The Community Scheme Ombud Service Bill (the “Bill”) was recently approved by the Portfolio Committee on Human Settlements. In terms of the Bill, “community schemes” include:
2. Share block companies governed by the Share Blocks Control Act (Act 59 of 1980) and the Companies Act (Act 61 of 1973), soon to be replaced by Act 71 of 2008;
3. Home or property owner’s associations, whether constituted as companies under the Companies Act or as common law associations, established to administer property developments;
4. Housing schemes for retired persons in terms of the Housing Developments for Retired Persons Act (Act 65 of 1988), and
5. Housing co-operatives under the South African Co-operatives Act (Act 14 of 2005).
This list also includes any other scheme or arrangement in terms of which there is shared use of and responsibility for parts of land and buildings.
This proposed legislation is a significant development in the South African law applicable to the administration of real property: it recognises a wide range of different legal arrangements currently used to provide urban housing and shared facilities as being part of a new class – the “community scheme”.
The purposes of the Community Scheme Ombud Service (the “Service”), set out in clause 4 of the Bill, can be summarised as being to:
(a) Provide a dispute resolution service with national reach for community schemes;
(b) Train conciliators, adjudicators and other Service employees;
(c) Take custody of, control the quality of and provide public access to all sectional titles scheme governance documentation and other such documentation determined by the minister;
(d) Promote good governance of community schemes and monitor that governance, and
(e) Provide education, information, documentation and other services to raise the awareness of owners, occupiers, executive committees and others who have rights and obligations in community schemes.
When a community scheme’s governing body (defined in the Bill as the “association”), an occupier or an owner has a dispute about the administration of the scheme with any other person who also has a material interest in that scheme, they will be able to approach the Service for assistance in resolving the dispute. The envisaged process involves the prior use of internal dispute resolution mechanisms. Where these prove ineffective and a dispute is referred to the Service, the first option will be professional conciliation. Where this fails or seems unlikely to succeed, the matter will be referred to an adjudicator for fast-tracked resolution.
In line with international best practice, the Bill does not give the Service unlimited jurisdiction in the sphere of community scheme administration disputes. The dispute must fall into one of the categories set out in clause 38 of the Bill, under the headings of financial issues, behavioural issues, scheme governance issues, meetings, management services, works pertaining to private and common areas, and general and other issues.
Training of conciliators, adjudicators, etc.
It is inevitable that some of those trained by the Service will use their skills in other contexts. When they operate outside the Service, these people’s skills will serve to raise the general level of understanding of the operations of community schemes in South African society and, in this way, will further the overall objects of the Service.
The governance documents for share block schemes, for property and home owners’ associations that are incorporated as companies and for housing co-operatives are kept and controlled by the Registrar of Companies. The documentation for sectional title schemes, including those retirement developments that are schemes, is filed at Deeds Registries. But, since 1997, the quality of the documents filed with the Registrars has not been examined or controlled, and in many instances documentation in the sectional title registers has been amended or removed without authorisation. The governance documentation for home owners’ associations that are common law associations is sometimes kept by local municipalities, but is not reliably updated or generally accessible. The governance documentation for retirement developments that operate on a contractual “life-rights” basis are not checked or kept by any government or municipal authorities.
The Service’s role in ensuring that scheme participants and role-players have reliable and ready access to their community scheme governance documentation will be a major factor in improving the operation of community schemes.
The Bill makes provision for annual returns that must made by community schemes to the Service, including copies of a scheme’s annual financial statements.
At present, there are many community schemes that operate without regard for the requirements of their governance documents and any statutes that may govern their operations. The fact that community schemes will have to prepare annual returns to the Service will serve as an annual reminder to scheme executives and managing agents that they must comply with the requirements of these provisions.
Raising awareness and education
Finally, and again in line with international best practice in “strata” and “condominium” schemes, the Bill recognises that it is important to educate those who have rights and obligations in community schemes and to raise awareness among them to prevent disputes, a significant number of which are caused by a lack of information and understanding of community schemes.
Prof Graham Paddock is an authority on sectional title law and practice, the lead consultant to the government for new legislation. Prof Paddock has been involved in sectional title training for a number of years and he has recently launched Paddocks Club – an exclusive online sectional title and community scheme learning community driven by personalised support and coaching. For more information see www.PaddocksClub.co.za or contact Kate on 021 447 4130.
This article was first published in the Property Law Digest Vol 15 Part 1 March 2011, a publication of LexisNexis.
Article reference: Paddocks Press: Volume 6, Issue 4, Page 2
This article is published under the Creative Commons Attribution license.