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EUA using CR

By George Masters on Mon, 12 Mar 2012 at 22:21

What are the legal requirements for owners to be granted exclusive use to certain areas of common property? The new Sectional Titles Schemes Management Act (STSMA) allows for conduct rules to confer exclusive rights to certain owners (Section 10.7)

The Body Corporate has engaged a surveyor to create new exclusive use areas granting certain owners preferential access to what was previously common property accessible to all. The disadvantaged owners are less than 25%, and so will be outvoted when a special resolution is taken at a meeting.

Is there any recourse for the disadvantaged owners, as the STSMA also states in 10.3 that such rules should be reasonable and apply equally to all owners? Who determines what is reasonable in this case? By the way, the trustees are all ones that stand to benefit?

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RE: EUA using CR

Myburgh Brink replied on Mon, 12 Mar 2012 at 23:33

Although the Sectional Titles Schemes Management Act, 8/2011, has been signed into law it has not yet come into effect. See STSM Act: §22. (1) This Act is called the Sectional Titles Schemes Management Act, 2011, and comes into operation on a date fixed by the President by proclamation in the Gazette.
(2) Different dates may be fixed in respect of different provisions of this Act.

This will only happen once the Regulations and Rules have been finalised. ...Show More

RE: EUA using CR

Leo Riphagen replied on Tue, 13 Mar 2012 at 05:03

EUA's cannot be created by special resolution.
Regarding § 27(A) refer to the Registar Conference Resolutions 2009. Chief Registar Circular no 69/2009:
"(a) These rules are management rules.
(b) The rules can be amended by unanimous resolution only."

RE: EUA using CR

Carel Basson replied on Tue, 13 Mar 2012 at 07:29

Follow

RE: EUA using CR

Myburgh Brink replied on Tue, 13 Mar 2012 at 11:09

CRC 69/2009 reflects the wishes of the conference, but how are they going to enforce it, as the Deeds Office no longer examines any rules filed (§35 (5)(b)).

There was a lengthy discussion on the Paddocks Club last year and this is part of what Prof Paddock had to say: "So my view is that it would always be best to make the S27A rule by unanimous resolution where this is reasonably possible. But if you can't get a unanimous resolution (perhaps due to not being able to get the 80% quorum or a single owner who decides to frustrate the process) without going to the High Court at huge expense and being subjected to long delays, I see the creation of S27A rules by special resolution as a permissible and sensible alternative."...Show More

RE: RE: EUA using CR

Annette Stones replied on Tue, 13 Mar 2012 at 16:24

Yes, points taken, but - what protection of allocated eua rights can be offered by the Conduct Rules, which can be changed simply by means of a special resolution reached by an ordinary quorum at a General Meeting? It is thus in the interests of owners to have the allocation of eua's protected by the requirements for amending Management Rules.

RE: RE: RE: EUA using CR

Gerhard Bezuidenhout replied on Wed, 14 Mar 2012 at 17:51

Hi, Annette - if taken without background knowledge, one might come to the conclusion from your post that it is easy (simple) to take a special resolution at an AGM...

Fact is such action will fall under "Special business" in terms of PMR55; PMR56(f) and, taking precedence, PMR54(1).

RE: EUA using CR

Myburgh Brink replied on Tue, 13 Mar 2012 at 20:54

I'm just playing devil's advocate on this one having experienced the major ST disease, namely apathy, a few times.

If a meeting is convened to create EUA's i.t.o. a MR, what are the chances of getting an 80% quorum as is required by the STA? If it is done by round robin what are the chances of not getting at least one owner voting against it? The result in both cases would be, currently, a High Court application....Show More

RE: RE: EUA using CR

Sandie Glee replied on Wed, 14 Mar 2012 at 09:39

We have the same issue and were wondering if written consent is required from all disadvantaged owners if EUA's are created int terms of 27A?

RE: RE: EUA using CR

George Masters replied on Mon, 19 Mar 2012 at 12:17

So, coming back to the original question, does this allow Body Corporates to deny access to certain areas based on results of a special resolution? And what is the recourse for the disadvantaged owner?

An example - a complex of 4 units with each owner having a PQ of .25 - the three owners decide that they do not wish the swimming pool to be used by the fourth owner, for whatever reason. They take a special resolution and the EUA is created using a conduct rule....Show More

RE: EUA using CR

Carel Basson replied on Thu, 15 Mar 2012 at 12:38

Myburgh
I'm responding in the light of your second posting being an advocate.Surely CRC 69/2009 has to have some substance .So I beleive that the resolution is based on the fact that Section 27 has to be changed by MR and therefore Section 27A as well .Why would Section 27 require MR amendment and Section 27A not? A members right to have an EUA registered by means of a notarial deed and be used for security , as you mention in your posting , will now be diluted by the new act.The BC will follow the CR route and majority vote will nullify the wish of the member who wants to have it notarially registered.BC's opt for the easy way out by using CR , which in fact , IMO , is simply wrong because they do not follow the act.( currently)

RE: EUA using CR

Myburgh Brink replied on Thu, 15 Mar 2012 at 13:55

I raised the same question with Prof Paddock about the apparent discrepancy between §27 and §27A. His reply was: "… my view is that although the then Department of Land Affairs originally intended S27A to allow exclusive use rights to be created in terms of rules made by unanimous resolution (the SGO Manual in the Library supports this intent) Parliament intentionally appreciated that to limit the procedure to unanimous resolutions would in practice make it unworkable and therefore chose a wording which, in my view, clearly allows these rules to be made by any type of rules.

Yes, §27A is entirely separate from §27, having been inserted later in order to address the practical difficulty that schemes continued to confer EU rights under rules even after Act 95 of 1986 came into operation - you will recall that this Act originally intended to do away with rule-based EU rights and have them all registered."...Show More

RE: EUA using CR

Anne Granada replied on Fri, 16 Mar 2012 at 19:15

The question is which owners will be granted EUA? Why should one person be given an EUA, and another one not? Will the most unscrupulous or dishonest person get the EUA if there are 20 units, and thre are only space for 10 EUA gardens. Will creating the EUA's lead to bribery or bullying?
If two owners want the same garden area, who must get it? Why should anyone be "granted" an EUA? He paid for the unit, he should clearly pay for the EUA garden. The funds could be used for better security, gardens, roofs, painting or rather to create a reserve fund.

RE: EUA using CR

Anne Granada replied on Fri, 16 Mar 2012 at 20:37

If trustees have been caught with their hands in the cookie jar, can they still be granted EUA- be granted ( given) EUA's for enriching themselves at the expense of the other owners. Clear conflict of interest, refusal to pay for " renting" common property, etc. where does one draw the line?

RE: EUA using CR

Myburgh Brink replied on Tue, 16 Apr 2013 at 14:56

I see RCR69/2009 was amended by RCR15/2011. This now means that EUA's can be created by either a MR or CR. Maybe the wording of §10 (7) of the STSMA acted as incentive for this change of heart.

RE: EUA using CR

Annie Graeme replied on Tue, 16 Apr 2013 at 16:04

Off course, the EUA cannot be sold, they revert back to body corporate.
The trustees may only spend a limited amount, so how did the " body corporate" employ a surveyor?
The owners who are allocated EUA must pay market related rent, and this would be high.
But the current situation is that it must be unanimous decision. No trustee who is "enriched" by being allocated an EUA may be involved in the process, as this would be in conflict of fiduciary duties.

RE: EUA using CR

Myburgh Brink replied on Tue, 16 Apr 2013 at 20:52

hi Annie
If the EUA's are created i.t.o. §27 they CAN be sold as they are registered per notarial deed in the name of the holder; they can also be used as security for a loan. Depending on the wording of the rule if the EUA's are created i.t.o. §27A it does not necessarily revert to the BC. If the EUA dates back to the 1971 Act an owner may request the trustees to have it registered in his name and they may NOT refuse – the costs of this is obviously for the owner's account.

The BC may only charge market related rates if the EUA's are NOT allocated to sections but remain under the control of the trustees, as the elected officials of the BC (§39 (1)). If they are allocated to owners then the BC may only recover any direct costs related to the EUA's (§37 (1) (b)). ...Show More

RE: EUA using CR

Myburgh Brink replied on Tue, 16 Apr 2013 at 22:04

Something I forgot to add. Any EUA's currently created still has to be done i.t.o. the current legislation, i.e. Sectional Titles Act 95 of 1986. The STSMA, even though it was signed into law in 2011, has not yet come into operation; this will only happen once its Reg's and Rules have been finalised and gazetted.

If the EUA's are to be created i.t.o. §27 the services of a surveyor is required as a revised sectional plan has to be lodged with the SG (§27(2)). It would also require a UR by the members and such a resolution may include conditions on how the EUA's are to be allocated or used....Show More

RE: EUA using CR

Nick Jones replied on Wed, 16 Oct 2013 at 17:17

The most important:
where the resolution in question adversely affects the proprietary rights or powers of any member as owner, the resolution shall not be regarded as having been passed unless such member consents in writing thereto.

Notice procedure for Special and Unanimous Resolutions
(2) For the purposes of the definition of 'special resolution' in subsection (1), a notice contemplated in that definition shall be deemed adequate if?...Show More

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