This is the third article in the series of the most popular questions we have received from the sectional title industry, relating to the changes in sectional title administration and management, as introduced by the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”). In this article, we will be looking at the process of arrear levy collection in sectional title schemes.
Under the Sectional Titles Act 95 of 1986 (“the STA”), the liability for contributions levied upon the members, accrues from the passing of a trustee resolution and may be recovered by the body corporate by action in Court of competent jurisdiction from the persons who were owners of units, holders of exclusive use areas, and holders of real rights of extension, at the time when such a trustee resolution was passed.
Whereas the STSMA now provides that contributions levied may be recovered by the body corporate by an application to an ombud (Community Schemes Ombud Service or “CSOS”), in terms of the Community Schemes Ombud Service Act 9 of 2011 (“the CSOSA”). In this regard, section 39 of the CSOSA sets out various prayers for relief, which the ombud may make, including an order in respect of financial issues.
The question that has arisen in practice, is whether the wording of the provision, namely the use of the word “may” indicates that the trustees, representing the body corporate, has a choice as to whether they wish to recover arrear levies by action in Court or by application to the ombud.
We know that respected attorneys have different views on this issue. Our view, is that the effect of the wording “may”, which is the same under the STSMA as it was under the STA, is that the body corporate may choose to take action, or to not take any action against a defaulting owner, and to rather take an alternative route, such as entering into a payment arrangement, or acknowledgement of debt, or to wait until the unit is sold and a levy clearance certificate is required for transfer.
Our further view, is that should the body corporate decide to take action against the defaulting owner, that it should do so by application to the CSOS in the first instance.
In this regard, we have considered Parliament’s intention in changing the wording in the legislation from “by action in Court of competent jurisdiction” to “by an application to an ombud”, and by the insertion of the relevant prayer in the CSOSA.
We have further considered the risks of approaching Court and not the CSOS, in that the Court may refer the matter for adjudication to the CSOS, or not give an Order as to costs in favour of the body corporate, as applicant, even in the case of success against the defaulting owner, due to the fact that the CSOS would not have charged fees to the scale of the legal fees incurred during the action in Court.
Should you have any queries relating to this topic, or want to find out about the Sectional Title short course where the changes to our industry will be explained, contact us at firstname.lastname@example.org or on 021 686 3950.
Should you wish to read Part 1 and Part 2 in this article series, please click on the relevant links below:
- Sectional title management ‘popular industry’ changes: Part 1 Reserve funds – click here
- Sectional title management ‘popular industry’ changes: Part 2 Maintenance, repair and replacement plan – click here
Article reference: Paddocks Press: Volume 11, Issue 12, Page 01.
Zerlinda van der Merwe is an admitted Attorney of the High Court, specialist Sectional Title Attorney (BA, LLB, LLM), Zerlinda brings a wealth of experience and forms part of the Paddocks Private Consulting Division.
This article is published under the Creative Commons Attribution license.