The amended Sectional Title Scheme Act can be at the best of times, difficult to navigate. Changes to owner rights, financial responsibilities and legal representation all make up an Act written with vagueness. Despite this, government and role-players believe the amendments are a positive step forward, serving to benefit all living in a sectional title scheme.
Community schemes have been in existence in South Africa for longer than 20 years, with very little options for dispute regulations outside of the courts. As the popularity of community schemes grow, and so disputes, the need for an intermediator mediate now becomes a necessity.
One of the important amendments to the Act is the establishment of the Community Schemes Ombud Services or CSOS. The mandate of the recently established Ombud will be to regulate the conduct of parties and ensure good governance within community schemes.
“The CSOS is classified as a Schedule 3A public entity in terms of the Public Finance Management Act and its executive authority is vested in the Minister of Human Settlements.”– Chief Ombud, Themba Mthethwa
Legal Avenues
The amendments to the Act, allow both owners and tenants to approach the Ombud with a complaint and or dispute. Avoiding the courts completely will greatly reduce legal costs and would fast track the dispute at point.
The Act also prohibits the nomination or appointment of trustees who default on levies and remain in breach of the payments and/or conduct rules. Scheme developers will not be able to impose unreasonable demands in meetings and cannot overturn the rules of the body corporate. This bodes well for schemes exploited by developers and corrupt trustees.
A voice of concern
Although the Act provides for the creation of a “Big Brother” Ombud, it also limits the voice of property owners. Owners may find themselves silenced and unable to raise points within special meetings. Trustees will now have the authority to make important decisions without seeking a mandate from the owners – for example, raising a special levy.
Generally, owners would attend trustees’ meetings so they can monitor how trustees are managing the body corporate’s money and property. However, owners will no longer be able to do this unless they are invited.
Members of an online forum hosted by sectional title law firm Paddocks voiced their anger and disappointed at this amendment. In their view, it would exacerbate the unaccountability of trustees who are making decisions without regard for the interests of the owners.
Below are further noticeable points from the amended Act:
1. Establish a reserve fund
At this point the amount that is suggested that will be required by each Sectional Title Scheme to be set aside is 25% of the budgeted annual levy figure. The aim of this fund is to cover costs of future maintenance and repairs to common property.
2. Register with the Community Schemes Ombud Services (CSOS)
Body corporates are required to be registered with the Community Schemes Ombud services.
3. Registering domicile, financial and scheme particulars with the Ombud
Audited annual financial statements are to be furnished to the Ombud. Other information to be submitted includes:
Domicile (also to be registered with the local municipality and the applicable Registrar of Deeds)
Details of executive committee
Details of management regulations
Details of fidelity insurance (over reserves, investments and 25% of the operational budget
4. CSOS Levy payments
From the 1st January 2017, a monthly levy is payable to CSOS. The levy is calculated on the lesser of R40 or 2% of the levy charged in excess of R500.
5. Certify changes of levy contributions
When the levy amounts are to be changed (which is usually annually), this must be certified in writing.
6. Changes to management or conduct rules
When the management rules are changed, the chief Ombud must approve these and issue a certificate.
7. Limit on proxies
There is now a limit on the number of proxies which can be held per person and a person will not be able to be proxy for more than two members.
8. Trustees
The Act prohibits the nomination or appointment of trustees who default on levies and remain in breach of the payments and/or conduct rules.
9. Chief Ombud can be approached to assist in resolving issues
when there is a deadlock with regard to a special or unanimous resolution
in recovering arrear levies from owners
to resolve conflicting management and conduct rules
It will take time before the impact of the Act can be measured. By international standards the Act amendments fit the bill. In South Africa however, there seems to be an overall resistance to the amendments. Government is confident but will the rest of us follow? Only time will tell.
For further information on the above article e-mail caryn@myersattorneys.co.za