- The SCA dismissed Waterford Estate Homeowners Association’s constitutional challenge but upheld parts of its appeal concerning membership and levies.
- Riverside Lodge unit owners were confirmed as members of Waterford Estate Homeowners Association and are liable for levies, while certain levy calculations were remitted for fresh adjudication.
- The SCA reaffirmed the powers of the Community Schemes Ombud Service and clarified applicable interest rates on arrears.
In a judgment that will affect thousands of community schemes across South Africa, the Supreme Court of Appeal has clarified the scope of membership, levy obligations, and the powers of the Community Schemes Ombud Service.
The ruling by Judge JE Smith and Acting Judge N Chili, with Judge A Schippers, Judge W Hughes, and Judge TD Cloete concurring, stems from a long-running dispute between Waterford Estate Homeowners Association NPC and Riverside Lodge Body Corporate, alongside its 101 unit owners. The Minister of Human Settlements and the Community Schemes Ombud Service were also parties.
Waterford Estate and Riverside Lodge are connected both geographically and administratively. Waterford estate is a secure residential estate in Fourways, Johannesburg, managed by the Waterford Estate Homeowners Association, which oversees security, roads, and estate-wide services.
Riverside Lodge is a sectional title scheme within the Estate, with its own Body Corporate, but sharing the Estate’s facilities and governance framework.
Riverside Lodge unit owners are automatically members of Waterford Estate and must pay levies for estate-wide services. This link was central to the legal dispute, with the court confirming that membership and levy obligations exist even though Riverside Lodge manages its own internal affairs, showing how sectional schemes interact with broader homeowners’ associations.
Waterford Estate had challenged Sections 39(1)(c) and (e) of the Community Schemes Ombud Service Act, arguing that adjudicators’ power to declare levies unreasonable was vague and lacked guidelines. The SCA rejected this, noting that “there is nothing vague about these provisions, nor the impugned provisions,” and that they provide associations, occupiers, and owners with reasonable certainty about what is required so they can regulate their conduct.
The court emphasised that adjudicators must act rationally, reasonably, and in accordance with due process, stating that “Sections 50 and 51 of the Act make it clear that the power of an adjudicator under s 39(1)(c) is not unfettered. It must be exercised rationally, reasonably, and in accordance with due process.” Judge Smith concluded that there was no reasonable prospect that the constitutional challenge would succeed.
Riverside unit owners are Waterford members
A central dispute was whether owners of units in the Riverside Lodge Sectional Title Scheme are automatically members of Waterford Estate and liable for levies. The SCA overturned the High Court and prior adjudicator’s decision, finding that both the statutory framework and Waterford’s own rules ensure that unit owners automatically become members upon transfer of ownership of a unit.
The court referred to the 2007 settlement agreement between Waterford and Riverside and Waterford’s constitutional documents, confirming that membership and levy obligations attach to unit ownership.
The SCA found errors in adjudicator decisions for the 2017–2020 levy and interest calculations, noting that key evidence, including testimony from Waterford director Richard Paul Evans, had been ignored. The court held that by disregarding Evans’s evidence, the adjudicator’s decision was “not rationally connected to the information before her or the reasons given for it,” and therefore had to be set aside.
All disputed determinations for these financial years were remitted to a new adjudicator, to be agreed upon by the parties or appointed by the Ombud for the Gauteng Regional Office. On interest, the SCA clarified that Waterford may charge interest on arrears at the prescribed rate until 31 January 2019, and at 1% per month from 1 February 2019.
Legal representatives sanctioned
Eugene Marais Attorneys, representing Riverside Lodge Body Corporate and its unit owners, were ordered to pay costs de bonis propriis for including irrelevant documents in the appeal record, which the court described as “a serious departure from the professional standards expected.”
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