A bit of background and legislation applicable to Body Corporates (Sectional title schemes)

The body corporate is established after opening a sectional title register, when the developer transfers the first unit into the name of someone other than itself. The Registrar of Deeds must issue a certificate to the effect that the body corporate has been established.

All owners of sectional title units are members of the body corporate, and they remain members until their respective units have been alienated. The developer is also a member of the body corporate until it has ceased to have a share in the common property when the last unit registered in its name has been alienated.

Sectional title schemes are creatures of statute in terms of which they are established and governed. The current legislation that governs sectional title schemes are the following:

• The Sectional Titles Act 95 of 1986 (STA)
• The Sectional Titles Schemes Management Act 8 of 2011 (STSMA)
• The Community Schemes Ombud Service Act 9 of 2011 (CSOSA)

In addition to the above, The Sectional Titles Schemes Management Regulations, 2016, issued in terms of The Sectional Titles Schemes Management Act, 2011 (Act No. 8 of 2011), have been effective since 7 October 2016 (STSMA regulations).

The Regulations contain the Management Rules for sectional titles schemes, as prescribed and as amended by a body corporate in accordance with section 10 of the Act.

The STA and STSMA are specific pieces of legislation applicable to the sectional title industry and are fleshed out by the STSMA regulations and its annexures (the prescribed management and conduct rules).

Audit requirements for Body Corporates (Sectional title schemes)

In terms of the STSMA regulations, rule 26(4) states that “unless all the sections in the scheme are registered in the name of one person, the body corporate must present audited financial statements to a general meeting for consideration within four months after the end of the financial year.”

Rule 26(5) further states that “The audit of a body corporate’s annual financial statements must be carried out by an independent auditor who has not participated in the preparation of the annual financial statements or advised on any aspect of the accounts of the body corporate during the period being reported on…”

In a nutshell, according to the above legislation, the annual financial statements of all body corporates (sectional title schemes) are required to be audited by an independent registered auditor and presented at the general meeting annually.

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