CSOS (Community Schemes Ombud Service) and the Sectional Titles Schemes Management Act 2011

The Department of Human Settlements has proposed major changes in terms of Management Rules as well as proposed the introduction of an Ombud’s Office for Sectional Title disputes. The Sectional Title Schemes Management Act, along with the Community Schemes Ombud Service have been gazetted, with effect from the 1st of October 2016.

2016-09-26-Signed-CSOS-Regulationss.pdf

2016-09-26-Signed-STSMA-Regulations.pdf

Below listed the major changes, which will effect each and every complex in South Africa.

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Ombud

An Ombud's office has been opened, this office will be dealing with all Sectional Title Disputes. Owners have the right to lodge their "disputes" with the Ombud. The CSOS has been established in terms of the Community Scheme Ombud Act 2011 [Act 9 of 2011] to regulate the conduct of parties within community schemes and ensure good governance. They will provide an alternative, impartial and transparent service for the resolution of unresolved disputes in community schemes.

Members and non-members (tenants) can refer disputes to the Ombud. This will result in us having to employee a compliance officer to attend to the required documentation to substantiate the Trustees/Body Corporate's case at the Ombud.

The cost of the Ombud Service is nominal, starting from R50.00 for an application and R100.00 for an adjudication. Further to these charges, the Body Corporate, at this stage, will be liable to pay a monthly levy over to the Ombud. The tariffs have been calculated per unit per month and are based on the levies payable by the members in the scheme.

The Ombud levy contributions are calculated as follows:

R0.00 - R500.00           -   R0.00 contribution

R501.00 - R2 499.00    -   2% monthly contribution per unit

R2 500.00 and above  -   A maximum contribution of R40.00 is payable per unit per month

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Proposed Management Rules in terms of Section 10 (2)(a) of the Sectional Titles Schemes Management Act, 2011

The current Prescribed Management Rules in the Sectional Titles Ac 95 of 1986 will fall away. These Management Rules will be replaced by the Management Rules contained in the Sectional Titles Schemes Management Act. There are some positive changes and some adverse changes. The most important changes are discussed below:

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Reserve Funds

The new Sectional Titles Schemes Management (STSM) Act dictates that each Body Corporate must have 25% of their current annual income in a reserve fund for future maintenance. This reserve must remain at 25% of the annual income and must be placed in a separate banking account.

Funds may not be transferred from the Reserve account to the current account to cover the running costs of the scheme. Most of our clients have separate banking accounts and we have always recommended that our clients build up their reserves. The bad news is, if a Body Corporate does not have sufficient reserves upon implementation of the new STSM Act, a special levy will need to be raised to ensure sufficient reserves can be put in place.

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Maintenance plans

All Bodies Corporate will have to ensure that a proficient 10-year maintenance plan is set up, upon implementation of the STSM Act. The maintenance plan must include all substantial repairs and refurbishments that do not form part of the day to day maintenance of the scheme. In this regard it is recommended that accredited companies or contractors draw up this maintenance plan. The positive of this change is that it prevents the deteriorating of a building.

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Insurance cover

The STSM Act requires that all buildings are insured for landslip and subsidence and riot. These items are currently excluded from all policies as the insurers will not carry this risk on basic policies. This amendment will seriously affect the ability to find insurance cover and it will also affect the premium costs.

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General liability insurance

The STSM Act requires sufficient liability insurance for Trustees as well as the Managing Agent. This will require proper procedures to be implemented when appointing contractors, ensuring that contractors have Workman's Compensation cover and that the contractors sign for full liability of their staff and sub-contractors. A lot of emphasis will be placed on health and safety in the building and compliance with relevant acts in this regard.

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Proxies and quorum requirements

The new STSM Act places a limitation on the number of proxies that a chairperson may carry. The chairperson is only allowed two (2) proxies. The STSM Act is also proposing that the quorum requirements are set at one third of the members present or represented by proxy. The reprieve is that if an owner owns many units in the complex, and hands in a proxy, that proxy counts as only one vote.

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Resolutions passed at AGM's or SGM's

The STSM Act has included a rule that states that the Trustees must wait one week before implementing a resolution passed at a Meeting of the Body Corporate in order to determine if any owners have objection to same.  This rule is a major concern as this will affect any resolutions that were duly passed by the members at the meeting forming a legal quorum.

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Levy collections and voting rights

The STSM Act states that owners can vote and serve as Trustees whilst in arrears, and until judgment has been taken against them by a Court of Law or a Judicator (CSOS). Further to this, the STSM Act states that the owner will be liable for legal fees incurred with regard to the collection of levies, but they have to consent to payment of same before the fees can be debited.

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Managing Agents

The STSM Act proposes that Executive Managing Agents (appointed by the passing of a special resolution) have the full power of a Trustee to make decisions regarding the scheme, maintenance etc. but must then report to the members on a quarterly basis as to the items that have attended to and the financial status of the scheme. We, as Managing Agents, will have to ensure that Trustees are actually fulfilling their duties and obligations.

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Tenants contact details as well as the Rental Housing Act

The STSM Act states that the Body Corporate must keep full records of Trustees, members and tenants. These records must include full names, ID numbers/passport numbers, section and mailing address, telephone numbers and email addresses. Due to the fact that a tenants can lodge a dispute with the Ombud, this information is required. Move-in policies and procedures will have to be implemented, noting the additional admin that this requires.

Further to this, the STSM Act states that any member who leases a unit to a tenant is responsible to ensure that the system, i.e. Rules, Water & Electricity prepaid meters etc. used does not infringe on the rights of the tenant in terms of Rental Housing Act or any other law. This means that decisions taken by the Trustees and Body Corporate have to be considerate to the Rental Housing Act, and the Constitution.