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Dear Valued Managing Agent
1. Our litigation department, acting for the Body Corporate in the above matter, recently received judgment of the full bench of the Jhb High Court. For a copy of the judgment, please contact our offices. The judgment:
1.1 Impacts on the till now accepted, proper and reasonable interpretation of Section 15B(3)(a)(i)(aa) of the Sectional Titles Act (“Section 15B”), which protects Bodies Corporate enabling them to receive all monies due (by way of a clearance certificate) prior to transfer of a unit and placing an embargo on transfer, until this occurs; and
1.2 Potentially excludes the Body Corporate from claiming a judgment amount obtained against the owner of the unit, from the purchaser at a sale in execution or any sale for that matter.
2. In regards to the Judgment, the High Court Judgment was a split decision, with 2 of the 3 Judges (“the majority judgment”) ruling on the interpretation of Section 15B in a detrimental manner that stands to have a negative impact on the protection afforded to Bodies Corporate in terms of Section 15B and 1 Judge ruling in a manner that upkeeps the embargo on transfer and the protection afforded to Bodies Corporate in terms of Section 15B.
3. The majority judgment unless overturned by the SCA (Supreme Court of Appeal) stands to have a detrimental effect on Bodies Corporate (and other community schemes) and may be referred to by any Owner or Purchaser seeking not to pay a Body Corporate on transfer, ALL monies due to the Body Corporate.
4. Our litigation department and our Counsel are of the firm view that the majority judgment is incorrect and must be appealed to the SCA. The SCA hearing will be presided on by 5 Judges and an erstwhile attempt will be made by us, to have the majority judgment overturned.
5. Our offices to assist the Body Corporate and in the interests of the industry have reached an agreement with the Body Corporate to handle the Appeal to the SCA on a risk basis with no fees being paid up-front by the Body Corporate.
6. However since the appeal to the SCA and the overturning of the majority judgment is in the interests of all Bodies Corporate in South Africa (and other community schemes) since litigation is always risky and since our client is at risk of a costs order against it, a request is hereby made to Bodies Corporate, other community schemes, Managing Agents and parties with vested interests, to assist with a contribution into our trust account, in the event of an adverse costs order being made against the Body Corporate.
7. We provide the following further information below:
SUMMARY OF THE CASE – The case arose out of the First Respondent purchasing a unit in the scheme of our client at a Sheriff’s auction, initiated by the Bondholder. The First Respondent refused to make payment of all monies due to our client and tendered security in the amount of R150 000.00 in exchange for a clearance certificate to be issued. Our client refused to accept the security. The First Respondent had signed the Sheriff’s conditions of sale agreeing to pay the levies outstanding to our client. The First Respondent applied to the High Court for an order directing our client to issue the required levy clearance certificate against payment by the First Respondent into his Attorneys trust account of the security tendered pending the institution of an action by our client against the First Respondent. The Judge hearing the First Respondent’s application ordered our client to sign all papers and take all steps necessary for the transfer of the unit, ordered the First Respondent to make payment of an amount of R250 000.00 as security and ordered our client to institute an action for the recovery of the amount owing by the First respondent within 10 days from date of the order. Our client appealed the decision to the full bench of the High Court, Johannesburg. In our opinion, the majority judgment of the full bench erred as set out above and their decision must be appealed to the SCA.
THE OUTCOME THE BODY CORPORATE EXPECTED
Our client expected the majority judgment to uphold the until now interpretation of Section 15B(3)(a)(i)(aa) which would mean, in this case, that the Purchaser of the unit at the Sheriff’s auction would have to first pay all monies due to our client or make provision to our client’s satisfaction for the payment of all monies due. Instead, in this case, the majority Judgment ruled that our client be compelled to provide a clearance certificate on the Purchaser making a payment of R250 000.00 when the amount due was well beyond this and ordered our client to retain this amount as security pending the outcome of an action to be instituted by our client against the Purchaser to recover further amounts outstanding in respect of the unit.
THE CONSEQUENCES OF THE JUDGEMENT
The consequences of the Judgment are that in future cases coming before the Courts in South Africa, lower Courts will be directed or bound to follow the majority decision in this case which has skewered the until now proper interpretation of Section 15B(3)(a)(i)(aa) which does not protect Bodies Corporates and enable them to receive all monies due (by way of a clearance certificate) prior to transfer of units. The judgment also potentially excludes the Body Corporate from claiming a judgment amount obtained against the owner of the unit, from the purchaser at a sale in execution or any sale for that matter. Owners and Purchasers may refer to this Judgment as setting a precedent and attempt to force Bodies Corporates to issue levy clearance certificates without having made payment or satisfied the Bodies Corporate for the full amount due.
8. We will keep you updated on this matter.
Warm Regards
The ALA Community Schemes Department