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EUA Extensions

By John Patrick on Tue, 13 Mar 2012 at 21:20

BACKGROUND
Homeowners Association, registered Section 21 Company. Own Articles of Association, Management and Conduct Rules as permitted by s30 of STA.
Exclusive Use Areas established in terms of s27A of STA. Relevant scale plans designating EUA’s as “Patio” “Courtyard” for each Unit held by the Association Management as per s27A. Levies are charged Rands per square meter of the area occupied adjusted annually. When alterations to a unit increase its area, the record of total area is amended and the Rand per m² charged for the addition.
Over the past 15 years, plans to fully enclose EUA’s have been approved by Management and the Directors; submitted to the City of Cape Town and after their approval, filed with the documentation of the applicable unit. In many instances, walls were removed thus extending living rooms, kitchens and bedrooms, all within the designated EUA area.
PROBLEM
Recently, approval was given by the Association and City Council to extend over a garden area. An owner attorney wrote to the Association which then consulted its attorney. The Association has been advised that certain of the alterations constitute extensions in terms of s24 of the STA. 113 units are affected. The Association, whilst not making it mandatory, desires owners to register the extensions with the Deeds Office. S24 requires owners to register?
A Special Resolution is proposed authorising the owners to extend the boundaries of their sections; authorising the Directors to instruct a Land Surveyor to prepare amended Sectional Title plans for the Surveyor General’s office and an Attorney to register with the Cape Town Deeds Office. The costs per unit are R3,200 and R3,000 plus VAT respectively, payable by the owners. It is stated that: ‘Owners not registering may face problems when selling the dwelling unit’.
I query the necessity to take these intended actions. The “extensions” were approved by EUA’s allocated in terms of s27A with the requirement to pay additional levies. Full plans of the units, including total m², are lodged with Cape Town City Council and the Associations management (in each section file). To date, there has not been a problem when selling sections which have been “extended”. The only potential query may be the different m² shown in the participation quotas at the Deeds Office and those in the plans held by the Association management!
On the basis of the previous paragraph, should I attempt to persuade owners to reject the Special Resolution?

Replies

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RE: EUA Extensions

Myburgh Brink replied on Tue, 13 Mar 2012 at 22:30

§24 is very clear as to what has to be done if a section is extended (increase in PQ value) and who is responsible for the costs relating to the extension. It is all good and well if all the owners are happy to continue ignoring the legal requirements and not rectifying the problem, but these things have a nasty habit of eventually surfacing when you least expect it. The correct procedures also have to be followed where the extension is done across a EUA to firstly cancel the EUA and then to recreate one for what is left of it.

It also means those owners not paying on the correct PQ values are being subsidised by the others. The calculation for the additional contribution on EUA's is set out in §37 (1) (b) – actual costs....Show More

RE: RE: EUA Extensions

Swazi Coetzee replied on Wed, 14 Mar 2012 at 14:20

In my opinion using the S.T.Act is in conflict with your H.O.A. Memorandum of Icorporation under the Companies Act.

RE: RE: RE: EUA Extensions

Gerhard Bezuidenhout replied on Wed, 14 Mar 2012 at 17:59

Yes, the post is rather confusing.

However, it is quite possible for a ST development to be created via the Companies Act, the fact remains that the ST Act stands to be acknowledged - the developer would only have created a very cumbersome environment in which the BC will find itself entangled between the various Acts.

RE: EUA Extensions

Myburgh Brink replied on Wed, 14 Mar 2012 at 19:40

To me this sounds like an ST scheme within a HOA, which was the assumption I made when doing my reply.

RE: RE: EUA Extensions

John Patrick replied on Wed, 14 Mar 2012 at 23:08

Thank you to all. Indeed, it’s very cumbersome. Within the Homeowners Association, 5 BC’s, ST,SB & Life Rights. The Directors refer to the Companies Act more than ST. Owners have never been told till now of the legal requirements set out in s24. All extensions totally cover the EUA’s. PQ’s are not used as such. A Rand per square metre rate is charged to each section based on the total areas, including EUA’s.
S24 makes it mandatory for owners to register the extensions. I’m mystified by the Directors statement that owners can choose not to register. They’ve ignored s24 for 14 years!!
Last year, Professor Paddock responded to a Club query about extension made without registering in the Deeds Office. Amongst his comments was “On the other hand, if the “extensions” have been “approved” by way of exclusive use rights being conferred under section 27A and the rules made for this purpose impose the obligation to pay additional contributions, these would give a specific formula according to which these must be paid”. This, together with our Directors saying owners can choose not to register, leads me to think there may be an alternate solution to the problem. I’m seeking to know if this maybe so?

RE: EUA Extensions

Anne Granada replied on Fri, 16 Mar 2012 at 21:14

The problem with HOa's is that the directors are so busy enriching themselves and breaching their fiduciary duty that they cannot assist in matters like these:
Fiduciary Duties in a HOA
◦ The concepts of fiduciary duties in SA mirror those developed under English common law and widely held in the United Kingdom, United States, Australia and Canada. At their most basic level fiduciary duties are requirements to act for the benefit of another without putting your interests ahead of hers. Fiduciary duties occur only in certain service-related relationships that require one party to have entrusted power over another in order for the services to be accomplished. These relationships include the relationship between a director and a company, the directors of a HOA and the homeowners in the home owners association, the trustees and the homeowners in a sectional title scheme.
2. Prohibition Against Self-Dealing
◦ A core tenet of fiduciary duties is the prohibition of self-dealing. This means you may not use your position as a fiduciary to advance your own interests to the detriment of the person(s) or organization you hold a duty to. Moreover, even when you are advocating for the interest of another, you may not acquire or usurp a benefit meant for the person who entrusted you with the power to act on his or her behalf.

i.e. you may not change the “rules” of the association and usurp the benefits of the other homeowners.
3. Duty of Loyalty
◦ Another fundamental fiduciary duty in is the duty of loyalty, which requires that you act for and only for the homeowners you have a duty to. This includes acting consistent with the goals of ALL the homeowners on whose behalf you are working. For example, in in a levy dispute, it would not only be required to follow the client's request but do so to the best of his ability.


4. Duty of Care
◦ The final component of fiduciary duty is the duty of care. The duty of care holds that when acting on behalf of another, the fiduciary has a fundamental responsibility to do so as any reasonably prudent person would do if put in a similar situation. Accordingly, if the intended action required a basic knowledge and the fiduciary performed the act without that basic knowledge, the fiduciary could be liable for a breach of her duty of care.


CPA
With the promulgation of the new Consumer Protection Act (CPA) the drafting and design of consumer agreements is here. The CPA requires that all agreements must be in plain language – but what does that mean in the HOA ? The Act also prohibits certain terms and provides for additional requirements for the validity of exclusions of liability and disclaimers. Then there is a list of terms in the regulations that, if included in a consumer agreement, are presumed to be unfair.

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