WHAT EXACTLY DOES AN ‘EXCLUSIVE USE AREA’ MEAN?

According to The South African Institute of Valuers, an Exclusive Use Area (ESA) is:

‘an area of the common property that is set aside for the exclusive use of one owner of a unit in a building. Typical of this would be a garden area, a carport, a storeroom, balcony or garage. To qualify as an exclusive use area, the part of the common property allocated for the use of individual owners would have to be noted in some way.’

Simple…right?  Well, not so fast!  “This section of property law still seems to elicit an enormous amount of discussion, argument and uncertainty,” says Michael Schaefer, CEO of specialist finance company ZDFin. “Typically, the older the scheme, the more prevalent the ‘problem(s)’,” he adds.

EUA’s are created when:

• the Developer opens the Sectional Title Register, they may choose to delineate the Exclusive Use Areas on the Sectional Title plans approved by the Surveyor General (Registered Exclusive use areas);
• the Body Corporate and the owners in the scheme may allocate an Exclusive Use Area by means of an amendment to the Management Rules or through the Conduct Rules, they which may (or may not) give more specific reference and direction to EUA contributions (see example);
• the Body Corporate may arrange for a Land Surveyor to delineate an Exclusive Use Area in accordance with Section 27(2) of the Act and then cede the newly created Exclusive Use Area to the purchaser thereof.

“It’s Important to understand legislative directive and intent of the prevailing legislation (Section 3(1)(c)), which is quite clear and difficult to argue the logic of,” continues Schaefer.  “Rules do allow for owners to be directly responsible for said costs, thereby negating the need for them to make contributions to the body corporate.”

“Personally, I do not believe that it is best practice to make it an owner responsibility, as practically it means that the maintenance seldom gets done uniformly, if ever – another whole enforcement issue –   and makes it exceptionally difficult to capitalise on economies of scale i.e. packaging larger projects to maximise cost efficiencies (and) at minimum scopes.”

ZDFin have over the past year moved into the Executive Managing Agent (EMA) space, a role that is increasingly ‘gaining traction’, according to Schaefer.  “Fortuitously, we have the skill set, expertise and capacity, which is proving to be a good introduction to schemes as to the other services we offer and can assist them with.”

The issue of Exclusive Use Areas (EUA’s), is something that ‘comes up all the time’, according to Schaefer.  “Managing Agents are expected to be everything from accountants, attorneys, engineers, project managers, counsellors, mediators, surveyors and enforcers, to mechanics and veterinarians.  As a result, they are typically always stretched.”

Schaefer says that building take-on’s, as a result, ‘seldom/if ever include a thorough review of plans and rules and physical inspections and reviews almost never done and arguably, are not within the immediate scope of the MA, although this does have financial and practical implications for the Body Corporate, and therefore should be on the radar for the MA.’

“Practically, de facto EUA’s, alienation of CP, extension of section(s) is most common,” Schaefer notes. “Where EUA contributions are being raised, the computation often lacks a professional nexus and is more a thumb-suck estimate which can, and often does, lead to longer term complications and owner prejudice.”

Where owners do make EUA contributions, Managing Agents would be well advised to ensure:

* All EUA contributions, irrespective of computation and associated methodology, are accounted for in a separate control account and monies ideally held in a ring-fenced, segregated account

*Computation is revisited annually, unless directed by rules, with the budget cycle ensuring maximum transparency and owner buy-in noting the EUA contribution will fluctuate

* Appointed maintenance consultants are briefed to pay particular attention to any EUA’s and highlight in the MRRP which is presented for approval at the AGM, this noting budgetary implications as per previous point. The appointment of a suitably qualified consultant to assist the Body Corporate with its MRRP cannot be overemphasized, as this is the basis from which any EUA contribution should be computed annually

* Technically there should be both an administration and a reserve EUA contribution

Schaefer says this is further compelling evidence for appointing an EMA to assist and guide you with these often delicate situations. “Managing a scheme optimally is not for volunteers, who for the most part, have neither the time or expertise to give it the attention it deserves.  To find out more about how ZDFin can improve the operation of your scheme visit https://zdfin.co.za/

FOR MEDIA ENQUIRIES:

Joanne Hayes, Tumbleweed Communications

Tel:  +27 (0)83 6277249                           e-mail:  tigerjo@iafrica.com

ABOUT ZDFIN – https://zdfin.co.za/

ZDFin is a specialist finance company providing smart solutions for Sectional Title Bodies Corporate, Home Owners’ Associations and Share Block companies.  We service all residential Community Schemes affected by the Community Ombud Service Act, including non-profit companies and voluntary associations governed by a constitution. ZDFin has a wealth of practical experience in property and financial management. We understand these challenges and our range of targeted financial products can be tailored to meet the specific needs of each individual scheme. Schaefer was previously a director and shareholder at Trafalgar, the country’s biggest residential property administration company, started by his father over 50 years ago.