Shock at new levy on housing

Townhouses, flats to cough up to introduce ombudsman plan

Homeowners in community schemes are set to fork out millions of rands annually to fund an ombudsman and establish significant financial reserves to meet the requirements of newly introduced regulations.

The new Community Scheme Ombud Service (CSOS) regulations and levies – which some have slammed as simply another new tax with questionable benefits – will be applied to all sectional title development schemes.

These will include townhouses and apartment blocks, share block companies, home or property owners’ associations, retirement home complexes and housing cooperatives, among others.

While no final decision has been made on the matter yet, the new levies may cause further outrage among #FeesMustFall students if the levies are applied to student accommodation operating within community schemes.

Rulings, according to the CSOS, have also not yet been made on whether the regulations will be applied to the substantial timeshare holiday ownership industry.

National property management company Trafalgar managing director Andrew Schaefer said most owners in sectional title schemes could expect their levy payments to increase now that the new Sectional Title Schemes Management Act, which complements and accompanies the CSOS regulations, has come into effect.

The community scheme regulations were gazetted by the government on October 7 and will be introduced on a staggered basis, with the community schemes’ first obligation being to register – and that requires a fee.

Among other requirements, community schemes must:

  •  Lodge governance documents with the CSOS;
  •  File annual tax returns and annual financial statements;
  • Collect a monthly levy (2% of the scheme’s levies) from all homeowners in the schemes every quarter of a scheme’s financial year, with a maximum of R40 payable from those whose levies are more than R500 a month.

    Unit owners whose levies are less than R500 a month will be exempt from the new levy; enforceable through magistrate’s courts.

    She could not say how much revenue the CSOS expected to collect through the levies.

    “The law is silent in terms of whether student accommodation in community schemes will be subject to the levies,” Lubelwana said.

    “A task team is working on this and whether timeshare schemes will also be affected.”

    Lubelwana said another reason for the legislation was to standardise regulations and to enforce good corporate governance in the sector.

    “The poor and the elderly – those paying a levy of less than R500 a month – will not be affected,” she said.

    “There is also a process whereby individuals or schemes can apply to be exempted from the levies.”

    National Association of Managing Agents (Nama) Eastern Cape director Chantelle van Heerden said the organisation supported the new regulations.

    She said the ombudsman would significantly reduce the costs and time it took to settle disputes through courts and that provisions for an ombudsman had already been made in earlier legislation covering community schemes and sectional title ownership.

    Van Heerden, who is also property firm The Bellbuoy Group managing director, said she had questioned why Eastern Cape hearings on the matter last year were only held in East London and not in Port Elizabeth.

    Her company alone managed a total of 230 community schemes, while two other property management groups in the metro managed 200 and 80

  •  Establish a reserve fund, as required by sectional title scheme regulations; and
  •  Insure against risk of loss;

    The benefits of the new regulations include access to the ombudsman’s conciliation and arbitration services, which also come with nominal fees, officials say.

    CSOS spokeswoman Wanda Lubelwana said the reasons for the establishment of the ombudsman included negating the significant costs and time involved in resolving community scheme disputes through the court system.

    The ombudsman would offer two dispute resolution services which would include conciliation and arbitration, with arbitration rulings being community scheme respectively.

    Bellbuoy’s portfolio included about 7 500 individual property owners.

    “Yes, we anticipate that there will be teething problems,” Van Heerden said.

    “We are maintaining contact with other industry players around the new developments.”

    But homeowner and body corporate member Pat Farmer believed the levies were simply another tax.

    The body corporate oversees the Bay’s Amadada Eco Village homeowners’ association.

    “Our common areas basically consist of open areas and a swimming pool,” Farmer said.[signinlocker][/signinlocker]

    “What benefits are we supposed to get from the tax?”

    Chartered accountant and former The Grange housing complex in Walmer body corporate chairman Paul Leese questioned the need for an ombudsman and additional maintenance reserves in community schemes, particularly in cases where significant reserves already existed.

    Rink Street’s Own Haven’s Park Towers portfolio manager, Carmen Kretzman , said although the scheme would be included, the increase would probably be absorbed into rental payments.

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