The difference between luxurious and non-luxurious improvements
If you've never heard the terms luxurious and non-luxurious improvements when dealing with sectional-title schemes, you're not alone. In short, these terms deal with improvements to common areas in a sectional title property. However, luxurious and non-luxurious improvements are handled very differently by the Body Corporate as prescribed by the Sectional Title Schemes Management Act (STSMA).
What is it?
Put simply, non-luxurious improvements are regarded as necessary and useful to the common property, while luxurious is defined as desirable but not necessary. What's more, non-luxurious improvements can be implemented without any active owner consent, while luxurious ones require much higher consent levels.
Previously, the Prescribed Management Rule 33 governed these improvements. However, it did not provide guidelines on the type of improvements considered a luxury and which were not.
It was only recently that Regulation 29 in the STSMA was established and provides clear guidance on distinguishing and handling improvements in sectional-title schemes.
What makes an improvement necessary?
The answer to whether the improvement is necessary and useful is dependent on each individual scheme - ultimately - subjectivity and value judgments play a big role in determining this. For example; if a scheme is adding or upgrading a swimming pool purely for aesthetic or recreational purposes this may be considered a luxurious improvement. However, the location and quality of the property may turn this into a non-luxurious improvement, especially if it is in a luxury estate in an upmarket area with holiday-letting options. In this case, a new pool becomes an essential part of the scheme, serving to increase its market value and desirability as a holiday home option.
According to the STSMA, it is the responsibility of all the members of a Body Corporate to determine whether the improvement is luxurious or non-luxurious.
If an improvement is deemed luxurious, in that it is not absolutely necessary, then a unanimous resolution is required. Trustees can only carry out a luxurious improvement if the Body Corporate passes a unanimous resolution to do so.
If it is deemed reasonably necessary, then all members will be given at least 30 days' written notice before the improvements are implemented. Within this time, trustees can request to convene a special general meeting to discuss and vote on the improvement. If the meeting takes place, the improvement will only get the go-ahead if the Body Corporate passes a special resolution to that effect. And if there is no meeting, trustees may proceed with the improvement after a specified time.
A few examples of essential non-luxurious improvements include replacing rotting wooden window-frames with aluminium frames and the installation of prepaid or separate meters for water, gas and electricity.
Great detail is provided in the STSMA on the installation of these meters to a member's exclusive use and common areas. Separate meter installations only require an ordinary resolution (majority rules), whereas prepaid meters are more complicated and need a special resolution (voted by at least 75%) to be passed.
The STSMA says the following about prepaid meters:
"A body corporate may on the authority of a special resolution install separate pre-payment meters on the common property to control the supply of water or electricity to a section or exclusive use area; provided that all members and occupiers of sections must be given at least 60 days' notice of the proposed resolution with details of all costs associated with the installation of the pre-payment system and its estimated effect on the cost of the services over the next three years."
If you're an owner living in a sectional-title property or planning to move into one, it is essential to understand all the rules involved in its management, including procedures around improvements. To find out more about this topic, speak to De Lucia Group today!
Author: De Lucia Group