By now, you should be aware that the Sectional Titles Schemes Management Act (“the STSMA”) and the Community Schemes Ombud Service Act (“the CSOSA”) came into operation on 7 October 2016. In our consulting department, we receive many queries from home owners’ associations (“HOA’s”) as to whether the provisions of the STSMA are applicable to these community schemes, whether established in terms of the Common Law, or registered as non-profit companies in terms of the Companies Act.
Does the STSMA apply?
No, the provisions of the STSMA and the Regulations, containing the prescribed management and conduct rules, do not apply to HOA’s. However, should there be bodies corporate, forming part of the HOA, these sectional title schemes will be administered and managed in terms of the STSMA.
What does apply?
If the HOA is established as a Common Law association, its constitution and rules (if any), form its governance documentation, applicable to each member of the association. Should the HOA be registered as a non-profit company (“NPC”), its memorandum of incorporation and rules (if any), and the Companies Act, are applicable.
In addition, the CSOSA, its Regulations, and the Schedule to the Regulations: Levies and Fees, are applicable.
How does the CSOSA apply?
Levies
As an owner of an erf within an HOA, your HOA must collect a prescribed monthly levy from you, which will, in turn, be collected from your HOA by the Community Schemes Ombud Service (“CSOS”) on a quarterly basis. This levy is calculated as the lesser of R40.00 or 2% of the amount by which the monthly levy charged by the HOA exceeds R500.00.
Registration
The trustees or directors must further ensure that the HOA is registered with the CSOS and that copies of the prescribed documents, such as the HOA’s annual return, annual financial statements, and governance documentation are submitted to CSOS.
Fidelity insurance
The CSOSA further prescribes that each HOA must ensure that it holds the minimum amount of fidelity insurance cover, which is the total value of the HOA’s investments and reserves at the end of its last financial year, and twenty-five percent (25%) of its operational budget for its current financial year.
Duties of scheme executives
The CSOSA sets out the duties of trustees or directors, as scheme executives. These include:
- attendance at, and preparation for, all executive and general meetings;
- the taking of reasonable steps to inform and educate themselves about their scheme, and its governance documentation;
- the taking of reasonable steps to obtain sufficient information and advice relating to any matter due to be decided on, in order to make conscientious and informed decisions in their executive capacity; and
- the exercise of an active and independent opinion in respect to these decisions.
Dispute resolution
The CSOS may be approached, should there be a dispute between member/s or tenant/s and the HOA, or the HOA and its member/s or tenant/s, or between members, and all internal remedies have been exhausted. There is a prescribed complaint form to be completed and a process to be followed, in order to obtain the relief sought on one or more of the prescribed grounds, as set out in the CSOSA.
Paddocks have created the Guide to CSOS Applications for Dispute Resolution assist you in understanding the CSOS, learn what types of assistance/orders it can give you, and guide you through the process of preparing a dispute resolution application.
Governance documentation
Lastly, the local Department of Planning and Building Development Management (in whose jurisdiction the HOA is situated) is still the custodian of a Common Law HOA’s constitution, and the memorandum of incorporation of an HOA registered as an NPC must still be submitted to the Companies and Intellectual Property Commission (“CIPC”).
Should you have any queries relating to this topic, contact me, Zerlinda van der Merwe, via email at consulting@paddocks.co.za or telephonically on 021 686 3950, for a non-obligation quote. Alternatively, contact us telephonically for a 10-minute telephonic consultation at a cost of R490.00 (incl. VAT).
Article reference: Paddocks Press: Volume 13, Issue 5.
Zerlinda van der Merwe is an admitted Attorney of the High Court, specialist Sectional Title Attorney (BA, LLB, LLM), Zerlinda brings a wealth of experience and forms part of the Paddocks Private Consulting Division.
This article is published under the Creative Commons Attribution license.
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6 Comments.
We’re Members of a Body Corporate and this Body Corporate (and other ones) is situated in a Home Owners Association where individual homes are also situated. We pay monthly levies to the Body Corporate as per Participation Quota but the Home Owners Association levy is charged equally to all including to the Body Corporate. We feel the Home Owners Association levy should be charged in a lump sum to the Body Corporate and then the members are charged as per P.Q. At present a 80 sq.m home pays the same as a 500 sq.m home. In the Home Owners Association’s MoI it stated that this the way levies are to be charged but it seems rather unfair to us. Look forward to your comment, thank you
Hi Zeger,
Thank you for your comment. We would love to help but unfortunately do not give free advice. Here’s how we can help:
– We offer a Free Basics of Sectional Title 1-week short course. You’ll be able to ask your course instructor any related questions. Find out more here.
– We offer consulting via telephone for R490 for 10 minutes. Please call us on +27 21 686 3950.
– We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes. Find out more here.
Kind regards
Paddocks
Good afternoon
Regarding the CSOS charges for Body Corporates within HOA’s. Normally only the B/C leviable charges will be charged CSOS (e.g. Levy R1000 – R500 rebate = R500 x 2% = R10) But the HOA also has a levy on the account for R1000 – R500 = R500 x2% = R10. The accounting system adds the two levies, then deducts the R500 rebate making the CSOS charge more (R2000-R500=R1500 x 2% = R30 CSOS levy.) If you use Propsys, the system also uses the total levies. Which is the right way to approach this besides issuing 2 separate levy accounts to the owner?
Thank you for your time.
Hi Ct Gouws,
Thank you for your comment. We would love to help, however we do not give free advice. Here’s how we can help:
– We offer consulting via telephone for R490 for 10 minutes. Please call us on 021 686 3950.
– We have Paddocks Club, an exclusive online club, to help you get answers to your questions about community schemes.
Kind regards,
Paddocks
Dear Zerlinda
Is it legislated that HOA’s also have to have a ten year maintenance plan or just Sectional Title?
Hi Claudine,
Thank you for your comment.
This is something our attorneys would be able to assist with. Please email us on consulting@paddocks.co.za with regards to your matter, and we can provide you with a no-obligation quote, so that we can assist you.
Kind regards,
Paddocks