by Mmabatho Shatadi Thole 
A recent Supreme Court of Appeal (SCA) judgment makes it clear that South Africans living in areas with Home Ownership Associations (HOAs) are required by law to pay for levies.
The SCA case, Waterford Estate Homeowners Association NPC v Riverside Lodge Body Corporate and Others, is a landmark ruling, according to Johlene Wasserman from VDM Incorporated.
In the case, an HOA’s application was dismissed with costs. It sought to have certain sections of the Community Schemes Ombud Service Act declared unconstitutional.
It has also looked to overturn decisions made by a CSOS adjudicator regarding contributions
owed by a body corporate.
The court ruled that the Community Schemes Ombud Service (CSOS) has broad authority to intervene when levies or governance decisions are unreasonable.
“The High Court had already dismissed the HOA’s constitutional challenge, finding that the Act does not give adjudicators unchecked power,” said Wasserman
“Instead, the Court emphasised that Section 50 includes important procedural safeguards to ensure that all relevant evidence is properly considered.”
The court also found no merit in the HOA’s constitutional arguments, noting that it overlooked the Act’s purpose, its context, and the clear wording of its provisions.
The Act’s purpose is to establish the Ombud Service, define its functions, and provide a structured dispute‑resolution system for community schemes.
The court said that the Ombud’s powers are not without limits. However, trustees who bypass proper processes or rely on informal processes may have their decisions overturned.
One crucial part of the ruling concerns layered and mixed-use developments, confirming that owners in these schemes cannot opt out of an HOA, meaning levies are mandatory.
“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),” Wasserman 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.”
Moreover, the court rejected arguments that the CSOS’s authority was unconstitutional, noting that ‘reasonableness’ is a long‑standing legal standard, and 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.”
That said, the CSOS adjudicators are not above the law, and need to act rationally, consider all the evidence and give proper reasons for their decisions.
In this case, several findings were set aside because the adjudicator ignored key facts and misread the agreements. The matter was thus sent to another adjudicator, which is a rare but significant outcome.
What this means for trustees and directors
“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,” note the legal expert.
“Trustees will be judged on compliance, evidence, and lawful authority, not on good intentions.”
She added that preventive governance is crucial and includes three critical components: proper appointment processes; lawful budgeting and levy calculations; and documented, defensible decision‑making.
Wasserman warned that the cost of getting governance wrong is no longer just internal disputes; it can escalate into years of costly, complex litigation, personal liability, and public censure.
Credit: www.businesstech.co.za
