Penalty Rule and Enforceability of the Fine
In order for a penalty rule to be binding on the body corporate, enforceable and the fine recoverable, it must be entrenched in the governance documentation of the scheme. It therefore needs to be contained in either the management or conduct rules. The first step in ensuring that the provision will be enforceable is that it must be accepted by the body corporate. If it is contained in a management rule it must be accepted by unanimous resolution. If it is contained in a conduct rule it must be accepted by special resolution of the body corporate. Furthermore the rules must be filed in the Deeds Office to be binding on the body corporate.
The second step is that the penalty rule must be both substantively and procedurally reasonable and fair in order to be enforceable. Section 35(3) of the Sectional Titles Act 95 of 1986 (“the Act”) states that:
“Any management or conduct rule made by a developer or a body corporate shall be reasonable, and shall apply equally to all owners of units put to substantially the same purpose”.
In order for the penalty rule to be reasonable the imposition of the penalty in the form of a fine must have a legitimate purpose. The purpose of the penalty rule could generally be to prevent nuisance. Specifically it could have the purpose of preventing transgressions of the rules. The fining provision could be even more specific in listing examples of transgressions that are finable such as noise nuisance; parking on common property; washing hanging on the balcony; being in arrears with levies; and damage to common property.
The procedure that must be followed in imposing the fine must also be reasonably, fairly and equally applied to all owners and residents put to substantially the same purpose. Although a fining provision might give the trustees a discretionary power to institute a fine, the rule cannot provide that the trustees can deviate from any process. The rules cannot contain a provision that excludes the owners’ common law rights to natural justice and due process. Taking enforcement steps to deal with transgressions requires that the owner or occupier who is affected by the decision must be notified in writing and given an opportunity to remedy the breach and to make representations at a trustee meeting.
The procedure of imposing a fine is the complainants should be required to lodge a written complaint or incident report to the trustees or the managing agent. The owner and tenant should then be given a written notice of the particulars of the complaint in writing and a reasonable opportunity to respond to the complaint. The transgressor must be given sufficient information and adequate detail on the nature of the conduct as well as the specific sections of the Act or rules that were allegedly breached in order to defend him or herself against the complaint. The offender must be warned that if he or she persists with such conduct or contravention, a fine will be imposed. I suggest that the written notice should also include a reference to the rule allowing the fine to be imposed.
If the owner or occupier persists with the conduct, the trustees should send a second notice pointing out that the contravention is continuing or has been repeated and inviting the person to a trustee meeting at which the person can explain or defend their actions. The notice time of this meeting should be long enough for the person to prepare a defense. The rule must therefore include an opportunity and process for a hearing for the transgressor. The trustees must take into account any representations received or made by the owner. However, the opportunity for a hearing should be given before the fine is imposed. At the meeting the transgressor must be allowed to state their side of the matter, call witnesses in their support and cross examine any witnesses the executives might have to the transgression. The trustees should then discuss the evidence from both sides in the absence of the transgressor and witnesses; consider all the circumstances and make a final decision on whether or not to impose the fine.
The rule should also set out the amount of the fine for each example category of transgression. The trustees should, from time to time, at a trustees meeting determine the amount of the initial and subsequent fine. The members in the general meeting could then approve the amounts that are to be fined. The amount that is fined must also be set out in the warning notice and in the fine notice. The fine imposed must be a reasonable amount. This does not mean that the amount cannot be substantial. The amount must be proportionate to the purpose of the penalty.
It is important to note that an immediate fine without following the due process set out above cannot be imposed for any category of contravention. The penalty rule and fining procedure must always be reasonably, fairly and equally applied to all owners and residents put to substantially the same purpose. There will always need to be a warning letter and a hearing in order for the penalty procedure to be properly implemented and the fine to be imposed.
The fine imposed may not be added to the contribution which an owner is obliged to pay in terms of section 37(1) of the Act and claimed by the trustees as part of the monthly installments payable by the owner. Section 37(1) states that the purpose of the contributions to the administrative fund is to pay for the scheme’s expenses for maintenance of common property and rates and taxes. The duty to contribute to the fund in terms of section 37(1) cannot include the duty to make payment of fines. The fine must be paid by the owner or occupier separately.