Many in the sectional title industry are questioning whether the Community Schemes Ombud Service provided for in the CSOS Act, which was signed into law in 2011 but is still awaiting proclamation, will cope with the numbers of enquiries that come in, and whether the cases will be dealt with in the turnaround times that they have promised.
This is according to Mandi Hanekom, operations manager of the sectional title finance company Propell, who says the principle of the service is sound in that it should enable residents of sectional title schemes and homeowners’ associations (HOAs) to take their disputes to one body with the sole aim of resolving these, instead of having to use an arbitrator or the courts.
The cost for this service will be borne by owners of units valued over R500 000 and is payable monthly, but will be available to everyone to use, regardless of the value of their unit.
Hanekom says the ombud service is meant to be a cost-effective way of settling disputes in the future so that the high costs of arbitration or litigation can be avoided.
In many cases, trustees, owners, tenants or managing agents might not have borne the full repercussions of going against the rulings as set out in the Sectional Titles Act because sectional title schemes may not have had the funds to pay for litigation, she says.
The draft CSOSA regulations also make it compulsory for all sectional title and HOA run schemes to take out fidelity insurance against the risk of money being lost as a result of fraud. The regulations go as far as to prescribe a minimum amount of fidelity insurance that must be taken out, and states that the policy must pay out without the scheme having to pursue criminal or civil proceedings to recover the stolen money. This insurance will, under the new STSMA regulations, have to be discussed at each AGM.
Hanekom says schemes will, however, not have to take out fidelity insurance if the person responsible for the finances of the scheme is already insured. For example, as long as the scheme’s managing agents can prove they have cover that complies with the regulations, this will be sufficient.
The current requirements are only that the trustees give the owners of units within a scheme an option of whether they think they need it or not. The body corporate can, therefore, decide not to take fidelity cover.
Public liability insurance will also be added to the list of items that have to be addressed at each AGM as this is needed in the case of any liability on the body corporate’s part for injury or death and damage or loss of property while on the common property of the scheme. The draft regulations go as far as to stipulate that there must be cover for at least R10 million, she says.
All bodies corporate must also have the buildings and improvements to the common property valued at least every three years, and this valuation must be presented at the AGM, which will be used in assessing the insurance cover needed for the scheme going forward.
“Ultimately, the common goal should be to assist schemes that need help and keep them financially safe without causing too much disruption or additional administration work for the trustees,” says Hanekom.