Advertisement
In South Africa, Community Schemes, such as sectional title developments and homeowners’ associations, play a crucial role in providing housing and managing shared spaces.
The Community Schemes Ombud Service (CSOS) levy was introduced in October 2016 to fund CSOS, which was created to offer an impartial dispute solution service. Historically, people would turn to the courts and legal experts to deal with such disputes so when the CSOS and the subsequent levy was introduced it was met with scepticism. Fast forward to 2023, the CSOS levy still creates confusion and some controversy.
Here we delve into the basics of how the CSOS levy works, its purpose and its implications for residents, estate managers and Homeowners’ Associations (HOAs).
Understanding the CSOS levy
Under the CSOS Act, rule 11 stipulates that every owner of a unit in a community scheme where there is shared use or responsibility of land or buildings (such as a sectional title complex, estate or HOA) must pay the levy referred to in the CSOS Regulation. It is collected by the community scheme on a monthly basis and paid over to Community Scheme Ombud every quarter. The level is calculated using a prescribed formula set out by the regulations as: “the lesser of R40 or 2% of the amount by which the monthly levy is charged but by the Scheme exceeds R500.” If this still isn’t clear or you’re unsure how this works, CSOS does have an excel calculator that can help you with the calculation.
‘Non-payment of the CSOS levy is a criminal offence and owners should be warned of this fact to ensure swift payment and to avoid criminal liability,’ explains Brendan Michie, attorney at Hammond Pole Attorneys.
Main and secondary dwelling charges
The CSOS levy has created some confusion among estate managers and HOAs, particularly in the case where an estate has a main and secondary dwelling. Questions have been raised as to whether a combined levy applies or if a levy is charged on a per-dwelling basis. Pearl Scheltema, CEO of Fitzanne Estates explains that levies would apply to both. ‘Whether it is a main or secondary dwelling, or even a Sectional Title property inside the HOA, levies are paid per stand or property owned.
Advertisement
‘For example, if you own a sectional title section situated inside a HOA, the CSOS contribution, per above calculation, will be payable on both schemes. The Body Corporate is considered “a scheme” as is the HOA.’
What are the levy funds used for?
The funds collected from the CSOS levy are utilised to cover the operational costs of the CSOS, which include dispute resolution services. CSOS was launched to create an alternative to lengthy court battles. ‘People living in a community scheme share the use and responsibility for parts of the land and buildings situated in their community scheme. Due to the shared use and responsibility, conflict often arises on matters involving finances, governance, behaviour, management etc.
‘Historically, unit owners had arbitration or court proceedings as their only legal recourse to address their complaint and/or dispute which, majority of the time, ended into a lengthy and very costly affair. Now, CSOS is there to resolve these community scheme disputes independently, efficiently, and cost-effectively,’ explains Tshidi Mahlangu Lekala from ES. Kgaka Attorneys.
Initial resistance to CSOS’ levy
The CSOS’ levy was initially met with some resistance after its introduction. This was mainly due to the fact that it couldn’t provide the level of service that residents desired when it came to dispute resolution. In the 2016/2017 CSOS annual report there were 315 disputes that had not been resolved within its specified service levels and this was attributed mainly to its staffing capacity issues. According to a Businesstech report, only 36% of conciliations had been finalised within 40 days with 64% taking longer than the 40% target.
Its latest annual report for 2021/2022, shows that dispute resolutions have become a mammoth task for the organisation with 8,308 applications for dispute resolutions being filed – 1,913 more than the previous financial year according to Mmamoloko Kubayi, Minister of Human Settlements. However, it appears the organisation is improving on its record with Kubayi highlighting that the organisational performance has improved in the year under review. She says in the latest annual report that CSOS registered an achievement of 82% versus 60% for the same period in the previous financial year.
Reduction in registration of schemes
As with many entities, the survival and efficiency of CSOS will also depend on its members, i.e., current schemes’ dedication to paying the levy on time as well as new schemes registering. In its latest annual report, CSOS highlighted that it had seen a decline in the number of registrations of schemes. In the 2021/2022 period it saw 925 scheme registrations whereas for the period of 2020/2021 it had seen 1,127 registration documents submitted.
Over the years, CSOS has made progress. It has increasingly become a vital component in the promoting of harmonious living within community schemes and it has got rid of its dispute resolution backlog. However, there’s no doubt that it has its work cut out and still has some way to go to improving its services to the communities it serves.
