Why Participation in Decision-Making is Essential for Sectional Title Scheme Members
Living in a Sectional Title complex, gated community, or other form of Community Scheme can give you a unique opportunity to make your voice heard.
While it is tempting to keep to yourself within your unit — individual property — living within a sectional property ultimately means you are now part of a wider collective, more tightly knit than the typical neighbourhood. This paradigm does come with duties, but it also comes with rights.
You likely already know that any legitimate Sectional Title Scheme is run by its Body Corporate, represented by the duly elected Trustees, but what can often be forgotten is that you are part of this Body Corporate too!
Bodies Corporate are, by definition, made up of every single person who owns a unit within the Sectional Title Scheme. As soon as you take possession of an individual property within the Scheme, you are effectively a member of the Body Corporate, and get a say in how the Scheme is run.
This basic property right is not based on seniority, or probation, but takes effect as soon as your unit is registered under your name. Wits University clarifies that no one can refuse you membership within your Scheme’s Body Corporate. Not even yourself. Membership is, in effect, an inalienable right for all owners within a Sectional Title Scheme.
Role of the Body Corporate
Earlier we said that all legitimate Sectional Title Schemes are run by their Body Corporate, but what does that mean?
In theory, this could mean that everyone living in a complex runs it at the same time, but this can get chaotic quickly, especially as the Scheme grows. Thus, in practice, the day-to-day operation and administration of the Scheme falls to Trustees. Who appoints these Trustees? The Body Corporate, which makes its decision based on the best interests of its members.
In theory this means all owners within the Scheme, but in practice it can only ever include those who participate and make their voices heard. This is important to note because, even with a great Trustee on board, major decisions regarding the running of the Scheme are ultimately made by the Body Corporate.
Major decisions are normally discussed either at the Scheme’s annual general meeting (AGM), or at special general meetings (SGM). The following are examples of major decisions:
- Approving budgets. Both the operational and maintenance budget
- Amending, adding, or repealing rules within the Scheme (such as solar installations)
- Appointing Trustees
- Improvements to common property
As part of a Body Corporate, you have a right to vote on these matters. If you are unable to attend a meeting yourself, you also have the right to appoint a proxy to vote on your behalf. This proxy need not be a member, but they cannot be a Managing Agent, nor an employee of a Managing Agent or the Body Corporate. If the proxy is a fellow owner in the Scheme, remember that they still have their own vote, and have their own interests.
You can choose whether to let your proxy vote on matters according to their discretion, or whether to set down in writing how they will vote in response to any resolutions you know are coming up.
Typically, you can expect two kinds of resolutions — the ordinary (which can still be major!), and the special.
The types of decisions members need to tackle can vary tremendously in the amount of agreement they require to be put into effect. Decisions that require the lowest level of agreement are called ordinary resolutions.
Examples of ordinary resolutions include:
- Trustee matters (e.g., appointments, removals, restrictions and directions)
- Confirming that the Scheme developer has appropriately fulfilled accounting and reporting obligations at the first meeting
- Ratifying contracts entered into by the developer for the Body Corporate
- Approving Scheme insurance
- Approving administrative and reserve budgets
- Deciding on a repair and replacement plan and approving the 10-year maintenance plan budget
- Appointing auditors
While this could all be covered under a scheme’s AGM, sometimes a situation comes up that requires the Body Corporate to convene sooner. SGMs, despite the name, are not just for special resolutions, but also for discussing ordinary resolutions. The “S” in SGM is just to denote its nature as a meeting whose time and place is decided responsively to tackle matters as needed. Compare and contrast with the AGM, which is more general and regular in nature.
Despite its nature, however, the SGM must still be convened under notice, otherwise the Body Corporate cannot properly gather to discuss the resolutions the SGM was called for. 14 Days advance notice is standard, as is sharing any documents relevant to the upcoming resolutions. Without those documents, owners within the Scheme may struggle to develop a well-informed opinion before discussion commences, tainting the decision-making process.
On the day that an SGM is held, a quorum is required to give effect to the decisions being made. A quorum is formed when either of the following is present and able to vote at the meeting:
- For a Scheme with less than four primary sections, or less than four members, at least 66% of the Scheme’s voting power must be present.
- Otherwise, 33% of the Scheme’s voting power must be present.
In both cases, this voting power can be established by members attending in person or by proxy.
If a quorum is not established within 30 minutes of the time indicated on the notice for the meeting, then everything is adjourned to the same day of the following week, at the same venue, and time.
If, upon that following week, the adjourned meeting still fails to establish a quorum within 30 minutes of its start time, the members present may declare themselves a quorum and proceed regardless, so that the vital business of the meeting may not be terminally postponed and ordinary resolutions may be taken. Only ordinary resolutions may be taken at an adjourned meeting where no quorum is present. Special and Unanimous resolutions still require a quorum to be present before a meeting and voting on the resolutions may take place.
This effectively allows all members of the Body Corporate 14-21 days standard to prepare for ordinary issues, or to decide on and brief a proxy if they cannot attend themselves. It’s recommended that members always take advantage of these rules when needed, as owners who do not participate at all may find themselves bound by decisions that they gave no say on.
Unlike ordinary resolutions, special resolutions give 30 days’ notice as standard.
This notice period can be shortened if the Trustees consider the matter urgent, even to as little as one week, but this move always requires the Trustees to send out their reasons for justification.
Special resolutions give effect to management decisions that have a significant impact upon the Body Corporate. They are listed in the Sectional Title Schemes Management Act and any decision requiring a special resolution can only be carried out lawfully by following the prescribed rules.
Decisions that require a special resolution can include:
- Amending the Scheme’s conduct rules
- Extending sections of property
- Changing various rights (e.g., servitudes or restrictive agreements) that can impact upon the property
- Management decisions for the Body Corporate (e.g., suing the developer, alterations or improvements to common property)
- Resolving disputes with developers
- Changing or cancelling exclusive use areas
- Unit extensions
These decisions can carry serious financial costs for the Scheme. Since the members of the Scheme must fund these decisions through their levies or special contributions, they will almost always want to be involved in making them.
Regardless, the quorum requirements for meetings to enable special resolutions are the same as those for ordinary resolutions, which allows for unusual situations to occur. As you will see from the rules below, it is a very real possibility that a special resolution could be passed at a postponed general meeting with relatively few owners represented.
Passing Special Resolutions
Special resolutions can only be passed with the support of at least 75% of those members in attendance or represented by proxy. Member support is determined by both their number (determined by a show of hands) and their value (the sum of the participation quota).
It is important to stress that the 75% needed is not of ALL owners in the Scheme, simply of those making up quorum at the meeting. To help combat major special decisions being passed with minimal representation, the Prescribed Management Rules of the STSMA offers a respite.
According to the STSMA, if a special resolution is passed at a general meeting by owners holding less than 50% of the total voting power (i.e. the power of ALL owners, rather than just those who attended), then the body corporate must not take any action to implement that resolution for one week after the meeting.
This allows for members who, together, hold at least 25% of the vote value, to request another general meeting to reconsider the special resolution. This can only be circumvented if the Trustees resolve that there are reasonable grounds to believe that immediate action is necessary to ensure safety or prevent significant loss or damage to the Scheme.
Risks of Non-Participation
With the above rules, a small portion of the Body Corporate could validly pass a special resolution with only a minority calling the shots (33.33% of owners).
As such a scenario can only happen due to non-participation, a case could be made that this is simply a natural consequence for members who refuse to use their democratic rights.
While this is true, it does not change the fact that special resolutions can carry huge — and often unexpected — ramifications for members within a Scheme, even those who didn’t participate, and this can cause friction within the Scheme later down the line.
Addressing Low Resident Engagement or Participation
If frictions within a Scheme remain unaddressed, resentment and regret have a chance to take root, ultimately hurting the Body Corporate’s ability to properly represent and care for all its members.
The involvement of residents is therefore crucial for creating a vibrant and harmonious community. Here are a few ideas on the ways a Body Corporate could address participation in Community Schemes.
Enhanced Communication: Life can be busy at times, but staying informed about important matters within your scheme is vital for good functioning.
Enhanced Communication: Life can be busy at times, but staying informed about important matters within your Scheme is vital for good functioning. The BC has an obligation to keep everyone informed. Above sending out the proper notices for AGMs and SGMs in good time, BCs can send out newsletters, email updates, or social media posts to inform residents of important developments. Reminders of important news or upcoming meetings, both well in advance and closer to the time, can help members orient themselves and encourage participation.
Engagement Initiatives: Seek out specific actions to develop involvement by the community, such as:
- If you aren’t sure what topics may interest your residents, consider property maintenance, landscaping, financial management, or community safety. Whatever topics you choose, make sure you provide valuable information and create an alternative platform for residents to interact, share ideas, and address concerns.
- Community events like braais, picnics, or cultural celebrations. Anyone who joins in these will have a chance to build kinship with one another. Even if they are awkward at first, they ultimately allow people within a Scheme to see each other more as friends or even family, rather than as strangers.
- Online forums or surveys can be easy to set up and provide a platform where residents can discuss community issues, share suggestions, and ask questions. Using surveys to gather feedback in advance of important decisions can give everyone a chance to express their opinions and preferences.
- Open house or site visits. These give residents an extra excuse to visit common areas, inspect facilities, or meet with the management team to discuss any concerns. This hands-on approach can help residents better understand the operations and management of their complex, which ultimately helps them to better understand the importance of their participation.
- When they are focused on specific areas of interest, such as landscaping, security, or social activities, they help residents feel more involved. They can even create openings for your residents to start running your other engagement initiatives! Delegating this level of decision-making carries many benefits, not just in a business environment, but also in your community’s environment.
Convenient Participation: As touched on under Enhanced Communication, it is wise to use technology to facilitate more efficient meetings. For starters, the use of online voting systems can enable residents who cannot physically attend meetings to have their voices heard without the fuss of setting up a proxy.
The use of round robin resolutions, in writing rather than via face-to-face meetings, is another convenient option. Although the process is largely the same using this process rather than the complication of arranging and setting up physical meetings can help to streamline decision – making.
By providing convenient participation options, as outlined above, members of a Body Corporate can actively contribute to the decision-making processes and community development, regardless of their physical presence or location.
To contact ANGOR with any questions, or for financial and property management advice, please go to: https://www.angor.co.za/
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