Courts Crack Down: Community Scheme Boards face personal liability

• Routine trustee and HOA decisions are increasingly being ruled unlawful by courts and CSOS.
• Directors and trustees now face personal liability for governance failures and unlawful actions.
• Preventative governance audits are becoming essential risk management, not optional compliance.

Courts are cracking down on unlawful decisions by CSB’s

For years, many decisions taken by trustees and HOA directors were treated as routine administrative matters, levy approvals, rule enforcement, appointment processes, exclusive-use allocations and budget sign-offs. Today, South Africa’s courts and the Community Schemes Ombud Service (CSOS) are taking a far tougher view.

According to Johlene Wasserman, Director of Community Schemes and Compliance at VDM Incorporated, the era of informal, lightly-regulated governance is over.

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“Actions that were previously considered low-risk are suddenly being tested against strict legal standards,” she says. “The consequences are immediate and far-reaching, and trustees and directors are being exposed to personal liability in ways they never anticipated.”

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A former senior official at both CSOS and the Property Practitioners Regulatory Authority (PPRA), Wasserman says community schemes have entered a period of heightened legal vulnerability, with disputes escalating in both volume and intensity.

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“The sector is under unprecedented pressure as legal scrutiny intensifies. Trustees and directors are often blindsided by risks embedded in everyday decision-making. Most of these disputes are not caused by bad faith, they arise because governance failures go unnoticed for years, until they explode into costly legal battles.”

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High Court and CSOS scrutiny is intensifying

Recent High Court judgments and CSOS rulings show that trustees and HOA directors are now being measured against strict statutory and fiduciary standards, including:

• Whether trustees and directors were lawfully appointed
• Whether decisions fell within their legal authority
• Whether fiduciary duties were breached
• Whether governance structures comply with the Sectional Titles Schemes Management Act (STSMA) and HOA constitutions

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“This level of scrutiny is reshaping how authority, compliance and fiduciary responsibility are interpreted,” says Wasserman. “In 2026, ignorance of governance law is no defence. Trustees and directors are judged on whether their decisions are lawful – not whether they meant well.”

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Main governance risks emerging

1. Invalid Appointments

• Issue: Trustees or directors not properly elected or mandated.
• Why it matters: Decisions may be legally void.
• Solution: Formal verification of election processes and resolutions.

2. Ultra Vires Decisions (Beyond Authority)

• Issue: Boards acting outside their powers under the STSMA or HOA rules.
• Why it matters: Courts can set aside decisions and impose cost orders.
• Solution: Legal review of delegations, mandates and rule interpretation.

3. Fiduciary Breaches

• Issue: Conflicts of interest, selective enforcement, or financial mismanagement.
• Why it matters: Personal liability can attach to trustees and directors.
• Solution: Independent governance oversight and disclosure protocols.

4. Non-Compliant Rules and Exclusive-Use Rights

• Issue: Unlawful or unenforceable rules, outdated conduct and management provisions.
• Why it matters: Schemes lose the ability to enforce decisions.
• Solution: Rule audits and statutory alignment.

5. Financial Governance Failures

• Issue: Irregular budgets, levies, special resolutions and procurement.
• Why it matters: Challenges can unravel years of financial decisions.
• Solution: Compliance-based financial governance reviews.

Reactive legal advice is no longer enough

Wasserman warns that most schemes only seek legal advice once conflict has already escalated – when levies are disputed, CSOS applications are filed, or directors face misconduct allegations.

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“By the time lawyers are called in, the focus is no longer prevention – it’s damage control. And that is the most expensive, stressful point to intervene.”

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Governance risk auditing: The preventative solution

She advocates governance risk audits as a proactive defence, a practice long standard in financial services and corporate regulation.

These audits typically assess:

• Lawfulness of trustee and director appointments
• Statutory compliance and fiduciary exposure
• Validity of rules and exclusive-use rights
• Decision-making authority and delegation
• Financial compliance and resolution procedures

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“The goal is simple: identify legal vulnerabilities before they become disputes,” she explains. “Governance audits are not about blame. They are about clarity. When governance is sound, disputes are less likely – and when they do arise, schemes are far better positioned to withstand legal scrutiny.”

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A sector growing in complexity

Modern community schemes are no longer simple sectional title blocks. Mixed-use developments, layered schemes, retirement estates and developer legacy structures have created intricate governance environments requiring specialist legal oversight.

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“At the same time, owners are far more willing to challenge decisions they believe are unfair or unlawful. Every board decision must now be taken with the assumption that it may one day be tested in court.”

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A cultural shift is required

While governance is still often treated as a box-ticking exercise, Wasserman says this mindset is dangerous.

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“Lawful governance is the foundation of trust, stability and financial security. Trustees and directors rarely fail because they don’t care – they fail because no one has shown them where the real risks lie.”

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Her message for 2026 is blunt: “Certainty is not achieved by hoping nothing goes wrong. It is achieved by ensuring that when something does go wrong, the scheme and its board stand on solid legal ground. Preventative governance is no longer optional. It is essential risk management.”

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