Body Corporate’s Watch Out! The Levies You Have Raised May Not Be Legally Enforceable

Body Corporate Rules and Levies
Are Body Corporate’s Raised Levies Legally Enforceable?

Body Corporate’s Raising Levies

The Sectional Titles Schemes Management Act, 2011 (STSMA) places various obligations on the Trustees of the Body Corporate as to how to properly raise levies and how to notify owners. 

A failure by a Body Corporate to raise levies and comply with the obligations listed in the legislation below can have disastrous consequences for the Body Corporate as a Court may rule that the levies have not become due, owing, and payable and that the owner does not have to make payment. 

This can further result in the levy obligation of the particular owner prescribing in which case the Body Corporate can lose its claim against the owner completely. 

The Legislative References in the STSMA Pertaining to Levies

The STSMA in Section 3(1)( e) states that a Body Corporate’s functions include “to determine the amounts to be raised for the purposes of the administrative levy fund and the reserve levy fund”.

Section 3(1)(f) of the STSMA states that it is a Body Corporate’s function “to raise the amounts so determined by levying contributions on the owners in proportion to the quotas of their respective sections”. 

Section 3(2) of the STSMA states that “liability for contributions…accrues from the passing of a resolution to that effect by the Trustees of the Body Corporate…”.

Section 3(5) of the STSMA provides that “the body corporate, must annually or whenever there is a change in levy, certify in writing:

a) the amount determined as the contribution of each owner; 

b) the manner in which such contribution is payable; and

c) the extent to which such contribution has been paid by each owner”. 

The Regulations to the STSMA and specifically Annexure A of the Prescribed Management Rules (PMRs), in PMR 25(1) states that “the body corporate must, as soon as possible but no later than 14 days after the approval of the budgets referred to in rule 17(6)(j)(iv) by a general meeting, give each member written notice of the contributions and charges due and payable by that member to the body corporate, which notice must- 

a) state that the member has an obligation to pay the specified contributions and charges; 

b) specify the due date for each payment; and

c) if applicable, state that interest at a rate specified in the notice which will be payable on any overdue contributions and charges; and

d) include details of the dispute resolution process that applies in respect of disputed contributions and charges”.

PMR 25(2) also states that “If money owing is not paid on the dates specified in the notice referred to in subrule (1) above that the body corporate must send a final notice to the owner, which notice must state-

a) that the member has an obligation to pay the overdue contributions and charges and any applicable interest immediately; and

b) if applicable- 

i) the interest that is payable in respect of the overdue contributions and charges at the date of the final notice; and

ii) the amount of interest that will accrue daily until the payment of the overdue contributions and charges; and

c) the body corporate intends to take action to recover the amount due if the overdue contributions and charges and interest owing are not paid within 14 days after the date the final notice is given”. 

How the Courts Have Viewed the Above Legislative Provisions and Non-compliance Therewith

The High Court, Johannesburg, during the latter part of 2021 was presented with appeals by 3 different Body Corporates from the Magistrates Courts, where Magistrates had refused to grant Body Corporates default judgments for arrear levies on account of the Body Corporates non-compliance with certain of the provisions set out above. 

In all 3 cases set out below, the Body Corporate had not sent out a PMR 25(1) and/or PMR 25(2) notice to the owner concerned as called for by the PMR’s. 

The first order made by Honourable Judge Makume on 29 July 2021 granted the appeal by the Body Corporate and stated that “Compliance with the requirements of Prescribed Management Rule 25(1) of the STSMA, is not a prerequisite for debt enforcement.”

In the second order made by Judge Sutherland on 9 November 2021, the Judge also upheld the appeal by the Body Corporate and ordered default judgement to be entered against the owner for the arrear levies, stating that “an owner who had not received the PMR 25(1) notice, whether deliberately not sent or inadvertently not sent, when faced with demands to pay arrears is not excluded from the liability to pay”. Judge Sutherland also stated that it is Section 3(2) of the STSMA that “triggers the duty to pay”.

In the third order Judge Kathree-Setiloane on 6 December 2021 also upheld the appeal by the Body Corporate, ordering the owner to pay the Body Corporate’s costs on an attorney and client scale and entered judgement against the owner for the arrear levies. The Judge also stated that non-compliance and failure to send the PMR 25(1) and (2) notice was not a requirement for the arrear levies to become due, owing and payable. The Judge further stated that the Regulations cannot be used to interpret the STSMA and that “a regulation or rule which constitutes delegated or subordinate legislation cannot trump an express primary statutory provision”.

Conclusion

From the legislative quotes above, it is clear that the Body Corporate has an obligation and must send out the PMR 25(1) and (2) notices. 

However, from the judgements set out above, it is also clear that should the Body Corporate have failed to send out these notices but have properly passed a resolution raising levies on the owner, in terms of Section 3 of STSMA, that the Body Corporate is still entitled to judgement against the owner in respect of arrear levies. 

Alan Levy Attorneys and Conveyancers: Sectional Title Schemes and Community Schemes Attorneys in Johannesburg

The purpose of this article is to provide a summary on the matter. This article does not constitute legal advice. 

If you need legal advice pertaining to Sectional Title Schemes, Home-Owners Associations, Share Blocks, and other community schemes matters, contact Alan Levy Attorneys for exceptional service and industry-leading legal expertise.

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