Changes brought about by The Sectional Titles Schemes Management Act and The Community Schemes Ombud Service Act

Two new acts came into effect on 7 October 2016, namely The Sectional Titles Schemes Management Act 8 OF 2011 (“STSMA”) and The Community Schemes Ombud Service Act 9 OF 2011 (“CSOSA”), affecting sectional title schemes, although the full extent of the application and interpretation of the acts are yet to be tested.

The STSMA does bring about some fundamental changes in the management of sectional title schemes but it does not repeal the whole STA. The Sectional Titles Act 95 of 1986 (as amended) (“STA”) continues to deal with mainly the conveyancing side of sectional titles. The STSMA seeks to paraphrase the management, governance and rules of the STA into a new, user friendly Act.

Some of the major changes in the STSMA relating to the way schemes are managed are the following:
  1. Section 3(1)(b) requires for a reserve fund to be established and maintained by bodies corporate. The amounts to be retained in the reserve fund must be reasonably sufficient to cover the cost of future maintenance and repair of common property but may not be less than the amount as may be prescribed by the Minister. The STSMA sets out a formula to determine what the reserve fund must be in a given year which will cover costs of future maintenance as well as repairs to common property. The administration fund established in terms of section 3(1)(a) makes provision for estimated costs for repairs and maintenance. Therefore, the reserve fund is in addition to the administration fund and its purpose is to make provision for unforeseen costs of maintenance and repairs, which have not been budgeted for.

  2. Section 3(1)(o) determines that bodies corporate need to notify the chief ombud, the local municipality concerned and the registrar of its domicilium citandi et executandi, which is its address for service of any process. The chief ombud, municipality and registrar need to have the domicile registered so that in events of cases being brought against bodies corporate by owners or vice versa, there is one address by which to serve notices which will simplify matters for any legal process.

  3. The number of proxies held per person will now be limited and a person will not be allowed to represent more than two members at an annual or special general meeting in terms of section 6(5) of the STSMA. The application of this provision may affect the quorum requirements applicable to the annual general meeting. Persons who own multiple units in a specific scheme will also be limited to one vote regardless of the number of units owned.

  4. The Community Schemes Ombud Service (“CSOS”) office may now be approached to help in cases where trustees are finding it difficult to recover owner contributions in arrears. Section 3(2) of the STSMA repeals section 37 (2) of the STA and determines that a body corporate will have a discretionary right to refer an owner’s liability for arrear levies to the relevant ombud’s office. The word “may” in section 37(2), give the body corporate discretion either to use the ombud’s office or to retain its common law right to enforce its claim in any other competent court.

  5. In addition, the STSMA and the regulations enacted in terms thereof, make provision for the CSOS office to assist schemes to remedy an inability to obtain either a special or unanimous resolution, resolve conflicting management and conduct rules and will ensure the safe storage and availability of management and conduct rules.
The Community Schemes Ombud Service Act (“CSOSA”) also came into force on the same date as the STSMA. Each community scheme, including sectional title schemes, share block companies, home or property owners’ associations, housing schemes for retired persons and housing co-operatives, are required to fund the CSOS. A prescribed monthly levy must be collected from every unit and paid to the CSOS on a quarterly basis. The levy will be based on a sliding scale per levies paid by the owners:

Monthly levy charged by the community schemes
Monthly CSOS Levy payable
Zero to R 500.00
R 0.00
R 600.00
R 2.00
R 700.00
R 4.00
R 800.00
R 6.00
R 900.00
R 8.00
R 1 000.00
R 10.00
R 1 250.00
R 15.00
R 1 500.00
R 20.00
R 1 750.00
R 25.00
R 2 000.00
R 30.00
R 2 250.00
R 35.00
R 2 500.00 and above
R 40.00


The purposes of the CSOS are set out in clause 4 of the CSOSA:

" 4.1. The Service must -
    1. develop and provide a dispute resolution service in terms of this Act;

    2. provide training for conciliators, adjudicators and other employees of the service;

    3. regulate, monitor and control the quality of all sectional titles scheme governance documentation and such other scheme governance documentation as may be determined by the Minister by notice in the Gazette; and

    4. take custody of, preserve and provide public access electronically or by other means to sectional title scheme governance documentation and such other scheme governance documents as may be determined by the Minister by notice in the Gazette.
"
The main functions of the CSOS are to assist in resolving disputes and to control sectional title governance. Prior to the enactment of the STSMA and the CSOSA, members of sectional title schemes had to approach the High Court to resolve disputes which is inherently expensive. Residents of community schemes will now have access to a simple, expedient and less costly means of recourse. The findings of the CSOS are as binding and effective as a court order.

When a dispute with regard to the administration of a scheme arises between that scheme’s governing body, an occupier or an owner with any other person who also has an interest in that scheme, the CSOS can be approached for assistance in resolving that dispute. The CSOS will be available with a minimal application fee and it will also be funded via the CSOS levy.

Where internal dispute resolution mechanisms exist, parties to the dispute must first exhaust these measures prior to approaching the CSOS. Where these prove ineffective and a dispute is referred to the CSOS, the first option will be professional conciliation, but where this fails or seems unlikely to succeed, the matter will be referred to an adjudicator for fast-tracked resolution. The CSOS will be able to resolve disputes limited to the categories set out in section 39 of the CSOSA, including financial issues; behavioural issues; scheme governance issues; meetings; management services; works pertaining to private areas and common areas and general and other issues.

The STSMA and the CSOSA are mainly interrelated and the one should not be read without reference to the other when interpreted. As with all new legislation, the full impact of the aforesaid acts will only become known once it has come under judicial scrutiny. It will take some time before certainty is established with regard to the interpretation of the acts as there is currently no case law to guide the practical effect and application of the acts. 

Daniël van Zyl
Van Zyl Kruger Inc
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