Sectional Title Schemes Management Bill & Community Schemes Ombud Service Bill: Departmental briefing

Meeting report

Sectional Titles Schemes Management Bill: National Department of Human Settlements (NDHS) briefing
Mr Khwezi Ngwenya, Director: Framework Legislation, National Department of Human Settlements, presented the Sectional Titles Schemes Management Bill (STSMB) to the Committee.

He explained that the aim of the Bill was to give effect to Cabinet’s strategy to bring all housing-related legislation that was administered by other Departments under the roof of the National Department of Human Settlements (NDHS or the Department). In terms of the “Breaking New Ground” Comprehensive Plan for Housing Delivery, the Department had been expanded to encompass the entire residential market.

The STSMB specifically aimed to remove the scheme management provisions from the Sectional Titles Act of 1986. The Bill also aimed to incorporate the scheme management provisions in a new statute that would be administered by the Minister of Human Settlements. Another aim of the Bill was to simplify the scheme management provisions, in order to make these more accessible to the public and officials who dealt with it, without changing their content.

Currently, the Department of Rural Development and Land Reform (DRDLF) was responsible for the administration of the Sectional Titles Act No. 95 of 1986. This Act dealt with the survey and registration of sectional plans, the registration of real rights in sectional title units and the management and administration of sectional titles schemes. Complaints from the public and problems arising from scheme governance actually fell outside the brief of that Department.

During 2007 the NDHS and the DRDLF thus established a Technical Task Team to ensure cooperation and consultation between the two departments during the drafting process of the STSMB and the Sectional Titles Act Amendment Bill. The two departments still continued to cooperate.

The two Bills were placed in the public domain during 2009, and were subsequently published in the Government Gazette for public comments. Both departments participated in the public comments and public consultation process.

Mr Ngwenya reported on the effect that the STSMB would have on the Sectional Titles Act of 1986. The Sectional Titles Act would retain only those provisions regulating the survey and registration aspects of sectional titles, and would continue to operate under the supervision of the Minister of Rural Development and Land Reform.

Mr Ngwenya then proceeded to outline the content of the STSMB. The Bill contained 21 clauses. Clauses 1-8 dealt with the definition, establishment, membership, name, capacities, functions and powers of the STSM. The trustees, fiduciary position of trustees, first meeting of bodies corporate as well as proceedings on behalf of bodies corporate were also dealt with

Clauses 9 to 10 of the Bill covered the rules that would be applicable to bodies corporate and sectional owners, and the effect of quotas and the variation of such quotas.

Clauses 11 to 16 of the Bill regulated various legal transactions with regard to the common property and units, such as alienation and letting of common property, expropriation of common property, exercise of a right of extension and extension of this common property. These clauses also detailed the duties of owners, insurance by owners, the recovery from owners of unsatisfied judgment debts against bodies corporate and non-liability of bodies corporate for debts and obligations of developers, the appointment of administrators and destruction of or damage to buildings

Clauses 17 to 21 of the Bill dealt with miscellaneous matters, including the establishment of a Sectional Title Schemes Management Advisory Council to advise the Minister. It also set out the procedure for appointing members of the Advisory Council, the making of Regulations and transitional arrangements.

Amendments to the Sectional Titles Act, 1986 were set out in a schedule to the Bill.

Finally, Mr Ngwenya indicated that the STSMB had been certified by the Office of the Chief State Law Advisor as consistent with the Constitution, and also not in conflict with any other law of the Republic.

Discussion
Ms M Borman (ANC) said that had the impression that this Bill was not actually introducing anything new to the legislation, but rather that the existing legislative provisions were being taken over into the new Bill. She thought that the weakness in the existing legislation was the lack of facilities to address conflict situations between parties. That could be improved in the new legislation.

Mr A Steyn (DA) also asked for confirmation that the provisions of the existing Sectional Title legislation were basically being taken across to the new Bill without amendments. He pointed out that often shortcomings in legislation showed up after it had been promulgated, and requested whether there was not a need to fine-tune the provisions while there was an opportunity to do so. 

Ms Borman and Mr Steyn asked what had been the response from the public when the Bills were brought into the public domain for comment.

Ms Njobe asked who had participated in the initial discussions on this legislation.

Ms M Njobe (COPE) wished to correct the presenter on the nomenclature used in the presentation. In 2007, there was no Department of Rural Development and Land Reform, nor a Department of Human Settlement, but instead the functions now being done by these departments were handled by the Departments of Agriculture and Department of Housing.

Ms Njobe understood the rationale behind centralising the legislation, but asked what would be the advantage of changing the legislation for the people on the ground.

Mr R Bhoola (MF) said that it was vital that the Committee receive a report on the 2009 public participation process, in order to be able to deliberate from an informed position.

Mr Bhoola noted that one piece of legislation impacted on another. He said that in the Ethekwini Municipality the people on the ground still experienced tremendous challenges in transferring title deeds into their names. The question was really whether the legislation, which may look good on paper, did address the problems that people were experiencing on the ground. In some cases, the body corporate or security guards seemed to serve as stumbling blocks.

The Chairperson said that she was confused by the presentation and what was being expected of the Portfolio Committee, since this legislation resided with another department. She asked if there advisory structures in the DRDLR, and, if so, what would happen to them.

Mr R Madame (ANC) said that more time was needed to interrogate the Bill and what it was proposing. He pointed to two clauses in particular. Surveying delayed on human settlement activity, and thus the Committee would need to look at those clauses and reach an understanding of what the Bill was trying to do.

Professor Graham Paddock, Lecturer: UCT and founding member of Paddocks sectional title consultancy, explained that the fundamental motivation was to make sectional titles a more practical, useful and inclusive system. Property developers, land surveyors, conveyances, the Deeds Office, bankers and town planners normally dealt with the technical complexities of sectional title transactions. The Bill thus dealt with the actual operation of sectional titles. Sectional titles had not been made sufficiently accessible to the general South African public, and it was necessary to do so since sectional titles would become one of the dominant systems in operation when high density residential areas become more prevalent in urban South Africa.

He outlined the background. In 2004 Cabinet had made the initial decision to move the administration of sectional title legislation across to the then-named Department of Housing. The Sectional Titles Act (the Act) was a multifaceted Act that stipulated how sectional title properties had to be managed, and contained the information that tenants, managers and owners needed to know. However, because society changed all the time, and banking practices changed constantly, the legislation also had to evolve constantly, and could be seen as “work in progress”. The Chief State Law Adviser had made some changes to the original legislation. In answer to the question whether the Bill aimed to address other issues that might have been identified, he said that although there were certainly problems with deed registration and land survey, but these were not addressed in this current process. This Bill would be a system to serve the public, the people who lived in and managed sectional title housing.

Mr Paddock noted that the advantage of this process was that it had taken a piece of legislation that essentially dealt with deeds registration and land surveying and had put it where it should be, under the ambit of the new Department of Human Settlements, which had the mandate of providing housing. Another advantage of the legislation was that it guided and educated people in order to avoid disputes.

Mr Paddock turned to the initial consultation process and said that in 2005 there was a process of public consultation. In 2006 there was a conference in Stellenbosch. In 2009 there was another process of public consultation.

He explained that the Sectional Title Schemes Management Bill and the Community Schemes Ombud Service Bill (SCOSB) were designed for people in retirement villages, block share properties and sectional title properties, who shared land and who also shared the financial responsibility to manage the properties in a manner which would be fair to all concerned. They provided the necessary recourse when things went wrong.

Mr Paddock reiterated that the process of formulating sectional title legislation would be ongoing, would never be fully complete, and likewise would never be perfect. There was a need for regulations, because the management and conduct rules for bodies corporate arose from the regulations.

The Chairperson said that no one disagreed with Mr Paddock, but he appreciated the concerns of the Members that they could not simply “rubberstamp” decisions made prior to the Fourth Parliament, but would need to examine the Bill in depth, and would need to consider whether they wished to make any changes. Members must engage with whatever legislation was put before them.

Mr Ngwenya said that the executive summary was available, as well as the public comments.

Ms Borman asked whether these were available on the internet.

The Chief Registrar of Deeds said that the Deeds Office was part of the whole process. He said that there were still some “housekeeping” issues between the Deeds Office and the DRDLR, but these were not serious. The Minister was fully aware of the process and the stage that it had reached. He confirmed that this Bill was intending to separate registration issues from consumer issues, and that had been the mandate given to Professor Paddock at the start of the process. He agreed with Professor Paddock that sectional titles would resolve the housing problems in this country, and this was confirmed by international benchmarking.

Mr Steyn said that he assumed that the Sectional Titles Act of 1986 would have to undergo a parallel process of being amended to remove the relevant clauses from that Act.

Community Schemes Ombud Service Bill (CSOSB): Department of Human Settlements briefing
Adv Jan Tladi, Chief Director: Legal Services, NDHS, tabled and explained the Community Schemes Ombud Service Bill (CSOSB). He noted that this Bill and the STMSB complemented each other.

Adv Tladi outlined the history of an ombudsman or ombud, which meant “representative of the people”. The modern form of ombudsman originated from Sweden, after King Charles XII of Sweden adopted the Turkish Islamic law concept of  QaziUlQuzat (judges over the judges), and created the Office of the Supreme Ombudsman to make government more accountable. In 1809, the Swedish Constitution had established an Ombudsman, linked to Parliament, not the Executive, in order to protect the rights of the people.

The reason for setting up an Ombud was to establish a simple and inexpensive recourse that would ensure independence, fairness and impartiality, and promote uniformity and consistency in handling disputes. It would also provide a remedy for the protection of the right to good administration.

Adv Tladi noted that most new housing developments were now happening in Community Schemes, involving governance by that community, shared financial responsibility and land and/or facilities being used in common. This model included sectional title schemes, share block companies, homeowners associations and housing schemes for retired persons.

Because they involved control and administration of finances, facilities and behaviour, community schemes could give rise to problems and disputes amongst participants, which would then need to be effectively resolved. Currently there was no effective and affordable conflict resolution mechanism available. This Bill would establish the Community Scheme Ombud Service to address this need. The Community Scheme Ombud Service (CSOS) would be established as a national public entity, with executive authority vested in the Minister of Human Settlements. The Bill would provide a framework for the avoidance and resolution of disputes in community schemes and the custody of community scheme governance documentation, as determined by the Minister of Human Settlements.

He outlined the content of the CSOSB. It dealt with the establishment of the CSOS, its mandate and functions, and its governing board. It contained provisions relating to the Chief Executive Officer, Chief Ombud and staff, and set out the procedure and practices around funding, as well as the procedure and scope of applications for relief made to the CSOS. The Bill also regulated the investigation of issues arising from applications for relief and the rights of parties to representation. It detailed the orders that adjudicators would be permitted to make when resolving community scheme disputes, and the right of parties to appeal against orders. Other miscellaneous matters included public access to information in regard to orders and levies payable by community schemes.

Discussion
Mr Steyn said that until such time that the Committee had had the opportunity to examine this Bill clause by clause, Members would only be able to ask general questions.

Mr Steyn said that presumably the personnel would be appointed by the Minister. He observed that the Bill made provision for the appointment of a Chief Executive Officer as well as the Chief Ombud, but pointed out that the more staff that were appointed, including the perhaps unnecessary Chief Executive post, the higher the levies would have to be. The structure had to be kept lean. He asked who would be responsible for the levies if, for instance, only 60% of the people supported the office while 40% did not. He noted that he belonged to a ratepayers association, which was a voluntary organisation.

Ms Borman asked about the public participation start up costs.

Mr Mdakane wanted to raise the issue of managing agencies. The structures formed under the new legislation had to be in line with what government was trying to achieve, in other words, to provide housing. He felt that Government was creating too many agencies, all of which needed money to survive. He pointed out that if the CSOS were to be set up in Tshwane, it would still be inaccessible to many, and that there had to be offices on the ground, in the provinces or at local authority level. If this did not happen, then he did not believe that the establishment of the CSOS could be justified. This meant that the financial responsibilities to run these services had to be taken into account.

Mr Mdakane said that South Africans preferred generally to use voluntary agencies to coordinate communities, but shied away from formal establishments. There had to be continuity.

Mr Bhoola said that the concept of the CSOS looked good on paper, but Mr Mdakane had made some very valid points. Managing agencies should not be seen as a lucrative business for a particular sector of society, and he enquired as to the legal perspective of such agencies, as his own understanding might be outdated.

Mr Bhoola cited problems in the Ethekwini Municipality. Mr Steyn had asked what would happen if 60% of participants in ratepayers associations were willing to support this, and he pointed out that the reality in Ethekwini was that the managing agency was effectively attached and selling properties in sectional title property schemes. 60% of the people had received their title deeds, but the operating municipality still had control of 40%, and the question was who was responsible for levies in the meantime, and what would happen to the rightful owners who could not afford the levies. The current problems must be analysed to provide a basis for creating a better system.

Prof Paddock suggested that Mr Bhoola should provide the relevant information to Adv Tladi so that his office could follow up on the matters. This Bill could not assist those waiting for title deeds.

Mr Bhoola did not entirely agree with the explanation. The Minister, through the NDHS, had a programme of encouraging people to become home owners. The Enhanced Extended Discount Benefit Scheme formed part of that process and was a good programme. In his view, sectional title contradicted this to a degree. The tenants paid rents to the municipality, who was the agent, yet the managing agent instituted legal proceeding against the tenant while the tenant was not in possession of the title deed. He needed an explanation.

The Chairperson suggested that Mr Bhoola should provide the legal department of the NDHS with all the relevant information so they could follow up on his questions.

The Chairperson thought that the NDHS was failing to address the issue. It was still creating agencies, who caused more problems. The NDHS had never produced a report on the challenges of poor people whose properties were being sold.

Prof Paddock commented on the cost of the CSOS. He noted that there was a fundamental distinction between voluntary membership of a ratepayers’ association and a sectional title situation. A person who owned or rented a sectional title property was obliged to submit to the rules of the body corporate, because of the sharing of land and buildings. There was a multifaceted funding model. Sectional title schemes, and therefore managing agencies, were only forty years old in South Africa. In the past, the person who collected the levies was declared to be an estate agent, so that consumers could be protected by the Estate Agents Fidelity Fund. Often, people would buy sectional title properties, but were not fully aware of all the costs involved, and could afford to pay only the bond, and not the levies. Sectional title was designed for people with middle-class incomes. If a sectional title owner failed to pay the levies, the managing agencies were entitled to attach and sell the property to recoup the levies. It was necessary that people must be educated about what sectional title involved, and agents should also not sell sectional title properties to people who would, in the long run, not be able to afford them. The issue of sectional title and how it worked would become common knowledge for South Africans in the future, assisted by these Bills.

Mr Ngwenya reiterated that the Ombud must have regional offices.

The meeting was adjourned.