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COMMUNITY SCHEMES OMBUD: IN A NUTSHELL


The Community Schemes Ombud Service Act No. 9 of 2011 was signed on 14 June 2011, however it was the Regulations in terms of Section 29 of the Act that everyone was waiting for. The Regulations were eventually finalised and signed by the Minister of Human Settlements Lindiwe Sisulu and thus the Act with Regulations became effective as from 7 October 2016.

The purpose of the Act, in terms of Section 2, is to provide for dispute resolution mechanisms in community schemes. Owing to the rising trend towards living in complexes and estates, it was concluded that the internal functions of community schemes need to be more closely regulated.

 

WHO IS IT APPLICABLE TO?

A community scheme is defined as:

"any scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings, including but not limited to a sectional titles developments scheme, a share block company, a home or property development, a housing scheme for retired persons, and a housing co-operative as contemplated in the South African Co-operatives Act"

The definition is very broad and leaves very little room to move. It is safe to say that if you live in some form of gated community, the Act will most likely be applicable.

 

REGISTRATION OF COMMUNITY SCHEMES

Within 30 days of the Regulations coming into effect, a community scheme must file the "CS1 Registration Form" with the Ombud. The Regulations came into effect on 7 October 2016 and therefore the registration documents need to be submitted on or before 7 November 2016.

In addition, community schemes must file the documents referred to in Section 59(b) of the Act within 4 (four) months after the end of the community scheme's financial year, by making use of the prescribed "Form CS2". The documents referred to the Section 59(b) of the Act are:

  1. an annual return in the prescribed form;

  2. a copy of its annual financial statements; and

  3. any other prescribed document or information.

 

COMPLIANCE BY COMMUNITY SCHEMES AND LEVIES

In addition to the registration requirements, there are additional compliance requirements set out in Regulation 16, which states that the Chief Ombud MAY by written notice require certain additional documents from the community scheme, such as the governance documents of the scheme (the MOI and Rules). It does not appear that this provision is mandatory by the use of the word "may". If the Chief Ombud does request these documents in writing however, the community scheme should comply with such request with 30 days.

The community scheme is also required to take out Fidelity Insurance to the value set out in Regulation 15. The purpose of this is to insure against the risk of loss of money belonging to the community scheme, which may be sustained as a result of any act of fraud or dishonestly committed by an insurable person.

 

LEVIES DUE TO THE OMBUD

The Ombud will be entitled to levies from each homeowner in terms of Section 59 of the Act and in terms of Regulation 11. The community scheme will be required to collect the levies from the homeowners on behalf of the Ombud, which will be paid over to the Ombud by the community scheme on a quarterly basis.

Levies due by each owner is calculated according to the following formula:

"The lesser of R40.00 or 2% of the amount by which the monthly levy charges by the schemed exceed R500.00"

Accordingly, community schemes in which monthly levies are under R500.00 per month, will not pay any levy to the Ombud.

However, by way of example, should the monthly levy of a community scheme be R1200.00, the levy payable by each homeowner to the Ombud would be R14.00, calculated as follows:

R1200.00 less R500.00 = R700.00

R700.00 x 2% = R14

 

FAILURE TO COMPLY

Any person who fails to comply with the Act inclusive of its regulations is guilty of an offence and is liable, on conviction, to a fine or imprisonments for a period not exceeding five years or to both a fine and such imprisonment. Where a person is convicted for a second or subsequent conviction for an offence contemplated in Section 34(1) of the Act, he or she is liable to a fine or imprisonment for a period not exceeding ten years or to both a fine and such imprisonment.

 

WHAT DISPUTES CAN BE REFERRED AND WHO CAN REFER A DISPUTE?

Any person may make application if such person is a party to or affected materially by a dispute. Section 38 of the Act stipulates the manner in which a dispute should be referred to the Ombud.

Disputes which are capable of being referred to the Ombud for dispute resolution in terms of Section 39 of the Act can be divided into 7 categories:

  1. financial issues;

  2. behavioral issues;

  3. scheme governance issues;

  4. meetings;

  5. management services;

  6. works pertaining to private areas and common areas;

  7. general and other issues including access to information.

After due process has been followed regarding notice, representation, investigation and inspection and provided that all time constraints have been complied with (where applicable) the dispute will be referred to conciliation (if possible) alternatively for adjudication.

 

IS LEGAL REPRESENTATION ALLOWED?

Generally legal representation is not allowed, save for when all the parties to the dispute consent thereto alternatively if the adjudicator concludes that it would be unreasonable to expect the party to deal with the adjudication without legal representation.

 

ORDERS AND COSTS

The adjudicator, after fully considering the matter, may dismiss the application if it is deemed to be frivolous, vexatious, misconceived or without substance alternatively if there has been a failure to comply with Section 51. In instances where an application has been dismissed, the adjudicator may make a costs order against the applicant .

If the matter is not dismissed, the adjudicator must make an order to:

  1. Grant or refuse each part of the relief sought;

  2. Apportion costs where applicable;

  3. Include a reason for the order;

  4. Draw attention to the right of appeal.

The order may also include certain ancillary relief such as when the order takes effect and within what period the order must be complied with.

Orders of the Ombud can be enforced in the Magistrate, Regional or High Court where appropriate depending on the jurisdiction of the Court in question.

 

RIGHT OF APPEAL

Only questions of law can be appealed to the High Court, which appeal must be lodged within 30 days of the delivery of the order of the adjudicator.

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