Here is Part Three in the series of 'Life Rights' articles written by Prof Graham Paddock. 

CLICK HERE for part 1 of this 5 part series

CLICK HERE for part 2 of this 5 part series

UNDERSTANDING LIFE RIGHTS: LRMA Committee, Management and Meetings

Article by Graham Paddock

Introduction: The first two parts dealt with the basics of life rights and then the establishment, nature, members and levies of a life right management association (‘LRMA’) in terms of regulations 6 to 12, 14 and 15 under the Housing Development Schemes for Retired Persons Act of 1988 (‘the Act’). In this third part I examine the LRMA’s committee, management and meetings and briefly compare it with a sectional titles body corporate.

Committee: At the Annual General Meeting the LRMA members must appoint the members of a committee. The committee can exercise the LRMA’s duties and powers to the extent that its members have conferred on it these obligations and rights and the members may give the committee specific directions, which are binding on its members. The committee decides how it will meet and conduct its affairs (Reg. 9(1)(p) and 9(7)(a)(ii)(bb)). The committee members must elect a chairperson (Reg 9(7)(c)). There is no provision for the chairperson to have a casting vote to break a tie at committee meetings.

Managing Agent:

• Appointment: The developer must appoint a managing agent for the scheme when it first alienates a life right. The management contract extends from year to year unless the developer, or after the first general meeting, the LRMA terminates the appointment with effect from the next annual expiry date (Reg. 6).  
• Assignment: When the LRMA is established, all the developer’s rights and obligations under the management agreement are automatically assigned to it (Reg. 11).
• LRMA assignment to managing agent: The LRMA can assign or cede any of its rights or duties to its managing agent (Reg. 9(4)).

General meetings:

• First general meeting: Within 60 days of its establishment the developer must call a meeting of the LRMA and give members a local authority certificate showing all rates and taxes on the land have been paid (Reg. 10).
• General meeting procedure: The members in general meeting decide how general meetings must be run, but by default: 14 days notice is required, a quorum is at least two members and the committee chairperson also presides at general meetings, and the notice of special business must be given to all members, the developer and the managing agent (Reg. 9(7)(a)(i)), 9(7)(b) and (c)) .
• Annual General Meetings: These must be held once a year, with not more than 15 months between them. They must deal with the approval of the budget, the election of the committee members, any special business and the determination of the LRMA’s service address (Regs. 9(5) and 9(7)(a)(ii)).
• Special General Meetings: All meetings other than the AGM are special general meetings. A detailed income and expense budget for the following year must be made available to all life right members at least 14 days before the AGM and the budget must be approved at that meeting (Regs. 9(5) and 12).
• Special resolution: This term is defined as a resolution passed by a majority of not less than three fourths of the votes of all life right purchasers / LRMA members, at a general meeting of which at least 14 days notice specifying the proposed special resolution has been given (Reg. 1).
• Voting: Members can appoint proxies and all matters are decided by simple majority, on a show of hands each member has one vote and on a poll they have one vote for each housing interest they hold (Reg. 9(6)).

The fundamental differences between a sectional title body corporate (STBC) and a LRMA are:

• Tenure rights: Sectional title owners have registered real rights recorded in the deeds registry. Life right holders have ongoing contractual rights and obligations to the developer in terms of a life right agreement and statutory rights and obligations under the Act. 
• Statutory regulation: STBCs are extensively regulated by the Sectional Titles Schemes Management Act of 2011 (‘STSMA’) and each body corporate’s management and conduct rules. LRMAs are only regulated by regulations 6 to 12, 14 and 15 under the Act and any conduct rules they may make. Both STBCs and LRMAs are community schemes that fall under the jurisdiction of the Community Schemes Ombud Service.

There have been STBCs since 1973 and LRMAs since 1988. Because the Act presupposes that every housing development scheme for retired persons will be based on only one of sectional titles, share blocks or life rights, neither the STSMA nor the Act contemplate the situation in which a retirement scheme might be subject to both of these statutes. However, in practice this does occur, with more than one management body established to administer the same scheme. The complexities that can arise in these circumstances will be discussed in part four of this series.

Courtesy: Graham Paddock

Graham Paddock is a specialist community schemes attorney, notary and conveyancer. He has been advising clients and teaching students for over 40 years, and was an adjunct professor at UCT for 10 years.

Article reference: Paddocks Press: Volume 18, Issue 19.

Web Link: https://www.paddocks.co.za/paddocks-press-newsletter/paddocks-press-understanding-life-rights-part-3/

This article is published under the Creative Commons Attribution license.