New regulations surrounding Sectional Title and Home Owners Associations

It is important for purchasers in a Sectional Title Scheme to know the difference between the Provisions for Sectional Title and those for Homeowners Associations.

The Department of Human Settlements, currently the umbrella body for Sectional Title schemes, has taken control of their regulation, by introducing “Community Schemes”.

Marina Constas, specialist sectional title attorney and director of BBM Attorneys states, “Community schemes include sectional title complexes, homeowners’ associations, shareblock developments, retirement villages, gated estates with constitutions and social co-operatives, which now fall under Section 1 of the Community Schemes Ombud Service (CSOS)”.

Community Schemes

The Community Schemes Ombud Service (CSOS) Act applies to all community schemes. The service is there to regulate, monitor and control the quality of all community scheme governance documentation and provide dispute resolution.

“Whilst the CSOS Act does not specifically talk about a compliance certificate for Homeowners’ Association rules, the Ombud’s office will be effecting amendments to bring the law regarding registration and rule compliance for Homeowners’ Associations in line with Sectional Title schemes.

The Ombud’s service is encouraging Homeowners’ Associations to send rules in for vetting,” Constas stated.

She added that the Ombud currently has jurisdiction to deal with any disputes in cluster schemes and notes that the Community Schemes Ombud Services levy must be paid by Homeowners’ Associations whether they are company registered or simply have a constitution.

Although the Ombud service faced serious challenges initially, great strides have been made, with over 33 000 complexes having paid over monies. Those Homeowners’ Associations that have not registered with CSOS will be penalised, she said.

“Now that the Ombud’s office is gaining traction, there will be time to augment and improve the provision of services and to flesh out interesting issues in the industry, such as the Air BnB onslaught,” said Constas.

Sectional Title

While the CSOS Act covers all community schemes, Sectional Title stakeholders must also consider the Sectional Title Schemes Management (STSMA), where recent amendments have introduced several new innovations. ie: the establishment of a reserve fund and a mandatory maintenance, repair and replacement plan.

“While many Trustees manage their buildings very well and have always had buffer funds, an inordinate number find themselves in financial difficulty, with buildings being run from hand to mouth each month.”

“This reserve fund aims to ensure that buildings do not fall into disrepair. A related maintenance, repair and replacement plan is another new innovation in the STSMA. From now on, the Body Corporate must prepare a written maintenance, repair and replacement plan which sets out the major capital expenses over the next 10 years.”

Constas pointed out that other important STSMA amendments include the stipulation that any changes to the Management or Conduct rules of a sectional title scheme must be approved by the chief Ombud after the necessary resolutions have been taken.

“The duties of owners have also been changed. An owner must now notify the Body Corporate of any change of ownership or occupancy in his unit. In terms of insurance, Trustees are now obligated to obtain valuations every 3 years and owners may not obtain an insurance policy in respect of damage arising from risk covered by the policy of the Body Corporate. Even pets have been revised in the STSMA legislation. “Disabled residents who require an assistance dog to reside with them and accompany them on common property no longer need the formal consent of Trustees.”

“On the financial front, the complex’s budget may now include a 10% discount on levies if an owner’s contributions are all paid on the due dates.

“There is no longer a reference to an accounting officer in the Sectional Title legislation. Consequently, all buildings, even those with 10 or less units, must be audited,” she said.

While the STSMA’s recent innovations do not automatically apply to Homeowners’ Associations, Constas notes that they may choose to adopt certain provisions from the Act.



In terms of the Sectional Titles Act, Section 37 of the act sets out the functions of a Body Corporate – its’ members being all the registered owners in a sectional title scheme. The members of the Body Corporate elect a Chairman and Trustees to represent them in matters relating to the control, management and administration of the sectional title scheme. It is their duty to ensure that the insurance aspects of the Estate are correctly insured for replacement value with the appropriate insurance policy. ie, all buildings, fixtures and fittings, outbuildings, walls, gates posts and fences and common property must be insured. The insurance policy wording is specifically designed for sectional title owned residential properties.

Generally, a sectional title insurance policy covers the Body Corporate for the full replacement value of all or any of the residential sections in the complex and any common property (less the land) that is destroyed or damaged as a result of fire, flood, earthquake, riots, burst pipes and vehicle collisions. Thus – it would cover what the total cost to rebuild the Estate should it be destroyed. The insurance will only pay for the result of the damage and never for the cause of the damage.

The purpose of insurance is to protect against loss due to a sudden and unforeseen event, not due to ordinary wear and tear or damages that occur over a period of time due to poor design or shoddy construction. The owner is responsible for the excess.

The insurance also covers the Body Corporate against third party public liability, trustee liability, employer’s liability, machinery breakdown, accidental damage, loss of money, the cost of additional security services that may be needed if any insured event occurs, the cost of alternative accommodation or loss of rent for owners whose homes in the complex are destroyed or unliveable for a certain period, demolition costs, inflation and escalation.

At each AGM meeting, the Trustees and the owners are presented with a Schedule setting out each unit number with a corresponding sum insured determined by participation quota (PQ) equal to the “floor space” in square meterage. A formal independent valuation every 3 years is advisable to ensure that the complex is not under-insured. The members of a Body Corporate must approve this valuation yearly at the AGM, and individual owners can increase their sum insured should they feel the value is insufficient due to internal modifications that they have made to their unit, and they will then be required to pay the additional premium.

It is important though for the members and trustees of the Body Corporate to know what is not covered by a joint policy. Owners of units in a sectional title estate must understand that the Body Corporate insurance is essentially ‘bricks and mortar’ insurance. If the cause of the problem is due to an external source including geysers, and falling within the section including the exterior walls but excluding interior walls and anything falling inside the section, then the Body Corporate insurance should cover it.

It does not cover the contents of their homes or any of their personal belongings – even if these are lost or damaged due to one of the ‘insured events’ covered by the joint insurance. If the cause of a problem is completely inside an owner’s unit (ie: a burst pipe), then the owner’s individual property insurance will cover the resultant damage. Owners and tenants need to take out their own, individual insurance policies to cover such damage.