Community schemes finally have a channel for complaints

Residents of community property schemes plagued by bad management or anti-social elements can now look to a new statutory dispute-resolution service for relief. reports

Residents of communally owned properties, including sectional title schemes and homeowners’ associations, can now complain to a statutory dispute- resolution service if they believe their complexes are being mismanaged or if they have a dispute with another resident.

The long-awaited Community Schemes Ombud Service (CSOS) officially opened its doors yesterday, when the final regulations governing its mandate and functions were published in the Government Gazette. President Jacob Zuma assented to the CSOS Act in June 2011, but it was four years later that the Minister of Human Settlements released a draft version of the regulations for public comment in October 2015.

The new Sectional Titles Schemes Management Act, which replaces parts of the Sectional Titles Act, also came into force on Friday (see

It is hoped the CSOS will result in a major shake-up of community schemes, particularly sectional title schemes, because many owners, tenants, trustees and bodies corporate thumb their noses at their statutory and common-law obligations and ignore schemes’ internal governance rules.

The common problems that beset schemes include:

• Poor management of scheme finances – in particular, not having fidelity cover to protect owners in the event of fraud or theft committed by scheme executives or a managing agent (see “Schemes must have fidelity cover”);

• Trustees making or amending the scheme’s rules without seeking a resolution from the body corporate;

• Disputes between owners and their body corporate over who is liable for maintenance and repairs;

• Trustees or owners making alterations to the common property without authorisation;

• Owners extending their dwellings and incorporating parts of the common property without permission; and

• Trustees being unable to stop anti- social behaviour, such as residents being disturbed by latenight parties and pets fouling the common property.

Until now, if a dispute could not be settled internally, there were two expensive alternatives: private arbitration or engaging an attorney and taking the matter to a magistrate’s court or the High Court. The cost, time and effort involved deterred many bodies corporate or owners from pressing their case. Aggrieved owners suffered in silence or sold and moved out.

The jurisdiction of the CSOS is not limited to sectional title schemes; it includes share-block companies, homeowners’ or property- owners’ associations, housing schemes established in terms of the Housing Developments for Retired Persons Act and housing co-operatives established under the South African Co-operatives Act.

If the CSOS accepts a complaint, it will be settled by conciliation or arbitration. An order issued by a CSOS adjudicator has the same authority as a judgment of a magistrate’s court or High Court, depending on the type of relief sought.

The ombud service comes at a price: all community schemes will have to pay a CSOS levy to the service each quarter. A scheme’s levy is calculated as two percent of the amount by which the levy of each unit in the scheme exceeds R500 a month. In other words, no levy is due by units that pay a community scheme a monthly levy of R500 or less. The levy is capped at R40 a month (or R480 a year), which kicks in once the monthly levy paid to the scheme is R2 500 or more.

As an example, if you, as a sectional title owner, pay a body corporate levy of R900 a month, your CSOS levy will be two percent of R400, which is R8 a month (R96 a year). If your body corporate levy is R1 750 a month, your CSOS levy will be R25 a month (R300 a year).

The draft regulations released last year proposed that the CSOS levy be based on a unit’s municipal valuation, but this was changed in the final regulations.

Owners whose monthly levy exceeds the R500 threshold can apply to have their CSOS levy discounted or waived. They will have to complete a prescribed form on which they must detail their income, assets, expenditure and liabilities.

Themba Mthethwa, the Chief Ombud, told Personal Finance that community schemes will have 90 days from the date on which the regulations were published ( October 7) to get their levycollection systems in order – in other words, schemes will not have to collect levies during the 90-day grace period.

The ombud service will not only provide a dispute-resolution service; it will be responsible for storing and monitoring community schemes’ governance documentation, such as management and conduct rules, constitutions and memoranda of incorporation.

Until now, the governance documentation of sectional title schemes had to be filed at a Deeds Office. If a body corporate amended its management or conduct rules, the amendments had to be filed at the Deeds Office in order for them to take effect. However, the Registrar of Deeds was not required to ensure that the rules complied with the Sectional Titles Act or the prescribed management rules.

Now, all community schemes will have to file their governance documentation with the CSOS, which will check that they conform to the relevant legislation.

All community schemes must register with the CSOS and, among other things, provide a copy of their governance documentation, their latest audited financial statement, the particulars of the people who serve on their executive committee (for example, a board of trustees) and details of their managing agent.

Schemes must, within four months of the end of their financial year, submit an annual return that identifiesthe members of their executive committee and is accompanied by their latest audited financial statement.

The CSOS is also tasked with educating and informing all community scheme role-players about their rights and obligations.

The CSOS head office in Johannesburg can be contacted by phoning 010 593 0533 or emailing info@ csos.org.za. Visit www.csos.org.za to download a complaint application form.

The CSOS also has a Durban office (phone 087 805 0235) and a Cape Town office (087 805 0226).