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Collecting arrear levies ahead – considering the CSOS Act

After being promulgated in 2011, the Community Schemes Ombud Service (CSOS) Act, has recently come into force following the finalisation and publication in the Government Gazette of its attached Regulations. The intention behind the Act is primarily to create an alternative dispute resolution institution, in much the same vein as the CCMA for employment disputes, to aid and assist people living in community schemes to resolve disputes fairly and to do so without having to incur huge legal fees and delays in the process.

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Traditionally the only real dispute resolution avenues open to those residing in a community scheme have been to take the matter to court or to approach an Arbitrator for a decision, and both of these choices have high costs associated with them, with the result that in many instances disputes were either never resolved or only resolved at great cost to the parties. Now in terms of the new Act, an Ombudsman has been appointed who leads a team of conciliators, adjudicators and investigators, acting for a nominal fee (R50 for a conciliation and R100 for an adjudication) and open to any member of the public or any community scheme to aid in resolving community scheme disputes. The timelines for resolving disputes have been given as five to 120 days depending on the complexity of the matter.

The question then becomes, how can the Ombud be of assistance in terms of resolving disputes? In terms of the CSOS Act, the Ombud has jurisdiction, and can make an order resolving any dispute pertaining to behaviour, governance, management services, common property works and financial issues. The scope of dispute that can be referred to the Ombud to adjudicate upon is very wide. This would apply to any “community scheme”, being defined as bodies corporate, home owner associations and shareblock companies or any other arrangement where land is shared to be used by a group of people, such as retirement villages and housing associations.

It is important to note, though, that the Ombud will require internal dispute resolution mechanisms to be applied and exhausted before the matter is referred to his office (eg warning and demand letters or meetings between the parties including the Trustees / Directors).

The greatest benefit is the Ombud’s capability to refer financial disputes. The financial issues that can be referred are vast in terms of Section 39(1) of the Act, but include asking for an order that errant owners be forced to pay their arrear and unpaid levies to the scheme, or an order forcing tenants to make payment to the scheme instead of the owner.

The order given by an adjudicator in the Ombud’s office will have the same weight as an order given by a Magistrate’s court or High Court depending on the nature of the order and quantum concerned, and once granted, a warrant of execution can be issued by a Magistrate’s court if the outstanding amount remains unpaid. In addition, an order by the CSOS Ombud may only be appealed on a point of law.

The further benefit to this is that legal representatives will usually not be allowed to represent parties in an Ombud adjudication, making the process much less formal and time consuming. It should be noted however that the Trustees still have discretion as to what institution they would like to use to recover arrear levies. In some instances, due to the amount owed or complexity of the matter, it may still be best to approach a court of law.

We believe, however, that the alternative mechanism now available could be used to great effect and will have positive results if the Ombud can resolve disputes speedily and effectively. It certainly appears to be a viable option, especially for cash-strapped schemes, to start recovering levy arrears for the benefit of all owners within those schemes. However, given that this is a new service mandated by new legislation, time will tell if the Ombud’s office has the necessary capacity and skills to execute the mandate to achieve a more cost and time-effective dispute resolution service.

Trafalgar has already identified a number of test arrear-levy cases applying to both Sectional Title and HOA community schemes to refer to the Ombud’s office and evaluate its effectiveness in assisting with arrear levy collections. It may still be necessary to approach the courts to execute Ombud orders, but only the experience of a number of cases will demonstrate a preferred approach for addressing levy arrears which have not been resolved with pre-legal debt collection measures.

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