Thinking Inside the Box

A Paddocks Sectional Title Lifestyle Blog

Lease agreements in sectional title schemes

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By Zerlinda van der Merwe

While the body corporate is not involved in the legal relationship between an owner, as a member of the body corporate and landlord of a unit, and a tenant, the body corporate is able to enter into its own lease agreement relating to the use and occupation of portions of the common property comprised in the scheme.

In terms of section 4(h) of the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”), the members of the scheme may, by special resolution, authorise the trustees to enter into a written lease agreement with an owner or an existing occupier of a section, relating to the use of a portion of the common property. Provided that the lease period, or any subsequent renewal period thereof, does not exceed ten years, as this would contemplate a long term lease agreement.

With regard to long term lease agreements, section 17 of the Sectional Titles Act 95 of 1986 (“the STA”) and section 5(1)(a) of the STSMA, provides that the owners and holders of a right of extension (in terms of section 25 of the STA) may, by way of a unanimous resolution, direct the trustees to let common property to an owner, occupier of a section, or a third party, for period of ten years and more. The unanimous resolution, once passed by the members, must be supported by a trustee resolution, and a notarial lease of land must be registered.

When entering into either a short term or long term lease agreement, the parties to the lease agreement may agree to a reasonable monetary amount as rental in exchange for the use of the portion of common property under the lease agreement, as well as any conditions of use and enjoyment such as compliance with the scheme’s registered management and conduct rules.

Portions of common property which are often included in short term lease agreements are parking bays, store rooms, and any part of the common property suited to the use of owners and occupiers. Whereas, long term lease agreements are often entered into between the body corporate and third parties for the use and operation of laundry facilities, positions most suited for the installation of cellphone masts or the infrastructure for fibre optic services, and the provision of public parking in mixed use sectional title schemes.

Before entering into a lease agreement, the body corporate must ensure that the correct process is followed, and that the parties to the lease agreement are duly authorised to do so. Failure to do so, may result in an unenforceable lease agreement.

Should you have any queries relating to this topic, or require our services to draft a lease agreement over common property, contact us via email at consulting@paddocks.co.za or telephonically on 021 686 3950.

Image source: aos.iacpublishinglabs.com

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3 comments on “Lease agreements in sectional title schemes

  1. Valerie Thompson
    January 2, 2017

    Thank-you for this article Zerlinda. In paragraph two you state that the BC may, by SR, “…authorise the trustees to enter into a lease agreement with an owner or an existing occupier of a section….” Does this mean that a party who is not an owner or an existing occupier may not lease an EUA? I am thinking here of the domestic workers employed by members and tenants being the only parties who may occupy EU domestic staff rooms and for which a lease has been signed by a member or occupier. This would also apply to staff rooms whose EU rights vest in the BC.

  2. Anne Greening
    December 29, 2016

    Hi, Zerlinda, One of our Sections is an registered step-down hospital. This section does not have its own kitchen, so we lease our common property kitchen to the owners, and they provide meals for our residents, to order.
    The lease is for one year, and is renewable annually. The lease has been in place for at least 15 years, and the arrangement has proved beneficial to both parties. We plan to obtain the necessary special resolution at our next AGM, to continue with this practice. I am wondering whether we need to re-approve the resolution at every AGM in future?

    • Paddocks
      January 11, 2017

      Hi Anne,

      Thank you for your comment. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.

      Kind regards,
      Paddocks

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