In 2016 the Community Schemes Ombud Service Act was brought into force, alongside the establishment of the Community Schemes Ombud Service (CSOS).
Community schemes include sectional title schemes, share block companies, homeowners’ associations, retirement housing schemes and housing co-operatives.
As shared responsibility for land and buildings can sometimes be fraught with conflict, the Community Schemes Ombud Service (CSOS) aims to resolve disputes in these schemes efficiently and cost-effectively.
Who is paying for the CSOS?
Under the CSOS Act, it is mandatory for all community schemes to register with the CSOS and contribute with the payment of levies, explains Justine Krige, director at law firm Cliffe Dekker Hofmeyr.
New community schemes are required to formally register with the CSOS within 30 days of the date on which they are incorporated, while pre-existing schemes were required to have registered by 7 November 2016.
“Regulation 2(1) provides that schemes must collect the prescribed monthly levy from every unit within a community scheme and pay these levies to the CSOS on a quarterly basis,” Krige said.
The calculation of monthly CSOS levies are as follows:
The levy is determined with reference to the existing monthly levy charged by the scheme, explained Krige.
“For example, if a monthly levy between R0 and R500 is payable in respect of a unit, then no monthly CSOS levy is payable,” she said.
“If a monthly levy of R2,500 and above is payable in respect of a unit, a monthly CSOS levy of R40 is payable. There is therefore a prescribed minimum of R0 and a maximum of R40 per unit, per month, with amounts ranging in between.”
While the regulations refer to an amount levied in respect of a unit and do not specifically refer to amounts being paid by either owners or tenants, Krige said that a directive sent out in March 2017 by the CSOS made it clear that it contemplates owners (rather than tenants) as liable for payment of the levies.
Krige said that the regulations also provide for certain discounts and waivers and that any person whose monthly net household (gross income less PAYE) income is below R5,500 is entitled to a 100% waiver of application and adjudication fees in respect of any dispute before the CSOS.
“Additionally, any person who may not qualify in terms of the above criteria, may lodge an application for discount and/or waiver for consideration by the Chief Ombud.”
The penalties for non-payment are ‘significant’, warned Krige
“Non-payment of levies on the due date will attract interest at a rate of 2% per month,” said Krige.
“In terms of section 34 of the Act, any person who fails to comply with the Act is liable, on conviction, to a fine or imprisonment for a period not exceeding 5 years or to both a fine and such imprisonment.
“Where a person is convicted for a second or subsequent conviction for an offence, he or she is liable to a fine or imprisonment for a period not exceeding 10 years or to both a fine and such imprisonment.
“Schemes will use normal debt collection mechanisms to collect outstanding levies from owners,” she said.
The payment of this levy is potentially problematic because the CSOS currently doesn’t provide a level of service that residents may want to use.
Instead, residents are more likely to turn to lawyers and other means of dispute resolution – while still paying for the CSOS through their attached levy.
Citing the 2016/2017 CSOS annual report, Krige noted that 315 disputes were not resolved within the specified service levels – primarily because the current workforce was unable to manage the drastic increase in new applications for dispute resolution.
Only 36% of conciliations were finalised within 40 days, with 64% taking longer than the 40-day target period (against a target of 80% being resolved within 40 days).
The CSOS also failed to meet registration targets.
As at March 2017, approximately 25,000 registration applications were received. However, only 7,434 community schemes were actually registered out of an annual target of 50,000 registrations, Krige said.
“The CSOS has also published just three adjudication orders which are the findings of disputed cases heard by it and the orders granted in each matter,” she said.
“The fact that the CSOS has only rendered adjudication orders in three matters since its inception two years ago suggests that its resources are severely constrained and that it is unable to expeditiously resolve disputes at the level required for it to fulfil its statutory mandate,” Krige said.
“If the CSOS is to be an effective institution and fulfil its mandate it is going to have to improve on the number of new registration applications that it processes (to establish a database of community schemes), and it is going to have to significantly increase its capacity to deal with dispute resolution applications. If it does not do so, it runs the risk of failure.
“Members of the public will not make use of the service if it cannot be rendered effectively, however laudable its objectives,” she said.