Latest CSOS Draft Practice Directive

By Ané de Klerk

The social media enthusiasts among our readers may have come across the latest Draft Community Schemes Ombud Service (“CSOS”) Practice Directive shared by the CSOS on Facebook last month. Others may have spotted the Draft under “News” on the CSOS’s website. Before we take a look at some of the proposed changes to the status quo contained in this Draft document, it is important to emphasise that that is exactly what this document is – a draft. It is not an accepted and published Practice Directive at this time. This means that the content of the document is not enforceable at present. Readers are also reminded that, in the past, CSOS has issued Draft Directives that never became accepted Practice Directives so the circulation of a Draft should not be accepted as a declaration of new processes and rules.

What makes this Draft Directive different from those that have come before it is the fact that the hefty 170-page document sets out to be a single resource to cover all relevant topics and to repeal all previously issued directives. The idea of having one guiding document certainly makes sense and, if accepted, should make it easier for community schemes roleplayers to find and follow due procedures. Past directives have not always been drafted clearly and directives issued at different times have given very different instructions and/or prescribed different processes, often leading to confusion in the industry.

This Draft Directive covers the following topics:

1. Registration of Schemes
2. Compliance and Enforcement with Legislation
3. Scheme Governance under the Disaster Management Act and Regulations
4. Approval of Special and Unanimous Resolutions for Sectional Title Schemes
5. Approval of Special and Unanimous Resolutions for Community Schemes other than Sectional Title Schemes
6. Lodgement of Rules Substituted, Added to, Amended or Repealed for Approval
7. Mandatory Submission of Governance Documents for all Community Schemes, other than Sectional Titles Schemes
8. Appointment and Applications of Executive Managing Agents
9. Application to the Ombud for Approval in relation to Consent for Use of Section or Exclusive Use Area
10. Appointment and Reporting of Administrators to CSOS
11. Payment and Collection of CSOS Levies
12. Waiver of Levies and Fees
13. The Opening of a Body Corporate Bank Account in terms of the STSM Act
14. The Submission of Annual Returns of a Community Scheme
15. Dispute Resolution

While much of the document simply quotes existing relevant legislation, such as the Sectional Titles Schemes Management Act and its regulations, some changes to previous directives are introduced, such as:

1. The Formal Introduction of CSOS’s Online Platform

While the platform is already available on their website, with this draft directive, the CSOS formally introduces their online platform, designed to enable relevant role players to  register schemes, apply for the appointment of an executive managing agent, submit applications in terms of section 13(2) of the STSMA, submit reports and the like.

The existing model of having to register schemes in person or via email has been proved ineffective over the past nine years. It therefore makes sense that CSOS proposes the use of a method whereby authorised representatives can register schemes themselves, without having to correspond with, and be dependent on feedback from, CSOS staff to have their schemes registered. Should the online platform be able to handle the load without constantly “crashing”, this could be an effective alternative.

2. CSOS Investigators to Conduct Regular Site Visits

A far less practical proposal that the CSOS makes in the draft is that they appoint CSOS investigators who “will conduct regular physical site visits to Community Schemes with the intention of assessing compliance and practices.”

This proposal is impractical for two reasons: firstly, the manpower required to conduct site visits to the massive amount of community schemes in this country on a regular basis is vast; secondly, the documentation to be studied to assess compliance is almost never held on site. If CSOS wishes to inspect a scheme’s compliance, they should do so by engaging with the scheme’s managing agent and/or executive committee (neither of which may be based on site) to audit the scheme’s governance documentation, minutes of meetings held and financial records.

3. Members to be Notified of Issuing of Section 10 Certificate

A new requirement proposed in the Draft is that community schemes must inform members of approved amendments to the scheme’s Conduct and/or Management Rules via email or by affixing the amended rules on the scheme’s notice board within 7 business days after the trustees receive the section 10 certificate from CSOS. While this makes practical sense, it raises the question of whether this is the type of directive the CSOS is empowered to give. Does it relate to the CSOS’s processes or does it extend beyond that? Read Auren’s article of the month for more insight into this topic.

Unfortunately the highly problematic Practice Directive on Undesirable Rules has not been approved upon before being incorporated into this draft Consolidated Directive. This portion of the Directive still does not provide clarity to readers, with parts of prescribed legislation still listed as “Undesirable Rules”. For example, the following is listed as an Undesirable Rule that will not be accepted by the CSOS:

“When the purpose for which a section or EUA is intended to be used is shown expressly or by implication on or by a registered sectional plan, not use nor permit such section or EUA to be used for any other purpose: provided that with the written consent of all owners such section or EUA may be used for that purpose as consented to.” when we know this echoes the content section 13(1)(g) of the Sectional Titles Schemes Management Act and it cannot therefore be ruled “undesirable” by CSOS. This part of the draft directive is clearly still in dire need of a redraft.

These are some of my thoughts on the Draft document, but I encourage all of our readers to peruse the Draft Directive yourself and to engage with it critically – evaluating the pros and cons of the proposal against the background of your own knowledge and experience in community schemes. As at the date of publication of this article, the CSOS has invited feedback on the Draft to be submitted until 4 April, so if you wish for your voice to be heard, make sure to make your submissions by the due date.

Specialist Community Scheme Attorney (BA, LLB), Ané de Klerk, is a Director of The Advisory, a boutique consultancy specialising exclusively in community schemes law. Her focus is legal education, which includes presenting seminars and running online and in-person training programs and courses. You can reach out to her via email at info@theadvisory.co.za to request an obligation-free quotation for assistance with better understanding the CSOS’s processes.