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Jun 21, 2017 | Featured, Property Investment

How the new Sectional Title Schemes Management Act affects you


Sectional title ownership has become popular: many enjoy the security and sense of community gained from living in a complex. But residents are also bound by the rules of a body corporate and don’t have full control over what they can do with their property. Sectional title schemes are, however, governed by laws that every owner and member of a body corporate should understand. Late last year, the government brought into effect the Sectional Title Schemes Management Act and the Community Services Ombud Service Act to update the law in this space. The introduction of the ombud office deals with disputes between sectional title owners and their body corporates, giving both parties an affordable way to reach resolution. It, for instance, assists body corporates to recover levy payments from members. The ombud also fulfils a compliance function. All body corporates have to register their complexes with the ombud’s office. They must also file the conduct rules, as well as any changes that have been made. What is important here is that the ombud must approve and certify any rules that have been amended as it has a duty to ensure that the rules are compliant with legislation.

All complexes also have to file their audited financials with the ombud every year. These must be accompanied by a budget for the next 12 months. The second important change introduced by the new legislation is that all sectional title schemes will have to establish and maintain a reserve fund to cover major maintenance projects and unexpected expenses. This fund must be at least 25% of the scheme’s total levy budget. The act states that body corporates can use a 15% annual levy increase to collect the necessary capital for this fund. They will also have to keep this money in a separate bank account and submit separate audited financials for it. This is not, however, just a rainy day fund that may never be used. The trustees will have to prepare a detailed 10-year plan for how they intend to use this money and report back every year to owners on how this plan is being implemented. The intention is to ensure that there is always funding to cover maintenance to all major capital items on the common property. Trustees will therefore have to consider well in advance at what point certain jobs will need to be done and what they are likely to cost, so that the money is always used in the best interests of the members.

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