Changes contained in the new legislation that have direct financial implications for sectional title owners include the following:

Prescribed Management Rule (PMR)

PMR 2 : Prescribes rules relevant to reserve funds. must be equal to at least 25% of the scheme’s total annual levy budget, and that if it is less than that at the start of any new financial year, the owners in the scheme must add 15% to their total levy budget for the next year as a contribution to their reserve fund.There is important implications. read more

PMR 22: Trustees must prepare a detailed written plan for the use of the reserve fund, and report back to owners annually on the implementation of this plan. The plan itself must list all major capital items on the common property that are expected to require maintenance, repairs or replacement over the next 10 years and must specify when these actions are likely to be necessary and what the cost is likely to be. In most cases this plan will have to be prepared by an outside consultant with the necessary expertise, so there will be a cost involved for owners.

PMR 23: A replacement valuation of all buildings and improvements in the scheme is professionally done every three years and that the scheme’s insurance is adjusted accordingly.

PMR 26 : Separate records and bank accounts are kept for the scheme’s administrative (levy) fund and the reserve fund; that separate budgets are prepared for the two funds and that the administrative fund must be independently audited at the end of every financial year by a person who has not had anything to do with the management of the scheme’s accounts during the year.

A provision that owners may be charged interest on any overdue amount payable to the body corporate (such as arrear levies) up to the maximum rate of interest payable under the National Credit Act, which is currently 35,4% per year.

Numerous other changes articulate the way sectional title schemes are to be managed and how both general and trustee meetings are to be called and conducted.

Other detailed rules about the appointment and removal of trustees, and about their responsibilities for ensuring good governance in the scheme and compliance with the Community Schemes Ombud Service Act, which also came into operation this month.

Most important of these changes is the provision that no person attending a meeting may hold more than two proxies for other owners.

All proposed amendments to either the Conduct Rules or PMRs of any scheme must now be approved by the office of the Community Schemes Ombud (even if the scheme owners took a unanimous decision to change them). Any changes will also not be enforceable until the Ombud has issued a certificate of approval.”

PMR 28 of the new Act makes provision for the first time for the owners of a sectional title scheme to decide to appoint (by special resolution) an “executive managing agent” – to take over all the functions and powers of the trustees.“Such a person would obviously need to be a qualified and registered managing agent with the expertise and resources to run the scheme on a full-time basis,