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Resolving disputes – Looking further at arbitration

There are many different types of sectional title disputes. The dispute can be about any aspect of the management and control of the scheme, or the actions of the trustees, owners or residents. A typical sectional title dispute may involve several owners and tenants, the trustees and the managing agent. If the dispute is about building construction, maintenance, improvements, alterations or repairs, a number of external service providers may be involved as well. A large number of people are typically involved in disputes and this can make them quite complex.

Because of this complexity, resolving sectional title disputes through the traditional method of going to court is an extremely lengthy and expensive process. Looking at other ways to settle disputes is beneficial for those involved in sectional title.

Disputes can be resolved in many different ways, some more formal than others. It helps to think of dispute resolution options as existing on a scale from less to more formal.

The least formal way of resolving a dispute is through negotiation directly with the parties involved. A more formal version of this process is to have each party represented by an attorney who negotiates on their behalf.

When people are unable to resolve a dispute through negotiation, they may decide to involve an impartial third party. Mediation, also referred to as conciliation, is an increasingly popular dispute resolution process in which the parties agree to meet with a mediator who can help them settle the matter. A mediator helps the parties to reach a settlement, but does not have any decision-making power.

A more formal option is arbitration. In arbitration, an impartial third party is appointed as a decision maker by contract or statute, or is chosen by the parties. The arbitrator makes a final and binding decision – one than can be enforced legally and cannot easily be appealed.

The most formal dispute resolution option is litigation, in which the matter is decided for the parties by the court system.

When choosing the most appropriate method for resolving a dispute, you will need to consider the advantage and disadvantage of each option, as well as the details of the dispute. Nevertheless, a general guideline is to start with the least formal option (negotiation), and use increasingly formal options only if the less formal ones are unsuccessful.

Arbitration for resolving disputes

The advantages of arbitration are that is faster, simpler and less expensive than court action, parties have control over the process and outcome, it normally occurs in private, and its results are usually confidential. Arbitration is not dependent on the cooperation of the parties and the decisions are usually binding.

The disadvantage of arbitration is that the decisions usually cannot be appealed. When parties agree to arbitrate, they agree to accept the decision of an arbitrator as final and binding. There are very few grounds for appealing an arbitrator’s decision.

The government has made regulations under the Sectional Titles Act for arbitration proceedings to resolve sectional title disputes. Prescribed management rule 71 provides that when a dispute between the body corporate and an owner, or between owners, arises from the Act or the rules, it must be determined by arbitration, unless an interdict or other form of urgent relief is required.

The rule provides that:
• The aggrieved party must notify the other interested parties in writing and copies of the notification must be served on the trustees and the managing agents, if any.
• If the dispute or complaint is not resolved within 14 days of notice, either party may demand that the dispute or complaint be referred to arbitration.
• The parties jointly appoint an independent and suitably qualified arbitrator within three days of the demand.
• If the parties are unable to agree on an arbitrator, any party may apply to the local Registrar of Deed, who will appoint one within seven days of the written application.
• The arbitrator determines the procedure to be used.
• The arbitrator may require that the party who determined arbitration furnishes security for the costs of the arbitration, without which the arbitration does not proceed.
• Where possible, the arbitration should be concluded within 21 days.
• The arbitrator must make an award within seven days of the completion of the arbitration and may determine how the parties will bear the costs of the arbitration.
• The arbitrator's award is final and binding on the parties; it may be made an order of the High Court on application by anyone affected by the arbitration.

The current wording of regulation 30 allows a developer to remove PMR 71 because it is not in the list of rules that may not be substituted, added to, amended or withdrawn when submitting an application for the opening of a sectional title register. If it has been removed, the body corporate can, by unanimous resolution, introduce an arbitration provision into the scheme rules.

Once the Community Scheme Ombud Service Act, No 9 of 2011, comes into operation, PMR 71 will be no longer apply and the process applicable to all community scheme disputes – where the parties do not agree otherwise – is likely to be:
(a) Internal or external conciliation.
(b) Adjudication in terms of the CSOS Act if conciliation is not successful.

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