Bodies Corporate and Home Owners’ Associations are starting to get a sense of how the office of the Ombud for Community Schemes is going to work – and the sorts of issues it will be able to resolve.
“A case in point,” says Andrew Schaefer, MD of national property management company Trafalgar, “is a dispute within an HOA that we recently took on over its Memorandum of Incorporation (MOI) that needs to be filed with the Companies and Intellectual Property Commission (CIPC)”.
“The MOI is the document that sets out the rights, duties and responsibilities of shareholders, directors and others within a company, and is required because HOAs are regarded as companies in terms of the Companies Act of 2008.”
An MOI had been drafted by the previous managing agent, he says, but the procedures followed to have it approved by the owners in the housing scheme were not correct and they placed it in dispute.
“The only solution to this was to have a new MOI drafted and approved correctly, but after two shareholders’ meetings and a round-robin vote, the HOA was still not able to get it approved because the owners have split opinions about one clause involving higher levies for consolidated stands.”
However, with the Community Schemes Ombud Service (CSOS) Act now in operation, Trafalgar has been able to assist the HOA to apply to the Ombud to take a decision and approve a new MOI, Schaefer says, and the matter has already been reviewed by a conciliator and referred for adjudication.
Another positive example of the help that the CSOS can offer Sectional Title and other community housing schemes is a current dispute over an alteration to a Sectional Title unit that does not conform to the overall design of the scheme, he notes.
“In this case, the owner of the unit did submit a plan which was approved by the Trustees, but when the alteration was done, it did not follow this plan. The Trustees wrote to the owner several times requesting that he amend the alteration but he refused to do so, and the body corporate then declared a dispute”.
“However, the new CSOS Act had just come into effect and the attorney advising the body corporate recommended that it should first try the CSOS dispute resolution process before going to court. The body corporate agreed, and the first part of the process, the conciliation, has already taken place”.
“Unfortunately, after some very heated discussion, it became obvious that the matter could not be resolved in this way, and the conciliator advised that it would be referred for adjudication. As the managing agent for this body corporate, we have followed up with the Ombud’s office and been advised that this is likely to take place within the next couple of months – which means that the dispute will be resolved far sooner than if the body corporate had decided to take the matter to court, and at a fraction of the cost.”
Indeed, says Schaefer, the whole purpose of the CSOS is to provide a cost effective and speedy way to resolve disputes within Sectional Title and other community housing schemes outside of the courts, and it is clearly working hard to fulfill this mandate.
“Anyone who is resident in a community housing scheme and is materially affected by a dispute within that scheme – whether it is between individuals or between an individual and the body corporate or the HOA – can apply to the CSOS to assist them to resolve the matter. It is important, though, to have a portfolio of evidence to present showing that attempts have already been made to resolve the dispute internally”.
“Typically, these disputes arise over financial matters such as the non-payment of levies or special levies; governance issues and management issues such as the allocation of parking spaces or the control of noise and other nuisances. And quite often, they can be resolved through independent mediation or reconciliation, which is the first alternative dispute resolution service provided by the CSOS. The aim of this process is to assist the parties in a dispute to arrive at a mutually agreeable solution, with the help of a third-party mediator appointed by the Ombud.”
Conciliation generally takes between two and four hours and is relatively inexpensive, he notes, requiring the payment of just R50 to lodge the application, and with no legal representation being allowed. Bodies corporate or HOAs can, however, be represented by managing agents, and will usually be charged an hourly rate for this service.
“If the parties cannot reach agreement during conciliation, the matter will be referred for adjudication, which is the second alternative dispute resolution service provided by CSOS. This process begins when an independent adjudicator is appointed by the Ombud, or selected by both parties from the list provided by the Ombud, and ends when this adjudicator has heard from each party and then makes a binding decision as to how the dispute is to be resolved”.
“Once again, the process is relatively quick and inexpensive compared to the courts, although adjudicators’ orders are enforceable in the Magistrate Court or High Court depending on the quantum or nature of relief granted.”