Community Schemes Ombud Service

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Community Schemes Ombud Service: Failure to pay​?
Article by Zerlinda van der Merwe​ - Paddocks

Over the last few weeks, we have been receiving numerous queries as to whether community schemes may withhold payment of levies to the Community Schemes Ombud Service ("the CSOS"). The answer is no, and this article will focus on the consequences of a community scheme's failure to comply with the requirement of the payment of levies to the CSOS, as required in terms of the Community Schemes Ombud Service Act 9 of 2011 ("the CSOSA").

The CSOS is funded by the levies collected from every registered community scheme in the country, including the fees for services rendered by the CSOS based on a cost recovery basis. Every community scheme already registered, in the process of registration, or still to register, has a legal statutory obligation, in terms of the CSOSA and its Regulations, to pay levies to the CSOS in the amounts as prescribed by the Minister, subject to any prescribed discounts or waivers which may be applicable.

These levies are required, in terms of the Regulations, to be paid over to the CSOS by community schemes every three months, following recovery from its members monthly. The levy is collected, subject to a maximum amount, and according to a formula. The formula is the lesser of R40.00 or 2% of the amount by which the monthly levy, charged by the scheme, exceeds R500.00. This means that individual units within a community scheme, where the monthly levies do not exceed R500.00, are effectively granted a 100% percentage waiver of the CSOS levies. Furthermore, any person or category of persons whose monthly net household income is below R5, 500.00 are also entitled to a 100% waiver of application and adjudication fees. Any person or category of persons who may not qualify in terms of the above criteria, may lodge an application for discount and/or waiver, for consideration by the Chief Ombud.

The scheme executives of community schemes must collect these monthly levies, calculated according to this formula, from every unit or erf within a community scheme, and pay the amounts collected to CSOS on a quarterly basis. Any community scheme that fails to pay a levy or any other amount due to the CSOS on the due date, must pay interest on that amount for the period it remains outstanding, at a rate prescribed by the National Credit Act.

The CSOSA has set out a number of requirements that must be complied with by community schemes across the country, and certain requirements have deadlines which must further be met. For example, every community scheme must register with the CSOS, providing them with their governance documentation and any other information that may be required to be completed and submitted; pay a levy to the CSOS, according to the aforementioned prescribed formula and recoverable from the members of the community schemes; and file its annual returns and copies of its annual financial statements with the CSOS.

In terms of section 34 of the CSOSA, there are various offences, which if contravened, may result in conviction. This section provides that any person associated with a community scheme or with the CSOS, may be found guilty of such an offence and may be liable, on conviction, to a fine or imprisonment for a period not exceeding 5 years, or to both a fine and such imprisonment. Should such a person be convicted for a second or subsequent conviction, for an offence, they may be liable to a fine or imprisonment for a period not exceeding 10 years, or to both a fine and such imprisonment.

As you can see from the above, it is vitally important for scheme executives and members to comply with the provisions of the CSOSA, as the consequences for non-compliance is far-reaching.

View Prof. Graham Paddock's video on CSOS levy raising, here, as well as his article titled "Why must I pay levies to CSOS?".

Article reference: Paddocks Press: Volume 13, Issue 09
Posted In: Paddocks Press Newsletter | 26 September 2018
This article is published under the Creative Commons Attribution license.

Author: Zerlinda van der Merwe - Paddocks

Submitted 10 Jan 20 / Views 2664