November 9, 2016
Sectional Title Schemes: New Reserve Fund Requirement and Other Key Changes
Note: What follows is of necessity only a brief overview of some very complex new provisions and, particularly if you are a trustee or administrator, it is essential that you familiarise yourself with all the changes. Contact us if you need any help.
The Sectional Titles Schemes Management Act (“STSM”) applies only to sectional title schemes and replaces the old Act’s Management provisions. It came into effect on 7 October 2016, together with the related Community Schemes Ombud Service Act (see next article).
The 10 year plan and reserve fund requirements
Bodies Corporate and Trustees in particular need to know about their new responsibilities and liabilities, amongst which is the well-publicised new requirement to prepare a 10 year plan for maintenance, repair and replacement of capital items. You must support this with a reserve fund sufficient to cover the cost of future maintenance and repair of common property.
The minimum level for this reserve fund has been set at 25% of the previous financial year’s “administrative fund” (the fund for operating costs) levies. If your scheme is short of this requirement (it will be if you have in the past relied on special levies to fund exceptional expenses as they arise), your levies will increase by at least 15% (in addition to any normal annual increase) until you catch up.
Other key changes
- The Body Corporate must notify (on Form A of the Regulations) the Chief Ombud, local municipality and registrar of deeds of its domicilium citandi et executandi address for service of process
- Changes to the procedures for the calling and conduct of meetings include a provision that no attendee can act as proxy for more than two members
- There is a 3 year revaluation requirement for all buildings and improvements, the valuation to be presented to an AGM for approval of insurance schedules
- A body corporate may charge interest on arrear levies, and other overdue amounts payable to it by a member, compounded monthly in arrear, at the maximum rate under the National Credit Act (Repo Rate + 21%).
November 9, 2016
All “Community Schemes”: New Rules and a New Ombud You Need to Know About
Note: As with the previous article, what follows is of necessity only a brief overview of some very complex new provisions and, particularly if you are a trustee/administrator/director or the like, it is essential that you familiarise yourself with all the changes. Contact us if you need any help.
The Community Schemes Ombud Service Act (“CSOSA”) came into effect on 7 October, together with the related Sectional Titles Schemes Management Act (see previous article). CSOSA applies to all “Community Schemes” (residential, commercial and industrial) including –
- Sectional title development schemes
- Home owners associations
- Property owners associations
- Share block companies
- Retirement housing schemes
- Housing co-operatives
- Any other “scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings”.
Community disputes – a new resolution process
If you have lived or worked in any community you will know just how easily disputes can arise, how bitter they can be, and how difficult it can be to resolve them.
A welcome innovation therefore is the new Community Schemes Ombud Service (“CSOS”) which provides an alternate dispute resolution process for anyone party to, or “materially affected by” a dispute.
The range of disputes on which the Service can adjudicate is extensive and covers levy disputes, nuisance complaints, repairs and maintenance disputes, complex meetings, financial, governance and management issues, exclusive use rights and the like – the list is long and widely-worded. Legal representation in adjudication proceedings is only allowed if the adjudicator and all parties agree or the adjudicator decides that a party cannot deal with the adjudication without legal representation. Orders may be appealed to the High Court, but only on points of law.
The scheme’s administrators can also ask for an order that a tenant pay rentals direct to them to clear a landlord’s arrears.
The cost of using the dispute resolution service itself is minimal (R50 per application, R100 per adjudication, R8 per copy of a document) but your levies will increase when schemes have to start recovering from you (and paying over to CSOS on a quarterly basis) a Service Levy based on your monthly levies – a sliding scale from zero for levies of R500 p.m. or less, up to R40 p.m. for levies of R2,500 p.m. or more. Download CSOS’s Levy Calculator here https://www.csos.org.za/regulations.html to see what you (and the scheme as a whole) will be paying. These new levies kick in 90 days from 7 October.
New duties for “scheme executives” and schemes
“Scheme executives” (trustees, directors and anyone else “who exercises executive control of a community scheme”) acquire various duties and fiduciary obligations, including a duty to be informed and educated about the community scheme, its affairs and activities and the relevant legislation and governance documentation. Governance documentation means any “rules, regulations, articles, constitution, terms, conditions or other provisions that control the administration or occupation of private areas and common areas in a community scheme”.
Schemes must (these are highlights only) –
- Take out fidelity insurance against loss of money through fraud or dishonesty
- Register with CSOS on form CS1, within 30 days of 7 October or incorporation
- Lodge annual returns and (within 90 days of 7 October or incorporation) governance documentation with CSOS.
November 9, 2016
Bad Tenants: Can You Lock Them Out?
“I’ll answer him by law” (Shakespeare)
It’s very tempting, when you have a bad tenant who doesn’t pay his/her rentals or otherwise remains consistently and unapologetically in breach of the lease, to slap the biggest and strongest padlock you can find onto the front door/driveway gate.
Don’t do it! By taking the law into your own hands you immediately put yourself in the wrong and can land yourself in all sorts of trouble with unnecessary delays, extra legal costs, perhaps even a damages claim.
A recent High Court case illustrates.
The landlord who locked the gate and paid the price
- The tenant of four sets of commercial premises allegedly –
- Failed to honour an acknowledgment of debt (presumably for rental arrears), and
- Sub-let a portion to some 150 people as accommodation without the landlord’s permission
- The landlord put a lock on the entrance gate to deny access to the tenant and his sub-tenants
- The tenant immediately approached the Court for relief. To understand the outcome (a decisive victory for the tenant) we need to understand how our law views the whole question of “self-help law”.
Taking the law into your own hands
It has long been a fundamental principle of our law that “no man is allowed to take the law into his own hands; no one is permitted to dispossess another forcibly or wrongfully and against his consent of the possession of property, whether movable or immovable. If he does so, the Court will summarily restore the status quo ante, and will do that as a preliminary to any inquiry or investigation into the merits of the dispute.”
In other words, no matter how strong your case against your tenant may be, a court will without further ado order you (in the form of a “spoliation order”) to allow the tenant back in. It won’t enquire into whether the tenant’s occupation is wrongful or illegal, nor will it enquire into your respective legal rights. Those enquiries only come later, when you comply with the law by bringing a proper eviction application before the court.
To succeed in obtaining a spoliation order, your tenant needs to prove only two things –
- That he/she was “in peaceful and undisturbed possession of the disputed premises” and
- That he/she was “deprived of that possession without consent or recourse to law”
Tenant 1, Landlord 0
After finding on the facts that the tenant and his sub-tenants had been in physical possession of the premises prior to being locked out, the Court ordered the landlord to immediately restore access and possession to them. The landlord must also pay the tenants’ legal costs, so it’s back to square one, and with somewhat lighter pockets.
Lessons for landlords
Prevention being, as ever, much better than cure, make sure up front that your tenant is good, trustworthy and creditworthy. Check with your lawyer that your lease is water-tight. Take sureties if you can. Insist on holding a reasonable deposit. Treat good tenants like gold, even if it means giving them a bit of rent relief.
Most importantly, if and when your tenant falls into arrears or otherwise seriously breaches the lease, seek legal assistance without delay!
October 5, 2016
Selling Property? Check for VAT Before You Sign
“There’s many a slip ‘twixt the cup and the lip” (very old and very wise proverb)
“Oops, we just lost R221k”
- The liquidators of a close corporation in liquidation sold a property to the buyer for R1,8m.
- The sale was vatable, in other words the sellers would have to account to SARS for VAT on the purchase price.
- Clearly the sellers intended the sale to be VAT exclusive so that they would receive the full R1.8m net of VAT. Indeed the bank holding a bond over the property, in giving its consent to the sale (a condition of the sale), specified that the offer price must exclude VAT.
- Unfortunately for the liquidators, the sale agreement itself was silent on this point, and our Value Added Tax Act specifically provides that any price charged by a vendor is deemed to include VAT. So, if you make the same mistake as the liquidators and don’t specifically provide in the sale agreement that the buyer will pay VAT on top of the purchase price, the buyer only pays the stated price. No more and no less.
- The buyer, when presented with a pro-forma invoice for VAT on the sale price, refused to pay it – and eventually asked the High Court to order the liquidators to pass transfer to him against payment of just the R1,8m.
- The liquidators asked for “rectification” of the contract to reflect the “true” agreement and the “common intention” of the parties to exclude VAT from the price. The Court however refused rectification, holding that no such common intention had been proved; and anyway, the liquidators should have formally applied for rectification, and hadn’t done so.
- The end result – the close corporation in liquidation must transfer the property to the buyer and loses the R221,053 VAT which it owes SARS. The liquidators clearly have some explaining to do to the bondholder.
© LawDotNews
October 5, 2016
Lost Views and Rising Damp – Lessons for Home Buyers
“Learn from the mistakes of others. You can’t live long enough to make them all yourself.” (Eleanor Roosevelt)
Front row v Back row: A sad tale, and a warning
- A sea-facing development in Cape Town contained two rows of houses –
- A front row of single-storey houses
- A back row of double-storey houses.
- Two front row owners decided to convert their houses to double-storey, and their building plans for the conversion were approved by the municipality.
- Unsurprisingly, the back row owners who stood to lose their views took fright and applied to the High Court for the municipality’s plan approval to be reviewed and set aside. When their application was refused, they appealed to a Full Bench.
- They lost again, the Full Bench dismissing their appeal. Unless they fund a further appeal they are stuck with watching helplessly as the neighbours’ builders deprive them of both their views and their sunlight. Their panoramic vistas across Table Bay will it seems give way to damp, moisture and mildew – not to mention a substantial drop in their houses’ market values.
- Always check the local zoning scheme – in this case for example the area’s height restriction was three storeys, which should have been a clear warning to the back row owners to investigate further.
- What counts is enforceable legal rights, not promises and good intentions. The developers and architects told the Court that in designing the development the “sacrosanct fundamentals” were to ensure that all the houses would have access to both views and “maximum light penetration”. Critically however they failed to translate these intentions into legal obligations. They could, said the Court, have formally restricted the front row houses to a single storey limit by using legal options like –
- The imposition of a servitude,
- Restrictions on the title deeds,
- A specific site development plan imposing a land use condition, or
- Registration of a homeowners’ association.
- If you are buying into a group housing scheme, don’t rely on the fact that it must be “planned, designed and built as a harmonious architectural entity”. This concept, held the Court, doesn’t give you any rights to a view, privacy or light.
- Equally, don’t put yourself in the position of having to prove any of the factors that would cause a municipality to reject building plans. These include factors like the building will be “dangerous to life or property”, or will “disfigure” the area, or will be “unsightly or objectionable”, or will “derogate from the value of adjoining or neighbouring properties”. None will be easily proved. For example there cannot, held the Court, be a derogation of value solely based upon a loss of view when the alteration complies with the law “unless the nature or appearance of the building are so unattractive or intrusive that it exceeds the legitimate expectation of parties to a hypothetical sale”.
- Indeed, if you are going to rely on having bought with a “substantive legitimate expectation” of your view remaining intact, make sure you keep proof. In this case, for instance, one of the affected owners testified that before buying her house she had undertaken a “due diligence investigation” by contacting the City and being advised by an official of the Planning and Development Department that the front row houses could not be converted to double-storey. But she could not recall the official’s name and the Court rejected her justification as vague and non-specific.
© LawDotNews
September 7, 2016
Trumped! A Home Owner Can Be Evicted As An Unlawful Occupier
Did you know that even as the owner of a house, you could still be evicted from it as an “unlawful occupier”?
That could happen if, to take one example from a recent SCA (Supreme Court of Appeal) matter, you give someone else a right of habitation (“habitatio”). But why, you may ask, would you do that?
Useful tools for property owners
Our law provides you with a range of useful tools to make the most of your property, including several different types of occupational and usage rights. For instance you will come across terms like “usufruct”, “usus” or “habitatio”. The distinctions between them are fine and not important for now, but what is important is that you don’t use any of them without getting specific advice on which – if any of them – will suit your particular needs.
How might you use these tools? Consider these two examples –
- You could – perhaps as an estate planning exercise – bequeath your house to one of your heirs, subject to a lifelong usufruct in favour of your spouse so that although he/she won’t actually own the house after your death, he/she can still live in it for life
- Or you could sell your house to someone else but retain for yourself the right to remain in residence for life.
From bitter family feud to eviction application
The facts in the SCA case were these –
- A mother sold her house to her son, subject to a lifelong right to live in it via a right of habitation. This was registered against the title deeds – an essential step in making a servitude like this valid and enforceable against all-comers
- The son subsequently married in community of property, so thereafter the house belonged jointly to him and his new wife
- The mother, son and daughter-in-law lived together in the house for many years
- The son eventually moved out after divorcing, and relations in the house deteriorated to the extent that the mother temporarily fled the house and obtained a family violence interdict against the (now ex) daughter-in-law
- The ex-daughter-in-law denied everything and said the mother was welcome to return at any time to live with her in the house. Naturally enough the mother declined this offer, and applied instead for an eviction order.
Who’s in charge?
Now our law requires that to evict an occupant you must comply with PIE (the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act). PIE requires that you prove either that you are the owner of the property or that you are the “person in charge” of it.
In this case of course the owner was the ex-daughter-in-law. But, held the Court, “where someone other than the registered owner is the ‘person in charge’ (i.e. the person with the right to determine who stays on the property), it is the consent of such person rather than the registered owner which is . . . relevant”.
Finding on the facts that the ‘person in charge’ was the mother, that she alone could give permission to live in the house and that she hadn’t given her ex-daughter-in-law any such permission (any previous implied consent having been withdrawn), the Court held that the ex-daughter-in-law is indeed an “unlawful occupier” and therefore subject to an eviction hearing.
In other words, a registered right of habitation trumps the owner’s rights of occupation to the extent that the owner can be evicted from his/her own home.
© LawDotNews
August 4, 2016
Plot And Plan: The Strange Case Of The Unsigned Sale Agreement
You buy a plot in a residential development and the developer agrees to build you a house to stated specifications and plans. You pay in full for the plot and it is transferred into your name. All good so far.
But then you fall out with the developer over the costs, finishes and other specs for the building work. What happens now? A High Court case illustrating a particular danger for both developers and buyers revolved around these rather unusual facts –
July 5, 2016
Neighbours Behaving Badly: Nip Illegal Building In The Bud!
Bad neighbours don’t just impinge on your enjoyment of your property; they can also cause serious harm to its value. So if you notice illegal building activity next door, move quickly to nip the problem in the bud.
Your hand in this regard has just been strengthened. An important new decision by the Supreme Court of Appeal (SCA) confirms that you aren’t limited to trying to compel the municipality to enforce its own building and zoning laws – you can apply for demolition directly.
July 5, 2016
Property sellers: just how far does your duty to disclose go?
“Where a seller recklessly tells half-truths or knows the facts, but does not reveal them because he or she has not bothered to consider the significance, this may also amount to fraud” (extract from judgment)
Firstly, a note on the CPA
What is said below does not pertain to those property sales where the very robust buyer protections in the CPA (Consumer Protection Act) apply. Generally speaking the CPA applies only where the seller is selling “in the ordinary course of business” (a developer for example), and most private sales will fall outside its ambit. That whole question is however a big topic on its own so watch this space for a future article on “Voetstoots v CPA”.