Sectional Titles Schemes Management Bill [B 20-2010]: Deliberations

Human Settlements, Water and Sanitation

18 October 2010
Chairperson: Ms B Dambuza
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Meeting Summary

The Committee discussed the proposed amendments to the Sectional Titles Schemes Management Bill.
In clause 1 the definitions of “special resolution” and “unanimous resolution” were completely changed so as to simplify and clarify their meanings. The definition of “local authority” was omitted and substituted by “local municipality”. This was done in order to avoid confusion as to which type of local authority was referred to, since there were many different types of local government.

In clause 3, a new subsection (b) was inserted. This provision compelled bodies corporate to maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property but not less than such amounts as may be prescribed by the Minister.

Clause 6 was a new insertion, which specified how bodies corporate should hold their meetings. In clause 13, subsection (2) was omitted and substituted by a new provision which reads as follows: “where damage to a section is covered by valid insurance policies taken out by the body corporate and the owner, the body corporate’s insurer must make good the damage and only if it fails to do so is the owner’s insurer liable to do so”. This provision provoked a lot of discussion with Members arguing that an owner should be allowed to claim from a second insurance company if they had premiums. It was agreed that further legal advice and further discussions were needed on this matter. It was noted that the Bill would only be adopted after the Community Schemes Ombud Services Bill had been considered.


Meeting report

The Chairperson announced that the Sectional Titles Scheme Management Bill would not be finalised at this meeting and would only be adopted after the Community Schemes Ombud Services Bill had been considered. Both Bills were linked and therefore needed to be considered together.

Proposed Amendments to Sectional Titles Scheme Management Bill
Ms Bongiwe Lufundo, Senior State Law Advisor, Office of the Chief State Law Advisor, read out the proposed amendments clause by clause. (See document for full list of all amendments)

Clause 1: definitions
The definitions of “special resolution” and “unanimous resolution” were completely changed so as to simplify and clarify their meanings. Since these definitions concerned issues of voting, the Committee had previously agreed that they needed to be more simplified in order to avoid confusion.

The definition of “local authority” was omitted and substituted by “local municipality”. This was done in order to avoid confusion as to which type of local authority was referred to, since there were many different types of local government e.g. metropolitan cities, district and local municipalities. The revised definition described
local municipality as defined in section 1 of the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000).

Clause 3: Functions of body corporates
Clause 3(1)(a) was amended to read as follows “to establish an administrative fund which is reasonably sufficient to cover the estimated annual operating costs”.

The Chairperson emphasised the importance of having the correct wording to ensure that consumers were protected.

A new subsection (b) was inserted. This provision compelled bodies corporate to maintain a reserve fund in such amounts as are reasonably sufficient to cover the cost of future maintenance and repair of common property but not less than such amounts as may be prescribed by the Minister.

Clause 6
After Clause 5, a new clause was inserted. The new provision outlined how bodies corporate should hold their meetings (issues pertaining to when meetings should take place, who should participate and how voting works were all covered in 8 subsections).

Clause 13
Subsection (2) was omitted and substituted by a new provision which reads as follows: “where damage to a section is covered by valid insurance policies taken out by the body corporate and the owner, the body corporate’s insurer must make good the damage and only if it fails to do so is the owner’s insurer liable to do so”.

The Chairperson voiced concern and said that the new subsection should to be reworded.

Mr M Mdakane (ANC) said that if the owner contributed to both insurers with his premium, then it should be the right of the owner to pursue either insurer. It was not fraud for an owner to claim from their second insurance company. Why should owners be denied the right to claim from their insurer if they had been paying premiums?

Mr T Botha (COPE) agreed and added that he assumed the bodies corporate insured some parts and the owners insured the rest.

Professor Graham Paddock, Paddock Consultants, explained that the body corporate usually insured the whole building. If an owner felt like their property was covered for less than the value of their possessions, they were welcome to approach the body corporate for more cover and pay extra premiums. The provision in question was for other insurances; for example if an owner was worried about things that the body corporate did not cover (other risks), then another insurance company could be approached. The provision was established to avoid fraud and must thus be simplified. Insuring with another insurer should not be for more money but for different risks. The owner cannot profit from taking out duplicate insurance.

Mr Botha related an example where many relatives took out burial policies when they saw a person was sick and about to die. After the death they all could claim from their policies, only 1 or 2 actually paif for the actual burial and the rest would profit from it.

Mr Paddocks replied that if one believed that nobody was hurt from that then it was acceptable to do it but if it harmed people then it ought to be stopped.

Ms Lufundo asked why owners needed 2 insurers to cover the same risks.

The Chairperson said that the clause needed to be rephrased.

Mr Mdakane asked the Committee to separate what was moral from what was legal; the second insurer would act just as a top up. He agreed the subsection needed to be reworked in order to articulate the true meaning and avoid confusion and legal help was needed.

The Chairperson added that bodies corporate should have their own rules, which included insurance issues.

Clause 15
The clause was rejected and replaced by a new redrafted clause with 5 subsections.

Mr Mdakane commented that many people did not have access to courts. The tribunal/ombudsman must be accessible and address this.

The Chairperson thanked the legal experts for their assistance and reiterated that the Bill would only be adopted after the Community Schemes Ombud Services Bill had been considered. Discussions on the latter Bill would take place the following week.

The meeting was adjourned.



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