Arbitration
By Zerlinda van der Merwe
“When will mankind be convinced and agree to settle their difficulties by arbitration?” – Benjamin Franklin
Prescribed Management Rule (“PMR”) 71 of Annexure 8 of the Regulations to the Sectional Titles Act 95 of 1986 (“the Act”) provides that should there be a dispute between the body corporate and an owner, or a dispute between owners, relating to the Act and the Rules, the dispute will be determined by way of arbitration.
Owning and / or residing in a sectional title scheme, very often, results in some type of dispute, either between a member of the body corporate and the trustees representing the body corporate, or between members as co-owners and neighbours.
There is a Roman Law maxim I learnt when I first started specialising in sectional title that I am often reminded of – “communio est mater rixarum”, which means “co-ownership is the mother of disputes”.
Arbitration vs Court proceedings
As I mentioned earlier, PMR 71 provides that disputes be resolved via arbitration, however, there are matters where Court intervention is required. For example, where an Interdict (being either mandatory or prohibitory) or any form of urgent relief is required. The Act specifically prescribes Court relief in certain circumstances. Let’s take a look at a few of these circumstances.
Firstly, section 37(2) of the Act provides that arrear levies may be recovered by the body corporate by action in either a Magistrates’ Court or a High Court. Should there be no dispute regarding the outstanding levies, the Court will have jurisdiction in the collection of these arrear levies, as there is no dispute for an arbitrator to determine. However, should there be a dispute, it must first be referred to arbitration, if demanded by a party (the trustees or the member concerned) to the dispute.
An example of a case successfully referred to arbitration, is the Body Corporate Greenacres v Greenacres Unit 17. In this case there was a dispute relating to a claim for unpaid levies The body corporate claimed from the owner of a unit, unpaid levies and electricity charges in respect of the unit. The owner’s defence to the body corporate’s claim was that it, as owner, had undertaken, at its own expense, certain work on the scheme’s common property, which the body corporate was obliged to undertake, but which it had requested the owner to perform.
Secondly, section 1(3A) of the Act provides that a body corporate may approach the High Court for sanction should it be unable to obtain a unanimous resolution from its members.
Section 44(2) of the Act further provides that should an owner be of the opinion that refusal to consent to a change of use of a section (ie. for purposes other than as indicated on the registered sectional plan of the scheme) is unfairly prejudicial, unjust or inequitable, such an owner may make an application to the High Court for relief.
Section 46 of the Act provides for an application to the High Court for the appointment of an administrator. The case of Bouraimis v Body Corporate of The Towers set out certain guidelines which the High Court may consider when exercising its discretion in granting such an application, such as the fact that the body corporate is experiencing serious financial difficulties, that there is maladministration on the part of the trustees, and the possibility that owners may suffer substantial prejudice if an administrator is not appointed.
Arbitration proceedings
PMR 71 provides that the aggrieved party must notify the other affected party/ies in writing of a dispute. Should the dispute not be resolved within fourteen days of the notice, either party to the dispute may demand that the dispute be referred to arbitration.
The nature and complexity of the dispute and the costs involved in the adjudication thereof must be taken into consideration when determining the appointment of an arbitrator. An arbitrator must be an independent and suitably qualified person. Should the parties to the dispute not agree on an arbitrator to be appointed within three days of the demand for arbitration, an application can be made to the Chief Registrar of Deeds for the appointment of an arbitrator, who will be appointed within seven days of the application.
Arbitration may be held informally or otherwise, as the parties may agree, or as the arbitrator may determine. The provisions of the Arbitration Act 42 of 1965 are applicable to arbitrations in terms of the Sectional Titles Act, insofar as the provisions can be applied in sectional title matters.
The arbitrator shall make their award within seven days from the date of completion of the arbitration proceedings. An appropriate costs order may be made at the discretion of the arbitrator, who may determine that the costs of the arbitration be paid by any one of the parties to the dispute, or jointly, considering the outcome of the arbitration.
The arbitrator’s award is final and binding, and may be made an order of the High Court upon application.
Advantages and disadvantages of arbitration
The advantages of arbitration is that, if the procedure is followed, it is a relatively quick, cost-effective way to settle disputes between the body corporate and an owner, or between owners in the body corporate. Arbitration may be less formal than Court litigation, the proceedings are private and confidential, and it is considered to be less destructive to harmonious living within a sectional title scheme. It is also possible to appoint a suitably qualified and knowledgeable arbitrator for a specific dispute, which may differ in nature and complexity between schemes. On the other side of the coin, as arbitration does not involve public proceedings, the arbitrator’s award is private and not published, therefore it offers no precedent value and does not contribute towards the development of sectional title law.
Should you be considering instituting arbitration proceedings, or require specialised sectional title advice during your arbitration proceedings, please contact us at Paddocks.
Image source: complexes.co.za
Thinking Inside the Box 
Hi
Recently a non-owner trustee – chairman, declared a dispute against the trustees, as a non-owner he was not permitted to do this – however the Arbitrator made an owner (who just happened to be present?) he made him a “substitute owner” for the case to continue!!!!
Is this permitted ? the owner in question is in arrears with his levy to the tune of R11,000 surely owners that do not pay their levies for years should not have the ability to declare a dispute?
Sounds crazy – have you heard of this before?
Hi Les,
That is an interesting question. We have not heard of a case of a “substitute owner” before. Should there be a dispute, an owner, even if they are in arrears or not considered to be a member in good standing, is allowed to follow the procedure as set out in PMR 71.
Thanks,
Paddocks