The recently promulgated Sectional Titles Schemes Management Act [STSMA], provides for sectional title schemes to open, administer and maintain two separate funds, a reserve fund (refer to section 3(1)(b) of the STSMA) and an administrative fund (refer to section 3(1)(a) of the STSMA).
The administrative fund must be, reasonably, sufficient to cover the estimated annual operating costs of the body corporate. This must be aligned with the operational budget approved by the members at an AGM, and cover the costs of the repair, maintenance, management and administration of the common property and payment of, inter alia, utilities, salaries, services and the insurance premium.
The reserve fund, on the other hand, must, in summary, be used for the implementation of the maintenance, repair and replacement plan [MRRP] of the body corporate.
The MRRP too is approved by the members at an AGM, and forecasts the maintenance, repair and replacement of common property buildings, plant and equipment over a 10-year period. Trustees would be well advised to seek the assistance of professionals when creating this plan at the outset, so as to, reasonably, pre-empt works requiring attention over this period and cost accordingly.
The MRRP, as well as its associated fund, is new to sectional title, and this year sees a change in the typical AGM agenda and order of business, to allow for the consideration and approval of this new plan and associated budgets. Thereafter, same must be maintained and tracked on an annual basis.
At Intersect we have created separate ledgers in the management accounts of each of the body corporates we administer, as well as separate investment accounts at financial institutions, to administer, maintain and track these funds for our clients.
At the same time the STSMA, as well as the Community Schemes Ombud Services Act (promulgated in October 2016), provides for each body corporate to hold sufficient fidelity insurance to cover the amounts held in these funds from time to time. This too Intersect has put in place for each of its clients.
Intersect Sectional Title Services is the communal schemes management specialist of the Spire Property Group, a national property management company providing comprehensive property services to residential, retail, commercial and industrial property owners.
Intersect operates out of Rondebosch in Cape Town and may contacted on 021 659 5965 or by visiting www.intersect.co.za.