Critical perspectives on the allocation of participation quotas to sections in mixed-use sectional title schemes; The adjustment of quotas after extensions to the scheme by the addition of non-residential sections; and the modification of quotas by the body corporate in mixed-use schemes

• Jurisdiction: South Africa
• Date: 12 October 2020
• Citation: (2020) 31 Stell LR 179
• Published date: 12 October 2020
• Pages: 179-200
• Author: Van der Merwe, C.G.

179

CRITICAL PERSPECTIVES ON THE

ALLOCATION OF PARTICIPATION QUOTAS TO

SECTIONS IN MIXED-USE SECTIONAL TITLE

SCHEMES; THE ADJUSTMENT OF QUOTAS

AFTER EXTENSIONS TO THE SCHEME BY THE

ADDITION OF NON-RESIDENTIAL SECTIONS;

AND THE MODIFICATION OF QUOTAS BY THE

BODY CORPORATE IN MIXED-USE SCHEMES

CG van der Merwe

BA LLB BA (Hons) and BCL (Oxon) LLD

Research Fellow, Department of Private Law, Stellenbosch University,

Emeritus Professor in Civil Law, University of Aberdeen

Abstract

This tale of three courts tells the story of how three South African courts,

starting with the Durban Division, followed by the Pietermaritzburg full

court, and culminating in the Supreme Court of Appeal, addressed the

tribulations encountered in a single mixed-use sectional title scheme.

In a mixed-use scheme, the developer has unfettered discretion, rst, to

allocate quotas to each non-residential section in the scheme, and second, to

allocate a percentage of the total participation quotas to the non-residential

component of the scheme. The legislation intended that a fairer result

would be achieved if par value, as opposed to oor area, were used for the

allocation. I propose that the developer should be compelled to disclose the

formula he or she employs, both for allocating quotas to commercial sections

and for allocating the percentage to the non-residential component. This will

facilitate the adjustment of, rst, commercial sections’ quotas; and second,

the initial percentage allocated to the non-residential component where that

component is enlarged by the addition of a further commercial section to the

scheme. In the instant case, this never happened, with dire consequences for

the body corporate.

The Sectional Titles Schemes Management Act 8 of 2011 allows the

body corporate to modify the ratio for levy contributions by adopting a

special resolution authorising the insertion of a modifying formula in the

rules of the scheme. I contend that the insertion in a conduct rule, and not

a management rule, would sufce. As the New South Wales and German

legislative templates for the promulgation of the rst Sectional Titles

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(2020) 31 Stell LR 179

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180 STELL LR 2020 2

Act 66 of 1971 do not contain a proviso requiring the written consent of an

owner adversely affected by the modication, I propose that this proviso

should be eliminated and that the ombud service should be authorised to

modify an existing method of allocation that is blatantly unfair and causes

grave disharmony in the scheme.

Keywords

Mixed-use sectional title, participation quotas, modication of quotas, addi-

tion of non-residential sections

1 Introduction

The allocation of rights and obligations is one of the most important issues

addressed by sectional title legislation. The success or failure of a scheme

may well depend on an equitable formula being reached for such allocation.1

The allocation is addressed in section 32 of the Sectional Titles Act 95 of

1986 (“STA”), which deals with the determination of participation quotas for

each section in a scheme.

The participation quota is important as it determines:

(1) a sectional owner’s undivided share in the common property of the

scheme;

(2) the value of his or her vote for the adoption of resolutions at a general

meeting; and

(3) the levies that a sectional owner must pay for the maintenance and

administration of the scheme, including his or her proportional

liability for the debts of the body corporate.2

The STA adopted a unique method for the allocation of participation quotas

for mixed-use schemes having both residential and non-residential sections.

The participation quota for residential sections is based on the oor area

of a section proportionate to the total oor area of all the sections in the

residential component of the scheme.3 For non-residential sections, the

developer is given an unfettered discretion to determine the quotas for each

non-residential section in the scheme4 as well as the percentage that must be

allocated to the residential component of the scheme.5 In both these instances

the developer has absolute freedom and need not disclose the formula

1 CG van der Merwe “Sectional Titles” in CG van der Merwe & JC Sonnekus (eds) Sectional Titles,

Share Blocks and Time-sharing (Service Issue 26 of November 2019) 4-3.

2 Section 32(3) of the STA and s 11(1) of the Sectional Titles Schemes Management Act 8 of 2011

(“STSMA”).

3 Section 32(2)(a) of the STA.

4 Section 32(2).

5 Section 32(2)(a).

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