A reader who is approaching retirement is considering his housing alternatives and has drawn up a shortlist of options.
One of these is a housing development that operates on the share-block system and he wants to know what the implications are of such a scheme.
See the reader’s question here.
While it has been eclipsed to a certain extent by sectional title schemes, the share-block option still finds its place in two typical circumstances – holiday accommodation and retirement villages.
The primary legislation applicable to the administration of a share-block scheme is the Share-Blocks Control Act.
This allows for the administration of a scheme permitting the use of immovable property by allocating a share to a particular person to whom such right to the property accrues through that share.
The immovable property belongs to a company, which is administered in accordance with provisions of its founding documents.
The accompanying use of a share held in such company – the right to accommodation and use of a portion of the immovable property – is also administered in accordance with these documents.
As a company is the owner of the immovable property, it also falls under the Companies Act insofar as the legislative provisions do not conflict with the terms of the Share-Blocks Control Act.
Importantly, and to provide the holder of a share with a measure of protection, the act is fairly inclusive in nature.
A company shall be presumed to operate a share-block scheme if any share of the company confers a right to or an interest in the use of immovable property or any part of immovable property.
It also states that the articles of a share-block company shall allow a member to be entitled to the use of a specified part of the immovable property.
These terms and conditions are contained in a use agreement entered into between the company and the member.
It is clear that the reader should examine both the founding documents of the company and the use agreement.
Due to the nature and intricacies of the documentation, it would be prudent for the reader to take legal advice on the content and provisions.
In this way he can ensure he is satisfied that the administration of the scheme in which he is interested will meet his needs and requirements.
Our reader must understand that, as the scheme is operated as a company, it will be administered and overseen by a board of directors.
In addition, similarly to a sectional title scheme, a levy, as prescribed by the board of directors, will be payable.
As set out in the act, this will allow for the maintenance, management and administration of the company and of the immovable property it operates in the share-block scheme.
It will also allow for the payment of rates and taxes and other local authority charges, as well as any charges for the supply of things such as electricity, gas, water, fuel and sanitary services.
A contract will be required for the reader to acquire ownership of a share in the particular scheme.
Legislation prescribes what matters are required to be set out in such a contract under certain sections of the act.
The contract will provide our reader with much, if not all, information and documentation he may require to properly assess the company and his prospective rights and obligations.
The company is also required to provide our reader with a copy of the latest audited financial statements which will assist him in assessing its financial health.
The reader should establish whether the scheme in question also falls under the auspices of the Housing Development Scheme for Retired Persons Act.
The reader should further bear in mind that he may approach the Community Schemes Ombud Service in accordance with the provisions of its act should he become embroiled in a dispute that cannot be otherwise resolved.
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