Sectional title - levies

Private Property South Africa
Michael Bauer

An important issue in sectional title schemes that managing agents and trustees need to keep in mind is when the levies are due. Section 37 (2) in the Sectional Title Act says that the levy contributions are due and payable on the passing of a resolution by the trustees of the body corporate. The usual process is that the levy budget is approved at the AGM with or without amendments, but within 14 days after that resolution must be passed once the trustees have worked out the levies for each unit, how the levy is payable, i.e. monthly, quarterly, annually, what interest rate will be charged if the payments are late and what compound interest will be added and then, of course, when the payments are due.

Some schemes ask for levies to be paid upfront for the year ahead, some split the amount into two payments and some schemes collect levies on a monthly basis.

There is a high percentage of sectional title owners though, who do not pay their levies on time and some not at all. In these cases in the past these defaulters were dealt with by attorneys once the account was handed over. Now, there is a growing trend towards mediation and arbitration to get these disputes sorted out because it is usually quicker and cheaper.

Once it is found that there is a levy default Prescribed Management Rule 71 states that arbitration can go ahead 14 days after a notice has been sent to the levy defaulter whereas using the older method of handing the account over to an attorney took months.

There was a recent case in Johannesburg where the arbitrator took all of 20 minutes to come to a decision as to what was owed by a trustee, what interest should have been paid and when it needed to be paid. This is because all of the processes were done correctly; there were resolutions in place stating clearly what interest would be charged and when payments were due.

The basis of efficient debt collection in all sectional title schemes comes from clear communication to all owners what levies are due, what interest will be charged and what time frame they have to pay.

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