Legal Issues Legislative revamp includes shared property Ombud

The legislation governing property held in community, including sectional title schemes, will be revamped if a number of proposals are approved by the Departments of Justice, Land Affairs, Housing and the National Treasury.

The Sectional Titles Act currently falls under the jurisdiction of the Department of Land Affairs. Although sectional title schemes are used for both residential and commercial property developments, the majority of these schemes are used for residential properties.

Community schemes include all schemes where the use of land and buildings are shared and communal financial responsibilities exist. The new legislation will include retirement villages, shareblock schemes and homeowners' associations within its definition of community schemes.

Three years ago, it was decided that the existing sectional title legislation should be separated into two separate Acts. One Act will govern the survey and registration aspects that apply to the developers of sectional title schemes and will fall under the jurisdiction of the Department of Land Affairs. Another Act will deal with the management and governance aspects of sectional title schemes, under the jurisdiction of the Department of Housing.

Two bills are expected to be published for public comment in the first half of next year - the first being the Sectional Title Scheme Management Law, aimed at the management and governance of the sectional title schemes, and another covering a proposed new Community Scheme Ombud Service.

The proposal to establish an ombudsman's office is a key component in the reform of the legislation. The Ombud would specifically focus on resolving complaints and disputes resulting from the common ownership of shared property, offering a simple and inexpensive recourse for owners of property in sectional title schemes.

All sectional title schemes must incorporate certain rules, as stipulated in the Sectional Titles Act, into the schemes' rules. Currently, owners face limited and ineffective options when trying to resolve complaints or disputes relating to sectional title properties. These options include private arbitration, or, provided the other party to the dispute agrees, taking the dispute to the High Court.

Both options are expensive and time-consuming, and the High Court option in particular involves a lengthy process, to some extent due to the fact that advocates and judges seldom have the expert knowledge relating to shared property and community schemes.

The Ombud's office is expected to provide a solution to the current situation, providing a host of essential services to sectional title owners.

Firstly, the Ombud will become the custodian of the documents that govern sectional title schemes and the protector of property owners' rights. The Ombud's office or a designated outsourced service provider will ensure that the rules of a scheme are fair and meet legislative requirements. This will be done both when the rules are first set up by the developer of a sectional title scheme and when the rules are changed by the owners, which can only happen if the majority of the owners agree to the changes.

Secondly, the Ombud will deal with complaints and resolve disputes by appointing full-time and part-time adjudicators to impartially handle investigations, hold hearings and make determinations. Both parties to a dispute will be bound by the determinations of the Ombud's office. The adjudicators' decisions can be appealed in the High Court, but only if the appeal is based on a legal issue.

Educating the public about their rights and obligations in terms of community property schemes is the third main objective of the proposed Ombud's office. International experience and the results of local Ombud's offices in other industries show that complaints can be reduced significantly through consumer education.

Fourthly, the Ombud's office will monitor the governance of community property schemes. The schemes may have to report to the Ombud on issues such as conducting annual general meetings and having sufficient insurance cover in place.

The big question, of course, is who will pay for the Ombud's office. According to the National Treasury, the Ombud scheme should be self-funding, although it has been proposed that the set up costs and the first year's running costs are covered by the Department of Housing.

After the first year, proposals for funding include an additional levy charged to sectional title property owners, and a small fee levied for the use of the Ombud's services. Another proposal includes charging a fee for obtaining copies of the rules of schemes, which are currently obtainable from the Deeds Registry offices.

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Courtesy Agent Estate Agency Affairs Board

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