MONO.insure Client Advisory: New CSOS Practice Directive Introduces Stricter Rules for Sectional Title Schemes

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A significant new Practice Directive from the Community Schemes Ombud Service (CSOS), published on 18 July 2025, introduces stricter compliance requirements and severe penalties for trustees and managing agents who fail to meet their obligations.

Major Changes for Sectional Title Schemes

According to Johlene Wasserman, Director of Community Schemes and Compliance at VDM Law and former CSOS employee, "The CSOS Practice Directive supersedes all previous documents and now serves as a single reference source for trustees, managing agents, and other stakeholders."

The directive marks a significant shift in how community schemes will be governed and enforced, with non-compliance no longer being treated as a minor administrative matter.

Severe Penalties for Non-Compliance

Wasserman warns that "trustees and managing agents who fail to meet their obligations could face penalties of up to 10 years in jail or significant fines."

The enforcement structure is clear:

• First-time offences: Up to 5 years imprisonment

• Repeat offences: Up to 10 years imprisonment

• Significant financial penalties

• Regular CSOS site visits and investigations

"Penalties for non-compliance are issued under Section 34(1) of the CSOS Act. While the Act doesn't specify exact amounts, enforcement actions will be proportionate to the seriousness of the contravention," Wasserman explained.

Identifying "Undesirable Rules"

One of the most critical changes is the identification of "undesirable rules" within community schemes. These are rules that CSOS deems unconstitutional or discriminatory and therefore have no legal standing.

"If such rules are included in the governance documents of a scheme, they may be rejected during the quality assurance process or later struck down by CSOS adjudicators," Wasserman said.

Examples of Unacceptable Rules:

Domestic Worker Restrictions:

• Forbidding domestic workers from having visitors

• Preventing them from speaking to each other on common property

• Requiring them to wear name tags or carry passes

Discriminatory Policies:

• Arbitrary pet restrictions (e.g., banning cats while allowing dogs)

• Rules forcing owners to use specific estate agencies for rentals or sales

• Unfair access restrictions

Improper Fine Administration:

• Summary fines or open-ended penalties

• Fines exceeding monthly levy amounts

• Penalties imposed without proper written warnings

• Lack of internal dispute resolution processes

Key Compliance Requirements

Wasserman emphasises that "trustees do not have any power to decide on fines or take action against an owner or occupier on their own. They have to follow the CSOS rules."

Mandatory Administrative Requirements:

• Registered rules with CSOS

• POPI (Protection of Personal Information) manuals

• Registered information officers with the Information Regulator

• Compliance with the Sectional Title Schemes Management (STSM) Act

Proper Fine Procedures Must Include:

• Written warnings before fines

• Proper internal dispute resolution processes

• Specific timeframes

• Fines less than monthly levies charged to the unit

Real-World Case Examples

Two previous case examples demonstrate how the new directive may be applied:

Case 1: Pet Policy Discrimination A rule banning cats but allowing dogs was challenged. CSOS ruled that the conduct rule was "unfairly discriminatory and unreasonable" and infringed on owners' enjoyment of their property. The rule was set aside.

Case 2: Access Rights Violation A homeowner within an HOA had their biometric access revoked, forcing them to enter as a visitor. CSOS found that "access to one's home is a core part of ownership" and ruled that only a court, not an HOA, could restrict it. The HOA was ordered to fully restore biometric access.

Implications for Schemes

These matters highlight how quickly rules concerning pets, access, or even cultural customs can be deemed discriminatory or unconstitutional,” Wasserman explained.

It is also believed that CSOS investigators are now carrying out routine site inspections to monitor compliance, so schemes should urgently review and amend any rules that may raise concerns.

Recommendations for Sectional Title Schemes

For Trustees and Managing Agents:

1. Immediate Rule Review: Audit all scheme rules against the new CSOS directive

2. Remove Undesirable Rules: Identify and eliminate any discriminatory or unconstitutional provisions

3. Update Procedures: Implement proper fine and dispute resolution processes

4. Ensure Registration: Verify all required documentation is registered with CSOS

5. Stay Current: Monitor ongoing CSOS requirements and prepare for site visits

For Unit Owners:

7. Stay Informed: Understand your scheme's rules and compliance status

8. Challenge Unfair Rules: Use proper channels to address discriminatory or unconstitutional rules

9. Know Your Rights: Understand what constitutes acceptable and unacceptable scheme governance

10. Document Issues: Keep records of any governance problems for potential CSOS complaints

The Path Forward

Trustees and managing agents, particularly those managing sectional title, share block, retirement, and similar community housing schemes, are urged to ensure all documents and governance practices are fully compliant with CSOS standards.

"It's important to remember that rules must also align with the Sectional Title Schemes Management (STSM) Act," she added.

With CSOS taking a more active enforcement approach, schemes that fail to adapt to these new standards face serious legal and financial consequences.

Stay peeled for our next article related to CSOS Directives that affect sectional title insurance.