By Prof Graham Paddock
Problems with development not selling well
Q1. We bought a home in a complex of six units almost a year ago. We are the only occupants so far as all other units are not yet built. Only one is partially built. We paid some cash to the developer and some money to the attorney and the balance would come through the approved bond. Nothing has changed and the house not registered in our name. We have been paying occupational rent for 11 months now and want to get out of the deal. How do we go about it? Is it possible?
A1. You need to get some specific legal advice from a litigation attorney who knows about land development in general and about sectional title developments in particular. As the only purchaser in occupation, you need competent assistance in dealing with the developer and his or her attorney. I suggest that you take your sale agreement and all other documentation to your own attorney as soon as possible.
Inaugural scheme costs
Q2. I have a sectional title scheme of 27 units that was constructed in three phases. The first owner (other than the developer) took transfer in 2007. There was no an inaugural meeting until now (September 2010). There is an outstanding account at the municipality for R250,000, which covers water, refuse and sewage services used since the scheme was started.
How do I apportion liability for the outstanding debt? Some owners have only been owners for a few months and so any recovery based on PQ would be grossly unfair to them. All the units that are not still owned by the developer have only been sold once (from the developer into their name).
When do costs start accruing to the body corporate? Is it when the first unit is transferred to somebody other than the developer, or is it when the inaugural meeting takes place?
A2. Costs start accruing for the body corporate’s account from the date it is established and one of the things the developer is obliged to provide is a clearance certificate. You need to make sure all the service charges were paid up at the date of the first transfer, and that any municipal bills that relate to periods before the body corporate came into existence are recovered from the developer.
Start by analysing the accounts to see when the amounts accrued. Anything billed after the body corporate came into existence must be recovered through levies. If insufficient levies were raised, you probably have proposed that the body corporate raise additional levies to cover the amounts.
It can be that pure ignorance gives rise to a situation where insufficient levies are raised and then new owners “buy into historic scheme debt”. But it is not unknown for developers to purposefully keep levies low, knowing that the municipality does not have the capacity to render service invoices within a reasonable time of the service delivery.
If there is a serious possibility that there has been manipulation of the levies to the advantage of, for example, the developer, you should suggest to the trustees that they get professional advice as to whether the body corporate has a claim.
Inspection of units
Q3. Our scheme is 10 years old. The trustees have served a notice to owners that an inspection of units will take place. However, some owners have threatened to serve the body corporate with a restraining order, arguing that this is invasion of privacy. With reference to Section 44 of the ACT, are the trustees entitled to do so?
A3. Since the sections are private property, the trustees must have a good reason for wanting to inspect them. All owners do not have to agree with the reason, but I suggest that unless the trustees want to:
(a) Inspect them (for some good reason, not just general nosiness);
(b) Maintain, repair or renew pipes, wires, cables or ducts carrying common services, or
(c) Ensure that some provision of the Act or the scheme’s rules is being observed,
they should not be carrying out the inspection.
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