Sectional Titles Scheme Management Bill [B20-2010]: deliberations

Meeting report

The Chairperson apologised about the delay to the delegation from the Department of Human Settlements (DHS). Members had needed to caucus on the Sectional Titles Scheme Management Bill and the Community Schemes Ombud Service Bill. Members took their work seriously. The Sectional Titles Scheme Management Bill was a crucial Bill. There was a large market not being taken care of. The majority of people were joining the sectional title market. The Committee would finalise the Bill in the following term. Members were prepared to work after hours to complete their work. Substantial changes were needed to the Bill.

Ms M Borman (ANC) said that Members were passionate about their work. They were concerned about the two Bills. Currently 51% of South Africans were living in the types of accommodation contemplated in the Bills. The Committee did not want to have too much bureaucracy around the office of the ombudsman. She asked why the two Bills could not be merged. Two different schemes were proposed. She wanted to understand the rationale for the separation. It was not clear what the Community Schemes Ombud Service Bill was saying. There was no costing nor any indication of at whom it was aimed.

Mr A Steyn (DA) explained the fundamental difference between the two situations. The ombudsman was aimed at a wider market. Each of the Bills had its own management structure. An advisory council was proposed in one and a board council in the other. There was duplication. A merger of the Bills would create one structure and halve the costs. Any extra costs would be added on to owners' levies. He wanted the DHS team to convince the Committee of the need for separate Bills.

Mr R Bhoola (MF) asked about the legal implications. He asked if the Bills spoke to one another. He asked if there were any negative factors that would arise from a merger. The different pieces of legislation dealt with certain sections of the community. He asked if any business or case studies had been done that could influence the Committee to make the right decision.

Mr Khwezi Ngwenya, Director: Framework Legislation: DHS, said there was a need to give a clear indication. The Sectional Titles Scheme Management Bill was about the management of sectional title schemes. It had to be read in conjunction with the Community Schemes Ombud Service Bill. The latter Bill contained a definition of the term “Community Scheme”. The Community Schemes Ombud Service Bill was not just about conflict resolution. It also had application to schemes such as home owners' associations and retirement villages where problems were being encountered. The ombudsman would deal with all schemes and not just sectional title schemes. The Sectional Titles Scheme Management Bill dealt with the functions of the body corporate. Technically it would be very difficult to merge the Bills.

Mr Steyn appreciated the distinction. He knew that the portion of the Community Schemes Ombud Service Bill dealing with the functions of the ombudsman would apply to other schemes. He asked if there were any other reasons for having separate Bills.

Mr Ngwenya replied that the purpose of the advisory council for sectional title schemes was to advise the Minister. The board would deal with registration issues.

The Chairperson said that Mr Steyn had been clear. Sectional title schemes would have an advisory council while the ombudsman had a board. She asked why the Bills could not be merged. All the issues could be accommodated in one Bill. The Committee would still work on this. The cost implications had to be considered. The DHS still had to present a business case.

Mr Ngwenya said that the DHS would make the business case available.

The Chairperson asked for an explanation of the difference between the various schemes.

Mr Graham Paddock, Consultant to DHS, said that the Sectional Titles Scheme Management Bill dealt with the management of schemes that were in the private sector. The purpose of the advisory board was to advise the Minister. The infrastructure already existed. In fact, there had been a structure in place since 1973. Sectional title was becoming increasingly popular. It was the way forward in urban areas.

Mr Paddock said that in terms of a Cabinet decision, all housing would be placed under the control of the DHS. Some home owners' associations were established in terms of common law and some under the Companies Act. Retirement villages were established in various ways. They could be based on life rights schemes, trusts or the Companies Act. Some requirements were listed in the Housing Developments for Retired Persons Act. These were a back-up to the regulations attached to the Sectional Titles and Companies Acts. Share blocks were regulated by the Companies Act. Schemes based on shared usage were regulated by the common law. It was a varied canvas.

Mr Paddock said that the Sectional Titles Scheme Management Bill was so important because it was a single piece of legislation for the guidance of both owners and managers. It was short enough that it was possible to learn the provisions it contained. Some of the clauses were simple while some were a bit more complex. It was a sensible decision to keep this separate. The Community Schemes Ombud Service Bill spoke to all forms of shared access to justice. It was possible to merge the Bills but this would cloud the understanding of the legislation. It would not make sense to him to create any form of infrastructure for a common purpose only in the Sectional Titles Scheme Management Bill.

Ms Borman was seeing the picture more clearly but still needed more clarity on the bureaucracy that would be created.

The Chairperson advised Members that they would not take the issue much further.

Mr Paddock said that there were a number of reasons for having separate Bills. The most important was that legislation was often not so easily understood. The country could not have legislation that only the elite could understand. The Sectional Titles Scheme Management Bill would affect the daily lives of many people and must be accessible. He had taught the subject of sectional title for many years and said that there were some complicated concepts. It was vital to write the legislation in easily understandable language. The different markets would be addressed better by keeping the Bills separate.

Mr Paddock said that the scope was in the business case. It had been well thought out. The intention was to keep the bureaucracy lean and clean. There would be a minimum of staff with some functions, such as education, being outsourced. The Department did not want to see a bloated administration. They had looked at the best cases. A chief ombudsman would be put in place and the legislation would create the structure.

The Chairperson asked if there would be any additional burden to the community.

Mr C van der Merwe, Consultant to DHS, said that the roles of the advisory council and the ombudsman would be quite different. The Sectional Titles Scheme Management Bill would deal with daily management problems. The ombudsman was responsible for dispute resolution. They could not be the part of the same body. Court proceedings were too expensive and lengthy. There was provision for arbitration in the current Act but this was also an expensive option.

The Chairperson asked what was in the budget. Members were concerned that there would be an increased burden on home owners.

Mr Paddock said that it would take time to get the implementation of the new Act off the ground.
For the first year the structures would be funded by the government. After that the bodies would have to be self-funding. On page 11 of the Community Schemes Ombud Service Bill there was clause 22 which outlined a multi-faceted approach to funding. Funding would come from levies and fees for services rendered amongst other things. There was also provision for appropriation. The Deeds Registration Office worked in a similar fashion. The process of taking a matter to the ombudsman would not be free but it would be considerably cheaper than going to court. At present nobody could say what the final cost would be, but the costs involved with action in the High Court precluded the vast majority of the population. It would be a cost effective mechanism for banks, estate agents and management bodies. There were already some cash transactions which could generate revenue such as the sale of special title rules. The office of the ombudsman would have to balance its books but would still be able to waiver or discount its fees in deserving cases. Dispute resolution was not happening at present.

The Chairperson asked the public to leave the room for a few minutes while the Committee discussed the new information at its disposal.

On the resumption of the meeting, she said that the Committee had agreed to accept the separate Bills. However, DHS would have to expect to make major amendments. They could now proceed to deliberate on the Sectional Titles Scheme Management Bill. The Committee still needed the business case. Members needed to prepare themselves. Members needed clarity on the number of regional structures that would be created. She asked how people in more remote areas could access the services of the ombudsman. The Department would need to quantify the expected revenue streams. The value of sectional title transfers each year should be calculated.

Mr Paddock said that this information was held by the Department of Rural Development and Land Reform (DRDLR). It might be easier for the Committee to procure this required information from the DRDLR. The DHS could not supply it.

The Chairperson said that if the DHS needed the information then the DRDLR must supply it. It was not necessary for the Committee to have to act as a go-between. She asked the DHS to start going through the Bill.

Long Title
Mr Ngwenya read the long title.

Ms Borman suggested that the word “control” be changed to “regulate”.

The Chairperson noted the Committee's agreement.

Arrangement of the Act
Mr Ngwenya read the Arrangement of the Act.

Mr Steyn noted that the heading for Section 19 was simply “The Act”. He felt that this should refer to the Sectional Titles Act by its full name.

Ms B Lufundo, Principal State Law Adviser, said that the full title of the Act was in the text of the Bill. It was not necessary to have the full title in this part of the Bill.

Mr Steyn was satisfied.

The Chairperson asked why there was not a standard layout for the Bill with chapters.

Mr Ngwenya did not know why this had not been done.

Ms Lufundo said that the Bill was relatively short, containing only twenty clauses. The Bill creating the office of ombudsman was much longer. There was no need to separate the Sectional Titles Scheme Management Bill into chapters.

Mr K Sithole (IFP) asked if the Bill provided for an advisory council or a board.

The Chairperson said that it was a council. She asked why there was no mention of trustees.

Mr Ngwenya replied that the trustees were addressed in the text of the Bill.

Clause 1 Definitions
“body corporate”.
Mr Steyn said that the body corporate was mentioned in Clause 2(1).

The Chairperson said that the reference to Clause 2(1) was correct.

“Court”
Ms Borman said that the reference to Section 12 should be changed to 12(2) for clarity.

Mr Steyn said that in some clauses there was a reference to the High Court.

Mr Paddock said that administrators were appointed by the High Court. Matters regarding the payment of levies could be heard in the Magistrates Court.

Ms Lufundo said that the definition was therefore wrong.

Ms N Mnisi (ANC) asked why court action would be necessary if the ombudsman was in place.

The Chairperson said that the definition needed to be worked over.

Mr Steyn had other definitions that he felt needed to be included. They should be incorporated alphabetically. In particular he felt that the term “competent authority” mentioned in Clause 3(1) needed to be defined.

“Chief Ombud”.
Ms Lufundo said that the term should not be written in all lower case letters. This would be consistent with the definition in the Community Schemes Ombud Service Bill.

“Department” and “Director General”.
Mr A Figlan (DA) presumed that the references to “Department” in the Bill only referred to the DHS.

Mr T Botha (COPE) asked what the implications would be of another name change to the DHS. The Act would have to be amended.

Mr Ngwenya reminded Mr Botha of the Interpretation Act. This Act covered the name changes to all Departments.

“exclusive use are”, “lease” and “Minister”.
These were all agreed to.

“owner”.
Ms Borman noted the use of the phrase “minor or person of unsound mind”. She asked if these were accepted legal terms.

Mr Joseph Maluleke, Consultant to DHS, said that it would not be proper to define these terms. These were subject to the inherent jurisdiction of the High Court. A judge would make this decision. It would be inappropriate for the legislation to restrict the power of the Court in this regard.

Ms Lufundo agreed that it was not advisable to define these terms in the Bill.

The Chairperson said that the determination of soundness of mind was a long process in the courts.

Mr Maluleke agreed that cases must be referred to court. Judgements would be made based on evidence prevented.

Mr Steyn said there was legislation about committal to a mental asylum. The DHS should perhaps look into that legislation. There might be a definition of unsound mind.

Mr Ngwenya said that sometimes not every word needed to be defined. The dictionary definition was often sufficient.

Mr Sithole was unsure of the meaning of “owned”.

Mr Ngwenya said that the definition of “owned” should be read in the same context as “owner”.

Mr van der Merwe said that the term “of unsound mind” was also used in the Sectional Titles Act. It was not defined there either, nor was the term “insolvent”.

The Chairperson said that Members should engage with the Bill itself.

Mr Botha said that only a court could prove a person to be of unsound mind.

Mr Maluleke said that the definitions must not be read out of context. The term “a representative” implied that some legal procedure had been followed.

Ms Mnisi assumed the same applied to the term “minor”.

Mr Steyn said that the concept of full dependency was recognised by the law.

“prescribed”, “regulation”, “rules”
The definitions were accepted by the meeting.

Mr Steyn said that the Committee had requested that the word “control” in the long title be replaced by “regulate”. The same change would also have to be made in Clause 9(2).

“Sectional Titles Act”
The Chairperson said that this Act had been amended many times. The term “as amended” should be added to the definition.

Mr Steyn said that the most recent amendment had happened the previous month.

Mr Paddock said that the term Sectional Titles Act was understood to include amendments.

Ms Lufundo said that the Act had been correctly cited. Any reference to the Act in another piece of legislation included a reference to all amendments.

Mr Maluleke said that the number of the Act was unchanged even though the text had been amended. The fact that it had been amended made no difference to the reference.

The Chairperson still felt that words “as amended” should be added.

“special resolution”
Ms A Mashishi asked what was meant by reckoning votes by number and by value.

Ms Borman noted that written notice was needed to call a meeting to table a special resolution. She asked if written notice included letters sent by facsimile or e-mail, or if even a short message system (SMS) sent via cellular telephone would be included in the concept.

Mr Steyn asked why there was a reference to three quarters in one sub-clause and 75% in the other.

Mr Paddock agreed with Mr Steyn. Using two different forms of number made no sense. The more modern way was to use percentages and not fractions. The delivery of a notice was done in accordance with management rules, which differed from complex to complex. To qualify to vote, a person must own at least one section of a complex. The term “value in number” referred to the number of sections owned by one person. The term “reckoned by value” was in accordance to the percentage of the complex owned by a person in accordance with the participation scheduled. Votes were thus weighted in proportion to ownership.

“this Act”
Mr Steyn asked if this included a reference to the accompanying regulations.

Mr Paddock explained that this term had a particular legal meaning. It included a reference to both the Act and its regulations.

“unanimous resolution”
Mr J Matshoba (ANC) queried the provision that an abstention would be reckoned as a vote in favour of a unanimous resolution.

Ms Borman felt that a proxy should also be defined. The reference to a local authority should be changed to a municipality.

Mr Steyn said that the question of written notice had still not been addressed.

Ms Mnisi asked if e-mail delivery was included.

Mr Bhoola said that the correct delivery of notice of a meeting had legal implications.

The Chairperson summarised the issues that had been raised. Agreement was still needed on some issues. A decision was needed on the concept of abstention.

Mr Paddock said that a unanimous decision was not exactly what it appeared to be. If the decision was taken outside of a meeting then a 100% vote was required. In this case written agreement would be sought from all owners. If the resolution was tabled at a meeting then a quorum of 80% was required. If a dissenting owner attended, he or she would have to vote against the motion in order to defeat it.

The Chairperson asked why an abstention should be reckoned as a positive rather than a negative vote.

Mr Paddock said that the wording could be changed to something like a “resolution without dissent”. This could be done.

Ms D Dlakude (ANC) said that people had a constitutional right to abstain from a vote. There was freedom of choice in the country.

Mr Bhoola said that if an owner disagreed with a resolution then that owner should attend the meeting and vote against it.

The Chairperson said that it was a question of practicality on the ground.

Mr Botha said that a unanimous vote then meant that there was no opposing vote. It might be that only 80% of owners were present.

The Chairperson felt it would be better to delete this clause.

Ms Borman said that this particular issue should be flagged and revisited. The DHS had heard what the concerns of Members were.

Mr Maluleke said that the Department would have to confer with the DRDLR.

The Chairperson said that management issues were addressed in this new Bill. The Committee would run through it again in deliberations.

Clauses 1(2), 1(3) and 1(4)
Mr Sithole asked what was meant by “so represented”.

Mr Paddock said that the word “so” played a useful purpose. It referred back to the way in which that owner was represented.

The Chairperson said that some definition was needed of common property and trustee.

Clauses 1(5)
Ms Dlakude noted that the Bill referred to marriage in community of property. She asked how customary marriages were accommodated.

Ms Mnisi added civil unions to the point made by Ms Dlakude.

Mr Paddock said that the question of community of property had a particular effect on the joint matrimonial estate.

Mr Maluleke added that Members must not confuse the various types of marriage. Whether it was a conventional or customary marriage it would still be defined as being in or out of community of property.

The Chairperson said that they needed to have a way to define this. People could take advantage of this. The DHS needed to go and work it out.

Ms Maluleke said that property ownership was captured by the Deeds Registries Act. This Act already recognised customary marriages and civil unions. The problem was out of the hands of the DHS. The information was held at the Deeds Office. There was a process in hand to make a challenge.

Mr Matshoba said that there should be changes to that Act.

The Chairperson disagreed. It could be left as it stood. The issue of the status of a marriage could be clarified in the regulations.

Clauses 1(6)
The Chairperson asked why a body corporate would want to rush to court so early.

Mr Steyn asked if the content of Sub-Clause 1(6) was really a definition. The provisions of this sub-clause should be moved to the Clause dealing with the functions of a body corporate.

Mr Paddock agreed that this could go elsewhere. The sub-clause was intended to qualify a definition. The drafters thought it would be a good place to hang it. Experience showed that it was absolutely impossible to achieve a unanimous decision. This was particularly so when a particular owner would face sanction. The sub-clause was in the original Act. A back door mechanism to take action was a necessity.

The Chairperson repeated her point that a body corporate could not just rush off to court. The ombud should be involved in such actions.

Ms Lufundo said that this measure was a relief to achieve a resolution. She noted the comments made by the Chairperson.

The Chairperson was not happy with the paragraph referring to the body corporate.

Mr Steyn said that there were references to many sections. Members should ensure that the cross-references were correct following the amendments to the Act.

The Chairperson felt the need for a definition of a developer. A remarkable contribution had been made. The Committee and the Department were acting as a team.

The meeting was adjourned.