On 7 October 2016, the Community Schemes OMBUD Service Act 9 of 2011 (CSOSA) came into force. This Act impacts anyone who owns property in a community scheme.
A community scheme includes sectional title developments, share block schemes, homeowners’ associations, retirement schemes or any other arrangement in terms of which there is shared use of and responsibility for parts of land and buildings. This is the first time that legislation has been enacted with a view to promoting good governance within community schemes in South Africa.
An ombud service (“the Service”) has been established in terms of the CSOSA, which serves two main functions. Firstly, it helps to regulate, monitor and control the quality of scheme governance documentation and acts as a repository for scheme governance documentation to ensure that the public has access thereto. In the case of sectional title schemes, the Chief Ombud must approve all amendments to the management and conduct rules. The second function is to provide a dispute resolution mechanism.
Disputes within a community scheme may be referred to the Service for adjudication. The parties are first required to try to negotiate a settlement through conciliation but, if unsuccessful, the matter will be referred to an adjudicator whose decision will be binding and may be made an order of court.
The factual findings of the adjudicator cannot be taken on appeal, with only points of law taken on appeal. Generally, legal representation is not permissible unless the adjudicator and all other parties consent or if the adjudicator determines that a party cannot deal with the adjudication without legal representation.
The type of relief that may be granted in the dispute resolution process is very broad and ranges, for example, from a requirement that an association records a new scheme governance provision, declares a resolution purportedly passed at a meeting void or invalid, to an order requiring the removal of an animal from a community scheme, or an order that a tenant in a community scheme must pay all or part of the rentals payable under a lease agreement to the association and not to his or her landlord. There are a host of other types of relief that may be granted.
Each community scheme must pay a monthly levy to the Service. The levy is calculated on a sliding scale, increasing in a ratio proportionate to the monthly levy charged to each property owner within the scheme. The scheme levy is to be collected and paid by the body corporate or the association, and an additional fee is payable to the Service for making an application to refer a dispute. If a matter proceeds to adjudication then an additional fee is again payable, although provision is made for the waiver of the application and adjudication fees in the case of persons whose gross monthly income is less than R5 500.
In order to promote good governance, the CSOSA introduced the concept of scheme executives for any person who is a trustee, director or other person who exercises executive control of a community scheme and sets standards for their conduct over and above those already applicable in terms of common law or any other applicable legislation such as the Companies Act, 2008, and sectional title legislation.
It remains to be seen whether the CSOSA achieves its objective. Much will depend on the strength of the administration of the Service and the quality of decisions reached in the dispute resolution process.