There could be trouble ahead for the owners of duet homes and properties in small sectional title (ST) estates that do not have a functional body corporate and are not being run in terms of the Sectional Title Schemes Management Act (STSMA).
So says Andrew Schaefer, MD of leading national property management company Trafalgar*, who notes that it has become quite common in recent years for big suburban homes to be renovated and sectionalised into “duets”, and for large stands to be developed into “boutique” ST complexes containing just a few free-standing homes.
“These are excellent in terms of city densification policies and efficient land usage, and they suit many modern buyers who want convenience, security and affordability rather than large gardens. The problem is that the majority of these developments are being run on a handshake basis, rather than according to ST legislation and the Community Schemes Ombud Service (CSOS) Act.”
He says that although they are legally members of a body corporate (even if there are only two of them), the owners in these schemes usually don’t formulate budgets, collect levies, hold AGMs or establish reserve funds. “They might agree informally to share certain costs like security and garden maintenance, but mostly they treat their homes as if they were freehold properties.
“And unfortunately, we are encountering an increasing number of cases where these arrangements are not working out at all well – quite apart from the fact that they are illegal and could expose the owners to quite hefty fines or even imprisonment for not paying their CSOS contributions.”
Most of these cases, says Schaefer, involve the construction of home additions or structures such as garages, carports and pools that have not been approved by the other member or members of the body corporate. “This approval is necessary because anyone buying into a ST scheme is effectively only buying their ‘section’, consisting of the interior of their home. The outsides of the buildings and the rest of the property including the gardens, driveways and security equipment are part of the common property are owned in undivided shares by all the owners in the scheme.
“Changing the size of one of the homes alters the scheme’s participation quotas (PQs) and could be prejudicial to the other owner or owners. In terms of ST legislation, building something for private use on the common property is also not allowed without the consent of the other owners. So even if there are only two owners, as in a duet scheme, and even if each has a separate entrance and a demarcated ‘private’ garden, the owner who wants to build on an extra bedroom or bathroom needs to first obtain the approval of the other owner, as well as planning permission from the local authority.”
Legislation also provides, he says, for the registered ST plan and participation quotas to be amended and approved by the Surveyor-General’s office, and for the title deed of the altered unit to be endorsed at the Deeds Office. “This can be quite a costly process, but if it is not done, it will be difficult for any or either of the owners in the scheme to sell their homes at a later stage – because any prospective buyer’s bank will want to see a copy of the amended ST plan before granting a bond.”
Other serious issues that often come up in small ST schemes where there is no functioning body corporate are how to deal with insurance issues, and how to deal with tenants renting from one owner and causing problems for the others.
“Owners can of course insure their own sections and the contents of those sections,” says Schaefer, “but in terms of ST legislation, a body corporate is supposed to insure all the buildings in the scheme and all improvements to the common property under one policy, with each owner contributing a share of the premium according to the PQs. If this is not done, most parts of the scheme will effectively not be covered for fire, flood or any other kind of disaster, and as we have seen in a number of cases, this can be financially devastating for the owners.”
Then there is the question of difficult tenants. “If the tenant of one owner is causing noise or nuisance problems for the other owners in a ST scheme, they usually have recourse to the body corporate and the conduct rules of that scheme – and if that fails, to the dispute resolution services of the CSOS. But where there is no functioning body corporate and perhaps only two owners, we have seen that they will most likely have to resort to lengthy and costly legal action to resolve the issue.
“It is thus in the interests of all owners to ensure that their schemes are properly run and managed – and to seek the help of an experienced managing agent such as Trafalgar as soon as possible if they need to correct an irregular situation.”
Issued by Trafalgar
For more information contact
Andrew Schaefer on 011 214 5200
Or visit www.trafalgar.co.za
*Trafalgar currently has more than 80 000 residential properties worth more than R80-billion under management in more than 1300 community housing schemes around SA.