select
|

Community Schemes Ombud Service Good News for Sectional Title Schemes

In a first for the residential property market a Sectional Title Schemes Management Act (STSMA) and Community Services Ombuds Service Act (CSOSA) have been signed by the Minister of Human Settlements and the President has signed the Proclamation Notice for these Acts.

“This is a good news for sectional title property owners and tenants as they’ll finally have access to an independent ombudsman to appeal to in the case of a dispute – a far less time consuming and more affordable option than going to the High Court”, says Bruce Swain, MD of Leapfrog Property Group.
 
The ombud will be able to adjudicate complaints in terms of financial or behavioural issues, matters involving work on private and common areas, issues regarding scheme governance and management services.
 
The establishment of these Acts mean that community schemes (which include body corporates, retirement villages and homeowner’s associations) will need to make a number of critical changes in terms of fees and levy collections as well as filing of schemes’ governance documentation within 90 days from the date of publication of the Acts. The registration of schemes will need to take place within 30 days.
 
Important changes:
 
Create a maintenance plan and reserve fund
 
Establish a ten-year maintenance plan and reserve fund. Body corporates will now be required to create the decade long maintenance plan as well as a separate reserve fund to cover the expected costs. The current suggestion is to set aside an additional 25% of the budgeted annual levy. “While this additional levy will initially put added financial pressure on home owners, I believe that proper maintenance will be of benefit to everyone in the long run. Many body corporates mismanage their complexes which leads to badly maintained common areas, which end up costing more to fix”, believes Swain. 
 
 
Contribute to funding for the Ombud
 
Pay an extra quarterly levy as part of the funding for the Ombud. The levy, payable by community schemes which include body corporates, retirement villages and homeowner’s associations, will comprise of 2% of the normal levy value, capped at R40. In cases where the normal levy is less than R500, the properties will be exempt although owners will still have access to the services offered by the Ombud. 
 
Register the domicile
 
Community schemes will hence forth be required to register the domicile with the chief ombud, the local municipality and the local registrar of deeds so that any notices of disputes can be served to one address.
 
Proxies limited

 
There will be a limit to the number of proxies held per person – it will no longer be possible to hold proxies for more than two people.
 
Register the scheme with CSOSA

 
All community schemes have to be registered with CSOSA and will be required to send regular copies and reports on the scheme’s financial health, as well as an audited annual report.
 
Certification required
 
Changes to rules and levy contributions have to be certified in writing.
 
Appoint a managing agent
 
A managing agent must be appointed to manage the property by the scheme’s trustees. “While many body corporates and trustees do an excellent job at managing their property, there is a large number that don’t – to the detriment of the entire scheme. This is a very positive move as it will ensure greater compliance, financial sustainability, and hopefully fewer disputes”, believes Swain.
 
“In recent years we have seen a trend with the banks to decline bonds based on the mismanagement of the schemes financials; the sellers are then unable to sell to anyone aside from a cash buyer, who may decide to walk away from the sale if the financials of the scheme aren’t good”, explains Michelle Cohen, Principal of Leapfrog Property Group  Johannesburg North East.
 
Take out fidelity insurance

 
Every scheme will need to take out fidelity insurance to cover itself against misappropriation of funds and fraud. A minimum amount is prescribed.
 
Swain says that, “All in all the creation of CSOS is a very positive step for community schemes in that it will do much to regulate the industry – ultimately protecting sectional property owners and their investments”.
 


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK