The new CSOS and STSM Acts
By now you might have heard, or will already be aware, of the changes shaking up the community schemes world.
On 7 October 2016, the Community Schemes Ombud Service (CSOS) Act and the Sectional Titles Schemes Management (STSM) Act, together with the respective regulations, came into operation.
So what does all of this mean? Well, quite a lot actually. Let’s start with CSOS.
CSOS brings a number of major changes that affect all owners, trustees and directors of community schemes in South Africa. By community schemes we refer to Sectional Title Schemes, Share Block Companies, Cluster Developments, Home Owner’s Associations (HOA), and Retirement Schemes.
Without dismantling the entire Act in this post, the essence is an affordable dispute service provided by CSOS, giving owners an alternative to the traditional, and far more expensive, arbitration or litigation.
We refer to it as more affordable, but not complimentary. To enjoy the benefits of CSOS, there are certain mandatory requirements levied on owners. From 1 January 2017, a charge of 2% of monthly levies over R500 must be paid to the CSOS. The fee is capped at R40 monthly and payable quarterly.
There is also finally a requirement to make fidelity insurance obligatory, with minimum prescribed amount determined. This means anyone who has access to the scheme’s funds must now be covered against fraud and misappropriation of funds. To our minds, this is a necessary expenditure for any responsible community scheme.
A body corporate must also take out public liability insurance, to cover the risk of any liability it may incur, for an amount of not less than 10 million rand.
Lastly, CSOS will regulate the quality of scheme governance documents, take custody and provide public access to these documents.
The second of the Acts which are now in operation is the Sectional Title Schemes Management (STSM) Act. This also brings with it a number of pertinent changes, the most important of which is the requirement to budget for and maintain prescribed levels of reserve fund balances.
The STSM Act also dictates that a separate bank account for the reserve fund should be opened and a written maintenance plan, for sectional title schemes only, should be prepared.
So, a number of important changes effecting us all, the detail of which we have merely touched on in this post.
We suggest that anyone with an interest in a community scheme get acquainted with these changes and ensure that the immediate requirements are understood.
For more information on specific items within these Acts, and their regulations, please get in touch with us.