When the Sectional Titles Schemes Management Act (STSMA) was signed into law on 7 October 2016, it shook up the lives of many body corporate members. The intention of the Act is good and, in essence, very positive for trustees, however, implementation of the legislation has proven to be less successful. Many schemes have been slow to embrace both the requirements and intent of the legislation insofar as scheme maintenance is concerned and directed, the biggest failure being in that it assumes that the maintenance will done.
Our experience has shown that in practice, this is not necessarily the case. In my opinion, three-to-five-year plans would be more realistic and more achievable. Definitive plans and the reserve levies required to implement them are often not practically affordable.
The legislation makes it mandatory for every scheme to have a 10-year maintenance plan, detailing projected works and providing the computation for levies that must be approved by the owners at the annual general meeting (AGM). Delayed AGMs due to Covid-19 and rising levels of debt, exacerbated by a weak economy, are also compromising the ability of schemes to run effectively. Their financial wellbeing is under threat and often funds ring-fenced as reserves – as per legislative directive – are utilised out of necessity to fund administrative shortfalls.
Sectional title schemes have to reassess levy contributions and critically, build up separate funds for reserve spend - on top of day-to-day expenses. This has created a challenge for many trustees whose fiduciary duty it is to fulfil this obligation. In all fairness, being a trustee is often a thankless task, carried out by well-meaning volunteers, who often, understandably, have neither the skill nor the experience in putting together 10-year maintenance plans and how to finance them.
On this, the fourth anniversary of the promulgation of the STSMA, we review aspects of the Act and offer advice, with specific reference to sectional title bodies corporate, on how community schemes (residential juristic entities, sectional title bodies corporate, homeowners associations and share block companies) can measure their current status and plan the way forward:
It is my view that only the market will correct the above, when prospective owners actively and critically assess reserve budgets and associated funds available, direct a maintenance and management plan and, critically, both managing agents and scheme executives accept that maintenance should be managed professionally and are prepared to meaningfully engage with specialists in the field.