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What is the right way to resolve internal disputes in your scheme?

Disputes often happen in sectional title schemes because people share spaces, costs, and infrastructure. These disagreements can involve various individuals such as tenants, property owners, trustees, and managing agents. The main two types of disputes are:

  1. Financial and Administrative Issues: These can include problems with bookkeeping, audits, taxes, and legal matters.
  2. Physical Issues: These involve maintenance, improvements, alterations, and extensions. Parties like the municipality, architects, engineers, contractors, land surveyors, and developers might need to be involved.

Before the Community Schemes Ombud Service Act (CSOS Act) was established in 2016, bodies corporate had to resolve disputes internally or through costly and time-consuming court proceedings. Even now, the CSOS requires that all internal remedies are exhausted before it considers a dispute resolution application.

How to best deal with internal disputes:

Enforce the scheme’s rules: The STSM Act mandates that each sectional title scheme must have rules to regulate and manage the community. These rules require approval from the CSOS to ensure they are fair and enforceable. All residents, including owners and tenants, must adhere to these rules, which cover everyday issues like keeping pets, parking vehicles, and noise levels. The body corporate, through its trustees, is responsible for enforcing these rules to maintain order and harmony within the scheme.

Rules to impose fines: Penalties are an effective way to enforce scheme rules. For a penalty to be binding, it must be included in the scheme’s management or conduct rules and must be fair and reasonable. Immediate fines are not permitted without due process; the penalty must serve a legitimate purpose, such as preventing rule violations or nuisances. Fining provisions should clearly list specific infractions and the corresponding penalties, ensuring transparency and fairness in their application.

Negotiation: Negotiation serves as an informal method to resolve disputes within sectional title schemes. This process involves the parties directly communicating and compromising to reach a mutually acceptable solution. To make the negotiated settlement binding, it should be documented in a written agreement. This approach helps resolve conflicts privately and amicably, reducing the need for formal dispute resolution mechanisms.

Mediation: When negotiation fails, conciliation, or mediation, is a viable alternative. This process involves an impartial third party who assists the disputing parties in settling without dictating the terms. This method helps maintain relationships and resolve disputes efficiently.

Arbitration: Before the establishment of the CSOS, sectional title schemes often used professional arbitrators to resolve disputes internally. An impartial arbitrator would be appointed to make a formal and binding decision on the matter. Arbitration remains a valuable option for resolving complex disputes, providing a definitive outcome that is enforceable and respected by all parties involved.

Appointing professionals: In cases where disputes are severe or complex, trustees may require assistance or replacement. A professional manager or management firm can be appointed to handle these issues effectively. When schemes face managerial deadlock, serious mismanagement, or significant financial troubles, appointing an administrator may be necessary. The administrator takes over the trustees’ functions to restore order, manage the scheme, and improve its financial health, ensuring the community’s well-being.

By understanding and utilising these internal mechanisms, sectional title schemes can handle disputes more effectively, ensuring smoother management and better living conditions for all involved.