Commercial levy centre of attention

This week a reader presents the Property Poser panel with an interesting question about setting up a participation quota system for a commercial property, in this instance a shopping centre.

The reader explains that the centre comprises 28 freehold stands, each with a building upon it. According to him, the “memorandum of articles” refers to a levy based on a budget divided by that number.

Lucille Geldenhuys Attorneys

Lucille Geldenhuys Attorneys

When a recent vote was taken, the decision was reached in principle, but no resolution drafted, that the levies should be charged per square metre according to the size of each building.

The reader wishes to know whether there is any justification in using this method for determining the levy payable.

According to Lucille Geldenhuys from Lucille Geldenhuys Attorneys in Stellenbosch the shopping centre appears to be operated as a homeowners’ association (HOA) despite the buildings being used for commercial rather than residential purposes.

“This may have arisen as a result of title deed and/or zoning and land use restrictions.”

In law applicable to sectional title, the participation quota is expressed as a percentage with four decimal places, says Geldenhuys.

“It determines the value of the owner of the section’s vote, his or her undivided share in the common property and proportional contribution to the running costs of a body corporate.”

Geldenhuys says it is arrived at by dividing the floor area of the section by the total floor area of all the sections in the scheme.

“In the case of an HOA, the provisions of the Sectional Titles Act are not applicable, but, if a non-profit company is involved, rather contract and company law.”

The constitution will therefore refer to the provisions used in determining the relative contributions by the respective owners, says Geldenhuys.

If changes are to be made to these provisions, the constitution will again be instrumental in determining how this should be done, says Schalk van der Merwe from Rawson Properties Helderberg.

Schalk van der Merwe - Rawson Properties

Schalk van der Merwe – Rawson Properties

“This will usually take place at the annual general meeting or a special general meeting.”

Van der Merwe says the constitution should state how such a special general meeting can be convened, the quorum required to properly constitute such a meeting and the number of votes required to effect an amendment.

“In principle, there’s no reason why the provisions in the Act can’t be replicated in the constitution of the HOA in question, as it will be done by agreement.”

This may result in a more fair division of expenses in instances where utility use and costs are higher as a result of a larger sized building, says Van der Merwe.

“Similarly, as the arrangement is by agreement, there may be some other basis that appeals to the various parties in question and is more appropriate in the circumstances applicable to the shopping centre and its layout.”

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