Does the CSOS have Jurisdiction over Developer Disputes? 

By Jennifer Paddock

The Community Scheme Ombud Service (CSOS) was established under the Community Schemes Ombud Service Act of 2011 (CSOS Act) to offer an impartial, transparent alternative for resolving administrative disputes within community schemes.

It appears to be accepted that the CSOS does not have jurisdiction over developers but I can find no legal justification for this view. This article argues the necessity of CSOS’s involvement in cases concerning developers and presents reasons supporting this assertion.

 

1. The CSOS Act Does Not Explicitly Exclude Developers

The CSOS Act doesn’t explicitly or impliedly exclude developers from its jurisdiction. According to Section 38(1) of the CSOS Act, any person with a “material interest” in a community scheme administration dispute can approach the CSOS for resolution. Developers, as the creators of community schemes, undeniably possess a material interest until they transfer ownership of all individual properties to successors in title. And even after they have transferred their last property, they often retain a certain level, and sometimes a significant level, of control over the management and administration of the scheme, which continues their material interest.

 

2. Developers Play a Crucial Role in Community Scheme Administration

Section 1 of the CSOS Act defines a “dispute” as: ‘a dispute in regard to the administration of a community scheme between persons who have a material interest in that scheme, of which one of the parties is the association, occupier or owner, acting individually or jointly’. 

Developers significantly influence community scheme administration, particularly in the early stages. They draft initial rules, appoint trustees or directors, and often manage the scheme for an extended period. Disputes involving developers can substantially impact scheme administration.

 

3. Exclusion Disadvantages Schemes and Owners

Excluding developers from CSOS jurisdiction leaves management bodies and individual owners with limited options for dispute resolution. High Court proceedings are often prohibitively expensive. If CSOS doesn’t accept these cases, many remain unresolved.

Developers also retain control over schemes in their early stages, influencing decisions affecting owners’ rights. Excluding them from CSOS jurisdiction could prevent accountability for potentially prejudicial decisions.

 

4. Undermining CSOS’s Mandate

Excluding developers from the CSOS’s jurisdiction arguably undermines its mandate to provide an alternative, impartial, and transparent service for the resolution of administrative disputes in community schemes. The CSOS is designed to provide a forum where all parties involved in a community scheme can resolve their disputes in a fair and equitable manner. If developers are excluded from this process, it could lead to a lack of transparency and fairness in the resolution of disputes involving developers which could be seen to undermine its mandate.

 

5. International Precedent

Comparable foreign tribunals, such as the Queensland Civil and Administrative Tribunal (QCAT) in Australia, successfully resolve disputes between community schemes and developers as well as owners and developers. 

The formation of the CSOS was largely based on the QCAT and other comparable foreign tribunals. If they include developers in their jurisdiction, the CSOS should too.

In conclusion, it’s imperative for the CSOS to reconsider its stance on developer jurisdiction because:

• The CSOS Act doesn’t explicitly or by implication exclude developers from its jurisdiction.
• Developers have a material interest in the community schemes they develop and play a crucial role in community scheme administration, often for an extended period, which places management body and owner disputes with a developer squarely within the CSOS’s jurisdiction under sections 38(1) and 1 of the CSOS Act.
• Inclusion aligns with CSOS’s mandate for effective dispute resolution and it promotes transparency and good governance.
• It aligns with comparable international tribunal practices.

In my view, the CSOS does have jurisdiction over developers and this is a fundamental requirement for the performance of its mandate to provide a more equitable and efficient dispute resolution process for all parties involved in community schemes.

 

---

Article reference: Paddocks Press: Volume 18, Issue 16.

Jennifer Paddock is a dual-qualified lawyer with experience working as a strata title managing agent and solicitor in New South Wales. Prior to this, she served as a specialist sectional title attorney and practice manager at Paddocks for five and a half years. She brings a wealth of knowledge and expertise to the Paddocks team. Contact her at consulting@paddocks.co.za.

This article is published under the Creative Commons Attribution license.