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Sectional Title Advice: When a special resolution is necessary and how it's carried out

In the management of all sectional title schemes there will come a time when a special resolution will be necessary to fulfil certain management needs.

These instances are listed in depth in the Sectional Title Schemes Management Act (STSMA) and should be noted carefully by all trustees of bodies corporate as any decision requiring a special resolution can only lawfully be carried out if this is done properly, says Michael Bauer, general manager of property management company IHFM.
 
A special resolution is a resolution passed by at least 75% calculated both in number (the number of members present in person or by proxy) and value (the sum of the participation quota) of the members of the body corporate who are present or represented at a general meeting; or agreed to in writing by members of a body corporate holding at least 75% of all the votes calculated both in value and number.

In terms of the STSMA, special resolutions by members are required by the body corporate in the following instances:
 
·         Section 4(b): when essential for the proper fulfilment of its duties, purchase, acquire, take transfer, mortgage, sell, hire or let units;
·         Section 4(e): borrow moneys required by it in the performance of its functions or the exercising of its powers; and
·         Section 4(h): let a portion of the common property to any owner or occupier by means of a lease other than a lease contemplated in section 5(1)(a)”.
 
Special resolutions are also required prior to the body corporate:
 
·         Section 2(7)(e): pursuing any claim against the developer
·         Section 3(1)(i): insuring against other risks in addition to buildings’ insurance (fire cover)
·         Section 5(1)(f): cancelling an exclusive use right
·         Section 5(1)(g): executing a servitude or restrictive agreement burdening the common property
·         Section 5(1)(h): approving the extension of boundaries or floor area of a section
·         Section 10(2)(b): substituting, adding to, amending or repealing conduct rules
·         Section 11(2)(a): changing the value of any owner’s vote or liability to pay levies (i.e. deciding that votes and liability will no longer be determined by PQ)
 
Additional instances where special resolutions are required are listed in the new Prescribed Management Rules:
 
·         MR 8(2): approving reward (payment) for trustees who are members
·         MR 15(4): changing the venue for meetings from the local municipal area where the scheme is situated
·         MR 23(8): insuring any additional insurable interest the body corporate has in the land and buildings of the scheme, and relating to performance of the body corporate’s functions
·         MR 28(1): appointing an executive managing agent
·         MR 28(7): cancelling a managing agent’s agreement on two months’ notice
·         MR 29(2): approving reasonably necessary alterations or improvements, if an owner requests a general meeting to discuss the matter
·         MR 29(4): installing separate prepayment meters on the common property to control supply the supply of water or electricity to a section or exclusive use area.
 
When setting a meeting for passing a special resolution, the body corporate must give 30 days’ notice to all members (unless the rules allow for a shorter notice period) and the notices informing members of the pending meeting must be in writing, delivered either by post or by hand. Emailed notices are acceptable to let members know about pending meetings, but do not replace the need for a physical notice to be given to owners.

While the procedures and requirements for special resolutions might seem onerous, if the trustees are organised in the structure of running their scheme, there should be no problem in holding meetings where special resolutions are to be passed and then implementing them, said Bauer.


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