Sectional title corner – Does our HOA now have to comply with CSOS?
Hi, we are a homeowners’ association (HOA) registered in terms of Section 29 of the Municipal Ordinance of LUPO Act 15 of 1985 (Common Law HOA). In terms of the CSOS legislation we are a community scheme.
- Are we obliged to take out fidelity insurance?
- Are we obliged to provide for a 10-year maintenance plan?
- Do we have to amend our constitution to delete the existing arbitration procedure and replace with the dispute resolution procedure as per the CSOS Act?
- In what respect/s does our HOA not have to comply with CSOS or are all the latter’s provisions applicable to it, as for the previous sectional title schemes that are governed by the Sectional Title Act? – Etienne
Hi Etienne, all homeowners association schemes are paying the monthly CSOS levy, as it allows scheme owners with the right to approach the Ombudsman.
One has to understand the scheme and the specification in its documents pertaining to maintenance to accurately advise on the maintenance plan.
Most owners should, however, be maintaining their own property; the directors should accommodate the maintenance needs for the common areas by providing a budget and plan for years to come for areas such as the guard house, roads (should they not be council roads within the estate), club house and so forth.
I would suggest you have your current constitution revised by a sectional tile expert such as BBM, to ensure you are in line with any management amendments that would affect an HOA, as well as any changes that may have taken place in the council by-laws, HR regulations, human rights and debt collection.
Many rules, both sectional title and HOA, are written without taking into consideration other acts, constitutions, and legislated amendments that may affect the management of schemes.
Not ensuring these are accommodated in the scheme could result in matters being thrown out of court.
An example be a scheme deciding on a debt collection process that is not in line with the debt collection regulations/act, and then this will result in the matter being thrown out of court.
In terms of fidelity insurance, it applies to all complexes – sectional title and homeowners associations.
Below is the full quote from the CSOS Act.
Regulation 15 (1) Subject to sub-regulation (5), every community scheme must insure against the risk of loss of money belonging to the community scheme or for which it is responsible, sustained as a result of any act fraud or dishonesty committed by any insurable person.
(2) For the purpose of sub-regulation (1) “insurable person” means any-
(a) Scheme executive;
(b) Employee or agent of a community scheme who has control over the money of a community scheme;
(c) Managing agent; or
(d) Contractor, employee or other person acting on behalf of or under the direction of a managing agent, who in the normal course of the community scheme’s affair has access to control over the monies of the community scheme.
(3) The minimum amount of the fidelity insurance cover required in terms of sub-regulation (1) is the total value of-
(a) The community scheme’s investments and reserves at the end of its last financial year;
(b) 25 percent of the community scheme’s operational budget for its current financial year.
(4) The insurance cover referred to in sub-regulation (1) must-
(a) Provide for payments of a loss by the insurer to the community scheme within a reasonable period after reasonably satisfactory proof of the loss has been furnished to the insurer; and
(b) Not require that criminal or civil proceedings be taken or completed against the insured person before payment is made under the insurance policy.
(5) A community scheme is not obliged to obtain fidelity cover for an insurable person if that person has delivered to the community schemes written proof that-
(a) The monies of the community scheme are covered by fidelity insurance that complies with the requirements of sub-regulations (3) and (4); and
(b) The insurer concerned has noted the community scheme’s interesting in the application of the proceeds of the policy and undertaken not to cancel or withdraw cover without giving the community scheme at least 30 days written notice.
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Answered by Petra Lewis, portfolio manager at Belmont Property Management