Body Corporate Matters - Exploring Voting Disqualifications in Sectional Title Schemes
By Jennifer Paddock
Owners of units in sectional title schemes are becoming more and more educated and familiar with the prescribed management rules (PMRs) made under the regulations to the Sectional Titles Schemes Management Act No. 8 of 2011, which apply to most schemes. This means that scheme managers need to be more on top of their game than ever.
Jennifer Paddock
In this article I unpack the provisions in the PMRs that deal with voting disqualifications and the implications these provisions have on quorum requirements. If you understand these you will be less likely to find yourself on the other side of a Community Schemes Ombud Service (CSOS) application brought by a clued-up owner challenging the validity of a body corporate resolution and/or general meeting.
1. PMR 20(2) – When owners are not allowed to vote:
An owner’s entitlement to vote on ordinary resolutions is revoked in the following circumstances:
a) FAILURE TO PAY DESPITE ORDER:
If an owner fails or refuses to pay the body corporate any amount due after a court or adjudicator has issued a judgment or order against them for payment of that amount, the owner is not allowed to vote for ordinary resolutions. This disqualification only stops an owner from voting for ordinary resolutions if there is an outstanding court order or CSOS order against them and, despite the order, the owner still refuses to pay. An owner who has fallen into arrears but does not have a formal order to pay the arrears is still entitled to vote for all resolutions.
b) CONTINUED BREACH OF CONDUCT RULES DESPITE ORDER:
If an owner persists in violating any of the conduct rules despite a court or CSOS adjudicator’s order to refrain from breaching the rules, the owner is not allowed to vote for ordinary resolutions. Again, this disqualification only applies if there is a formal court or adjudication order in place ordering the breach/s to stop and, despite such order, the owner continues to breach the conduct rules.
It is important to note that an owner who is disqualified from voting due to one of the above circumstances is still entitled to vote for special and unanimous resolutions.
2. PMR 14(3) – When trustees are not allowed to vote:
A trustee is not entitled to vote on any:
a) contract or dispute involving the body corporate in which the trustee is directly involved; and
b) any other matter in which the trustee has a personal interest, whether directly or indirectly.
The purpose of this disqualification is to avoid any conflict between the trustees’ personal interests and those of the body corporate which they are serving.
3. PMR 16(3) – When the developer is not allowed to vote:
At the first general meeting of a new sectional title scheme, the developer is not entitled to vote on the following motions:
a) the motion to approve evidence of income and expenditure concerning the management of the scheme from the date of the first occupation of any unit until the date of establishment of the body corporate during the initial period;
b) the motion to approve the financial statements relating to the management of the scheme from the date of establishment of the body corporate to the date of notice of the first general meeting;
c) the motion to ratify or not ratify any contract entered into by the developer on behalf of the body corporate;
d) the motion confirming that the developer has furnished the body corporate with copies of all the documents that the developer is obliged to hand over to the body corporate (including a copy of the sectional plan, a rates clearance certificate from the local council confirming that all rates up to the date of establishment of the body corporate have been paid, and proof of the scheme’s income and expenditure from date of occupation of the first unit until the date the body corporate was established);
e) the motion confirming that the developer has paid over to the body corporate the residue of the income referred to above.
4. PMR 20(3) – Votes of sections owned by the body corporate don’t count:
Any votes associated with sections that are registered in the name of the body corporate are considered abstentions and therefore don’t count.
The body corporate itself cannot have voting rights at its own meetings or in the decision-making process. This provision ensures that decisions are made solely based on member votes, reflecting the will of the members of the body corporate.
5. PMR 19(2) and (3) – Impact on quorum requirements:
The disqualifications mentioned above have implications for the calculation of a quorum in sectional title schemes.
PMR 19(2) specifies how many body corporate members must be present or represented at a general meeting to constitute a quorum and it states that only members who are entitled to vote must be counted for this purpose. This means that persons who are disqualified from voting must not be counted for the purposes of establishing a quorum.
It is important to note that in terms of PMR 19(2) and (3) the value of votes associated with sections registered in the name of the body corporate or the developer is not taken into account when establishing a quorum.
6. Conclusion:
Understanding the disqualifications from voting in sectional title schemes is crucial for sectional title scheme managers to ensure that general meeting quorums are properly constituted and that body corporate resolutions are legally binding.
Courtesy: Paddocks Press
Article reference: Paddocks Press: Volume 19, Issue 2.
This article is published under the Creative Commons Attribution license.
