Community scheme governance now tested in higher courts

• Supreme Court ruling confirms community scheme decisions can be challenged in higher courts, raising governance accountability for trustees and directors.
• CSOS powers upheld, but adjudicators must follow proper procedures and justify decisions based on evidence and law.
• Informal levy practices and weak governance now expose schemes and trustees to legal and financial risk.

Community schemes in the spotlight

Governance within community schemes, including sectional title bodies corporate and homeowners’ associations, has moved firmly into the legal spotlight following a landmark Supreme Court of Appeal (SCA) ruling that reshapes how disputes and governance decisions are reviewed.

The ruling confirms that decisions made within community schemes are not insulated from scrutiny and may ultimately be tested in South Africa’s higher courts.

According to Johlene Wasserman, Director of Community Schemes and Compliance at VDM Incorporated, the judgment reinforces the importance of lawful, transparent governance across schemes nationwide.

The landmark case reshaping governance

‍The ruling stems from the Waterford Estate Homeowners Association NPC v Riverside Lodge Body Corporate and Others case, where governance and levy disputes escalated through the courts.

Wasserman explains that the Supreme Court confirmed the Community Schemes Ombud Service (CSOS) has broad authority to intervene where levies or governance decisions are unreasonable.

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“The Court emphasised that the CSOS Act includes procedural safeguards and that adjudicators must properly consider evidence and context,” she says. “The Ombud’s role is to provide structured dispute resolution and promote good governance within schemes.”

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However, the Court also clarified that CSOS powers are not unlimited. “The Ombud’s powers are not without limits, and trustees who bypass proper processes or rely on informal practices may find their decisions overturned,” says Wasserman.

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CSOS powers upheld, but adjudicators must follow the law

While arguments challenging CSOS authority were rejected, the Court also reminded adjudicators that they must act rationally and provide proper reasons for their decisions.

In this case, several findings were overturned because key evidence and contractual arrangements were ignored, and the matter was referred back for reconsideration by a new adjudicator, an unusual but significant development.

Levy liability and governance practices clarified

The judgment is particularly significant for layered and mixed-use developments, confirming that homeowners’ association membership and levy obligations are legally binding, not optional.

According to Wasserman, long-standing informal practices about levy responsibility will no longer stand if unsupported by scheme rules and legislation.

Schemes relying on custom or informal arrangements may now face legal exposure.

Courts warn against poor litigation practices

The Court also issued a strong warning to legal professionals, ordering attorneys to personally bear costs after unnecessary paperwork burdened proceedings.

This reflects growing judicial impatience with poorly managed litigation in community scheme disputes.

What trustees and directors must now understand

For trustees and scheme directors, the message is clear: governance decisions must withstand scrutiny at every legal level.

Informal processes and undocumented decisions are increasingly risky. Wasserman stresses that schemes must prioritise preventative governance, including:

• Proper appointment procedures
• Lawful budgeting and levy calculations
• Documented and defensible decision-making

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“The cost of poor governance is no longer limited to internal disputes,” she warns. “It can escalate into prolonged litigation, financial loss and reputational damage.”

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Governance standards are rising

The SCA ruling signals a new era for community schemes: accountability, compliance and proper governance are no longer optional.

As schemes grow in size and complexity, trustees and directors must ensure decisions are legally sound and transparently documented.

In today’s environment, good governance is not merely good practice, it is essential for survival.

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