Recent amendments to the Sectional Titles Regulations

Recent amendments to the Sectional Titles Regulations, published in June in the Government Gazette, sees the return of the power of trustees to increase levies before the AGM by up to 10 percent.

Martin Bester, Managing Director of Intersect Sectional Title Services says that this mitigates the cash flow implications of increases that are effected at the beginning of the financial year but only accounted for in the levies after the AGM, usually some four months later.

Newly included management rule 4Aa, states that: After the expiry of a financial year and until they become liable for contributions in respect of the ensuing financial year, owners are liable for contributions in the same amounts and payable in the same instalments as were due and payable by them during the expired financial year:

"Provided that the trustees may, if they consider it necessary and by written notice to the owners, increase the contributions due by the owners by a maximum of 10 per cent excluding capital expenditure to take account of the anticipated increased liabilities of the body corporate.

"Such increase shall be ratified or changed after the Annual General Meeting by the trustees once the body corporate has approved or amended the schedule of income and expenditure."

"Other amendments made to the Sectional Titles Regulations include that the title deed of any real right registered over land is to now be included within the sectional titles register. All documents and correspondence, placed in a sectional title file, must now be endorsed with a deeds registry date endorsement upon filing," explains Bester.

"Management rule 7 (Annexure 8 of the Sectional Titles Act), which deals with the nomination of trustees, has also been amended to restrict any person from being nominated to act as a trustee if they are in arrears with levy contributions or in persistent breach of the rules (rule 64) and even restricts any member from nominating a trustee if that member themselves is in breach of rule 64."

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  • Anna Smith - posted 04 Aug 2015 07:18 AM                                    

    The Trustees may, by written notice, increase the levies payable by a maximum of 10% (excluding capital expenditure) at the end of the financial year but the increase must be ratified or changed by the members at the AGM when approving the income and expenditure for the year.

    Capital expenditure, as opposed to operational or revenue expenditure (expensed in current year), is defined as expenditure used to acquire or improve on a long-term asset that has value beyond the taxable year, such as equipment or building improvements.

  • Mark Bechard - posted 03 Aug 2015 06:33 PM                                    

    "Provided that the trustees may, if they consider it necessary and by written notice to the owners, increase the contributions due by the owners by a maximum of 10 per cent excluding capital expenditure to take account of the anticipated increased liabilities of the body corporate."

    The wording of the amendment is very ambiguous. Does the phrase "excluding capital expenditure" mean that the 10% increase may only for expenses that are not of a capital nature, or that the 10% limit does not apply to expenses of a capital nature?

    Also, the term "capital expenditure" is not defined or referred to anywhere in the Sectional Titles Act.

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