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What is this New Levy we are required to pay towards the Community Schemes Ombud?

Many homeowners living in gated communities may have received notifications of a new levy payable. We share such an example:

“We write to inform you that the aforementioned legislation has come into effect from the 7 October 2016. We would now like to inform all owners of some of the important implications arising from the legislation.

To summarize, there are four pieces of new legislation which have varying degrees of relevance depending on which juristic entity residential complex you own and reside in:

⦁ Community Schemes Ombud Service Act, 2011;
⦁ Regulations on Community Schemes Ombud Service Act;
⦁ Sectional Titles Schemes Management Act, 2011;
⦁ Sectional Titles Schemes Management Regulations;

Items 1 & 2 above affect residential owners in any and all Schemes as defined [sectional title body corporate, homeowners’ association (NPC or by voluntary association), share block company or retirement village] while items 3&4 above affect only sectional title bodies corporate (this in addition to items 1 & 2); the purpose of the Acts being to provide an affordable and efficient dispute resolution service (the CSOS Ombud) which we view as a potentially positive development.

Whilst there is a lead-in period for the registration and submission of all governance documentation for property Schemes, same being 30 and 90 days respectively, we are currently attending to the registration and lodgement of required documentation with the CSOS Ombud, where the necessary authority resolutions sent to your Trustees and Directors have been signed

All Schemes

⦁ Registration with the Community Schemes Ombud Service (“CSOS”) and the submission of specified governance documentation;

⦁ Payment of a monthly CSOS levy commencing 1 January 2017 in an amount equal to 2% of the monthly levy (first R500 exempt to a maximum of R40 per unit); this charge will therefore appear
as a new line item on your monthly levy statement in line with this timing
⦁ Requirement for the Scheme to have fidelity cover subject to the provisions of Regulation 15 of the CSOS Act

Sectional Title Bodies Corporate

In addition to the above:

⦁ Sectional title Schemes must budget for both an administrative fund, this akin to the budgets currently done by Schemes without a maintenance contingency, and also a reserve fund which takes a 10-year maintenance plan of the Scheme into account as explained further below. The quantum, formulae and contributions towards achieving a minimum reserve fund are defined in The Act and Regulations;
⦁ The formation of a 10 (ten) year maintenance plan which is to be tabled for approval at each Annual General Meeting and which is a determining factor in the calculation of the reserve fund of the Scheme;
⦁ Change in quorum requirements and limitation of proxies;
⦁ Schemes must tend to a professional insurance replacement valuation once every three years and also (as a result) restrict the application of the ‘average’ clause;
⦁ Restriction of items which are capable of being loaded onto the levy account(s) of owner(s); Amendments and variations to Rules need to be lodge and approved by the Ombud;

While the above summary is not intended to be definitive, it does highlight some the major implications of the aforementioned legislative changes.

There are, as is typically the case with new legislation, a number of uncertainties and ambiguities both within the said legislation and with alternate, existing and applicable, legislation, which we are currently working directly with the CSOS, to clarify.

We look forward to working with both you and the CSOS Ombud, to ensure the efficient and harmonious implementation of the new legislation and management of your property Scheme.
Yours faithfully

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