Maintenance Repair and Replacement Plan

In October 2016, the Sectional Titles Schemes Management Act was promulgated.

This provided for, inter alia, the implementation of a Maintenance Repair and Replacement Plan (MRRP) and the creation of a Reserve Fund, to fund the projected expenses in the plan.

To do this, the scheme requires a plan which includes, inter alia, the following:

• the major capital items expected to require maintenance, repair, and replacement within the next 10 years;

• the present condition or state of repair of those items;

• the time when those items or components of those items will need to be maintained, repaired, or replaced;

• the estimated cost of the maintenance, repair and replacement of those items or components;

• the expected life of those items or components once maintained, repaired, or replaced; and

• any other information the body corporate considers relevant.

To this end, we advocate the use of a professional company that specialises in the drafting of Building Condition Reports and aligned maintenance plans.

We interviewed several such companies and reviewed the reports issued, pricing models and turn-around times, and settled on one company, which we refer all of our sectional title clients to.

This has worked well, and it assists the trustees in all capital or major maintenance and related budgeting areas.

The MRRP and aligned budget, once drafted, are then circulated to all owners for adoption at the next annual general meeting.

Thereafter, the trustees are in a position to resolve the requisite levies, and undertake the proposed maintenance and or replacement of common property plant, equipment, and facilities.

Although the aforementioned Act was promulgated in 2016, Intersect had applied a similar methodology for years prior, which resultied in minimal impact on most of our clients when the time came to implement the provisions of the Act.

The importance of insurance in Sectional Title and community schemes

One of the most important functions of a body corporate (and property owners association), viz a vie the trustees, is to ensure that the scheme is adequately insured.

So much so, that insurance is specifically referred to in the Sectional Title Schemes Management Act (STSMA), as well as the CSOS regulations and the prescribed management rules, the latter of which determines the extent of the role in more detail.

Sections 3(1) (h) (i) of the STSMA states as follows:

3. (1) A body corporate must perform the functions entrusted to it by or under this Act or the rules, and such functions include—

(h) to insure the building or buildings and keep it or them insured to the replacement value thereof against fire and such other risks as may be prescribed;

(i) to insure against such other risks as the owners may by special resolution determine;

The primary functions of the body corporate are carried out by the trustees, to this end the Act and registered rules prescribe that trustees must, inter alia:

• ensure that the building(s) and equipment be valued, on, at least, a 3-yearly cycle;4

• ensure that the policy be kept up to date;

• ensure that the policy includes cover for specified perils;

• ensure that the policy includes additional items, as may be required from time to time and/or agreed upon at an AGM;

• ensure that the policy includes fidelity insurance, or that a separate policy is in place for same, and;

• ensure that the policy includes public liability and trustee indemnity cover.

Policies are in place for a year at a time and renewed each year. Intersect has always played a crucial role in assisting trustees in this regard, by ensuring that, as best it can, the above is met. Moreover, Intersect assists the trustees, owners, brokers and insurers with regards to common property insurance claims that may arise from time to time.

In order to continue assisting trustees, and to ensure best practice is followed, that all boxes are ticked and that the processes are efficient, we reviewed, in its entirety, the role of insurance, where it pertains to our clients’ schemes. This includes both sectional title and, to a lesser, but equally important, degree, home owners and property owners associations.

Intersect administers many schemes, with a total replacement value in excess of R12bn, spread over several insurers, with several brokers appointed.

When reviewing the insurance role, our goals were as follows:

1. to ensure that all of our clients enjoy the economies of scale that our large portfolio represents;

2. to ensure that every policy not only covers the minimum requirements of the prevailing acts, but also covers perils that we have learned through decades of experience, should be included;

3. to ensure that the processes of both annual renewal, as well as daily claims facilitation, are streamlined and more efficient;

4. to ensure that processes are in place to ensure that our clients’ buildings and equipment are regularly valued.

To this end, we applied some out of the box thinking and approached major property insurers, with a view to achieving the above goals, in the most cost effective and efficient manner.

What we found, specifically with the COVID-19 outbreak and its effect on the global insurance industry, is that even some of the larger insurers have capacity issues and are experiencing re-insurance woes, hitherto not experienced.

After many weeks of negotiations with these insurers, we arrived at the following solution, that will not only achieve the above, but also allow us the additional buying and negotiating power to ensure that our clients’ future needs are looked after.

Our solution is summarized as follows:

1. We appoint a single insurer, to be reviewed on an annual basis;

2. We appoint a single broker, to be reviewed on an annual basis;

3. We adopt a single policy wording, that covers all required and additional perils;

4. We have the rates (which determine the premiums) priced on the gross sums insured, rather than on the individual sums;

5. We review and renew at single, specified, times of the year, i.e. January, for March renewals;

6. We engage with the appointed insurer to ensure cost effective, regular, valuation adjustments;

7. We process all insurance claims through a single broker and streamline the process both in terms of claims facilitation, as well as refunds and payments to and from our trust account;

8. We settle all premiums, on a monthly basis, thereby minimising risk of unpaid premiums and retaining funds in investment for the clients’ benefit, and facilitate this through an additional, separate, trust account, so as to ensure that our clients’ funds are correctly administered and accounted for, reduce related audit time and increase cash flows.

Intersect turns 50!

Intersect Sectional Title Services turns 50 in 2021.

For half a century, Intersect has been providing property management services to sectional title schemes and home owners associations in the Western Cape.

We thank all of our clients for their ongoing support, especially over 2020, which has been a most challenging year for us all.

Here’s to another 50 years of solid property partnerships!

Simplifying sectional title insurance

Intersect has, in collaboration with a leading insurer and insurance intermediary, compiled a comprehensive and tailor-made insurance product for the sectional title schemes it manages.

This product, with industry-leading cover and hugely competitive rates, will ensure that the very important role that trustees are entrusted with, being the insurance of the buildings, fixtures, plant and equipment, will be met with exceptional due diligence and care.

Ensuring that the requisite cover is in place, at the current replacement values, is an incredibly important task, not only to mitigate issues at claims stage, but also to satisfy bondholders and members alike.

Not only has Intersect secured a comprehensive product at exceptional rates, but, in doing so, has also streamlined the renewal, payment and claims processes involved in the insurance of buildings and related covers.

Intersect managed to negotiate cover better than most vanilla, or even specific, building insurance policies and has negotiated rates based on its collective clients’ insurance replacement values, which exceeds R12bn.

Regular, in some instances annual, updated valuations are obtained, to ensure that the replacement values, at any point in time, are adequate, thus mitigating the risk of averages being applied - a requirement of the prevailing acts.

Annual review of the portfolio, including rates, claims and cover, are held every January, with adjustments being made on 1 March each year.

Intersect has been administering community schemes since 1971, and in 2021 will celebrate 50 years of sound property management.

How do body corporates fund maintenance?

In order to fund the maintenance of the buildings and all other parts of the common property, as well as offset all expenses incurred in the day to day running of the scheme, every body corporate is required (S3(1)(a)(b) of the STSMA) to establish and maintain an administrative fund to cover its expenses. Additionally, every body corporate must establish and maintain a reserve fund, and must prepare a 10-year maintenance, repair and replacement plan (MRRP), for this purpose.

The Trustees estimate the body corporate’s expected expenditure from both the administrative and the reserve funds in the form of budgets.

Budgets are considered at each annual general meeting and, once approved by owners, the Trustees resolve the required contributions and the instalments in which they must be paid, as well as the interest rate that will be applied on overdue instalments.

Contributions are then divided amongst owners in accordance with the participation quota (PQ) of each owner’s section.

The PQ, expressed as a percentage to four decimal places (unless the management rules specifically require otherwise, i.e. a notional PQ), is calculated by dividing the floor area of each owner’s section(s) (as reflected on the sectional plan) by the total of all the floor areas of all the sections in the scheme.

The Trustees then instruct Intersect to collect these contributions on their behalf and, at the same time, issue instructions with regards to applying interest on overdue instalments. Should Intersect not be successful in the collection of contributions from an owner, the matter is referred back to the Trustees, pursuant of an instruction to hand the account over to a collection attorney, as Intersect does not act as a debt collector, as defined by the Debt Collector’s Act. All costs incurred in doing so are recovered from the defaulting owner.

POPI Act and community schemes

The Protection of Personal Information Act, No. 4 of 2013 (POPIA) was promulgated on 1 July 2020.

This places an onus on scheme executives, i.e. Trustees, Directors, Employees and Managing Agents, to ensure the protection of the information of the members of the scheme and manage the inflow and outflow of information in a prescribed manner.

The POPIA provides for the appointment of an accountable person, to ensure the above.

Typically, the accountable person will be the Managing Agent (if appointed), as the Managing Agent maintains the schemes’ records, however, Trustees, Directors and employees of the scheme also have access to members information and, naturally, the accountable person cannot control the actions of all these parties.

All relevant POPIA information must be collated and provisions of the POPIA adhered to, within 1 year of the above date.

The types of personal information held by scheme executives includes, inter alia, identity numbers, telephone numbers, physical and postal addresses, and email addresses.

Intersect will not publish or hand out personal information of a member without the member’s permission, unless the Sectional Titles Schemes Management Act or Constitution or Memorandum of Association, whichever is applicable, specifically provides to the contrary, and will strive to ensure that all scheme documents, such as insurance schedules, annual financial statements, minutes etc., keep access to members’ information to a reasonable minimum.

Update on COVID-19 & community schemes

Following the notice of advanced level 3 regulations on 17th June 2020, and the subsequent published amendments, the National Association of Managing Agents (NAMA), of which Intersect is a long standing member, issued the following on its notice board in terms of how these advanced regulations will affect community schemes.

The below summary is taken from the aforementioned notice and not necessarily the opinion of Intersect:

Meetings:

Although meetings are permissible for business purposes, the limitations in numbers and strict adherence to both health protocols and social distancing, make meetings, practically, very difficult.

Meetings, if required, should therefore continue to be held virtually, wherever possible.

Exercising:

People may leave their place of residence for exercise purposes between 06h00 and 18h00, but may not exercise in groups of more than 4 persons.

Visitors and social gatherings:

Social gatherings at ones residence is still prohibited under advanced level 3 regulations.

Visitors should still not be allowed access to the community scheme, for recreational purposes. However, visitors offering care to immediate family members within a community scheme is permitted.

Common property use during lockdown

There has been, and remains to this day, uncertainty around the use of the common property in community schemes during the nationwide lockdown.

To summarize, all community schemes, this includes sectional title schemes and homeowners associations, are subject to, inter alia, the directives issued by the Community Schemes Ombud Service (CSOS), and, in summary, CSOS has directed that all community schemes must adhere to the regulations issued by the South African Government, from time to time.

Therefore, regardless of whether a schemes’ registered rules or constitution or memorandum of incorporation, or even its trustees or directors, states anything to the contrary, all persons using the common property, are subject to the prevailing regulations.

Neither the managing agents nor the trustees and or directors of the scheme may make discretionary decisions that contradict the prevailing regulations, nor may owners, tenants, visitors and or service providers.

COVID-19 - BODY CORPORATE MANAGEMENT UPDATE

Intersect has been in business since 1971 and has overcome the economic hardships and survived several recessions in that time. This latest adversity, being the outbreak of COVID-19, and the devastating effects it has, and continues to have, on our economy, is no different, and we are pleased to report that we are likely to see this one through as well.

In fact, this last month of working from home, and even more remotely assisting our clients, has been quite a positive experience, in that it has highlighted the back-end functions that we provide to our clients, which is really the backbone of the services we provide.

Many of our clients have, as have we, refocused attention on the financial and administrative duties involved in managing community schemes, and this is really where our strength lies.

We are proud to report that our clients were, by and large, unscathed by the lockdown, so far, and this is largely due to the processes and policies we have adopted over the years now bearing fruit.

Sure we are finding the physical property management, specifically repairs and maintenance, challenging, but our Trustees have really stepped up to the plate, and for this we are, as should every owner in every scheme be, truly grateful. In doing so, Trustees (and hopefully owners too) have renewed appreciation for the amount of work that goes into managing property.

At Intersect, this past month allowed for introspection, to getting back to the basics. Our primary role, as property managers in the community schemes arena, is to provide the Trustees with support on financial and administrative fronts. Guiding Trustees to ensure that sound fiscal policies are adopted, reserves are built, levies and contributions collected, and creditors managed, is all part of what we do, and we do this well.

Long before the new Acts kicked in, we advocated long-term budgeting and the building of reserves, which, apart from softening the blow in 2016 when the new provisions were applied, is now bearing fruit.

We have tight fiscal policies in terms of how we deal with our clients funds, requiring, inter alia, Trustees to approve all invoices and requiring creditors to jump through certain hoops in order to get paid, and these are sound principles, that protect both us as company, and our clients alike.

We also spend an inordinate amount of time, guiding our Trustees to ensuring that one of their most fundamental tasks, being insurance, is properly undertaken. We use the strength and size of our book (in excess of R11bn under cover) to ensure that our clients get the best possible cover, for the best possible premium and that all the requirements of the various acts are adequately applied. We can also, based on the size of our book, negotiate best practice service level agreements with affiliates, such as insurance brokers, leading to the expeditious, fair and reasonable satisfaction of claims.

A business’s mettle is tested in times of adversity - we haven’t experienced adversity like this in our company’s lifetime - and we are happy to report that we have come out on top. This is reassurance for our clients - to know that their assets are in good hands and that fiduciary responsibilities are being met.

We take great pride when properties are listed for sale in our portfolio with one of the selling points being “a property within a well-managed scheme, with a strong balance sheet and pleasant living environment”. Ultimately, this is what we are all striving for.

For the next while, and as long as we face lockdown at higher levels, our physical offices will remain closed until further notice or until restrictions are lifted accordingly, however, its business as usual in terms of collections, payments, issuing of management reports and responding to our clients.

We wish all of South Africa all the very best for the duration of the lockdown and subsequent phased-in economic restructuring.

Can trustees reduce levies?

The full effects of the COVID-19 outbreak on the economy is yet to be determined.

Expenses, such as levies, recoveries and contributions (hereinafter referred to as contributions) in community schemes, have come under the spotlight, as requests are being received for cash flow relief, in the form of reduced levies and or levy ‘holidays’.

But can the managing agent or trustees reduce or even reverse contributions.

Well, the answer ito the managing agent is simple - NO, unless the managing agent is appointed in the capacity of an executive managing agent, as the managing agent has no jurisdiction or powers ito determining contributions. The managing agent’s roles is to collect the contributions, as determined by the trustees, following the adopted annual budget.

As for the trustees, its a little more complex. Yes, the trustees do determine the contributions, but they do so based on an annual budget, approved and adopted at a general meeting. Deviating from this should be carefully considered, and changes, if any, communicated to the members, timeously, in terms of either the Constitution, Memorandum & Articles of Association, or Section 5 of the Sectional Titles Schemes Management Act (whichever is applicable).

However, contributions are the lifeblood of the scheme. The trustees would be well advised to carefully review the financial status of the scheme, before making such changes, taking into account reserves, cash flow and upcoming projects or expenses.

Intersect and COVID-19

Following the releases and regulations issued by President Ramaphosa in terms the Coronavirus outbreak, and, in an attempt to protect both our clients and our staff members, Intersect Sectional Title Services has implemented the following measures, with immediate effect:

Office Hours:

Whilst we will continue to maintain our current office hours, we will be operating off site to ensure that essential services are undertaken, whilst, at the same time, limiting the contact between staff and or clients.

Meetings:

Video conferencing meetings may be scheduled, provided all parties to the meeting have access to same, this may be set up with the property manager concerned.

3rd party service providers:

A great deal of our time is spent dealing with 3rd party service providers, such as security, cleaning, hygiene and maintenance companies, and, equally, we will all be at the mercy of whatever measures those companies have put in place to protect their clients and staff, so we ask that all clients be patient and understanding under the circumstances.

Likewise, if your telephone call and or email is not responded to immediately, please be accordingly patient.

Like all companies currently, we regret any inconvenience that this may cause, but in the spirit of containing the spread of the Coronavirus, and in the responsible interests of both our clients and our staff, we believe the above measures to be the least we can do at this uncertain times.

We wish all of our clients all the very best over this trying period and hope that same is short-lived.

Commercial & Retail Sectional Title Buildings ...

There are increasing numbers of commercial and or retail specific sectional title schemes being registered currently.

This is largely due to the fact that sectional title is a great vehicle for creating joint ownership in a building or office park or even mall, allowing landlords and or business owners to either enter the commercial property market and or to purchase property for their own business’ needs.

Intersect Sectional Title Services is well geared to manage such schemes, as Intersect’s methodology is more business focused than, perhaps, is required in a residential scheme, although the latter does benefit from this methodology.

We focus on the collection of levies, management and investment of funds, insurance requirements and the payment of creditors. All done within a corporate structure and environment, using best practice methodology and in line with the prevailing Acts and strict fiscal policies that we inherited from our holding company, Spire Property Group, consequent of same managing listed property funds’ assets.

We pride ourselves on our business like approach to managing sectional title. In essence, Intersect is businesspersons managing businesspersons’ property assets.

Should you be an owner within a commercial and or retail sectional title scheme or property owners association, situated within the Western Cape, feel free to make contact with our Managing Director, to discuss your scheme’s needs, as well how Intersect can satisfy them.

Happy Holidays

Intersect Sectional Title Services wishes all of its clients a very happy holiday season and all the very best for 2020.

Our offices will be closed on Friday, 27th December 2019.

We will also be closing the offices early on both Thursday, 2nd January and Friday, 3rd January 2020.

For the rest of the time we will be open as usual, albeit on a reduced staff compliment between 16 December 2019 and 10 January 2020.

We encourage all service providers to present their December and January invoices prior to the 16th of December to ensure prompt payment.

We thank all of our clients, staff, service providers and friends for their ongoing support over the past year.

Going Solar?

“Greening” a property or building not only seeks to improve sustainability and reduce costs, but also seeks to reduce the property or building’s carbon footprint. However, rules apply when dealing with any addition to the common property of sectional title schemes, of which the roof is part.

Sectional title schemes are not only blocks of flats, but may also include semi-detached as well as detached houses or townhouses.

Either way though, before anything may be installed on the roof, in most cases this is common property, the written approval of the Trustee’s must first be sought.

The Trustees, in turn, whilst they should not unreasonably withhold permission, do have to consider the affect, if any, on the harmonious appearance of the scheme, as well as the future maintenance of the equipment and the potential damages to the roof structure once installed. Other aspects such as weight of the panels, pitch of the roof, waterproofing, insurance, desirability etc., all need to be considered.

Owners who do not obtain written permission, and proceed to installing solar panels may find themselves in front of the Ombud or even faced with an order of court to remove same.

We have found that trustees are more inclined to approve photovoltaic (PV) systems, to that of the older technology, and, for the most part, point blank decline solar geysers.

Once (if) approved, the owner should also be ware that keeping the equipment in good order will then become their responsibility, not that of the body corporate, and that this onus is passed on to his or her successors in title.

Trustees of blocks of flats, i.e. with roofs that are shared and, often, barely visible to the residents, have a similar set of criteria to consider, however, the visual impact is less than in schemes made up of single or double storey houses. Here the trustees need to consider the desirability, maintenance and return on investment, as well as infrastructural requirements.

Insurance Replacement Values

On 7 October 2016, the Sectional Titles Schemes Management Act (2011) came into force, along with its prescribed regulations, management and conduct rules.

One such management rule deals with valuations for insurance purposes.

Management Rule 23(3) prescribes that bodies corporate must obtain a valuation to determine the replacement values of the buildings and improvements, at least, every 3 years, and present same at the following AGM:

23(3):- A body corporate must obtain a replacement valuation of all buildings and improvements that it must insure at least every three years and present such replacement valuation to the annual general meeting.

At Intersect, we have advocated this practice from long before the promulgation of the new acts, and, in certain circumstances, even advise valuations on an annual basis.

We do this to ensure that our clients’ buildings’ replacement values, at any point in time, are up to date and accurate, so as to mitigate disputes should a claim be registered, and the Insurer happen to question the values applied.

The duty to insure the buildings and improvements, plus any additional items as approved at an AGM, at the correct values, is that of the Trustees, however, few trustees are qualified to determine replacement values, and for this we advise the services of professional valuers, not only to ensure correct values, but also because the valuers carry professional indemnity insurance, in case the values are tested and found to be incorrect.

As mentioned above, we sometimes advise annual valuations, as opposed to the minimum 3 year period, as many of the buildings we manage exceed R500m in replacement value, and any error, in between valuations, could be material and lead to averages (essentially under-insurance) being applied by the Insurer, and ultimately, losses for the members of the body corporate.

Furthermore, the cost to conduct the valuations, annually, can be negotiated and factored into the annual budget of the scheme.

Load Shedding

The recent load shedding, levels 2-4, that we have been experiencing across the country, has highlighted a few issues in buildings, not the least of which is the consideration of generators.

A large number of our clients are considering the installation of generators, to mitigate future outages.

This is fine for the schemes that can afford them, bearing in mind that they are, very, expensive, however, even generators will struggle with level 4 load shedding, such as we are experiencing at present, with 2-3 outages of 2.5 hours each, in every 24 hour cycle.

Trustees should also be cognizant of the required resolutions in order to purchase and install such equipment in sectional title schemes.

Moreover, generators must be serviced regularly, and filled with diesel, often, especially with level 4 outages.

So, consider the capital, as well as the operational, costs associated with generators and compare this against the needs and wants of the building and its residents, before making such a long-term decision and significant spend. Also, make sure that you tick the statutory sectional title boxes if proceeding.

These outages have caused problems for us at our office too, as our systems are also geared to handle 2 hours, but not the 5 hours we are currently experiencing, so should you try to contact us, during level 4 load shedding, it is possible that we might not respond, immediately, for which we apologize in advance.

Smoking and the Communal Scheme

Smoking has always been a problem in communal schemes, especially sectional title buildings such as apartment blocks where smoke can enter other apartments.

This has recently come under the spotlight, since the Constitutional court declared that one may smoke cannabis within one’s own private property.

The Sectional Titles Schemes Management Act, its regulations, as well as the registered rules of the scheme, and or the Constitution, if an HOA, must be consulted, should an objection or dispute arise as a result of smoking residents.

Whilst most rules are silent on smoking, specifically, the Act and its regulations are silent on the topic as well, however, the Act (viz S13(1)(e), as well as the prescribed regulations (viz Management Rules 30 (a)(b)) do provide for no resident to cause nuisance or interference with any other resident (by resident the Act refers to owners and or members, however, by definition, this includes tenants and or visitors).

Therefore, should a complaint be received about the ingress of smoke or odours, same may be referred to a dispute resolution process, some rules specifically provide for same, such as the Community Schemes Ombud Service, for a ruling.

Purchasing into a new sectional title development

When considering a purchase into a new sectional title scheme, there are few factors to take note of before signing on the dotted line.

Sectional title schemes (i.e. body corporates) are established once the 1st transfer takes place from the Developer to any other person, this may be months, if not years, after the agreement of sale is concluded.

Typically, a deposit is paid upfront and retained in an interest-bearing account by the Developer, and the balance of the purchase price payable upon transfer. In the mean-time though, the Developer will commence with putting services in place to ensure that on the date of occupation (which usually precedes the date of establishment), the scheme can function.

Occupation is offered once the municipality has issued an occupancy certificate, thereby confirming that the building (parts thereof) is in a habitable condition.

Prior to the establishment of the body corporate, the Developer must draft certain documents and a budget, to project the levies that will be payable from the date of establishment onwards.

Two such documents are the management and conduct rules.

It is important to review the rules before purchasing, as certain rules may not appeal to you.

A budget too needs to be drafted, as the levies will be based on same. This budget may be drafted months, if not years, before the establishment of the body corporate, so bear in mind that the levy quoted at the time of sale, need not be the levy that is applied at the establishment of the body corporate as services, utilities, plant and equipment, contracts are all yet to be finalized. Furthermore, inflation and escalation applies to the period between drafting the budget and the date of establishment of the body corporate.

Levies are not to be confused with occupational interest or rent. The latter may be charged by the Developer from the date of 1st occupation, and continue until the establishment of the body corporate, after which date the levies shall apply.

It is also important to understand the difference between the roles and responsibilities of the Developer to that of the body corporate, once established. This is dealt with in the Sectional Titles Schemes Management Act and regulations. All prospective purchasers should make themselves au fait with the Act and regulations, as these, along with the rules, will govern the scheme in perpetuity.

Useful tips for repairs and maintenance

Please note that this guideline is merely to assist the Trustees when making decisions regarding the repairs and maintenance of the scheme, very often a precedent has been set with regards to some issues, and these, as long as they are both reasonable and within the ambits of the Acts, may be applied in future cases.

Remember that when making decisions the Trustees are setting precedents all the time.

Each case should be based on its merits, and the Trustees are often required to use their discretion when deciding how to go about a particular task, and how the costs thereof will be allocated. There are many 'grey' areas when dealing with Sectional Title schemes and the differences between owner and body corporate costs.

The Body Corporate’s obligations in general:

The body corporate is responsible for the repairs and maintenance and upkeep of common property.

All pipes, ducts, wiring etc. for the common property, or which services more than one unit must be maintained by the body corporate.

The Owner’s obligations in general:

The owner must maintain and keep in good state his section.  He must also keep neat and tidy any part of the common property to which he has a right (i.e. exclusive use areas – such as gardens, patios, balconies, parking areas, garages etc.).

The owner is responsible for the costs and remedy of all damages to his section, however, if the damage is caused as a result of an external factor, then the owner may have a claim against another owner and or the body corporate. 

Note:

Trustees should be wary of involvement in disputes between owners. Such matters should be referred to the Ombud, via CSOS.  The body corporate does however get involved if the costs of repair of the damage of the affected section is claimed via the body corporate insurance policy.

Specifics:

Window Frames:

The costs of replacement/repair is generally split on a 50/50 basis between owner and body corporate.  If the repair/replacement to the frame is as a result of owner’s negligence, then the body corporate could refuse to pay half the costs. By the same token, if the repair/replacement is as a result of the body corporate’s negligence, then the owner could refuse to pay half of the costs.

This is where the question of precedence is very important. Some schemes have resolved that owners replace/repair their windows at their own expense.

Suggestion: It is often best to stick to the 50/50 split, as often negligence is difficult to prove.

Window Panes:

This is almost always a cost for the owner. There are a exceptions, but they are few and far between.

Broken panes as a result of an insured event are often not worth claiming for, as the cost of the excess outweighs the cost of replacement. In many instances where panes are broken as a result of wind, the owner did not properly close or tighten the window.\

Suggestion: It is best to adopt a policy of owners pay for panes and frames are split on a 50/50 basis.

Geysers:

The Act points out that if a hot water installation services only one unit then the maintenance of that installation is for the owners’ account. But having said that geysers are also fixtures.

Geysers are, more often than not, included in the insurance policy as they are fixtures. 

All insurance policies differentiate between burst and leaking geysers (the same rule applies for all water, sewerage and drainage pipes too).  Any consequential damage caused as a result of either a leaking or a burst geyser is covered under the insurance policy.

If a geyser bursts, the owner may claim from the insurer, and will be liable for the excess, which may be determined on the age of the geyser (on a sliding scale).

Arguments often ensue regarding excesses, but the answer is that if a member is claiming, he’s likely due to pay an excess.

Suggestions:

If a geyser bursts:

1. Get the owner to have a new geyser installed

2. Claim from the insurer

3. Claim for any consequential damage, if applicable

4. Get the owner to pay 100% of the excess in terms of the claim

If a geyser leaks:

1. Get the owner to have the geyser repaired

2. Claim for any consequential damage, if applicable

3. Check if geyser repair is covered by the insurance policy, if not the owner covers the costs of repair

4. The owner pays the excess of the consequential damage, if applicable

Replacing geysers prior to them bursting or leaking is for the owner’s own account.

Doors:

All internal doors are to be repaired and maintained by the owner.

Doors leading on to the common property from any section forms the median line and thus the cause of the damage/repair must be determined, in order to determine liability and responsibility.  If same cannot be determined, it may be an idea to apply the 50/50 rule and may be attended to on the same basis as windows.

Suggestion: External doors should be replaced/repaired on a 50/50 basis, and this includes doors to common property or to exclusive use areas, unless the rules, specifically, state otherwise.

Trees:

All trees on common property to be maintained/removed by the body corporate.

Trees in exclusive use areas to be maintained by the owner enjoying the rights to that area, but removal (as the roots are actually in common property) should, in effect, be removed by the body corporate.

Remember that removal of trees does interfere with the harmonious appearance of the scheme and should only be done if necessary.

Regular or routine maintenance that should be undertaken by Trustees:

Annual:

• Rain gutters: Inspect for secure fastening and clean out

• Roofs and Flashing: Inspect and repair

• Water Heaters: Inspect, drain and descale

• Fire Extinguishers: Inspect and recharge

• Smoke Alarms: Inspect and test battery

• Storm Drains: Inspect and clean

• Lawn Sprinklers: Inspect, test, replace heads, and reset timers

• Exterior Doors: Inspect weather stripping, thresholds, hinges, door closers and locks

• Parking Lot: Inspect for cracks and potholes

• Balcony and Stairwell Railings: Inspect for secure fastening

• Exterior of buildings: Inspect for wood rot, loose or damaged trim, paint deterioration and loose or damaged sidings

• Audit of the lifts, if applicable, by the service provider

• Tree trimming

• Drain/stack pipe cleaning and clearing of roots that may damage the drains

Quarterly:

• Swimming Pool: Inspect filters and pumps, oil and adjust

• Exterior, Common Area and Signage Lighting: Inspect and adjust timers or photocells.

• Pest control

• Servicing of the electric fence, including removing/cutting back vegetation that may damage the fence

ALWAYS REFER TO THE REGISTERED RULES AND SECTIONAL PLANS IF UNSURE!

VAT and Levies

The recent change in the VAT rate, from 14 to 15 percent, prompted a revisit of the issue around VAT, specifically with regards to levies in body corporates, share-block companies and home owners or property owners associations in South Africa.

According to Martin Bester, Managing Director of Intersect Sectional Title Services, a subsidiary of the Spire Property Group, levy income at body corporates, share-block companies or home owners or property owners associations (except those created for managing time-share schemes) is exempt from VAT, provided such schemes supply services to their members and the costs for these services are paid from levy fund contributions received from members.

However, such schemes may apply to SARS for voluntary registration as VAT vendors. 

This would typically apply to schemes of a mixed-use, commercial, industrial and or retail nature.  Very few residential schemes would warrant voluntary VAT registration.

Intersect manages several VAT registered schemes, including industrial business parks, commercial office parks, mixed-use high-rise developments and sectional title registered hotels.