CSOS Act will affect thousands

OCTOBER 11, 2016

The much-anticipated Community Schemes Ombud Service (CSOS) Act is now fully operational and applicable to all community housing schemes including Sectional Title and shareblock schemes, cluster complexes and estates run by home owner associations (HOAs), retirement villages and housing co-operatives.

It will bring about several major changes in how such schemes are run and will affect hundreds of thousands of property owners and tenants as well as scheme trustees and directors around the country, says Andrew Schaefer, MD of leading national property management company Trafalgar.

  • The first and most important of these changes is that all residents of community schemes will now have access to a low-cost dispute conciliation (mediation) and adjudication (arbitration) service provided by the statutory Community Schemes Ombud Service, so that they do not need to pay a private arbitrator or go through costly and lengthy litigation. The Ombud’s office will be able to decide all matters related to the finances, governance and management of community schemes as well as the conduct of residents, and an adjudicator’s order will carry the same legal weight as a magistrate’s court judgment.
  • The second major change brought about by the new Act will be the introduction from January 2017 of a new levy to contribute to the funding of the CSOS, which has already been established. This CSOS charge will be 2% of the portion of each owner’s usual monthly levy over R500 and will be capped at R40. Anyone who initiates a conciliation with the CSOS will also have to pay an application fee of R50 and another R100 if conciliation fails and adjudication becomes necessary.
  • Thirdly, the Regulations of the Act provide for every scheme to take out fidelity insurance to cover itself against fraud or misappropriation of their funds by any “insurable person” who has access to those funds, such as a trustee, employee of the body corporate or a managing agent. The minimum amount of insurance is also prescribed.

Schaefer notes that in terms of the CSOS Act and its Regulations, all existing community schemes will also have to do the following:

  • Appoint an authorised representative to represent the scheme at the CSOS, be the contact person and administer the scheme’s CSOS membership requirements;
  • Register with the CSOS using a set form;
  • File a copy of the scheme’s governance documentation with the CSOS;
  • File an annual return in a prescribed format within four months of the scheme’s financial year-end;
  • File a copy of the financial statements within four months of the financial year-end; and
  • Co-operate with the Ombud to resolve any dispute relating to the scheme.

He also says that sectional title trustees and HOA directors will in future be known as members of the “executive committees” of their schemes, and will have more duties and responsibilities in terms of the new legislation. They will be required to:

  • Take reasonable steps to inform and educate themselves about the scheme, its affairs, activities and governance documents and any relevant legislation;
  • Take reasonable steps to obtain sufficient information and advice on all matters to be decided by the executive committee;
  • Attend all committee meetings and the AGM of the scheme;
  • Exercise due diligence and prepare for those meetings; and
  • Take an active interest and form independent opinions in respect of any decisions to be taken.

Other matters dealt with in the new Act and Regulations include the penalties that can be imposed when schemes fail to provide access to the documents or information required by the CSOS or provide misleading data or information. These penalties include fines and imprisonment. 

And finally, says Schaefer, the new legislation makes it clear that in addition to a providing a dispute resolution service, the CSOS will be responsible for the regulation and control of all community scheme governance documents as well as public access to those documents; the promotion of good governance in community schemes; and the provision of information and education to make all stakeholders in community schemes more aware of their rights and obligations.