Essential for sectional title schemes

Essential for sectional title schemes to follow the prescribed management rules any attempt to ignore these is in fact a breach of the law, says IHFM gm

Many of the arguments and contentious issues encountered on sectional title schemes relate to the cost and/or the need for maintenance and improvements, says Michael Bauer, General Manager of IHFM, a professional sectional title management company which manages over 800 sectional title units.

Body corporate members, said Bauer, will find that, although there is no clear definition in the Sectional Title Act as to what are luxurious improvements and what are non-luxurious improvements but the Sectional Title Act stipulates that different procedures have to be followed before trustees can go ahead with either category of improvements on a legally sound basis.

The Prescribed Management Rules 33 (1) for luxurious improvements lay down that a unanimous decision from the body corporate members has to be obtained.  This can be achieved by getting written consent from all body corporate members (owners) or by calling a special general meeting.  If the latter course is followed, 30 days notice has to be given to all body corporate members.

When such a meeting does take place, the Act stipulates that a quorum of at least 80% of the members must be present in person or by a proxy and, again, all body corporate members present in person or by proxy have to vote in favour to obtain the required unanimous resolution for  the improvements proposed.

If this unanimous resolution is not achieved, said Bauer, the trustees can either drop the proposal - or they can seek a relief High Court ruling because, in their view, the improvement is absolutely essential.

In the case of non-luxurious improvements, said Bauer, the approval process is similar.  The trustees have to write to all the body corporate members (owners) giving details of the cost, why they consider it necessary, how it will be paid for and how the payment will affect their levies.

The trustees have then by law to wait 30 days before going ahead.  If during that period they receive even one objection from a body corporate member, they are obliged to call a special general meeting, again giving 30 days notice.  If this then results in acceptance (i.e. a special resolution) the trustees may proceed with the improvement.

At all meetings of trustees and/or body corporate members, added Bauer, minutes must be kept and if this is not done those holding the meeting are, in fact, in breach of the law.

Discussing the issue of luxurious and non-luxurious improvements, Bauer said that it is always difficult to define these.

Some owners will argue that a swimming pool is absolutely essential in any good scheme and is not a luxury item.  Others will object to the use of terracotta rather than cheaper tiles, arguing that the former are luxurious.

There is always a danger, added Bauer, that the trustees of a sectional title scheme will, intentionally or unintentionally, act in ways that break the prescribed management rules of the Act and open themselves up to disputes and conflicts between members of bodies corporate.

When a managing agent or trustees are performing with reasonable efficiency there is a tendency, especially in small schemes, to allow them to take decisions without following the prescribed management rules.  Sometimes, said Bauer, this goes on for years and years before something serious goes wrong - whereupon it transpires that the trustees or the managing agent were acting without following the prescribed procedures and resolutions.

A good managing agent, said Bauer, will always understand, usually better than most trustees and most body corporate members, the need to keep a property in good repair and to upgrade it steadily over the years.

He will, therefore, persuade the trustees to budget for this as generously as possibly, drawing up a five year plan.  In this way he will help them to avoid or reduce the need for the special levies which are always such a contentious issue and which often cause much friction between trustees and body corporate members.

Bauer commented that although body corporate trustees are indemnified by law in most cases, they can be held responsible when they have acted with gross negligence - and this sub-section of the law, he said, covers neglecting to carry out essential repairs and improvements, even though the body corporate members themselves may have been reluctant to pay for these and may have persuaded the trustees not to go ahead with them.

To take just one example, said Bauer, where a lift badly needs replacing or improving, it could be gross negligence to delay doing this

For further information see IHFM website at or contact Michael Bauer on 021 424 7595.


Article by: IHFM