November 9, 2016
Note: As with the previous article, what follows is of necessity only a brief overview of some very complex new provisions and, particularly if you are a trustee/administrator/director or the like, it is essential that you familiarise yourself with all the changes. Contact us if you need any help.
The Community Schemes Ombud Service Act (“CSOSA”) came into effect on 7 October, together with the related Sectional Titles Schemes Management Act (see previous article). CSOSA applies to all “Community Schemes” (residential, commercial and industrial) including –
- Sectional title development schemes
- Home owners associations
- Property owners associations
- Share block companies
- Retirement housing schemes
- Housing co-operatives
- Any other “scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings”.
Community disputes – a new resolution process
If you have lived or worked in any community you will know just how easily disputes can arise, how bitter they can be, and how difficult it can be to resolve them.
A welcome innovation therefore is the new Community Schemes Ombud Service (“CSOS”) which provides an alternate dispute resolution process for anyone party to, or “materially affected by” a dispute.
The range of disputes on which the Service can adjudicate is extensive and covers levy disputes, nuisance complaints, repairs and maintenance disputes, complex meetings, financial, governance and management issues, exclusive use rights and the like – the list is long and widely-worded. Legal representation in adjudication proceedings is only allowed if the adjudicator and all parties agree or the adjudicator decides that a party cannot deal with the adjudication without legal representation. Orders may be appealed to the High Court, but only on points of law.
The scheme’s administrators can also ask for an order that a tenant pay rentals direct to them to clear a landlord’s arrears.
The cost of using the dispute resolution service itself is minimal (R50 per application, R100 per adjudication, R8 per copy of a document) but your levies will increase when schemes have to start recovering from you (and paying over to CSOS on a quarterly basis) a Service Levy based on your monthly levies – a sliding scale from zero for levies of R500 p.m. or less, up to R40 p.m. for levies of R2,500 p.m. or more. Download CSOS’s Levy Calculator here https://www.csos.org.za/regulations.html to see what you (and the scheme as a whole) will be paying. These new levies kick in 90 days from 7 October.
New duties for “scheme executives” and schemes
“Scheme executives” (trustees, directors and anyone else “who exercises executive control of a community scheme”) acquire various duties and fiduciary obligations, including a duty to be informed and educated about the community scheme, its affairs and activities and the relevant legislation and governance documentation. Governance documentation means any “rules, regulations, articles, constitution, terms, conditions or other provisions that control the administration or occupation of private areas and common areas in a community scheme”.
Schemes must (these are highlights only) –
- Take out fidelity insurance against loss of money through fraud or dishonesty
- Register with CSOS on form CS1, within 30 days of 7 October or incorporation
- Lodge annual returns and (within 90 days of 7 October or incorporation) governance documentation with CSOS.