Sectional titles under pressure in South Africa

A landmark court ruling has tightened oversight of sectional title and homeowners’ association (HOA) governance, confirming the Community Schemes Ombud Service’s (CSOS) power to overturn levies and decisions and putting trustees and directors under heightened legal pressure.

VDM Incorporated Director of Community Schemes and Compliance Johlene Wasserman noted that governance by community schemes has moved into the spotlight, with decisions now being open to testing in South Africa’s highest courts.

This follows a Supreme Court of Appeal (SCA) judgment that reshaped the rules for trustees, directors, and the CSOS.

In Waterford Estate Homeowners Association NPC v Riverside Lodge Body Corporate and Others, the SCA confirmed that the CSOS has broad authority to intervene when levies or governance decisions are unreasonable.

Wasserman explained that the High Court had already dismissed Waterford’s constitutional challenge, finding that the Act does not give adjudicators unchecked power.

“Instead, the court emphasised that Section 50 includes important procedural safeguards to ensure that all relevant evidence is properly considered,” she explained.

“It also found no merit in Waterford’s constitutional arguments, noting that the HOA had overlooked the purpose of the Act, the context in which it operates, and the clear wording of its provisions.”

Wasserman added that the Act’s purpose, as highlighted by the Court, is to establish the Ombud Service, define its functions, and provide a structured dispute‑resolution system for community schemes.

“These functions include offering a dispute resolution service, training conciliators and adjudicators, promoting good governance in community schemes, and monitoring how these schemes are run,” she said.

“The court made it very clear that the ombud’s powers are not without limits, and that trustees who bypass proper processes or rely on informal practices may find their decisions overturned.”

CSOS powers upheld

Wasserman explained that the court rejected arguments that the CSOS’s authority was unconstitutional, noting that “reasonableness” is a long‑standing legal standard and that CSOS adjudicators are trained professionals.

“For schemes hoping that contractual freedom alone would shield them, the ruling is a wake‑up call – CSOS can and will intervene where levies are unfair,” she warned.

At the same time, the court warned that CSOS adjudicators are not above the law. As such, they have to act rationally, consider all the evidence, and give proper reasons.

“In this case, several findings were set aside because the adjudicator ignored key facts and misread agreements. As a result, the matter was sent back to a new adjudicator – a rare but significant outcome,” she said.

Wasserman said the judgment is particularly important for layered and mixed‑use developments because it confirms that for owners in layered or mixed-use schemes, HOA membership is not optional.

“It’s typically a condition registered against the Title Deed of the property and explicitly mandated by the HOA’s founding documents (MOI or Constitution),” she said.

“Levy liability is not optional nor is it based on informal practices, and old habits about ‘who pays what’ must be backed by law. Schemes relying on informal arrangements may now find themselves legally exposed.”

In the court’s “strong” rebuke, Wasserman said attorneys were ordered to pay costs personally for burdening the court with unnecessary paperwork.

“This shows the court’s growing impatience with sloppy or abusive litigation in community scheme disputes,” she explained.

According to Wasserman, the takeaway is simple: governance decisions now have to withstand scrutiny all the way to the appellate courts.

“Informal practices, undocumented decisions, and ‘we’ve always done it this way’ are no longer safe. Trustees will be judged on compliance, evidence, and lawful authority, not on good intentions,” she said.

Preventative governance is therefore essential, now, Wasserman said. She highlighted the three critical components –

• Proper appointment processes
• Lawful budgeting and levy calculations
• Documented, defensible decision‑making

“The cost of getting governance wrong is no longer just internal disputes,” she warned. “It can escalate into years of costly and unpleasant litigation, personal liability, and public censure.”