By Auren Freitas dos Santos

Buying a unit in a sectional title scheme is a very exciting, yet daunting experience.  To ensure the utmost peace of mind it is important to be cognisant of your rights when purchasing a unit from the developer in a development scheme.

When any person other than the developer becomes the owner of a unit in a sectional title scheme, a body corporate is established. In terms of section 2(8)(a) of the Sectional Title Schemes Management Act 8 of 2011 (“the STSM Act”), the developer must convene the first general meeting of owners not more than 60 days after the establishment of the body corporate. Prescribed Management Rule 16(4) as included in the STSM Act (“PMR”), provides for the agenda points which must be discussed at the first general meeting of owners. One of the most important discussion points is the ratification of the terms of any contract entered into by the developer on behalf of the body corporate.

The reason for this ratification can be found in section 15(2) of the STSM Act which affords protection to members of a development scheme by providing that no debt or obligation arising from any agreement between the developer and any other person is enforceable against the body corporate. For example, should the developer have entered into a contract with a managing agent or a service provider to maintain the lifts in the scheme, these contracts will not be binding on the body corporate unless ratified at the first general meeting of the owners. As the developer’s vote on the body corporate’s ratification of contracts is suspended, the developer does not have any say in this regard and the decision is left to the members present at the first general meeting of owners.

Should the developer fail to convene the first general meeting within 60 days after the establishment of the body corporate, PMR 16(6) prescribes that any member of the body corporate can call for the meeting and the body corporate can recover the cost of doing so from the developer. Furthermore, such a contravention of the Act by the developer is a criminal offence and the developer will be liable for a fine or imprisonment for a maximum of two years, or both.

The provisions, as described above, are focused on protecting the interests of individuals buying a unit in a development scheme and ensuring that the wishes of the members are respected. It is important for members of a newly established body corporate to be cognisant of their right to ratify contracts entered into by the developer on behalf of the body corporate. Should these contracts have an adverse effect on the financial well-being of the scheme, the members have the right to cancel the agreement and negotiate more favourable terms.

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