The two new Acts affecting communal schemes, such as sectional title, share-block and owners’ associations, were enforced on 7th October 2016. These are The Sectional Titles Schemes Management Act, no. 8 of 2011 (STSMA), and The Community Schemes Ombud Service Act, no. 9 of 2011 (CSOSA).
Many trustees and managing agents alike are still getting to grips with the recent changes brought about by the new acts, but a few immediate and fundamental duties have been placed on trustees in terms thereof, and these were to be implemented within prescribed time-frames.
It is important to note that not all provisions of both acts affect all communal schemes, as home owners’ & property owners’ associations, for instance, are not subject to the STSMA, however all communal schemes are subject to the CSOSA.
Below I highlight a few pertinent duties that were imposed and what we at Intersect have done to assist our clients with their compliance.
Reserve and Administrative funds:
The STSMA (and its regulations and prescribed management rules), provides for the operation of two separate funds, a maintenance reserve fund and an administrative fund. In terms thereof Intersect has established both funds in its clients’ sets of accounts and opened separate trust investment bank accounts for each.
In brief the maintenance reserve fund must be used for the implementation of the maintenance, repair and replacement plan (MRRP) of the body corporate (basically a plan of foreseen repairs, maintenance and replacement of plant and or equipment, over a 10-year cycle), whereas the administrative reserve is the reserve maintained to reasonably cover the estimated annual operating costs for the balance of repairs and maintenance, payment of services, insurance and administration - the latter has always been a requirement for body corporates.
Intersect obtained, completed and submitted all the requisite forms, rules and governance documentation to register each scheme with the Ombud, by the prescribed date. Fidelity insurance: Over and above the fidelity guarantee, already in place on all Intersect’s clients’ insurance policies, the CSOSA provided for additional fidelity insurance to be taken out by the trustees, thereby ensuring that fidelity cover is in place, equal, at least, to the total cash reserves held by the community scheme at any point in time.
Intersect sourced the most comprehensive policy, with the most favourable terms and conditions, for all its clients and rolled same out to ensure compliance in the unlikely event of a fidelity related claim.
Maintenance, Repair and Replacement Plan:
Intersect assisted its clients by drafting templates for the 10-year MRRP to be presented at the 1st AGM after the 7th of October 2016. On approval by the scheme’s members, the plan would become effective and the subsequent additional levy, if any, applied.
All funds received pursuant of this provision will be directly transferred to the MRRP’s separate trust investment account.
Intersect Sectional Title Services is the communal schemes management specialist of the Spire Property Group, a national property services company providing comprehensive property services to residential, retail, commercial and industrial property owners.
Intersect operates out of Rondebosch in Cape Town and may be contacted on 021 659 5965 or by visiting www.intersect.co.za.