Unpacking special resolutions
Category Newsletter: Article
In sectional title schemes, there are many different types of decisions that can be taken, and in each case, the requirements for such a decision or vote is different and often more complicated than the prior resolution. It is important in order for the proper administration and management of the scheme that the requirements for taking decisions are known, understood and applied.
This article looks at all the procedural requirements of special resolutions, as provided for by the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”) and the Prescribed Management Rules (“PMRs”) of Annexure 1 of the Regulations to the STSMA.
Notice requirements for meetings where special resolutions are tabled
Special resolutions may be tabled for member approval, either at a special general meeting (“SGM”) or in writing, known as a round robin resolution. Should an SGM be convened, the notice calling the SGM must contain the proposed special resolution, in terms section 6(2) of the STSMA and PMR 15(3), and be sent to all members thirty (30) days prior to the SGM.
In terms of section 6(3)(a) – (c) of the STSMA, the notice must be sent to all members via hand delivery, or pre-paid registered post to the members’ sections, or pre-paid registered post to another address within South Africa, that the member has chosen in writing for the purpose of receiving notices. In addition (but not as an alternative) to one of the above methods of delivery, the notice can, in terms of section 6(4) of the STSMA, also be emailed or faxed to the members.
Quorum requirements for meetings where special resolutions are passed
At the SGM, a quorum must be present or represented by proxy, provided that a person must not act as a proxy for more than two members before the business of the meeting can be dealt with.
In terms of PMR 19(2)(b), a quorum in a scheme of more than four primary sections, for the purposes of passing a special resolution, will be the members (in attendance personally or represented by proxy) entitled to vote, and holding one third of the total votes of all the members of the scheme, in value (participation quota), provided that at least two persons (members or representatives) are present at the SGM.
In terms of PMR 19(4), if within thirty (30) minutes from the time appointed for an SGM, a quorum is not present, the meeting stands adjourned to the same day in the next week, at the same place and time.
Voting requirements to pass a special resolution
In order to be validly approved, the special resolution must be passed by at least seventy-five percent (75%) of the members, present personally or represented, at the SGM. These votes must be calculated both in value (participation quota) and in number, in accordance with section 1(1) of the STSMA.
In terms of section 6(6)(a) of the STSMA, when votes are calculated in value, the total participation quota of all sections registered in the name of a member is calculated. In terms of section 6(7) of the STSMA, when votes are calculated in number, each member has one vote, irrespective of the number of sections owned by that respective member.
In terms of PMR 20(9)(a), should the special resolution be passed at a SGM, where the quorum is less than 50% of the total value of all members in the scheme, the resolution cannot be implemented for a period of one week, allowing members to take the steps provided for in PMR 20(9)(b).
Round robin special resolutions
Should the special resolution be tabled for approval via a round robin process (in writing), as opposed to at SGM, there is no requirement for a notice period. However, the members should be afforded a reasonable opportunity to consider, and vote on, the proposed special resolution. In order to be validly approved, the special resolution would need to be passed by at least 75% of all the members of the scheme, calculated both in value and number.
A special resolution cannot be taken via a round robin process when it relates to the termination of the management agreement entered into between the managing agent and body corporate, in terms of PMR 29(2)(c), an improvement to common property, as contemplated in PMR 29(2), and the installation of pre-payment meters, in terms of PMR 29(4).
When special resolutions are needed
A special resolution is required to:
1. Sue the developer;
2. Insure against additional risks;
3. Purchase or otherwise acquire units, mortgage or sell units;
4. Borrow money;
5. Enter into short leases of common property to owners and occupiers;
6. Cancel registered exclusive use rights;
7. Approve servitudes or restrictive agreements;
8. Approve section extensions;
9. Make or change conduct rules;
10. Create and confer exclusive use rights in terms of a conduct rule;
11. Make rules altering vote values or contribution liability (which further requires written consent of any owner adversely affected);
12. Remunerate member trustees;
13. Hold general meetings outside of the municipal area of the scheme;
14. Appoint an executive managing agent;
15. Cancel a management agreement on two months’ notice;
16. Approve a reasonably necessary improvement should a meeting be requested;
17. Approve body corporate installation of pre-paid meters on the common property.
As you can see, the outcome of special resolutions are far-reaching and so it’s important that these types of votes are tabled, taken and recorded correctly.
Author: Zerlinda van der Merwe, Paddocks