Press Release: RELIEF FOR DISTRESSED SECTIONAL TITLE BODY CORPORATES
Published by Legal Resources Centre 3 July 2019
The Legal Resources Centre (LRC) represented a group of owners of units in the Flamingo Court sectional title scheme. These owners were largely occupants of former municipal owned flats and have been residing in this scheme for over 20 years. They purchased these flats after a decision was made to convert the building to a sectional title scheme and sell the units to then tenants in terms of what was then called the Discount Housing Benefit Scheme – part of the government’s overall commitment to improve access to housing under the RDP.
Unfortunately many of the owners complained they were not sufficiently informed that ownership would be substantially more expensive than their rentals – which some were already battling to pay – and that they could lose their homes as a result. They complained they were not provided with any comprehensive costing on long-term maintenance and repairs of the building that they would be responsible for and no financial assessment was done on the prospective owners’ ability to pay the joint costs of sectional title ownership. In time, the upkeep levy costs for maintenance, installation of individual meters, rusted pipes, electricity wiring, and compliance with the Sectional Titles Schemes Management Act, for the multi-storey building proved too costly for these owners – many of whom survive on social assistance.
This scheme has been in distress for over a decade and the High Court appointed an administrator in 2010 to take charge and resolve the issues confronting it within 12 months. Over the years the administrator applied for extensions of his term. On 15 February 2018 the administrator applied for an extension of his term for another five years.
That application was opposed by the group of owners, represented by the LRC. They complained that the Administrator, since his appointment, had not benefitted the body corporate as he had not complied with his obligations in terms of the Sectional Titles Schemes Management Act.
In order to break the deadlock between the administrator and this group, the Court arranged for an amicus curia to be appointed and to conduct an investigation of the affairs of the body corporate and the manner in which the administrator had performed his duties over the past 9 or so years.
The amicus also opposed the extension of the administrator’s term. He found that the administrator had not convened AGMs or kept proper books of account. Outstanding levies had increased and administration fees had increased over the years. It was also found that almost half a million rand had been spent on legal fees but no action had been taken against those not paying their levies.
The Durban Regional Court, in a well-reasoned judgement noted that the case must speak to the promotion of the spirit of the Constitution and the Sectional Titles Schemes Management Act. The Court supported the opposition by the LRC and reinforced the fact that administrators are appointed to safeguard the rights of the body corporates and must therefore work toward placing the body corporate in a functional state.
The Court dismissed the administrator’s request to be appointed for another term of five years with costs. The owners were ordered to inter alia convene a meeting to constitute an interim committee that will then arrange for a general meeting to be called at which the trustees will be elected.
The LRC hopes the judgment may encourage the owners of distressed body corporates to work very closely with court appointed administrators to ensure that the cause of the distress is cured over the shortest period of time. The reason is that administrators charge fees that can be ill-afforded by these body corporates. Once the causes of distressed body corporates are removed the administrator can be discharged from his/her duties and allowing the trustees to resume the administration of their body corporate.
Attorney on Record: Trevinen Maistry