11 Mar How do you know if your scheme is compliant with the STSM Act?
The Sectional Title Schemes Management Act (STSMA) brought many new compliance requirements for sectional title schemes. Although some of these are from the old legislation prior to 2016, most are new and require more frequent assessment.
Community Schemes Ombud Service (CSOS)
All sectional title schemes are obliged to be registered with CSOS and each owner in a scheme must contribute a monthly levy to CSOS – to be paid quarterly – which is calculated based on their administrative levy contribution.
In addition, each scheme must submit the details of their newly appointed trustees as well as the financial statements of the scheme to CSOS after their annual general meeting (AGM).
Annual General Meetings
Legislation on when AGMs must be held has not changed since the STSMA came into effect. Schemes are required to have their AGMs within four months from the financial year-end of the scheme. The COVID-19 pandemic made this very difficult for schemes to adhere to and CSOS has been accommodating by providing extensions.
Prior to the pandemic it was always accepted that meetings should be held in person but this has now changed with online and hybrid meetings becoming viable alternatives. Accordingly, many more schemes than in past have been able to attend their AGMs and be compliant with the Act.
Maintenance Repair and Replacement Plan (MRRP)
Each scheme is obligated by law to prepare a MRRP which outlines their major capital expenditure for the next 10 years. This plan must be prepared by the trustees and presented to the members at each AGM.
Trustees often choose to appoint a third party with building construction knowledge and relevant experience to prepare the MRRP on their behalf.
In the past, there was no obligation on schemes to have the buildings valuated but this led to various problems, such as the replacement values of the sections being too high or too low, rendering the scheme over-or under-insured. The effect of this is that schemes were paying for insurance that was not based on updated or accurate replacement costs.
The STSMA now requires schemes to be valued by independent valuers every three years. These valuations can be used to adjust insurance replacement values to more realistic levels.
This type of insurance was previously not compulsory and left to members to decide if they wanted to incur the annual premium for this cover. It was always assumed that it was the property managers’ responsibility to insure the scheme’s funds as they were managing its bank account.
Legislation now stipulates that fidelity cover is required to insure the scheme’s funds against any fraudulent activities by the trustees or anybody else who has access to the funds. It further states that the premium for this insurance must be paid for by the scheme itself.
Policing of Compliance Requirements
All of the above requirements are relevant and valid, and have a specific purpose; however, it is difficult to see how, and by whom, these compliance requirements will be enforced as there is no way for any body of authority to keep control of all of these requirements. At the end of the day, each scheme must decide for themselves and keep in mind that aside from the items listed in this article being obligated by law, it mainly serves to protect the body corporate members and their property assets.
For schemes to keep up to date with their compliance it is important that responsible and committed trustees are appointed who know and understand the relevant Acts, and to appoint property managers that can assist and advise trustees on their duties with skill and efficiency.
As new laws are introduced in the country, schemes are encouraged to adapt and comply with further legislation which can only be done with astute trustees and managers managing the affairs of the scheme.