THE COMMUNITY SCHEME OMBUD SERVICE ACT No 9/2011 (CSOS) AND THE SECTIONAL TITLE SCHEMES MANAGEMENT ACT No 8/2011 CAME INTO OPERATION ON 7 OCTOBER 2016 AND WILL AFFECT ALL LIVING IN ESTATES AND ALTHOUGH THEY PROVIDE CERTAIN BENEFITS, THEY ALSO CREATE A FINANCIAL BURDEN ON OWNERS AS ALL LEVIES WILL INCREASE.
The main purpose of these acts are to provide standard rules for Sectional Title Schemes, to promote and monitor good governance of all Schemes and to provide an Affordable Dispute Resolution service.
In order to finance the operation of the Ombud service all Schemes will, from 1 January 2017, have to pay a fee based upon the current levies paid by an owner. This fee is equal to 2% of the monthly levy amount with the first R500.00 exempt and with a maximum of R40.00 for levies in excess of R2 500.00 per month.
NO FEES PAYABLE IF:
Monthly levy charged |
Less R500.00 rebate |
Monthly CSOS fees Payable |
Zero to R500 |
R0 |
|
R1000 |
R1000 –R500 =R500 |
2% of R500 = R10 |
R1500 |
R1500 - R500 = R1000 |
2% of R1 000 = R20 |
R2000 |
R2000 – R500 =R1500 |
2% of R1 500 = R30 |
R2500 and above |
R2500 – R500 =R2000 |
2% of R2 000 = R40 |
Owners of Sectional Title Units situated in Home Owner controlled Estates will pay double fees based upon the levies charged by the H.O.A. and also on the levies paid for the Sectional Title Unit.
All Schemes are now obliged to take out Fidelity Insurance to cover the potential loss of Scheme funds resulting from fraud, theft, etc. over and above other insurance policies
All Sectional Title Schemes are to have a reserve fund equal to 25% of their total annual contributions – If the current reserve fund is below the 25% requirement, levies must increase with at least 15% to make provision for this.
The Management and Auditor are tasked with more auditing requirements which will also lead to higher levies.
Management must ensure that their actions and governance provisions are in line with the prescribed acts and rules and do not unreasonably interfere with the rights of an individual owner or occupant. Trustees and Directors of Schemes must acquaint them with the provisions of these as their failure to comply can have dire consequences resulting in them being found guilty of an offence with penalties of fines and even imprisonment.
Due to the complexity of these new requirements and the huge responsibility upon Management it is advisable that Directors and Trustees use the services of reputable established managing agents registered with the EAAB and NAMA in order to minimize their own exposure and ensure strict compliance.