By Chris Fourie, General Manager – Community Schemes Management
Ensuring that your community scheme is compliant is a key responsibility of the scheme executives (trustees) in a community scheme.
Community schemes are impacted by various sets of legislation (Acts), including but not limited to the Sectional Titles Schemes Management Act and Regulations, the Community Schemes Ombud Services Act and Regulations, Protection of Personal Information legislation, and requirements from the Receiver of Revenue.
Although there are many community schemes that are well managed by active and knowledgeable trustees, there are also many schemes where the executives are not that informed due to being new to the industry. They may have questions about where to start when it comes to matters of compliance.
We highlight the key focus areas that scheme executives must prioritise to ensure that their community scheme is compliant.
Budget
Sound financial management is the cornerstone of a community scheme’s success. The scheme executives must ensure that a relevant and financially sound budget is implemented each financial year. This will enable the scheme to meet all its obligations and make provision for the maintenance reserve.
Audited Financials
The scheme executives must ensure that the annual audit is completed and signed off timeously. PMR 26(1)(c) states that a community scheme (body corporate) must prepare annual financial statements for presentation at the annual general meeting.
Annual General Meeting
The community scheme must call an annual general meeting within four months after the scheme’s financial year-end. This is a legislative requirement (PMR 17.1) and also ensures compliance with CSOS legislation.
Annual CSOS Returns
CSOS returns must be submitted within four months of the scheme’s financial year-end. It is therefore crucial that the scheme’s budget, audit, and annual general meeting are completed timeously so that the CSOS returns can be submitted on time.
10-Year Maintenance Plan and Maintenance Reserve
The scheme executives must draft and maintain a ten-year maintenance plan. The plan must be updated each year, and scheme executives must report back on its execution at the annual general meeting.
Insurance
Community scheme insurance is a legal requirement and must be renewed and updated annually. At each annual general meeting, the insured replacement value of the buildings and common property must be considered and approved. The meeting must also approve the extent of the insurance cover, including buildings and common property, public liability, and the fidelity guarantee.
Valuation
The Sectional Title Schemes Management Act requires that a community scheme commissions a full replacement cost valuation every three years. The valuation ensures that the scheme is neither over- nor underinsured.
Annual Fire Equipment Compliance
In community schemes, annual fire equipment compliance is crucial for safety and insurance purposes. The community scheme – not the individual owners – is generally responsible for maintaining fire equipment in common areas. This includes annual servicing, inspections, and ensuring compliance with fire safety regulations. Failure to comply could result in the insurance policy not covering fire damage.
Tax Compliance and Public Officer Appointment
Each community scheme must be registered for tax and must submit its tax returns annually. The scheme must appoint a public officer, who must be a natural person. This individual becomes liable if tax returns are not submitted on time. SARS will charge penalties if a scheme’s tax affairs are not up to date or compliant.
Protection of Personal Information and Information Officer Appointment
The Protection of Personal Information Act (POPI Act) mandates responsible collection, processing, storage, and sharing of personal information. This includes video surveillance data, requiring scheme executives to protect residents’ and visitors’ information. The Act also highlights the need for a privacy policy and a Promotion of Access to Information Act (PAIA) manual for recording and maintaining processing operations. The scheme must appoint an Information Officer, who will be liable for POPIA compliance.
Although compliance functions can be outsourced to service providers, the scheme executives remain ultimately responsible for ensuring that the community scheme is compliant on all fronts.
If you are unsure of the status or responsibilities related to general community scheme compliance matters, please contact us at MidCity Property Services – Your Property Partner for Life.
