- The Supreme Court of Appeal has confirmed the Ombud’s broad authority to review unreasonable levies and governance decisions.
- Trustees and directors relying on informal or undocumented practices risk having their decisions overturned.
- Adjudicators must act rationally and consider all evidence, or their rulings may be set aside.
Governance in estates, sectional title schemes, and body corporates is no longer a quiet administrative exercise.
Decisions taken by trustees and directors can now be tested in court and overturned on appeal, exposing schemes to costly litigation and placing personal responsibility squarely on those who make the calls.
This follows a judgment by the Supreme Court of Appeal, which confirmed the strong oversight powers of the Community Schemes Ombud Service and made it clear that levy decisions and governance conduct must meet standards of reasonableness, evidence, and lawfulness.
The dispute arose after the Waterford Estate Homeowners Association challenged the Ombud’s authority to interfere with its levy and governance decisions, arguing that the powers granted to adjudicators were unconstitutional and amounted to unchecked interference in private scheme management.
The High Court dismissed that challenge, and the matter went on appeal, where the Supreme Court confirmed that the Ombud’s oversight role is lawful and necessary, although parts of the adjudicator’s ruling were set aside and referred back for reconsideration.
According to Johlene Wasserman, Director of Community Schemes and Compliance at VDM Incorporated, the ruling reshapes how trustees, directors, and managing agents approach compliance.
Court strengthens Ombud oversight and accountability
Referencing the recent Waterford Estate Homeowners Association dispute, Wasserman says the court confirmed that the Ombud has broad authority to intervene when levies or governance decisions are unreasonable.
“The High Court had already dismissed Waterford’s constitutional challenge, finding that the Act does not give adjudicators unchecked power. Instead, the court emphasised that Section 50 includes important procedural safeguards to ensure that all relevant evidence is properly considered.
“It also found no merit in Waterford’s constitutional arguments, noting that the Homeowners’ Association had overlooked the purpose of the Act, the context in which it operates, and the clear wording of its provisions.”
She adds that the purpose of the legislation is to establish the Ombud Service, define its functions, and provide a structured dispute resolution system for community schemes.
“These functions include offering a dispute resolution service, training conciliators and adjudicators, promoting good governance in community schemes, and monitoring how these schemes are run.”
Importantly, she notes, the powers are not without limits. “The court made it very clear that the Ombud’s powers are not without limits, and that trustees who bypass proper processes or rely on informal practices may find their decisions overturned.
“The court rejected arguments that the Ombud’s authority was unconstitutional, explaining that ‘reasonableness’ is a longstanding legal standard, and adjudicators are trained professionals. For schemes hoping that contractual freedom alone would shield them, the ruling is a wake-up call. The Ombud can and will intervene where levies are unfair.”
At the same time, she stresses that adjudicators themselves are accountable. “They have to act rationally, consider all the evidence, and give proper reasons. In this case, several findings were set aside because the adjudicator ignored key facts and misread agreements. As a result, the matter was sent back to a new adjudicator, a rare but significant outcome.”
The judgment also clarifies liability for levies in layered and mixed-use developments. Wasserman says homeowners association membership is not optional and is typically registered against the title deed.
“It’s typically a condition registered against the Title Deed of the property and explicitly mandated by the HOA’s founding documents. 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.”
In what she describes as a strong rebuke, attorneys were ordered to pay costs personally for burdening the court with unnecessary paperwork. “This shows the court’s growing impatience with sloppy or abusive litigation in community scheme disputes.”
What trustees and directors must now do
For trustees and directors, the message is direct. Governance decisions must now withstand scrutiny all the way to the appellate courts. Informal practices, undocumented decisions, and “we’ve always done it this way” approaches are no longer safe. Compliance, evidence, and lawful authority will matter far more than good intentions.
Preventative governance has therefore become essential. Proper appointment processes, lawful budgeting and levy calculations, and documented, defensible decision-making are no longer best practices but basic legal requirements.
“The cost of getting governance wrong is no longer just internal disputes,” Wasserman warns. “It can escalate into years of costly and unpleasant litigation, personal liability, and public censure.”
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