Sectional Titles Schemes Management Bill: Continuation of deliberations

Meeting report

Sectional Titles Schemes Management Bill [B20-2010]
Mr Khwezi Ngwenya, Director: Framework Legislation, National Department of Human Settlements, continued to take Members through Clauses 13 to 20 of the Sectional Titles Schemes Management Bill (the Bill)

Clause 13: Insurance by owners
Mr A Steyn (DA) asked the reason why Clause 13 should prescribe that the owner must take out a second insurance cover for the same building, even though the Body Corporate had already insured that building.

Ms V Bam-Mugwanya (ANC) also felt that the duplication of insurance cover for the same building was not necessary.

Professor Graham Paddock, Paddock Consultants, explained that the owner had a choice whether to take out more insurance if that owner was not happy with the level of cover already taken. He said that, for instance, owners might feel that the cover taken out by the Body Corporate was not to their satisfaction or was not sufficient. The Body Corporate was obliged, at the least, to insure the building against fire. However, the owners should be free whether to opt to take out cover additional to that, which protected them against more risks, although the owners would still be obliged to pay levies based on the Body Corporate cover.

The Chairperson urged the drafters to employ more user-friendly language.

Mr M Mdakane (ANC) concurred with this remark.

The Chairperson asked why the Body Corporate should effectively be “let off the hook” in respect of certain risks.

Mr Steyn asked why the Body Corporate might only cover certain aspects of the property risks, and not others.

Professor Paddock replied that the Body Corporate had an obligation to arrange for insurance cover for the whole building, whereas the owners could cover matters such as air conditioners. The Body Corporate might arrange cover of the whole building, in the amount that might be lost over one months’ rental while the building was being repaired, whereas the owner might wish to insure to the amount of a year’s or six months’ rental while the building was being repaired. An owner of a unit was also a co-owner of the whole building, so he or she bore a double responsibility. The insurance company would, in the case where the owner had arranged own insurance, pay the owner separately for his personal loss of income during repairs to that building.

The Chairperson asked for clarity on the difference between an owner and co-owner.

Professor Paddock explained that the person or entity that had bought a unit in the sectional title building was the sole owner of, for instance, that particular 5-roomed flat. However, that same person was also a co-owner of the communal property (including lifts, stairs and all communal areas) because he owned a section of the whole property. Therefore, ownership of a single section of the communal property was exclusive to the owner, but the ownership of the whole structure of the building was shared among all unit owners.

Mr Mdakane reiterated that the language used in this Bill was intimidating and difficult for ordinary people, such as owners of the units, to understand. The Bill should be written in simple and plain language.

Mr Steyn suggested that Clause 13(2) should be deleted, as the substance of it had been covered earlier.

Ms M Borman (ANC) cautioned Members about deleting some clauses, because of the cross-referencing nature of this and related legislation. She asked the legal drafters to try to rework the Bill to ensure that any deletion would not affect other clauses.

The Chairperson agreed with Ms Borman’s remarks.

Ms Bam-Mugwanya asked who was responsible for informing the owner about the risks that were covered, and when this must happen.

Professor Paddock replied that the insurance policy was one of the items dealt at during the Annual General Meeting of the Body Corporate.

Mr Mdakane suggested that that Clause 13(2) should be re-written so that it followed more logically from the previous clauses.

Professor Paddock explained that he would have to consult with the insurance industry, to look at the precedence as to who was responsible to cover which risk.

Mr Steyn asked for clarity on Clause 13(3). He said that there was no sense in an owner insuring his own section of the property but also contributing to the premiums on other items that were not part of his own section. This would, for instance, be akin to a person insuring his neighbour’s car.

Professor Paddock explained that Mr Steyn was incorrect in assuming that an owner of one part of the sectional title property was not the co-owner of the entire communal building. He said that items such as built-in cupboards and carpets were not considered as the property of the owner of the unit, although the individual was free to insure them against damage. The individual owner was being required to contribute to overall cover because he was a co-owner of the overall building.

Mr Mdakane suggested that perhaps the work “not” should be inserted before the word “cover” in Clause 13(1), which would make Clause 13(2) redundant.

The Chairperson asked Ms Bongiwe Lufuno, State Law Advisor, Office of the Chief State Law Advisor, to consider the possible redrafting of this clause.

Clause 14; Recovery from owners of unsatisfied judgments against bodies corporate, and non liability of bodies corporate for debts and obligations of developers.
Mr Mdakane thought that the last part of the sentence contained in Clause 14(b) should read “Section 10(2)” and not “Section 9(2)”.

The Chairperson asked the State Law Advisors to deal with this comment.

Mr Mdakane suggested that in Clause 14(1)(c) the Body Corporate should be protected from obligation or debt incurred by individual co-owners.

Professor Paddock replied that this provision was aimed at protecting the developer against the Body Corporate, because the ordinary law was not binding on the Body Corporate. He gave an example of automatic gate that might need repairs, saying that the developer would, in terms of this clause, not be held liable for the maintenance of that faulty gate.

Clause 15: Appointment of administrators
Ms Borman suggested that in Clause 15(1), the word “local authority” should be changed to “municipality”.

Mr Steyn suggested the insertion of the word “or” before the phrase “local authority”.

Professor Paddock disagreed with Mr Steyn and said that the word “or” would appear further down in the Bill.

The Chairperson said that the dispute resolution process should start with the Ombudsman, before it went to the courts.

Professor Paddock explained that the Chief Ombudsman and the Court could appoint the administrator, and it was up to the Committee to decide on that point. There was a risk that the administrator could end up controlling the Body Corporate, like a manager. The High Court or the Ombudsman had to appoint and give clear guidelines to the administrator.

The Chairperson asked for clarity on the role of the administrator.

Professor Paddock likened the role of the administrator to that of a liquidator, who would be appointed when a business was in financial trouble, rather than being a managing agent who could be fired at any time. The administration was the equivalent of a judicial adjudicator, in respect of sectional title matters.

Mr Mdakane mentioned that the issue was simple, and that either a Court or the High Court should appoint an administrator.

Clause 16: Destruction or damage to buildings
Mr Steyn asked for clarity on the “fiction” of destruction, pointing out that the building was already destroyed.

Professor Paddock replied that the “fiction” of destruction could also refer to building that was too old to repair and thus had to be demolished, in which case the term “destruction” was used in a fictional sense.

The Chairperson asked the difference between the Body Corporate and the owner.

Professor Paddock explained that the Body Corporate was a legal entity that had rights. All owners were members of the Body Corporate. The Body Corporate could be likened to a corporation in the business world.

Mr Steyn asked the reason why Clause 16(1)(b)  referred to “all interested parties”, when the building had to be rebuilt.

The Chairperson thought that this clause did not make sense at all.

The Committee agreed that the State Law Advisors and the Department should find alternative ways of redrafting Clauses 16(1)(a) to (c).

Mr Mdakane asked for clarity on “the imposition of conditions” in Clause 16 (3)(b)(v).

Professor Paddock explained that this simply added to the powers of the Court.

Ms Borman suggested that in Clause 16(4) the words “who has obtained on” should be deleted, before the word “or”.

Professor Paddock felt that the clause should remain, saying that the meaning would be changed if the words were deleted.

Mr Steyn suggested that in Clause 16(6)(a) the words “or administrator” should be inserted after the phrase “judgment creditor”.

Professor Paddock said that he saw no harm in Mr Steyn’s suggestion.

Members of the Committee, and the Department’s legal drafters, agreed.

Ms Borman enquired about the use of the comma in Clause 16(9).

The Chairperson suggested that the words “Advisory Council” should be listed and explained in the definitions section of the Bill.

Ms Lufuno explained that since there was only one reference to the Advisory Council in the Bill, it was probably unnecessary to include it.

Mr Mdakane argued that there was no harm in including it in the definitions section.

Mr Ngwenya also agreed that it should be included.

Clause 17: Sectional Title Schemes Management Advisory Council   
The Chairperson asked what would be the level of the Department’s representative in the Advisory Council, and who would be providing the secretarial duties.

Professor Paddock replied that the Ombud’s office had full time staff, including a secretary to capture minutes. The Director General would nominate a representative of the Department.

Mr Mdakane felt that the Minister should have a right to appoint a person in the Advisory Council.

The Chairperson concurred with Mr Mdakane.

The Chairperson asked why there was a need for alternates, pointing out that this would amount to double remuneration being paid to the Advisory Council.

Mr Morris Mngomezulu, Chief Director, Department of Human Settlements, explained that the Advisory Council members were only paid when they actually attended meetings, and thus the alternates would only be on stand-by, and would attend and be paid only in cases where the full members were, perhaps through sickness, unable to attend.

Mr Mdakane suggested the use of a quorum system rather than having permanent alternates.

Ms Borman also thought that this would be useful.

Members agreed that the system of alternates should be changed to one where a quorum was required.

Ms Bam Mugwanya enquired about the term of office of the Advisory Council members.

Professor Paddock replied that the Advisory Council term of office was five years.

Mr Mdakane suggested that in Clause 17(5), the words “all inclusive” should be used, rather than making specific reference to males, females or geographical groups, which would also mean that any other grouping, such as those with disabilities, or gay groupings, would be included.

The Chairperson asked the reason why the Deputy Ombudsman was named as the Deputy Chairperson of the Advisory Council.

Mr Ngwenya replied that the Deputy Chairperson of the Advisory Council did not have to be the Deputy Ombudsman, and that the position of a Deputy Ombudsman had not yet been created.

Mr Steyn suggested, in respect of Clause 17(4), that Members of the Advisory Council should rather elect an acting Chairperson when the Ombudsman was not available.

The Committee and the Department agreed with this suggestion.

Ms M Mnisi (ANC) asked why, in respect of Clause 17(11)(b), the Chairperson should have to decide the time and venue of the Advisory Council meeting.

Professor Paddock replied that the Chairperson of the Advisory Council would need to inform other members of the Council about the time and date of the meeting.

Mr Mdakane suggested that the Minister should not direct the Chief Ombud to convene a meeting.

Mr Mngomezulu then suggested that the clause could be rephrased to say that “the Minister may refer any urgent matter to the Advisory Council” rather than making reference to “instruct”.

The Chairperson asked whether the Advisory Council had any fiduciary obligation, and had to disclose its interests.

Mr Mngomezulu replied that the Advisory Council was not an entity, therefore it did not need to have fiduciary powers.

Clause 18: Regulations
The Chairperson suggested that the Advisory Council should be accountable to Parliament. She urged Ms Lufuno to include the role of Parliament in the next draft. She reminded the drafters that Parliament had to exercise oversight over the Executive.

Clauses 19 and 20, and Schedule
Ms Lufuno informed the Committee that there was still a need to consider the Schedule.

Mr Mdakane said that the discussions on the substantive parts of the Bill were finished, and that the consequential issues would probably only take about 20 minutes to discuss.

Mr Steyn differed with this view, and said that Members would need to have copies of the amended legislation in front of them, when they were considering the Schedule.

The Chairperson noted that further discussions would take place in the following week.

The meeting was adjourned.