Different types of decisions require different levels of consensus in sectional title schemes. The general principle is that the more the decision affects the members of the body corporate (from a financial perspective), the higher the level of consensus is required. In the next series of articles, I will deal with the different types of resolutions, namely a sectional title special resolution, ordinary resolution; and unanimous resolution.
How to take a special resolution in a body corporate
Special resolutions are defined in section 1 of the Sectional Titles Schemes Management Act 8 of 2011 (“the STSM Act”) as:
“Special resolution means a resolution –
- Passed by at least 75% calculated both in value and in number, of the votes of the members of a body corporate who are represented at a general meeting; or
- Agreed to in writing by members of a body corporate holding at least 75% calculated both in value and in number, of all the votes.”
Section 6(2) of the STSM Act requires that at least 30 days of written notice be given (unless the scheme’s rules provide for shorter notice) if there is a special resolution on the agenda of the sectional title meeting. PMR 15(3)(b) requires that the notice must be accompanied by a copy or comprehensive summary of any document that is to be considered or approved by members at the meeting.
Quorum requirement and delayed effect of some special resolutions
There is no raised quorum requirement for special resolutions taken at an AGM, but if a special resolution is taken at a meeting by members holding less than 50% of the total value of votes, then PMR 20(9) states that the special resolution does not become effective immediately. Should a special resolution be passed at an AGM by 75%, calculated in number and PQ, of a quorum representing less than 50% of the total PQ of all members in the scheme, the body corporate must not implement the special resolution for one week following the meeting where the special resolution was passed. The trustees can take a resolution to implement the special resolution in circumstances where there are reasonable grounds to believe that immediate action is necessary to ensure safety or prevent significant loss or damage to the scheme. Within seven days from the passing of the special resolution, the members who hold at least 25% of the total votes (calculated in value) may, by written and signed request delivered to the body corporate, require that the body corporate hold an SGM to reconsider the special resolution. In terms of PMR 20(10), the trustees must not implement the special resolution, unless it is again passed by special resolution, or a quorum is not present within 30 minutes of the time set for the second SGM.
Types of decisions requiring a sectional title special resolution
The following list is a complete record of the types of decisions that require a special resolution:
- Section 2(7)(e) of the STSM Act: Suing the developer for a claim in respect of the scheme.
- Section 4(b) of the STSM Act: To approve the purchase, acquisition, transfer of, mortgage, sale, give transfer of or hire or let of a unit by the body corporate.
- Section 4(e) of the STSM Act: To approve the body corporate borrowing money.
- section 4(h) of the STSM Act: To approve the short-term lease of common property.
- Section 5(1)(f) of the STSM Act: The cancellation of a notarial deed of cancellation of an exclusive use right in terms of section 27(5) of the Sectional Titles Act 95 of 1986 (the “ST Act”).
- Section 5(1)(g) of the STSM Act: To execute or accept servitudes or restrictive agreements that the creation of a servitude burdening or benefiting the land contemplated in terms of section 29 of the ST Act.
- Section 5(1)(h) of the STSM Act: Authorising the extension of a section as contemplated in section 24 of the ST Act.
- Section 10(2)(b) of the STSM Act: Substituting, adding to, amending or repealing the conduct rules.
- Sections 10(7) and (8) of the STSM Act: The creation or amendment of exclusive use rights in terms of the conduct rules in terms of section 27A of the ST Act.
- PMR 8(2): Authorising the remuneration of trustees who are owners.
- PMR 15(4): To decide to hold a general meeting outside of the scheme’s municipal area.
- PMR 23(8): Deciding that the body corporate must insure against more risks than fire and those prescribed.
- PMR 28(1): To appoint an executive managing agent.
- PMR 28(7)(a): To cancel the managing agent’s appointment on two months’ notice.
- PMR 29(4): To approve the installation of pre-paid meters.
Different requirements of special resolutions
The following two decisions require different or additional consent to the normal special resolution requirements:
- Section 11(2) of the STSM Act: Making rules that vary the effect of the participation quota for the purpose of vote values and liability to make contributions. To approve these rules the body corporate must take a special resolution and must also obtain the prior written consent of owners who are adversely affected by the decision
- PMR 29(2): Authorising an improvement or alteration to the common property that is reasonably necessary. In terms of this procedure, the body corporate needs to approve the changes to the common property only if an owner requests a meeting to discuss and vote on the issue after trustees have notified owners of their intention to proceed with improvement.
As discussed, special resolutions are required for some very important body corporate decisions. It is for this reason that the correct procedures need to be followed in order for there to be a successful outcome at the meeting.
Stratafin has created an AGM Template pack that includes everything that you will need to host a legally compliant AGM, including the notice of change of rules as discussed in this article.
Written by Dr. Carryn Melissa Durham of Stratafin.