By Prof Graham Paddock

Prof Graham PaddockOn the second occasion when the Department of Human Settlements Portfolio Committee deliberated on the Sectional Titles Schemes Management (“STSM”) Bill, on 15 September 2010, the first question to be addressed was the reason why this Bill needs to be separate from the Community Schemes Ombud Service (“CSOS”) Bill.

At first, it was not clear to the members of the committee why two separate pieces of legislation were required. The committee members were also concerned that, in terms of each of the two pieces of legislation, there was provision for an advisory board. In line with the general concern that unnecessary bureaucracy should be avoided and government costs should be kept as low as possible, they wanted to know why the two pieces of legislation could not be merged and why the Minister and Department of Human Settlements could not be advised by only one body.

The answer to the first question is that the two bills exist for fundamentally different purposes. The STSM Bill can be compared to the Share Blocks Control Act in that it regulates the management and control of a particular type of community scheme, whereas the CSOS Bill seeks to ensure the cost-effective resolution of disputes and good governance in all community schemes. It was explained to the members of the committee that the STSM Bill would be less user friendly to the owners and managers who are responsible for the operations of sectional titles schemes if it was cluttered up with provisions that relate to many other types of community schemes. Conversely, it would be inappropriate to include in legislation that is designed to apply to all community schemes a set of governance provisions that apply only to sectional titles schemes.
The answer to the second question
is that those members of the private sector giving regular input into the operation of the STSM Act will be supporting the management and regulation of all sectional title schemes by their owners and professional managers. However, those advising on the operation of the ombud service will be advising the minister and chief ombud responsible for the operation of a widely based dispute resolution scheme and concerned about education and dispute-avoidance in all forms of community scheme.

These understandable confusions highlight the facts that there are many types of community scheme that operate on very different legal principles and that the average South African is not aware of the complexities involved in this area of housing. Community schemes include sectional titles complexes, home owners’ associations, share block schemes and retirement developments, amongst others.

Whereas there is specific national legislation for sectional titles and share blocks, home owners’ associations may be established in terms of the Companies Act or in terms of the common law. The law does make specific provision for retirement developments, but the Housing Developments for Retired Persons (“HDRP”) Act does not prescribe any particular form of development, so it is possible for a retirement development to be established as a sectional titles scheme, as a share block scheme or in terms of any other legal arrangement. In some cases, more than one piece of national legislation will apply to the operations of a retirement development. And it is also possible for developers to avoid the application of the HDRP Act, often referring to their developments as being designed for “the active over-50s” rather than as retirement developments. In practice, most retirement developments operate on the basis of contracts, often referred to as “life rights agreements” entered into by the retirees and the operators of the retirement development.

To add to the fundamental complexity of community schemes, it is not unusual to find one type of scheme within another. An example of this is a sectional title scheme embedded within a property owners’ association in a development that includes different types of residential precincts as well as retail elements. In this example, the sectional title scheme will be subject to two sets of governance documents.

The vast majority of new South African housing is coming onto the market in the form of one or other type of community scheme. As municipalities struggle to deliver world-class service to the residential properties within their jurisdictions and the police struggle to keep crime under control, it is becoming increasingly usual for groups of owners of conventional properties to band together either as a home owners’ association or a residential improvement district to ensure delivery of the services that are necessary to maintain their property values. It is no exaggeration to suggest that within the next 20 years, the vast majority of urban houses in South Africa will be involved in some form of community scheme.

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Article reference: Paddocks Press: Volume 5, Issue 9, Page 1

Professor Graham Paddock is one of the Course Instructors of the UCT Sectional Title Scheme Management short course. Click here for more information about this course.
This article is published under the Creative Commons Attribution license.