As most home owners and trustees are aware there have been recent changes to the legislation governing community schemes in South Africa. The changes came into effect on 7 October 2016 and have caused a major shakeup in the property industry. As the proud Manging Agent of over 150 community schemes Pam Golding Property Management Services (Pty) Ltd feels obligated to provide some much needed clarity to our clients and as a result we will be publishing regular articles on our website relating to the new legislation in order to educate and empower our valued clients.
What follows is a brief synopsis of some of the very complex new provisions and, particularly if you are a trustee or director, it is essential that you familiarise yourself with all the changes.
The following legislation came into operation on 7 October 2016:
- The Sectional Title Schemes Management Act 8 of 2011 (STSMA) and its regulations; and
- The Community Schemes Ombud Service Act 9 of 2011 (CSOS) and its regulations.
The STSMA applies only to sectional title schemes and replaces the old Sectional Titles Act’s (STA) Management provisions while CSOS applies to all “community schemes”.
Firstly, it is important to understand the newly introduced concept of a community scheme. In terms of CSOS a community scheme means any scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings, including but not limited to –
- Sectional title development schemes
- Home owners associations
- Property owners associations
- Share block companies
- Retirement housing schemes
- Housing co-operatives
- And any other “scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings”.
Turning the focus to the legislation governing sectional title schemes it must be made clear that the STA has not been repealed and this Act now exclusively deals with land title and conveyancing aspects relating to the registration of sectional titles schemes. All of the management provisions of the STA have been removed and replaced by the STSMA. The STSMA now provides for the establishment, management and regulation of bodies corporate. For the main part the previous management provisions contained in the STA have been transferred to the STSMA and redrafted in a more user friendly manner with the aim of assisting trustees and managing agents.
Although the STSMA has been structured on the foundations of the STA there are some major changes to the new Act which are going to change the way that sectional titles schemes are managed and it is important for trustees and managing agents to get to grips with these changes as soon as possible.
A quick bird’s eye view of these changes include, the requirement of a maintenance plan and a reserve fund, changes to the procedures to calling and conducting general meetings and the requirement to have the property revaluated every three years for insurance purposes. Please note that we will look at these and further changes in more detail in the weeks to follow.
Finally let’s look at the CSOS which was drafted with the aim of:
- providing for dispute resolution;
- regulating, monitoring and controlling the quality of all affected Scheme governance documentation, for example their constitutions and their rules; and
- providing a central repository for governance documentation relating to all the Schemes in the country and to allow public access thereto, either electronically or by other means.
The Ombud service will charge each member of a community scheme an amount which will be “the lesser of R40.00 or 2% of the amount by which the monthly levy charged by the Scheme exceeds R500.00.” Units with monthly levies of R500.00 per unit or less are therefore entitled to a 100% waiver. Once the levy payable exceeds R2 500.00 the fee will be capped at R40.00. These levies are payable by the Scheme to the Ombud service quarterly and shall be collected as of January 2017.
Every community scheme was required to register with the Ombud service within 30 days from the date of publication of the CSOS regulations. This was a mammoth task which was undertaken by our staff and we are pleased to report that the majority of our clients have been registered, save for a handful of clients which are yet to provide us with the required mandate.
The types of relief that may be applied for are divided into seven categories, namely, (1) financial issues; (2) behavioural issues; (3) scheme governance issues; (4) meetings; (5) management services; (6) works pertaining to private areas and common areas; and (7) general and other issues. We will go into greater deal on these issues in a separate article.
In addition to providing a dispute resolution service, the Ombud service will be responsible for monitoring the quality of the documentation that regulates how community schemes are governed, and what owners and residents can and cannot do with the aim of notionally improving the governance of community schemes. Every community scheme is required to lodge their scheme’s governance documentation with the Ombud service by no later than 7 January 2017.
Another further requirement which has been introduced by the CSOS is the requirement for every community scheme to obtain fidelity insurance. This requirement took effect immediately following the publication of the regulations and we are in the process consulting with and obtaining quotations from various brokers to have the required cover put in place for each of our clients. We will provide much needed clarity on this issue in a separate article.
We trust that this article has been insightful and that you will continue to monitor our website for more articles to follow. Should you be a trustee or director in a community scheme and are not already a client but require assistance in navigating your way through the newly introduced legislation please feel free to contact me on firstname.lastname@example.org.