New regulations surrounding Sectional Title and Home Owners Associations
It is important for purchasers in a Sectional Title Scheme to know the difference between the Provisions for Sectional Title and those for Homeowners Associations.
The Department of Human Settlements, currently the umbrella body for Sectional Title schemes, has taken control of their regulation, by introducing “Community Schemes”.
Marina Constas, specialist sectional title attorney and director of BBM Attorneys states, “Community schemes include sectional title complexes, homeowners’ associations, shareblock developments, retirement villages, gated estates with constitutions and social co-operatives, which now fall under Section 1 of the Community Schemes Ombud Service (CSOS)”.
The Community Schemes Ombud Service (CSOS) Act applies to all community schemes. The service is there to regulate, monitor and control the quality of all community scheme governance documentation and provide dispute resolution.
“Whilst the CSOS Act does not specifically talk about a compliance certificate for Homeowners’ Association rules, the Ombud’s office will be effecting amendments to bring the law regarding registration and rule compliance for Homeowners’ Associations in line with Sectional Title schemes.
The Ombud’s service is encouraging Homeowners’ Associations to send rules in for vetting,” Constas stated.
She added that the Ombud currently has jurisdiction to deal with any disputes in cluster schemes and notes that the Community Schemes Ombud Services levy must be paid by Homeowners’ Associations whether they are company registered or simply have a constitution.
Although the Ombud service faced serious challenges initially, great strides have been made, with over 33 000 complexes having paid over monies. Those Homeowners’ Associations that have not registered with CSOS will be penalised, she said.
“Now that the Ombud’s office is gaining traction, there will be time to augment and improve the provision of services and to flesh out interesting issues in the industry, such as the Air BnB onslaught,” said Constas.
While the CSOS Act covers all community schemes, Sectional Title stakeholders must also consider the Sectional Title Schemes Management (STSMA), where recent amendments have introduced several new innovations. ie: the establishment of a reserve fund and a mandatory maintenance, repair and replacement plan.
“While many Trustees manage their buildings very well and have always had buffer funds, an inordinate number find themselves in financial difficulty, with buildings being run from hand to mouth each month.”
“This reserve fund aims to ensure that buildings do not fall into disrepair. A related maintenance, repair and replacement plan is another new innovation in the STSMA. From now on, the Body Corporate must prepare a written maintenance, repair and replacement plan which sets out the major capital expenses over the next 10 years.”
Constas pointed out that other important STSMA amendments include the stipulation that any changes to the Management or Conduct rules of a sectional title scheme must be approved by the chief Ombud after the necessary resolutions have been taken.
“The duties of owners have also been changed. An owner must now notify the Body Corporate of any change of ownership or occupancy in his unit. In terms of insurance, Trustees are now obligated to obtain valuations every 3 years and owners may not obtain an insurance policy in respect of damage arising from risk covered by the policy of the Body Corporate. Even pets have been revised in the STSMA legislation. “Disabled residents who require an assistance dog to reside with them and accompany them on common property no longer need the formal consent of Trustees.”
“On the financial front, the complex’s budget may now include a 10% discount on levies if an owner’s contributions are all paid on the due dates.
“There is no longer a reference to an accounting officer in the Sectional Title legislation. Consequently, all buildings, even those with 10 or less units, must be audited,” she said.
While the STSMA’s recent innovations do not automatically apply to Homeowners’ Associations, Constas notes that they may choose to adopt certain provisions from the Act.