Is a Community Schemes Ombud Service Vital?

A residential complex can be a breeding ground for disputes. People with different temperaments and values share the same living space, while rules and trustees restrict what residents can and can’t do. If not dealt with properly, disagreements can lead to a breakdown in relationships between neighbours, and mismanagement of the scheme.

Themba Mthethwa noted that, “South Africa needs a statutory body that will enable disputes in community schemes to be resolved easily and effectively. ” Mthethwa, who is the chief ombud of the Community Schemes Ombud Service (CSOS), explained that in the absence of an ombud service, the only recourse has been a professional arbitrator or the courts, even for minor disputes.

According to a local property agent, a judge lamented the fact that a High Court was burdened by a dispute between a homeowners’ association and an owner because of a barking Chihuahua. Most individual owners cannot afford litigation or arbitration, while the adversarial nature of the court process also acts as a deterrent against taking on people they have to live with.”

A law student, Isaac Morics noted that “The regulations, and the Act itself, are set to be a game-changer for “community schemes”, which include a variety of arrangements (residential and commercial) involving the shared use and ownership of property, the most well-known being sectional title and homeowners’ associations.”

All community schemes are now directly accountable to a body, tasked with ensuring that they are properly managed. Schemes must register with the CSOS and each year submit a return to the CSOS, listing their executives, the levies paid by each unit and their annual financial statements.

They must lodge their governance documents, such as their management and conduct rules, with the CSOS, and the service must approve any changes to these documents before they can become effective.

The CSOS is specifically mandated to ensure that sectional title schemes comply with the new Sectional Titles Schemes Management (STSM) Act, which also came into operation on October 7.

According to worldwide stats, South Africa has the fourth-highest concentration of community schemes in the world. Mthethwa noted that community schemes had an asset value of more than R800 billion in 2015 and managers of these schemes collect R11 billion in levies annually.

The launch of the CSOS was the culmination of a process that started in 2004, when the cabinet mandated a committee, consisting of representatives from various government departments, to investigate how disputes in sectional title schemes should be dealt with.

Although many people are only now starting to come to terms with the reality of the CSOS, it has been in existence since 2013, when the Minister of Human Settlements appointed the seven non-executive members of the CSOS’s board, who serve for a three-year term. The board appointed the chief ombud and the chief financial officer, who are also executive members of the board.

Mthethwa’s five-year term as chief ombud started on October 1, 2014. His priorities were to establish the CSOS’s head office, which is in Sandton, and to appoint and train staff, anticipating that the CSOS legislation would take effect the following year. As it turned out, the draft regulations were only published for public comment a year later, in October 2015.

Although the CSOS is an “ombud” service, neither the chief ombud nor any of the regional ombuds are involved in resolving disputes. They are essentially chief executives and administrators. Conciliators or adjudicators settle disputes.

The CSOS hopes that most disputes will be settled via conciliation (like mediation), where a trained conciliator works with both parties to facilitate a mutually acceptable agreement. Conciliation is a “no-fault”, informal process, and a settlement can be reached in face-to-face meetings or by the parties exchanging submissions.

If the dispute cannot be resolved by conciliation, or if conciliation is not appropriate, the case will be referred to an adjudicator drawn from a panel made up of retired magistrates and judges, and professional adjudicators.

Adjudication is more formal than conciliation, and the adjudicator will rule in favour of the parties (or dismiss the application) and issue an order that has the same status as a judgment of a magistrate’s court or the High Court.

A party who is dissatisfied with an order can appeal to the High Court, but the grounds are limited to how the adjudicator applied the relevant law. Mthethwa says this prevents litigants from resorting to the courts to delay the implementation of orders.

The CSOS could not issue adjudication orders until the final regulations were promulgated on October 7. In the 2015/16 financial year, the CSOS finalised 646 complaints, most of them (225) by conciliation, but a large number (133) were closed without being resolved because the applicants failed to submit information requested by the CSOS.

The balance of the applications was rejected, withdrawn, settled by the parties without conciliation, or referred to other tribunals.

Mthethwa says that, contrary to expectations, the vast majority of complaints were not about barking dogs or noisy neighbours, but were financial matters, including “excessive” levy increases.

The imposition of special levies and the “incorrect” calculation of levies were amongst the other complaints. He says a common problem underlies all these complaints: owners and trustees do not understand how to apply the legislation that governs sectional title schemes.

One of the CSOS’s responsibilities is to educate owners, residents and scheme executives about their rights and obligations, and Mthethwa says carrying out this mandate is crucial to ensuring harmony and good governance in community schemes. The service plans to roll out several free workshops around the country and make educational material available.

He says it’s apparent that many owners do not understand that, when they buy into a community scheme, they automatically become liable for the expenses associated with maintaining and repairing the common areas – such as the exterior of the building, corridors, lifts, gardens and paving.

“Owners don’t attend an AGM where it’s decided, for example, that the building has to be painted. Then they become angry when their levies are increased,” Mthethwa says. “But when we investigate these complaints, we find that the body corporate did, in fact, follow the proper decision-making process before the levies were increased.”

He says owners must get involved in their schemes, attend meetings, read the governance documentation, and hold their executives accountable.