Property Management, Property Rentals and Property Financial Services in South Africa

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Community Schemes Ombud Service (CSOS)

In 2011 the Community Schemes Ombud Service Act was published – to be promulgated at a date to be announced by the Minister. The Regulations to the Act had to be finalized before the Act and Regulations will be able to come into operation. The Regulations have now finally been published on 2 October 2015 and opened to public comment within 30 days thereafter.

Even though the Act have been published in 2011 already, many Trustees, Directors and owners in Community Schemes are not aware of the effect this Service will have on them.

A Community scheme is defined as “any scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings”. This definition includes Sectional Title Schemes, Homeowners and Property Owners Associations, Shareblock companies, Retirement Villages and Housing Co-operatives.

The CSOS is a national public entity with its head office in Johannesburg and will have regional offices.

The functions of the CSOS are:
• Develop and provide a dispute resolution service
• Provide training – Conciliators; Adjudicators & other employees
• Regulate monitor and control the quality of ST scheme governance documents (and other as determined)
• Take custody, preserve and provide public access to ST scheme governance documentation (and other as determined)

In performing its functions the CSOS must:
• Promote good governance in community schemes
• Provide education, information, documentation and such services as may be required to raise awareness to owners, occupiers, executive committees and others
• Monitor community scheme governance
• May generally deal with any such matters as may be necessary to give effect to the objectives of this Act

The types of issues the CSOS will be dealing with has been summarized into different categories:
• Financial issues
• Behavioural issues
• Scheme governance issues
• Meetings
• Management Services
• Works pertaining to private areas and common areas
• General and other

The CSOS will be operated on funds received from the following:
• Money appropriated by Parliament
• Levies collected from Community Schemes
• Fees for services rendered
• Interest derived from investments of the Service
• Loans raised by the Service
• Donations
• Subsidies and grants

With the Regulations to the Act that was published on 2 October 2015 it was proposed how these levies will be raised to Community Schemes.

The Act stipulates the following – this is fixed and not currently open for public comment:
• The levies must be paid on or before the 30th of September each year
• Interest of prime + 1 will be raised on arrear levies

The Regulations publish on 2 October 2015 and now open for public comment proposes the following as levies to be paid.

It will be a monthly levy payable by each unit based on a sliding scale:

Municipal Valuation of Unit Monthly Levy Payable
Zero to R 500 000 R 0.00
R 500 001 to R600 000 R 3.40
R600 001 to R 700 000 R 6.80
R700 001 to R 800 000 R10.20
R800 001 to R 900 000 R13.60
R900 001 to R 1 000 000 R17.00
R 1 000 001 to R1 250 000 R25.50
R 1 250 001 to R1 500 000 R34.00
R1 500 001 to R1 750 000 R42.50
R 1 750 001 to R 2 000 000 R51.00
R 2 000 001 to R 2 250 000 R59.50
R 2 250 001 to R 2 500 000 and above R68.00

Any person whose monthly net household income is below R5500 are entitled to 100% waiver of the levy. Other persons may also apply for waivers.

The Act also stipulates that all Community Schemes must file the following documents to the CSOS on or before 31 October of each year:
• Annual return
• Contact details of Trustees / Directors
• Annual financial statements
• Other prescribed documents

Trafalgar will be submitting comments and recommendations in this regard before the end of October 2015. This will include that comments that we have already received from some of our Trustees stating that they do not understand why they have to pay this exorbitant levy when they feel that they are not really going to get anything for it.

Summary of comments:
• It is stipulated that the CSOS will review all rules made from the date it comes into operation and will comment and give back to the scheme rules that are not reasonable and or cannot be enforced – Can they check the rules proposed by the Trustees before the necessary resolution is passed by the Community Scheme?
• The CSOS levies are exorbitant – what are the members getting for that?
• How is the CSOS going to charge the levies – will they be sending an invoice to each individual member? Or will they invoice the Community Scheme directly to pay it? Maybe they are going to say that each Community Scheme must calculate and pay over the levies – but how will they
then verify that the correct levies are paid?
• Why are there two forms to apply for waivers of the levies? Are there two levies? Must the Community Scheme pay a levy as well as each member in the scheme?
• What training are the CSOS staff going to receive?
• What qualifications will the CSOS staff have to have?
• What is the turnaround time for disputes?
• Will the CSOS staff have the capacity to provide all the services they are proposing?

Should you have any queries in this regard please contact the writer.

Kind regards

Karien Coetzee
National Property Management Consultant
(021) 410 5512
karienc@trafalgar.co.za

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