Are Sectional Title Schemes A Viable Option For Low-Income Households?

The following Op-Ed is written by Anneline R. Turpin, Attorney- LRC Land Programme

Our Constitution affords us the right to adequate housing. According to the United Nations Committee on Economic, Social and Cultural Rights[1], the right to adequate housing should be seen as a right to live somewhere in security, peace, and dignity with one of the entitlements being security of tenure. It is almost an instinctual belief that home ownership provides an individual with security of tenure. Based on this belief, many tenants living in former state -owned flats (sectional units) accepted the offer to purchase their homes under the government’s Enhanced Extended Discount Benefit Programme (Benefit Programme). The Department of Human Settlements[2] reports that the benefit programme was introduced “to assist persons to acquire state financed rental housing, existing sales debtors to settle the balance on purchase prices of properties acquired from the public sector or to settle publicly financed credit that had been used for housing purposes. This programme applies to state financed properties first occupied before 1 July 1993 and stands or units contracted for by 30 June 1993 and allocated to individuals by 15 March 1994. The programme entails the discounting of an amount on the selling price or outstanding loan balance of the property and where the discount amount equals or exceeds the purchase price or loan balance, the property was transferred free of any further capital charges.” The intention of the state may have been to provide ownership to previously disadvantaged families with limited means, but the reality is that the offer of ownership entailed the financial burden of maintaining sectional title schemes being passed onto low-income households. These costs have proven unaffordable with the consequence of homelessness becoming a real threat to security of tenure.

Sectional title legislation at the time of its implementation was intended to apply to the middle- and high-income earning households. The Sectional Title Act 95 of 1986 (Sectional Title Act) when implemented sought to regulate and provide for the division of buildings into sectional units and to provide for that of the common property. Body corporates were also established to control the common property and to apply rules to the schemes. In 2011 the Sectional Title Schemes Management Act 8 of 2011 (Schemes Management Act) was enacted, amending various sections of the Sectional Title Act. The Schemes Management Act regulates the establishment, management, powers, and functions of body corporates. The Community Schemes Ombud Service Act 9 of 2011 (CSOS) was established to regulate the conduct of parties within community schemes and to support their good governance. Community Schemes are defined in the CSOS Act as “living arrangements where there is shared use of and responsibility for land/buildings such as sectional title, homeowners’ associations, retirement housing schemes, share block companies and housing cooperatives”. Once ownership of a unit is passed, the owner will automatically become part of the body corporate of that sectional title scheme.

The eThekwini Municipality currently owns and lets approximately 7460 rental units, termed council rental stock. Tenants are still encouraged and, in some cases, compelled by Human Settlement functionaries or representatives to purchase their flats for a nominal sum. A case study of Flamingo Court, Umbilo conducted by the Urban Future Centre stated that “Letting go of rental stock is a way for the municipality to reduce the expenses related to maintenance and utilities associated with public ownership.”  Community consultations confirm that prior to the sale and transfer of these flats, the purchaser is not provided with any meaningful information from the municipality or any state organ regarding the duties and obligations of owning a sectional unit. The new owners, however, soon realise that the maintenance of their scheme including the common property is transferred to them. For sectional title schemes to remain financially viable, the body corporate must be able to provide for the maintenance and running costs of the scheme. The collection of levies is paramount, and the administration of the scheme’s affairs requires legal, accounting, and financial knowledge and constructive participation from the people residing in the scheme. Tenants offering to take ownership, need to be informed of the financial implications for the collective responsibility for the repair, upgrading, maintenance and upkeep of all common areas, including the insurance, services and rates for the common areas.

The body corporate is also responsible for all operating costs paid through an administrative fund whilst maintenance is provided for by a reserve fund. These funds are maintained by levying contributions from unit owners. Owners are further collectively levied for the cost of the Community Schemes Ombud Service, which provides adjudication and dispute resolution for sectional title schemes. Owners are also responsible for special levies that trustees raise from time-to-time.

The Legal Resources Centre (LRC) has partnered with the Poor Flat Dwellers Movement and the South Durban Community Environmental Alliance and through our advocacy work we convene training sessions to assist and inform affected communities. Using information booklets and workshops, we seek to improve communities’ knowledge of their duties and obligations as sectional title owners. In instances of gross mismanagement of the sectional scheme, the LRC has litigated (Flamingo Court, Garuppa Heights) within the eThekwini to ensure that several households right to security of tenure remained protected.                                    

Municipal rental stock should only be converted to sectional title schemes, once the scheme’s body corporate has undergone rigorous education and training to ensure that the beneficiaries will be capable of managing the sectional scheme. We support ownership affordability tests at the outset to determine whether the scheme is financially sustainable. Where households do not ‘pass’ the affordability test, the LRC recommends that those households remain within the subsidized rental programme, to protect against execution and eviction due to a failure to make levy contributions.

Sectional title schemes may not be the most appropriate model of ownership for indigent and/or low-income households. One of the reasons for offering ownership under the Benefit Programme was to address our harsh political past of forced removals and to provide a means of security for urban land tenure. However, by placing former council stock renters under the umbrella of sectional title ownership, the state may be prejudicing the right to security of tenure. If government views sectional title schemes as a viable option to accommodate large numbers of households within a limited space, then reform of the sectional title regulatory framework must be considered to accommodate indigent and low-income households living within sectional schemes. Without urgent governmental intervention vulnerable families remain at risk of execution and homelessness, as they will not be able to benefit further from other state housing benefits.

[1] The Committee’s general comments No. 4 (1991) on the right to adequate housing and No. 7 (1997) on

forced evictions.

[2] Department: Human Settlements Province of Kwazulu-Natal, Housing Subsidy, Financial Interventions:  Enhanced Extended Discount Benefit Scheme, Part 3 of the housing Code, 2009.