Warning to sectional title owners – follow proper procedures, they exist for everyone’s protection.

Warning to sectional title owners – follow proper procedures, they exist for everyone’s protection.

When an owner of a unit in a Cape Town sectional title scheme wanted to extend his unit by building onto his garden area (exclusive use area) which forms part of the common property, the matter ended up in court. He claimed the body corporate had given him the go-ahead to extend his unit, but other members of the body corporate said this was not the case. While the high court initially found in his favour, the judges hearing the appeal have come to a different conclusion. The appeal court stated that the ‘informal’ way in which the whole matter had been dealt with meant proper legal standards hadn’t been met and inter alia sufficient proof was not provided that a unanimous resolution was adopted to alienate a portion of the common property and furthermore sufficient proof was not provided that a special resolution was adopted to allow the owner to extend his unit onto common property.

Read the judgment

https://lawlibrary.org.za/akn/za-wc/judgment/zawchc/2024/23/eng@2024-02-13

This decision firstly is a sobering reminder to members of body corporates that they must follow the rules relating to meetings, proper notice, and procedure. Secondly, it makes it abundantly clear that owners can’t simply make informal deals with each other with regard to the common property in a section title scheme.

It all started when Johannes Wessel Greeff (“Greeff”), one of the owners of a unit in the sectional title scheme known as Merriman Court in Green Point, wanted to extend his unit onto a portion of the common property. His initial plan was to build a garage on the garden area over which he has an exclusive use right.

Greeff some years ago began lobbying for permission to make the changes he wanted. He claims that the body corporate ‘gave him permission to build a garage’ in 2007. In the years that followed, he pushed forward with the idea on the basis that he was authorised to proceed. However, other members of the body corporate denied this.

Eventually, the matter came to the high court where Greeff was successful in persuading the court that he had been given the necessary authority by the body corporate and had thus acquired permission to extend his unit onto the common property over which he had an exclusive use right. The judge in the court a quo ordered that the members of the body corporate should hold a special meeting at which they would all be ‘compelled’ to vote in favour of the approval of Greeff’s plans.

Body corporate didn’t follow mandatory steps

Perhaps not surprisingly, the body corporate then appealed to a full bench of the high court where the appeal was upheld and the order of the court a quo was set aside.

The appeal judgment, written by Judge Allie with the agreement of two other judges, Judge Salie and Judge Mangcu-Lockwoood, goes through the minutes of various body corporate meetings that relate to Greeff’s request to extend his unit, and at several points notes how the mandatory processes as set out in various legislation were not followed.

One feature of the minutes discussed by the judges is that at a crucial meeting, attended only by Greeff, his architect and one other member of the body corporate, it was effectively agreed that Greeff could build within the common property garden area and that the roof of the garage he proposed to erect would be ‘available’ for another owner ‘to extend her garden’. According to the minutes, Greeff ‘confirmed’ that this other owner ‘will be receiving approximately 16 square metres to use for her garden area’.

The judges write, ‘What is astounding about the recordal of the discussions and approval [at this meeting] is the scant attention paid to the fact that the garden area constitutes a portion of common property and the decision to “give away” a portion of immovable property owned by the body corporate’, isn’t dealt with as the law requires, namely, by way of a ‘pre-circulated written resolution to dispose of property belonging to all the members of the body corporate as common property.’

If this was a lease, there was no agreement about payment

Similarly, in relation to Greeff’s agreement to ‘give’ a portion of his planned garage roof to another owner, that ‘arrangement’ would ‘offend section 2 of the Alienation of Land Act, if it is contemplated that by extending onto his section, [Greeff] acquires ownership of the garden area and he grants to the owner of [another section] ownership or some other limited real right, to a portion of the newly extended roof.’

On the other hand, if the idea was that Greeff would lease the garden area, rather than acquiring rights of ownership, the minutes don’t reflect any discussion about payment in exchange for the right to build on a common area belonging to the members of the body corporate.

On appeal, the judges stated the implication if the high court judgment were to stand: Greeff would exercise the rights of proprietary ownership of the exclusive use garden area (which forms part of the common property belonging to all the members of the body corporate), ‘without paying any remuneration for those square metres of vacant land, and without an express resolution having been taken to alienate that land’ in favour of Greeff.

Ownership would first have to be passed to him and incorporated into his unit

The minutes show that members of the body corporate had not approved his plans. There was merely an in-principle approval at an early stage, subject to Greeff providing the other members with more information. His plans changed substantially from when he first raised the issue, and some members of the body corporate raised their concerns with him in subsequent emails.

Looking at the law that applies to sectional title properties, the court said that the Sectional Title Schemes Management Act (STMA) had clear requirements before something like the building work proposed by Greeff could go ahead.

Both STMA and the Alienation of Land Act would require a written record of a decision by all the members of the body corporate to alienate part of the common property, in this case to Greeff. This wasn’t done and no proof was provided that a meeting at which the decision was allegedly taken, was properly convened. The mere claim by Greeff that there was such a meeting and that it was properly convened, was insufficient.

‘No room’ for informal arrangements about common property

Then there’s this scathing comment by the court, ‘The management of a sectional title scheme is not akin to private treaty arrangements where interested parties can simply strike informal deals. It is regulated by statutes so that members, the developer, mortgagors and third parties’ rights are all protected.’

The law left ‘no room for informal dispositions of portions of common property’, the court added.

There was no doubt that the body corporate’s affairs ‘were not adequately managed,’ the court wrote. But that didn’t mean ‘that its bad practice can lead to a re-writing or variation of the applicable law.’

Punishment for trustees breaching their fiduciary duties

Greeff had claimed that the body corporate conducted its affairs ‘in an informal manner’ and that it thus did away with ‘the need for formal notices and compliance with statutory requirements.’

But there were legal formalities that had to be complied with before changes, such as he had requested, could happen. And there were also a number of ‘fiduciary duties’ owed by the trustees to the body corporate, with punitive measures that could be taken should the trustees ‘in fact breach their fiduciary duties.’

Key elements of these procedures hadn’t been observed in this case, and the ‘informal manner’ in which it was claimed that decisions and resolutions had been taken, all without written proof, left the court ‘uneasy’ about whether other key elements had been observed.

Making sure every member took an informed decision

They weren’t being sticklers just for the sake of it, said the judges, but it was necessary for the law to be observed to make sure that all members of the body corporate had ‘made informed decisions … when deciding to effectively alienate or forego the rights of all members [except Greeff] to a portion of the common property that [he] wishes to extend a building on.’

The court found that he ‘does not even make it out of the starting blocks’ in establishing the criteria needed to grant an order in his favour.

The judges therefore upheld the appeal, set aside the earlier high court orders, and dismissed Greeff’s original application, with costs.

It’s all been an expensive and time-consuming business and can’t have made for happy relations at Merriman Court. More than that, however – it could all have been avoided if proper procedures had been followed.