The CSOS’s latest Draft Practice Directive

By Ané de Klerk

On 14 March 2023, CSOS (Community Schemes Ombud Service) staff circulated a Draft Practice Directive on section 39(7)(b) of the CSOS Act to industry roleplayers via email, asking for comment and input to be submitted by 19 March 2023. While, at the date of publishing this article on 5 April 2023, a final Practice Directive based on this draft has not yet been published by the CSOS, it is important for those involved in community schemes – such as managing agents, attorneys, trustees, owners and tenants residing in such schemes to take note of what the CSOS is planning and what practical effect such directive could have on them once published. The key points of the Draft Practice Directive are as follows:

THE PURPOSE OF THE PROPOSED PRACTICE DIRECTIVE

At present, when applying to the CSOS for dispute resolution, relevant roleplayers can pick which order or orders they wish to apply for from the 39 orders set out in section 39 of the CSOS Act (the repetition of the number being no more than a delightful coincidence.) With this draft directive, the CSOS wishes to expand their jurisdiction to include 12 more orders, which will bring the total number of orders within the CSOS’s jurisdiction to 51. 

THE PROPOSED NEW CATEGORIES

At present, the CSOS’s jurisdiction is limited to these 7 categories:

1. Financial
2. Behavioral
3. Scheme Governance
4. Meetings
5. Management Services
6. Works pertaining to Private and Common Areas
7. General (which would be better labeled “Access to Information” as the only existing order under this heading is for an order to grant access to information and/or documentation to an applicant who has been wrongfully denied such access).

The twelve new proposed orders are divided into the following new categories to be introduced:

1. Contractual Issues
2. Adjudication orders
3. Trustees
4. Administrators
5. Managing agents

ADJUDICATION ORDERS

One of the main objectives of the draft directive is to create a legal framework for the internal review of CSOS matters. While for some time now we have seen the Chief Ombud review the CSOS’s own matters and even at times set aside such matters, to date there is no legal basis for a review of CSOS matters to be done in this way – something the draft directive attempts to address. The fact that the draft directive states that it is to “apply retrospectively from 1 April 2022” due to “numerous complaints received by the Office of the Chief Ombud” substantiates this viewpoint. Why does this matter? Without having a basis in law, the CSOS cannot internally review its own matters and reviews (which are so often warranted in CSOS adjudication matters) have to be referred to the courts – a very expensive exercise which negates the CSOS’s function to provide assistance in community scheme disputes at low or no cost. If a CSOS matter is likely to end up at the High Court for review, one can hardly consider seeking relief from CSOS to be a low-cost exercise.

The draft directive also sets out the manner in which such internal review is to be requested, which differs from the manner in which applications for other orders must be made. From the draft it appears that a different form will have to be used and that said form must be emailed to a different email address than the ones used when seeking other orders from CSOS. Interestingly, it also sets a limit on the size of the submission (ten pages), which differs from any other application (in which case you may submit as many pages as is needed for you to make your case). The other main difference between this application and others is that this one will not be considered by an adjudicator assigned to the matter, but by the Chief Ombud himself.

OTHER NEW ORDERS

Three new orders relating to contracts have been proposed, including orders requiring an association to repay overpayments or refund deposits to someone who used to be a member of the scheme and declaring any of the following to be contrary to CSOS legislation or regulations:

1. a contract’s term(s) and/or condition(s);
2. enforcement and/or recognition of a contract term and/or condition relating to community schemes.

Three orders relating to body corporate trustees have also been proposed, including orders determining who a body corporate’s lawful trustees are and declaring that a trustee has breached their fiduciary duty and must therefore pay to the body corporate:

1. the financial loss suffered by that body corporate as a result; or
2. the economic benefit the trustee received as a result.

Two orders relating to administrators are proposed. These are orders requiring court appointed administrators to cite CSOS as an interested party in their papers:

1. extending their term of appointment; or
2. making changes to their appointment.

Finally, two orders relating to Managing agents have also been proposed: one to prohibit a managing agent from managing a scheme’s finances and the other requiring the Property Practitioners Regulatory authority to make a determination regarding a managing agent’s conduct.

IN SUMMARY

If the draft directive is to be accepted and published, the CSOS’s jurisdiction will be expanded. Applicants will be able to apply for a wider range of orders and in cases where CSOS Adjudicators’ hands would previously have been tied, they would now have wider powers to grant those types of orders. Notably, orders dealing with a breach of fiduciary duty by trustees and wrongdoings by managing agents would then fall within the CSOS’s jurisdiction – something community scheme owners have been pleading for for some time. Finally, it would provide the legal framework for CSOS Adjudication order reviews to be done internally, rather than by the courts. While these are significant proposed amendments to section 39 of the CSOS Act, for now it is important that we remain mindful that they are still mere draft proposals at this time. They have not yet been published and are not yet enforceable. For now, we can only read and examine the draft for the purpose of ascertaining what it is that the CSOS may choose to implement in due course.

You can read the Draft Practice Directory in its entirety on our website by clicking here.

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.