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 on Friday, October 7, 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 October 7 (see Bodies corporate must have separate fund for big expenses).
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 Community 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 late-night 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 levy-collection 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 also has a Durban office (phone 087 805 0235) and a Cape Town office (087 805 0226).
HOW THE OMBUD SERVICE CAN HELP YOU
The Community Schemes Ombud Service (CSOS) Act sets out how to apply to the CSOS to intervene in a dispute and how the CSOS will try to resolve a dispute if an application is accepted. Here, in brief, are a few things you should know.
Who can apply to the CSOS for help?
Any person who is a party to, or materially affected by, a dispute relating to the administration of a community scheme can apply for the intervention of the CSOS. At least one of the parties to the dispute must be an association (for example, a body corporate), an owner or an occupier (effectively, a tenant). A “person” is a natural person or a partnership, trust, corporation, or a private or public entity.
Will I be charged a fee if I want the CSOS to intervene in a dispute?
Yes, there is an application fee of R50. If your dispute is referred to an adjudicator, there is an additional fee of R100. The application and adjudication fees are waived if your net (after-tax) household income is less than R5 500 a month. Schemes and individuals can apply to have their fees discounted or waived by completing a prescribed form that requires them to provide details of their income, assets, expenditure and liabilities.
What type of disputes can the CSOS address?
An adjudicator can issue orders in respect of a wide range of issues arising in the context of community schemes. These include:
• Financial issues – for example, ordering a body corporate to re-calculate or refund a levy, or ordering a body corporate to have its financial statements audited.
• Behavioural issues – for example, ordering that a behaviour, such as playing music loudly, constitutes a nuisance and ordering the relevant person to stop that behaviour, or ordering an animal, such as a pet dog kept in violation of the scheme’s rules, to be removed from the property.
• Meetings – for example, ordering that a resolution adopted at a general meeting of a body corporate or at a meeting of the board of trustees is invalid, or ordering that a resolution passed at a general meeting is void, because it unreasonably interferes with the rights of an owner or occupier.
• Private and common areas of the property – for example, ordering a body corporate to carry out repairs to the common property, or ordering a body corporate to grant an owner or occupier exclusive-use rights over a certain part of the common property.
• Scheme governance – for example, ordering an association to approve or amend a management or conduct rule.
• Management services – for example, ordering a managing agent to comply with the terms of his or her contract of appointment.
• Access to information – for example, ordering an association to make governance documents or records available to a resident.
Does the ombud rule on complaints?
Disputes are settled by full-time and part-time conciliators and adjudicators who are appointed by the chief ombud and who work under the supervision of a regional ombud or deputy ombud.
How do I apply for the CSOS to intervene in a dispute?
You must send an application to the chief ombud or a regional ombud. Your application must include:
• The relief you are seeking, which must fall within the jurisdiction of the ombud;
• The grounds on which the relief is sought; and
• The name and address of each person whom you believe will be affected materially by the application.
If you think you qualify for a discount or waiver of the adjudication fee, include a request for a discount or waiver.
What will happen if my application is accepted?
The ombud must follow certain procedures before deciding how a dispute will be settled. The other parties affected by your application must be notified that they are parties to the dispute and of the substance of your application. They must be invited to make submissions and informed whether the application qualifies for a waiver or discount of the adjudication fee.
The ombud must notify the applicant of the submissions received and provide the applicant with an opportunity to:
• Inspect the submissions;
• Make a written response relating to issues raised in the submissions; and
• Confirm whether he or she wishes to proceed with the application. If the applicant does not, within 14 days of the delivery of this notice, confirm that he or she wishes to proceed with the application, the ombud will reject the application.
An applicant is entitled to withdraw the application at any time before the ombud refers to the application to an adjudicator.
On what grounds could the ombud reject my application?
Your application could be rejected if:
• You do not submit further information or documentation requested by the ombud;
• You are unable to provide evidence that an attempt to resolve the dispute through a community scheme’s internal dispute-resolution mechanism was unsuccessful;
• The relief you seek does not fall within the jurisdiction of the CSOS;
• The ombud believes the dispute should be dealt with in a court or another tribunal; or
• You do not qualify for the applied-for discount or waiver of the adjudication fee.
Will every dispute be settled by adjudication?
No. After an ombud has received an application and has afforded the other parties to the dispute an opportunity to respond, he or she will refer the matter to a conciliator if the ombud believes there is a reasonable prospect that it can be resolved by way of a negotiated settlement. If the ombud does not think the case can be resolved via conciliation, or if the conciliation fails, the ombud will refer the matter to adjudication. Once an application is referred to an adjudicator, the ombud plays no further role in resolving the dispute.
Who chooses the adjudicator?
If the application qualifies for a discount or a waiver of the fee, the ombud will choose the adjudicator. If a fee must be paid, all the parties to the dispute will have an opportunity to choose an adjudicator from a list drawn up by the ombud. If they cannot agree on an adjudicator, the ombud will appoint one.
Am I entitled to legal representation?
Parties to a dispute are entitled to legal representation during the adjudication process only under one of two conditions: either that the adjudicator and all the parties agree to it; or that adjudicator decides that, based on the nature of the dispute, it would be unreasonable to expect one of the parties to deal with the adjudication process without legal representation.
How will an adjudicator investigate a dispute?
An adjudicator is expected to observe the principles of due process of law. However, when considering evidence, the adjudicator is not obliged to apply the “exclusionary rules of evidence” as they are applied in the courts. The CSOS Act states that, when investigating a dispute, an adjudicator “must act quickly, and with as little formality and technicality as is consistent with a proper consideration of the application”. An adjudicator may request the parties to provide information, which may be in the form of an affidavit. The parties may also be required to be interviewed in person by the adjudicator. He may call for other parties to make submissions and inspect common or private property and inspect the records of an association.
What types of orders can an adjudicator make?
An adjudicator can make an order to grant an application, in whole or in part. The adjudicator may add provisions to the relief sought in the application. An adjudicator can make an order that dismisses an application. Such an order will be made if the applicant fails to co-operate with the adjudicator when the matter is being investigation, or if the adjudicator considers the complaint to be frivolous or without substance. If an application is dismissed, the adjudicator can also order the applicant to compensate the affected parties if they suffered financial loss as a result of the application.
Is there a right of appeal against an order?
Yes, but the appeal must be made to the High Court within 30 days after the order has been delivered to the parties to the dispute. The appeal can be made only on the basis of how the adjudicator applied the law to the matter, not on the facts of the case.
To whom is the CSOS accountable?
The CSOS is governed by a Board of Service that consists of seven non-executive members, who are appointed by the Minister of Human Settlements, and two executive members, the chief ombud and the chief financial officer, who are appointed by the Board of Service, with the approval of the Minister. The current board was appointed on January 1, 2013.