Proposed Legislative Amendment to Sectional Titles Act

Mr Slot Hauber Deed Office

Mr Matthee (NNP) explained that the committee would be considering a Sectional Titles legislative proposal by Dr Conroy. Further consultations would take place later on in the year.

Mr Matthee (NNP) stated that he was pleased to have Mr Mkhalipe and Reverend Malachi present at the meeting. In terms of the committee rules, it would be necessary to engage with these members of Parliament. He said Dr Conroy was assisted by an expert in the field, Mr T Marse, an attorney on Sectional Titles matters in South Africa. Mr G Paddock, a lawyer, was also present at the meeting.

Dr Conroy stated the concept of sectional titles was not generally understood. Although he had prepared to introduce the concept to the committee, he would not be able to do so because of time constraints.
Dr Conroy stated that an amendment to the Sectional Titles Act 95 of 1896 would be imperative. He explained that experience had shown that the standard of management would impact on the success of sectional title schemes. He listed the results of inadequate management:
No provision for future expenses in respect of maintenance.
Insufficient attention to maintenance.
An escalating problem of unpaid levies.
Inability of the body corporate to meet its financial commitments.
A deterioration in the standard of management due to lack of funds.
Absence of enforcement of the rules.
A decline in the market value of units.

Mr Du Toit called for a point of order. He pointed out the fact that Dr Conroy was simply reading his memorandum word-for-word, and suggested that a summary would be more appropriate due to the time constraints faced by the committee.

Mr Matthee (NNP) acknowledged the point made, and asked Dr Conroy to be as brief as possible.

Dr Conroy explained that he had not come prepared for a short meeting, and as a result had not prepared a summary. He stated that he would deal comprehensively with the introductory matter, and then would briefly deal with the consumer aspects of sectional titles.

Dr Conroy referred to the growing public perception that sectional title ownership was bad, and referred to certain aspects that would have to be changed:
Protection of owners against defective building standards.
Protection of owners against inadequate management.
Provision of a cheap, fast and effective dispute resolution mechanism.
Consumer education.
He stated that it would be essential to attempt to develop a uniquely South African sectional title model.

Dr Conroy moved on to deal with Consumer aspects, and explained that the proposal related primarily to schemes that had previously been subsidised and to the limited public management therein. He stated that an important issue in this regard was the fact that the budgeting of insufficient funds in an effort to keep the levies low, only had adverse effects. In addition, local government appeared to be in the best position to render assistance, and that this factor would have to be looked at. He said that the removal of local authorities from the approval procedure had been a mistake and that the situation would have to be revised.

Dr Conroy dealt with customary law and traditions, and explained that the concept of immovable property was a new one in cultures and customs of our previously disadvantaged citizens. As a result, these citizens were currently adapting to the culture of individual ownership. Exposing these citizens to sectional title ownership without supporting structures, and expecting them to adapt, would therefore often lead to loss, disappointment and disillusionment, thereby undermining any efforts to promote individual home ownership.

Dr Conroy added that he also wanted to see the introduction of an adjustment to the basis upon which participation quotas would be determined.

Dr Conroy referred to the special rules for small schemes and stated that it happened more and more that suburban owners would divide their homes into sections in order to avoid the difficulties associated with normal subdivision. In addition, it appeared that the local government authorities actually encouraged the practice.

Dr Conroy stated that as far as special rules for mixed schemes were concerned, intense friction would be experienced between the owners of commercial sections and those of residential sections in mixed schemes. These disputes would arise due to divergent interests in the usage of the building, and these disputes could therefore only be resolved through amendments to the rules.

Dr Conroy said that an effective mechanism to resolve disputes would be very important. The 1997 amendments to the Act introduced arbitration as the primary mechanism for the resolution of disputes in the sectional title arena. This was done because it was correctly perceived that the sectional title community had an urgent need for an effective dispute resolution system. He explained that there were many reasons, in this regard, why arbitration would not be an appropriate remedy, and pointed out three of them:
It is often more expensive than litigation.
Legal representatives are often utilised, thereby disadvantaging parties that can not afford them.
Few qualified arbitrators for sectional title problems exist.

Dr Conroy explained that the Act made reasonable provision for future compulsory expenses. He stated that this duty was often ignored, thereby making it understandable that the provision would not be regarded as a current priority.

Dr Conroy said that he also wanted to see that provision was made for the removal of certain transgressors. This is because they would make life difficult for the other owners. He noted that the committee had the option of considering the extreme measures taken in Spain and Germany.

Dr Conroy referred to the item on the facilitation of execution sales to enforce levy payments, and stated that the Act and the model Management Rules contained certain powerful mechanisms to enable bodies corporate to collect arrear levies. He said that this was correct because the 'snowballing' effect of non-payment of levies had to be avoided at all costs. He added that the situation had to be addressed by providing that where an execution creditor is a sectional title body corporate, the mortgagee would be compelled to elect either to pay the arrear levies or to allow the sale to proceed.

Dr Conroy stated that there were technical aspects that would have to be attended to. However, he ended his presentation on that point. He concluded that the matters highlighted in the memorandum could not be regarded as conclusive. In addition, the suggested substantive improvements to the Act would have to be thoroughly considered. He respectfully suggested that the committee adopt an approach that would also deal with the consumer aspects of the legislation. He ended by saying that only then would the sectional title format in South Africa fulfils its potential in the process of urbanisation.

Discussion
Mr Matthee (NNP) stated that Dr Conroy had given a good overview of the proposal. He mentioned that the Chief Whip and the Programme Whip were also present at the meeting, and he thanked them for their ongoing support. Before opening the floor for questions, he pointed out that this was merely the first step in the process. As a result thereof, the committee would not be taking a decision on the matter.

Mr Du Toit asked to what extent a consideration of S 54 Sectional Titles Regulation Board would affect the process.

Mr Surty stated that what clearly emanated from the document was that it was a memorandum. He felt that it would have been more appropriate to have first dealt with the legislation. He further imagined that it would have been appropriate to engage with the Department itself. While he saw merit in the proposal, his view was that the document was a memorandum, and therefore it was open for further deliberations. He proposed that he should meet with Mr Matthee and Mr Du Toit in order to consider the most appropriate course to follow. He emphasised the fact that it would be inappropriate to deal with a lump document requiring further consultation at this stage.

Dr Conroy stated that it appeared that he had unwittingly stepped on some toes. He explained that he had merely used the process in terms of the rules, and that he did not see this as the final document. He stated that he had religiously stuck to the procedures, and as a result could only say that he had unintentionally caused controversy by not consulting the Department. He added that it was clear that they could not limit themselves to the Department of Labour. He stated that the Act was almost perfect as far as technicalities would be concerned. However, it was lacking as far as social aspects.

Mr Surty called for a point of order. He explained that he was not suggesting that the proposal was not worthy of consideration. He was merely stating that there had to have been engagements with the relevant Departments. He stated that he would have to be satisfied that the members directly affected by the process had been made formally aware. He questioned whether the select committee had been consulted in terms of its responsibilities, and stated that the committee would have to look seriously at proposals. Thus he called for Dr Conroy to respond to the process issue.

Mr Du Toit stated that the Act had provided for a Board with the legislative task of reviewing legislation and receiving public opinion. He said that considering the proposal at this stage was actually wasting Parliament's time. He repeated that to continue the process at this stage without further consultation would be inappropriate because it would be necessary to engage with the experts and to obtain their opinions. He noted that he was glad that the presentation had brought a significant matter to bear.

Mr Van Niekerk said that as a matter of process it would be necessary to look at the rules. He stated that the purpose of the committee was not to deliberate on the issue. In his opinion they were pre-empting the issue.

Mr Matthee (NNP) stated that some of the comments made by Mr Du Toit were strange to him. He explained that three relevant committees had been invited to the meeting. The correct procedures in terms of the rules were followed. Parliament had referred the matter to the committee. He agreed that there was a Board, but stated that they could not remove the Constitutional right of every Member of Parliament to bring forth a proposal. He agreed that the correct procedures would have to be followed, but stated that this was the first step in the process. He added that is was a good thing that the matter had been brought to their attention. Nevertheless, the process would now have to be followed. He stated that in the end, the mechanism to bring a proposal to Parliament was the most important way for any Member to put light on an issue.

Mr Du Toit responded that that is exactly what he was welcoming.

Mr Matthee (NNP) asked Dr Conroy to take the matter further.

Dr Conroy explained that he did not think that it would have been appropriate at that stage to consult the relevant bodies. He stated that he had strictly followed that procedure in terms of the rules. Nevertheless, he said that he had not intended to by-pass anyone.

Mr T Titus stated that he was very clear as to what the process was. He added that it was also clear that a number of other stakeholders would also have to become part of the process. He wanted to know how Parliament and the Executive could work together in unison.

Mr Matthee (NNP) responded that it was for this very reason that the different departments had been invited to the meeting.

Mr Titus said that he did not know whether private members were allowed to make proposals that would impose duties on another sector without consulting the relevant bodies. He referred to S 9 Municipal Systems Act 2000, and noted that it did not impose the duty to consult on any private members. Thus he asked whether a private member was able to impose responsibilities on a sphere of government without following other processes. He emphasised that they all shared the goal of introducing legislation that could be implemented. He stated that they all agreed that the sectional titles legislation would have to be reformed. The question only was therefore how to proceed, and what consultative policies to follow?

Mr Matthee (NNP) stated that he would not be able to answer this question at this stage because it dealt with the Constitutional rights of Private Member Bills. He said that Parliament would make the final decision as to whether the proposal could, even in merit, proceed. Should this occur, Parliament would then pay to have the Bill drafted, and from that point deliberations would occur in accordance with the normal processes. He added that as far as financial implications would be concerned, the committee would consult relevant committees, and the process would then continue.

Mr Matthee (NNP) asked Dr Conroy to give an indication of the financial implications of the proposal.

Dr Conroy stated that there would indeed be financial implications as far as drafting the bill. Nevertheless, this was not the question posed, and he replied that he would not be able to give an indication of the financial implications at this stage.

Mr Du Toit stated that prima facie, there were huge financial implications. He submitted that Dr Conroy would not be able to move a step without spelling out the financial implications.

A member stated that the various infrastructural constraints were unforeseen at this stage. She agreed that there would be financial implications, but she suggested that consultations occur at all levels (such as NGOs, Communities, Local Government etc). She felt that the various stakeholders had not been sufficiently consulted, and suggested that these matters be brought to the fore.

Mr Surty stated that the private member rights were Constitutional rights. However, in terms of their rules, cost implications would be very important. He cautioned the committee not to fool itself that the amendments would occur in a vacuum. In addition, he reiterated that the document was tantamount to a memorandum. Thus it was not a sufficient attempt to bring a legislative proposal before Parliament. Before putting a substantive proposal before the committee, he stated that it would be necessary to embark on consultative proposals. It would be necessary to consider relevant political matters. He reaffirmed the fact that there was merit in the proposal. However, he stated that it would be necessary to confer on the process. This called for the committee to make an informed decision regarding the appropriate process.

Mr Matthee (NNP) replied that consultative processes were definitely the most important issues at the end of the day. He called for the committee to take the proposal very seriously because it would be necessary to have a combined and inclusive approach following consultations with the relevant departments. He noted that if Mr Surty were to frame a proposal, he would suggest its immediate adoption.

Mr Matthee (NNP) stated that Dr Conroy could respond to the questions if he was in a position to do so. He added that Dr Conroy had the option of first engaging in the consultative process before responding.

Dr Conroy stated that he felt that it would be necessary to give serious thought to the re-writing of the rules.

Mr Surty said that he felt that Mr Matthee (NNP) should not have raised that element of consultation because it was a Constitutional right. He stated that it would be necessary to ensure oversight in a multi-party democracy.

Dr P J Bouwer made two points in an attempt to assist the committee:
If processes were to be followed in terms of the rules, and if the intention would be to extend responsibilities to local government, publication would therefore be necessary. This would inevitably have cost implications.
The proposed memo did not indicate who would be responsible for the ombudsmen. This was a real policy decision that would have to be taken into account in order to deal with the cost issue.

Dr Conroy stated that he obviously did not have the knowledge. He suggested that it would be necessary to have a system to assist private members in the future. All he could add was that in 2001 it had cost R40 000 in legal expenses in an attempt to settle a matter between a body corporate and financing agencies.

Mr Matthee (NNP) noted that on 24 April 2002, there would be a workshop by the committee in the National Assembly. He stated that they were all invited, and he suggested that representatives of the committee also attend the workshop. He added that within a month, the committee itself would be holding a workshop.

Mr Matthee (NNP) asked the committee to afford Mr Paddock the opportunity to speak as the meeting was reaching its closure.

The committee agreed to let Mr Paddock speak.

Mr Paddock stated that the comments made had emphasised the importance of consultation. He explained that since the Act came into effect in 1973, the situation in South Africa had changed. He said that it would therefore be necessary to deal with all the affected interest groups in the act.

Mr Du Toit called for a point of order. He stated that they were not turning the meeting into a public hearing at this stage.

Adv Peremanov stated that they were Constitutionally obliged to protect the wider majority that they sought to address in the same vein.

Mr Van Niekerk felt that Dr Conroy had made the mistake of giving the committee a memo type of document because it had led to the debate. He suggested that the process continue.

Mr Matthee (NNP) suggested that further consultations occur around the 9 May.

Mr Du Toit stated that the legislative process would have to continue. He stated that it would be undercut by legislation. However, they would not be able to halt the process in order to drive the Executive process by Parliament. Thus he suggested that the committee would only be ready to assess the development of the process by about November 2002. He proposed that Dr Conroy continue with his consultations because the document did not provide a basis on which to workshop it. He went on to plead that the committee afford the Executive the opportunity to complete the proper process that was already underway. This is because the Executive had the competence to effectively complete the process. He ended by saying that whilst Dr Conroy would be conducting his consultations, the committee would create the interaction for Parliament.

Mr Du Toit added that their processes were complicated. He stated that the socio-economic role of legislation was very important. The result was that a public hearing within two months would only lead to bad results.

Mr Titus stated that the members of the committee had spoken. It was therefore clear that the process had to continue. He asked the committee to endorse the proposal and to end the current debate.

Mr Matthee (NNP) stated that he would take the matter further with Mr Surty and the relevant parties, and that they would reach a decision as to the appropriate date. In the meantime, he invited all the members to the conference on 24 April 2002 at the Good Hope Chamber. He stated that he looked forward to hearing from Dr Conroy following further deliberations.

The meeting was adjourned.