A High Court judgment that examines, among other issues, a body corporate’s right to insist on actual payment before issuing a clearance certificate for transfer, the effect of a magistrates’ court judgment on its claim, the need for taxation of legal collection costs and the use of the services of the Community Schemes Ombud Service rather than the courts.
(Gauteng Local Division of the High Court, Case No. A5002/2020 dated 23 September 2020)
This case interpreted section 15B(3)(a)(i)(aa) of the Sectional Titles Act, No. 95 of 1986. This provision states that, if a body corporate exists, a unit cannot be transferred until the body corporate has given a certificate confirming payment, or satisfactory provision for payment, of all amounts the owner owes it in respect of that unit, as at the date of registration.
The original dispute arose when a unit was purchased at a judicial sale and the purchaser undertook to pay the amounts due to the body corporate. When asked for a levy clearance certificate, the body corporate required payment of amounts the purchaser considered were not due to the body corporate by the owner. These included interest charged at a higher rate than had been awarded by a court on a judgment debt, un-taxed legal costs that had been irregularly debited to the owner’s account and amounts that the body corporate estimated would become payable before transfer was registered.
The body corporate reduced its claim, but refused to give the purchaser any documentation substantiating its levy and interest claims and refused the purchaser’s offer of security in an amount substantially less than its reduced claim. Its approach was that the purchaser must pay all the amounts it claimed in full before it would issue the levy clearance certificate.
The purchaser approached the Gauteng High Court, where a single judge ordered the body corporate to accept a specified amount of security for the claim and issue the levy clearance certificate, on the basis that the security—more than had been previously offered, but less than was claimed—would be invested and held in trust pending the finalisation of the dispute. The body corporate refused to comply with the judge’s order and appealed.
Three judges considered the appeal. The majority dismissed the appeal with costs. The third judge disagreed and recorded his views that the body corporate was entitled to full payment, notwithstanding the unresolved disputes.
The judgment deals with many issues, but in this brief summary I will deal with four that I consider most pressing. The majority judgment:
- HELD that a decision to reject an offer of security must be based on reasonable grounds and not prejudice the owner. (pars 22 and 23)
- HELD that when a body corporate takes judgment against an owner for outstanding levies and attaches a unit in execution, its claim is no longer a burden on the unit covered by section 15B(3)(a)(i)(aa), as the nature of the debt has changed. The judgment debtor remains personally liable for the debt and costs. The body corporate cannot claim the same amount from the person who purchases the unit at the sale in execution.(par 27).
- HELD that the body corporate had unlawfully debited collection and legal costs, as well as interest thereon, to the owner’s account. These costs had not been taxed or agreed by the owner and were therefore not due, and the body corporate failed to prove its authority to charge interest. (pars 28 to 32)
- QUERIED why the body corporate was claiming levies from the purchaser, when they can be recovered from the owner by an application to CSOS. (par 33)
These aspects of the judgment should be of particular interest to any body corporate that is considering suing an owner for outstanding contributions levied, collection commission, legal costs, interest or for any other amounts in respect of a unit. It is possible that certain aspects of the judgment may be taken on appeal, to be considered by the High Court for a third time. The full text of the judgment can be downloaded from the Southern African Legal Information Institute’s site:
Graham Paddock is a specialist community schemes attorney, notary and conveyancer. He has been advising clients and teaching students for over 40 years, and was an adjunct professor at UCT for 10 years.
Article reference: Paddocks Press: Volume 16, Issue 10.
This article is published under the Creative Commons Attribution license.