The importance of ring-fencing exclusive use area contributions in a body corporate
Time to put a ring on it
Introduction
Disputes regarding the maintenance of Exclusive Use Areas (EUAs) are common in sectional title schemes. A recent matter before the Community Schemes Ombud Service (CSOS), Kelston Body Corporate v Bougainvillea Property Investment (CSOS3481/WC/23), highlights the legal responsibilities of both the body corporate and unit owners, particularly concerning repairs to EUAs and the accurate calculation and allocation of related contributions.
What are EUAs?
EUAs, in terms of the prevailing sectional title legislation, are defined as parts of the common property designated for the exclusive use of a specific owner.
Facts of the case
In this case, the Applicant (Kelston Body Corporate) sought reimbursement from the Respondent (holder of an EUA Roof Patio, RP8) in terms of Section 39(1)(e), alternatively Section 39(6)(b)(ii), of the Community Schemes Ombud Services Act, 2011 for repair costs totalling R84,722.22, as well as interest thereon from date of order to date of payment. These costs included R46,851.00 for repairs to RP8 and R37,871.22 for parking bays (PA8-PA13) below RP8, which were damaged as a result of water leakage. The body corporate argued that the damage to the parking bays was due to the inadequate waterproofing of RP8, which it then repaired.
The Respondent contended that it has been paying both its regular levy and an additional contribution for the relevant EUA. It further submitted that the EUA was constructed around 30 years ago, and that both the Respondent and its predecessors have consistently made monthly contributions to the body corporate for its maintenance.
The Respondent also pointed out that the body corporate lacks a maintenance plan for the common property, including the EUAs. Despite requests, the body corporate has been unable to account for the advance contributions made by the Respondent and its predecessors in relation to the EUA. Additionally, the body corporate has not acknowledged any of the payments already made by the Respondent or its predecessors for the maintenance of the EUA.
Furthermore, the Respondent argued that the damage to the parking bays beneath the EUA resulted from the body corporate's failure to maintain or repair EUA RP8, and that there is no justification for holding the Respondent liable for any consequential damage in the circumstances. It emphasised that the damage was not caused by a "section" owned by the Respondent, but rather by the body corporate’s neglect in fulfilling its statutory maintenance obligations for the EUA, which constitutes common property.
The body corporate admitted that it had collected contributions towards the maintenance of the EUA incorrectly. Instead of estimating the necessary maintenance costs, the body corporate based contributions on the square meterage of the area. Furthermore, the contributions were not allocated properly and were used for general operating expenses, not specifically for the maintenance of the EUA.
Legal framework and adjudication
While owners have exclusive rights to use EUAs, the body corporate remains responsible for maintaining it, as stipulated in Section 3(1)(l) of the Sectional Titles Schemes Management Act 8 of 2011 (STSMA). The body corporate is required to maintain all common property in a state of good repair.
According to Section 3(1)(c) of the STSMA, the body corporate must require the owners of sections entitled to the right to the exclusive use of a part or parts of the common property, whether or not such right is registered or conferred by rules, to make additional contributions to the body corporate’s funds. These contributions must be based on an amount estimated necessary to defray the costs of maintenance, rates, taxes, insurance, and utilities, unless in terms of the rules the owners concerned are responsible for such costs.
In the present matter, the body corporate mismanaged the contributions made by the Respondent by failing to allocate them properly for the intended maintenance. The Adjudicator ruled that the body corporate had failed in its duty to manage the contributions and maintain accurate records. As a result, the application to order the Respondent to reimburse the body corporate for repair costs was refused.
Key Takeaways
Correct calculation and allocation of levies:
Section 3(1)(c) of the STSMA requires that levies for EUAs be based on an estimate of the costs necessary for maintenance, rates, taxes, insurance, and utilities. These levies should be calculated in advance, with proper consideration for the specific maintenance needs of the EUA, rather than simply relying on square meterage.
Body Corporate’s maintenance responsibility:
Under Section 3(1)(l) of the STSMA, the body corporate is responsible for maintaining all common property, including EUAs, in a state of good repair, however, the cost of maintaining an EUA is the responsibility of the holder of the exclusive use right, who retains the financial obligation for its upkeep.
Use of contributions:
Contributions raised for the maintenance of EUAs must be used exclusively for that purpose. Mismanagement of these funds, as seen in this case, can prevent the body corporate from successfully claiming reimbursement for related repairs.
Conclusion
Funds and maintenance must be managed effectively
This case highlights the critical importance of proper fund management in sectional title schemes. The body corporate must ensure that levies for the maintenance of EUAs are raised in advance, based on an accurate estimate of maintenance needs. These funds should be allocated and used solely for the maintenance of the EUAs, in compliance with the law.
Moreover, the case reinforces the body corporate’s duty to maintain common property, including EUAs, in good repair. Failing to manage funds and maintenance effectively can lead to disputes and unsuccessful claims for reimbursement, as demonstrated in the matter under consideration.
If you are interested in seeking our legal advice on the above matter, please email info@tvdmconsutlants.com or contact 061 536 3138 today!
Meet the Author
Rizaar Smidt is a Community Schemes Consultant at TVDM Consultants, to read more about Rizaar, click here.
Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of TVDM Consultants. The content herein is for information purpose only, and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever, and no action should be taken on the basis thereof unless the application and accuracy has been confirmed by a legal advisor. TVDM Consultants and the author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content.
