often requires that a developer representative serve as chairperson.
These rules are usually justified on the basis of continuity, completion of the development, or “protecting the developer’s investment”.
In reality, they can have far-reaching consequences:
- Owners may be effectively excluded from meaningful governance;
- Budgets, contracts, and rules are shaped to suit development priorities rather than long-term scheme sustainability; and
- The developer is able to control decision-making without bearing a proportionate share of financial liability and risk.
While transitional governance is not inherently problematic, the difficulty arises when the “development period” is:
- Vaguely defined;
- Extended indefinitely; or
- Used as a shield against owner oversight.
Cost Exemptions and Preferential Treatment
Another recurring feature is the inclusion of rules that excuse the developer from paying certain levies, contributions, or costs, or provide that the developer’s units are effectively cross-subsidised by other owners. e.g. different PQs for commercial (lower levy cost per m2) and residential sections.
These provisions are often buried deep in the rules and only come to light years later, once savvy owners begin scrutinising scheme finances.
When combined with section 11(2) rules, the effect can be stark. Developers pay less, other owners pay more, and the cost burden is permanently distorted.
Exclusive Use Areas as Commercial Assets
In mixed use schemes, developers also commonly reserve large portions of common property as exclusive use areas (EUAs) in their favour, from which they may operate restaurants, retail outlets, offices, parking operations, or other commercial ventures.
While EUAs are legitimate in principle and law, problems arise where:
- The EUA allocation is disproportionate;
- The commercial benefit is significant; and
- The contribution payable for that exclusive use does not fairly reflect the benefit derived.
The Cumulative Effect: Control Without Accountability
Individually, each of these mechanisms may be defensible. Collectively, they can result in:
- Significant financial advantage for the developer;
- Voting and governance dominance;
- Suppressed owner participation;
- Less unregulated common property available for general owner use; and
- Long-term structural imbalance within the scheme.
This is not an accident of drafting, it is often the result of deliberate design at scheme inception.
What Bodies Corporate Can Do About It
The most important point for owners and trustees to understand is this: Developer-imposed rules are not untouchable simply because they were there “from the start”.
Once at least 30% of the body corporate consists of owners other than the developer, the body corporate may repeal developer-imposed rules [Regulation 6(6) read with section 10 STSMA]. While this does require a unanimous resolution (for management rules) or a special resolution (for conduct rules) and CSOS-approval [section 10 STSMA], it can be done.
In addition, any owner who believes that a scheme rule is invalid or unreasonable may apply to the CSOS for an order under section 39(3)(c) or (d) of the Community Schemes Ombud Service Act, 2011, to have it removed.
In Closing
The real issue is not whether any single section 11(2) rule is technically lawful. It is whether the combined effect of those rules aligns financial contribution with benefit, aligns voting power with ownership risk, and supports the scheme as an owner-driven entity.
_________________________________
Article reference: Paddocks Press: Jan 2026, Volume 21, Issue 1
This article is published under the Creative Commons Attribution license.
Recent Comments