The Community Scheme Ombud Service has been in operation for over six years and it now has a new chief ombud, Mr. Adv. Boyce Mkhize, who took office on 1 April 2021. So we need to look at the CSOS, assess the effect it has had on the community scheme industry as well as the cost of its operations, consider where it is delivering value for money, and how it could improve its service. Then we can give the CSOS chief ombud the input he needs. Here are my views:

 

The most positive aspects of the CSOS are:

• The stakeholders in community schemes can now, at very little cost, apply to the CSOS to resolve their conflicts and collect overdue contributions.
• The adjudicators, lawyers, managing agents and trustees who become involved in CSOS matters are becoming better informed and more aware of the laws that apply in community schemes. When CSOS adjudications are taken on appeal, the lawyers, advocates and judges who deal with the appeals in the High Court learn more about community scheme law.

However, there are aspects of CSOS that are not positive:

• The quality of service delivered by the CSOS is frequently criticised, particularly its staff availability by telephone and in response to email enquiries. Its website is frequently not operating properly, which makes its documentation and advice inaccessible.
• The CSOS has an inefficient levy billing and collection system. There is no evidence that the CSOS has developed a database of all community schemes and their owners, or even knows how many community schemes and owners there are in the country. The levy income figure of R 217 060 000 for the 2019/2020 financial year suggests that only 452 208 owners paid levies of R40 per month, which appears to be a very low number. The percentage of community schemes and owners that are not paying CSOS levies is not known.
• The R 81 765 000 of CSOS income that was irregularly invested in VBS Mutual Bank as reported in the 2017/18 annual reports has not been recovered.
• The adjudication process is frequently criticised, suggesting that adjudicators are not prepared for the hearing and take a long time to produce their awards. In addition, many of the adjudicators’ awards—which form a vital record from which the public can learn—are not published by the CSOS.

After six years and with an adequate flow of revenue, the CSOS should have a competent staff, including conciliators and adjudicators, who can provide information promptly and give a reasonable service. The CSOS revenue figures, extracted from its financial statements, are set out below. The total revenue will have exceeded R1 Billion by the end of the 20/21 financial year.

2014/15 Financial Year – Total Revenue R 41 034 000

• Government grant and subsidies: R 40 000 000
• Interest on investments and other income: R 1 034 000

2015/16 Financial Year – Total Revenue R 40 835 000

• Government grant and subsidies: R 39 521 000
• Interest on investments and other income: R 1 314 000

2016/17 Financial Year – Total Revenue R 60 986 000

• Government grant and subsidies: R 30 020 000
• Scheme levies: R 30 392 000
• Interest on investments and other income: R 565 000

2017/18 Financial Year – Total Revenue R 206 179 000

• Government grant and subsidies: R 29 400 000
• Scheme levies – Allocated: R 97 430 000
• Scheme levies – Unallocated: R 73 394 000
• Dispute resolution income: R 217 000
• Interest on investments: R 5 738 000

2018/19 Financial Year – Total Revenue R 236 741 000

• Government grant and subsidies: R 31 105 000
• Scheme levies: R 195 672 000
• Dispute resolution income: R 424 000
• Interest on investments: R 9 403 000
• Disposal of assets and other income: R 137 000

2019/20 Financial Year – Total Revenue R 264 684 000

• Levies Income: R 217 060 000
• Government Grant: R 32 847 000
• Dispute resolution income: R 441 000
• Interest received: R 14 310 000
• Other income: R 26 000 

TOTAL REVENUE OVER 6 YEARS –  R 850 459 000

Government subsidies: R 202 893 000
Interest on investments: R 32 364 000
Levies paid: R 613 948 000
Dispute resolution income: R 1 082 000

I encourage all community scheme owners to look at the figures, and those who have made use of the CSOS should consider their experiences and give the new chief ombud feedback, constructive criticism and suggestions.

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Graham Paddock is a specialist community schemes attorney, notary and conveyancer. He has been advising clients and teaching students for over 40 years, and was an adjunct professor at UCT for 10 years.

Article reference: Paddocks Press: Volume 16, Issue 5.

This article is published under the Creative Commons Attribution license.

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