Orders Relating To Meetings And Resolutions In Community Schemes

A CRITICAL ANALYSIS OF CERTAIN ASPECTS OF THE COMMUNITY SCHEMES OMBUD SERVICE ACT, NO 9 OF 2011

MONTH 5: MAY 2019


Orders Relating To Meetings And Resolutions In Community Schemes 


There are many different community schemes and arrangements in South Africa. For many years there was no regulatory body governing these schemes. The Community Schemes Ombud Service Act 9 of 2011 (“CSOSA”) came into operation in October 2016 and many of these schemes now qualify as community schemes under the CSOSA. Subsequently, the CSOSA established a regulatory body established by government to deal with complaints and disputes in community schemes and to oversee compliance and corporate governance in such schemes. 

The CSOS is designed to provide an alternative, impartial, cost-effective and transparent service for the resolution of administrative disputes in community schemes. The term “community scheme” refers to a wide range of shared land use arrangements, including sectional title, share block and retirement schemes, home owners’ associations and housing co-operatives. 

The CSOSA defines a “dispute” as:

“a dispute in regard to the administration of a community scheme between persons who have a material interest in that scheme, of which one of the parties is the association, occupier or owner, acting individually or jointly”.

This means that the CSOS can deal with disputes regarding the administration of a community scheme if the dispute is between persons who each have a material interest in the scheme, such as executive committee members, owners, occupiers, managing agents and bondholders, and one of the parties to the dispute should either be the association or an owner or occupier.

Section 39 of the CSOSA provides for a list of seven types of orders that a CSOS adjudicator can give in terms of a dispute application. Each month, I will consider one of these seven categories of types of orders from a practical point of view to determine which kind of community scheme disputes can be taken to the CSOS for resolution and how an adjudicator can deal with such disputes. It is important to note that the list of orders provided for in the CSOSA is not exhaustive as the chief ombud is entitled to propose any other order.

Most member decisions in community schemes are taken at meetings or by written resolutions of its members. For the next two months I will consider the various orders that can be applied for in terms of the CSOSA pertaining to meetings and resolutions to ensure proper functioning of community schemes. The first few orders are summarised below. 


An order requiring the calling of general meetings 

Due to the importance of member decisions taken at meetings or by written resolutions, disputes may arise when the association will not convene a general meeting at the request of owners or if one executive is unable to get the majority required to convene a member meeting. In terms of section 39(4)(a) of the CSOSA, an application may be made for an order requiring the association to call a general meeting of its members to deal with specified business.


An order declaring that a meeting was not properly called

The governance documentation of a community scheme or legislation will usually set out the procedure which has to be followed for the proper calling of meetings. Procedures are in place to ensure all persons effected by decisions made during such meetings received proper notice to attend the meetings. If an owner is aware that some procedural requirement for the proper calling of a meeting was not complied with, he or she can apply to the CSOS to have this confirmed by way of an adjudicator’s order and an appropriate order made regarding the business purportedly done at the gathering. In terms of section 39(4)(b) of the CSOSA, an application may be made for an order declaring that a purported meeting of the executive committee, or a purported general meeting of the association, was not validly convened.

One of the most common reasons a meeting is not validly convened is because proper notice has not been given to all persons entitled to attend. In such circumstances an owner who is prejudiced can apply to have the CSOS adjudicator order that the meeting was not validly convened and to have any decision taken at that meeting set aside.


An order declaring that a scheme resolution is void or invalid 

In practice, the validity or effectiveness of a resolution taken at either an executive committee meeting or a member meeting in respect of a certain issue may be questioned. In this case any person with a material interest in the issue can require an order that the resolution is indeed either void or invalid. In terms of section 39(4)(c) of the CSOSA, an application may be made for an order declaring that a resolution purportedly passed at a meeting of the executive committee, or at a general meeting of the association was void; or is invalid.

An executive committee or member resolution may be declared invalid or void for a wide range of reasons. It could be a procedural issue, such as the meeting not having been properly called or the lack of a quorum. In this regard, the applicant could also rely on the subsection discussed under the previous heading. Alternatively, it could be a substantive issue such as the fact that the resolution is contrary to a provision in the scheme’s governance documentation or the law applicable to the community scheme.

Section 6(8) of the STSMA provides that where the unanimous resolution would have an unfairly adverse effect on any member, the resolution is not effective unless that member consents in writing within seven days from the date of the resolution. Accordingly, if a member alleges that a particular unanimous resolution does have an unfair adverse effect on him or her , but the trustees disagree and threaten to implement the resolution, the owner can approach the CSOS for an order under this provision to confirm the invalidity of the resolution on the basis of its unfair adverse effect on him or her.

Keep an eye out for next month’s newsletter as I will be looking at the other orders relating to meetings and resolutions in community schemes. 
 
DANIËL VAN ZYL

ASSOCIATE ATTORNEY & CONVEYANCER
VAN ZYL KRUGER INC

 

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