The Community Schemes Ombud Services Act (“the CSOS Act”) states that upon receiving an application, an ombud may require the applicant to provide evidence that an internal dispute resolution mechanism has been unsuccessful.

What this means essentially, is that before making an application to the CSOS for relief, you should ensure that you can prove that you have made a reasonable attempt to resolve the dispute internally within your community scheme.

Proving this seemingly simple fact can become complicated if the governance documentation of your community scheme contains a provision requiring the dispute to be referred to arbitration.

Arbitration clauses commonly found in the governance documentation of home owners associations, often create confusion when read in the context of the CSOS Act and raise the following questions:

1. Can the aggrieved party to a dispute still make an application to the CSOS for relief or are they obliged to refer the matter to arbitration?
2. Is such an arbitration clause considered to be an internal dispute resolution mechanism for purposes of the CSOS Act?

To answer these questions correctly, it helps to understand that a traditional arbitration clause typically involves the appointment of an external arbitrator (usually at a very high cost) because the parties were unable to resolve the dispute internally.

Based on this basic principle, we believe that it is not reasonable or logical to support the argument that an arbitration clause is considered to be an internal dispute resolution mechanism which precludes an affected party from seeking relief from the CSOS.

The CSOS was established to provide for a dispute resolution mechanism in community schemes and in terms of the CSOS Act any person may make an application to the CSOS, if such person is a party to or affected materially by a dispute in regard to the administration of a community scheme, provided that one of the parties to the dispute is the community scheme, an occupier or an owner.

Furthermore, the CSOS Act states that no person may waive or limit the exercise of rights in terms of the CSOS Act or act contrary to any provision thereof.  Therefore rejection of an application based on the argument that the dispute must be referred to arbitration will result in the limitation of the applicant’s statutory right to refer the dispute to the CSOS for adjudication.

We therefore believe that the correct answer to the above mentioned questions is as follows:

1. Firstly, a party to a community scheme related dispute should always be entitled to make an application to the CSOS, regardless of whether or not the community scheme’s governance documentation contains an arbitration clause, and
2. Secondly, an arbitration clause cannot be regarded as an internal dispute resolution mechanism for purposes of the CSOS Act.

Should you require assistance in understanding your right to refer a dispute to the CSOS, please don’t hesitate to contact our consulting department at consulting@paddocks.co.za for a no-obligation quote, to provide the necessary legal assistance.

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Article reference: Paddocks Press: Volume 14, Issue 11.

Specialist Community Scheme Attorney (LLB, LLM), Auren Freitas dos Santos, has previously been a Portfolio Manager and a Legal & Compliance Officer of a large managing agency.

This article is published under the Creative Commons Attribution license.

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