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Your ST scheme needs your vote before it can rent out common property

The installation of a cellphone mast on the common property within a sectional title complex will benefit not only the members of the scheme, but also the residents of the neighbourhood. What’s more, is that a long-term lease agreement with a cellphone service provider is often associated with quite a significant additional income stream, which could negate the need for a levy increase or raising of special levies, making such a proposal very attractive to the trustees of a sectional title scheme.

It is important to know what the powers of the trustees of a scheme are with regards to entering into an agreement such as this with a third party cellphone service provider. Zerlinda van der Merwe, an admitted attorney who forms part of the Paddocks Private Consulting Division, advises that, although the benefits to the scheme is clear, trustees should consider all possible effects from the installation of a cellphone mast in the complex or estate before entering into an agreement with the third party.

Van der Merwe explains that, should a third party cellphone service provider approach the scheme (represented by the trustees) the trustees must ensure that the correct procedure, as set out in the Sectional Titles Act 95 of 1986 (“the Act), is followed to obtain approval to enter into the lease agreement.

The lease agreement for a part of the common property will be entered into between the body corporate, with trustees as representatives, and the third party service provider. In this regard the trustees must obtain the approval of a unanimous resolution of the members of the body corporate, in accordance with section 17 of the Act. Once the unanimous resolution is obtained, the trustees, in accordance with section 17(2) of the Act, must ensure that a trustee resolution is prepared and signed by two trustees.

Important conditions pertaining to the agreementTaking note

“The part of the common property which will be used for the installation of the mast must not be subject to any right/s of exclusive use,” stresses van der Merwe, explaining that this applies whether the right of use is registered in the name of a member of the scheme, in terms of section 27 of the Act, or created and allocated to a member by the scheme’s registered management or conduct rules, in terms of section 27A of the Act.

Should a trustee have an interest in the contract to be entered into, for example, should they be a shareholder in the service provider, they will be disqualified, in terms of Prescribed Management Rule 23 of Annexure 8 of the Regulations to the Act, from signing the trustee resolution, and entering the lease agreement on behalf of the body corporate. In a case like this the trustee should not be involved with any further negotiations with the service provider.

Often, trustees are of the mistaken belief that they are entitled, without the approval of the members, to enter into such a lease agreement. However, in terms of section 38(i) of the Act, the trustees are only entitled to enter into a short-term (shorter than ten years) lease agreement, with a member of the body corporate, or a current occupier of a unit within the scheme. Whereas, section 17 of the Act, as set out above, applies to long term (longer than ten years) lease agreements, entered into with either, members, occupiers or third parties.

This advice first appeared on Paddocks


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