Community Scheme Ombud Service – An Overview by Prof Graham Paddock

The Community Scheme Ombud Service Act, No. 9 of 2011 (“the Act”) will come into force on a date to be fixed by the President by proclamation in the Gazette.

In terms of the Act the term “community schemes” includes:

1. Sectional titles development schemes in terms of the Sectional Titles Act (Act 95 of 1986);
2. Share block companies governed by the Share Blocks Control Act (Act 59 of 1980) and the Companies Act (Act 61 of 1973), soon to be replaced by Act 71 of 2008;
3. Home or property owner’s associations, whether constituted as companies under the Companies Act  or as common law associations, established to administer property developments;
4. Housing schemes for retired persons in terms of the Housing Developments for Retired Persons Act (Act 65 of 1988), and
5. Housing co-operatives under the South African Co-operatives Act, 2005 (Act 14 of 2005)

as well as any other scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings.

This Act is a very significant development in the South African law applicable to the administration of real property in that it recognises a wide range of different legal arrangements currently used to provide urban housing and shared facilities as being part of a new legal class, the “community scheme”.

The purposes of the Community Scheme Ombud Service (the “Service”), set out in clause 4 of the Act,  can be summarised as being to:
(a) provide a dispute resolution service with national reach for community schemes;
(b) train conciliators, adjudicators and other Service employees;
(c) take custody of, control the quality of and provide public access to all sectional titles scheme governance documentation and any other such documentation determined by the Minister; and
(d) promote good governance of community schemes and monitor that governance;
(b) provide education, information, documentation and services to raise awareness of owners, occupiers, executive committees and others who have rights and obligations in community schemes.

DISPUTE RESOLUTION

When a community scheme’s governing body (defined in the Act as the “association”), an occupier or an owner has a dispute with any other person who also has a material interest in that scheme in regard to the administration of that scheme, they will be able to approach the Service for assistance in resolving that dispute. The envisaged process involves the prior use of internal dispute resolution mechanisms. Where these prove ineffective and a dispute is referred to the Service, the first option will be professional conciliation, but where this fails or seems unlikely to succeed, the matter will be referred to an adjudicator for fast-tracked resolution.

In line with international best practice, the Act does not give the Service unlimited jurisdiction in the sphere of community scheme administration disputes. The dispute must fall into one of the categories set out in section 38 of the Act under the headings:  Financial issues;  Behavioural issues; Scheme governance issues; Meetings; Management services; Works pertaining to private areas and common areas and General and other issues.

TRAINING OF CONCILIATORS, ADJUDICATORS ETC.

The Act recognises that the skills necessary to operate the dispute resolution processes may not be generally available at reasonable cost and therefore specifies that one of the Service’s functions is to train conciliators and adjudicators. The persons who carry out these functions on a full or part-time basis will need a working knowledge of the law and practices involved in the operations of the relevant community schemes as well as in the processes of investigation, conciliation or adjudication.

It is inevitable that some of those trained by the Service will use their skills in other contexts. When they operate outside the Service, these people’s skills will serve to raise the general level of understanding of the operations of community schemes in South African society and in this way further the overall objects of the Service.

GOVERNANCE DOCUMENTATION

The governance documents for share block schemes, for property and home owners’ associations that are incorporated as companies and for housing co-operatives are kept and controlled by the Companies and Intellectual Property Commission. Such documentation for sectional titles schemes, including those retirement developments that are sectional titles schemes, is filed at Deeds Registries. But since 1997 the quality of the documents filed with the Registrars has not been examined or controlled, and in many instances documentation in the sectional title registers has been unauthorisedly amended or removed.The governance documentation for home owners’ associations that are common law associations is sometimes kept by local municipalities, but is not reliably updated or generally accessible. The governance documentation for retirement developments that operate on a contractual “life-rights” basis are not checked or kept by any government or local municipality.

The Service’s role in ensuring that scheme participants and role-players have reliable and ready access to their community scheme governance documentation will be a major factor in improving the operation of community schemes.

MONITORING

The Act makes provision for annual returns that must made by community schemes to the Service, including copies of a scheme’s annual financial statements.

At present there are many community schemes that operate without regard for the requirements of their governance documents and any statutes that may govern their operations. The fact that community schemes will have to prepare annual returns to the Service will serve as an annual reminder to scheme executives and managing agents of the necessity to comply with the requirements of these provisions.

RAISING AWARENESS AND EDUCATION

Finally, and again in line with international best practice in “strata” and “condominium” schemes, the Act recognises that it is important to educate those who have rights and obligations in community schemes and to raise awareness amongst them so as to prevent disputes, a significant number of which are caused by a lack of information and understanding of community schemes.

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