Why Community Schemes are Democracy in Action

Annual General Meetings (AGM) season is upon us, both AGMs and Special General Meetings (SGMs) serve as primary forums where special resolutions can be passed. These meetings are not only a legal requirement but are a platform to make unit owners aware of important operational and management matters.

The special resolutions passed at these meetings, directly and indirectly, affect the entire sectional title scheme (“scheme”), hence it is only right that as a unit owner of the scheme, you have the right to vote in respect of important scheme decisions and not be bullied.

Ergo, schemes are an illustration of democracy in action. In this article, we look at the quorum and voting requirements, including the procedures to be followed when passing a special resolution, as provided for Sectional Titles Schemes Management Act 8 of 2011 (the STSMA) and Prescribed Management Rules (PMRs) of the STSMA Regulations.

The right to vote

A unit owner is automatically a member of the body corporate and has the right to vote at all its general meetings either in person or by way of valid representation in the form of a proxy. If all the formalities of a meeting are not followed correctly, the resolutions passed at that meeting could be challenged and even found invalid.

Quorum

Before an AGM or SGM can start, a quorum must be present. A quorum is a percentage of unit owners present in person or validly represented by proxy based on their respective *Participation Quotas (PQ).

In terms of PMR 19(2), a quorum in a scheme of more than four primary sections will be the unit owners (in attendance personally or validly represented by proxy) entitled to vote and holding one-third of the total votes of all the unit owners of the scheme, in value (PQ), provided that at least two persons (unit owners or representatives) are present.

In a scheme with less than four primary sections or unit owners, the prescribed quorum requirement is attendance in person or by proxy, of unit owners who are entitled to vote and hold two-thirds of the total value (PQ) of the votes of

Voting

A special resolution requires at least 75% of the votes, calculated both in number (each unit owner having one vote) and in value (the sum of the participation quota) of the unit owners present in person or validly represented by proxy. A special resolution can also be passed in writing if at least 75% of ALL the unit owners of the body corporate, calculated both in value and number, vote in favour of the resolution.

This voting requirement ensures that there can be no bias based on PQ value, as the votes have to be calculated in number too. In short, it means that a unit owner holding a majority vote in PQ value, will not be able to make and/or overwrite all the decisions because their vote in number is equal to the other unit owners’ vote in number.

Implementation of a special resolution after a vote

Prescribed Management Rule (“PMR”) 20(9)(a) of the STSMA Regulations confirms that if a special resolution is passed at a General meeting by unit owners holding less than 50% of the total value of all unit owners’ votes:

  • the body corporate must not take any action to implement that resolution for 1 week after the meeting;
  • UNLESS 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.

To note

A unit is not entitled to vote on ordinary resolutions if they fail or refuse to pay the body corporate any amount due after a court or adjudicator has given a judgment or order for payment of that amount, or if they persist in the breach of any of the conduct rules of the body corporate after a court or an adjudicator has ordered that they refrain from breaching the conduct rules. This disqualification does not apply to special or unanimous resolutions.

 *The participation quota (“PQ”)  is the floor size of any specific section

Source:  https://www.stsolutions.co.za/special-resolution-quorum-and-voting-why-community-schemes-are-democracy-in-action/

For more stories like this, Get Estate Life Magazine for free

No Comments

Post a Comment