The purpose of the STSM Act is to provide for the establishment of bodies corporate to manage and regulate sections and common property in sectional titles schemes and, for that purpose, to apply rules applicable to such schemes and a sectional titles schemes management advisory council.

The STSM Act does not repeal the Sectional Titles Act (“STA”) 95 of 1986 (as amended) but certain provisions of the STA have been repealed and/or amended, with the enactment of STSM Act. Various interested parties have raised concerns over the interpretation of section 3(2) of the STSM Act, especially since the STSM Act, repeals Section 37 (2) of the STA.

Section 37(2) (new amendment) provides that: “Liability for contributions levied under any provision of subsection (1), save for special contributions contemplated by subsection (2A), accrues from the passing of a resolution to that effect by the trustees of the body corporate, and may be recovered by the body corporate by action in any court (including any magistrate’s 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 resolution was passed: Provided that upon the change of ownership of a unit, exclusive use areas and real rights of extension, the successor in title becomes liable for the pro rata payment of such contributions from the date of change of such ownership.”

Section 37(2) of the STA permits a body corporate to recover arrear levies from an owner by instituting legal proceedings in a Court, having jurisdiction. The question that is asked is “whether with the repealing of section 37(2) of the STA and the enactment of section 3(2) of the STSM Act, will result in a body corporate referring all levy defaulters to the office of the ombud to recover the arrear levies from the owner rather than Court?

In order to answer this question, the interpretation of Section 3 (2) of the STSM Act must be analyzed. This section provides as follows:-

“Liability for contributions levied under provision of subsection (1), save for special contributions contemplated by subsection (4), accrues from the passing of a resolution to that effect by the trustees of the body corporate, and may be recovered by the body corporate by an application to an ombud from the persons who were owners of units at the time when such resolution was passed: Provided that upon the change of ownership of a unit, the successor in title becomes liable for the pro rata payment of such contributions from the date of change of such ownership.”

The important words in the above section are the following: “….and may be recovered by the body corporate by an application to an ombud from the persons…”

Usually, in the interpretation of statutes, the word “may” is considered to be permissive rather than directory. The word “may” used in this Act (statute) provides the body corporate, in this instance, with a discretionary right to refer an owner’s liability for arrear levies to the relevant ombud’s office which will be established in terms of this Act. The word “may”, give the body corporate discretion either to use the ombud’s office or not.

It is a discretion which the body corporate may exercise in accordance with the relevant circumstances of each handover/levy defaulter.

The word ‘may’ in its natural meaning is permissive and imports a discretion, and must be construed as discretionary unless there is anything in the subject-matter to which it is applied, or in any other part of the statute, to show that it was meant to be imperative.

If, on the other hand, the Section 3 (2) of the STSM Act stated the following: “and shall be recovered by the body corporate…”, then with the use of the word “shall”, the body corporate would be under a duty to refer all levy defaulters to the ombud’s office, rather than the legal hand over route. The use of the word “shall” is peremptory and this would have meant that from the date of the supposed operation of this Act, any new levy defaulters would have to be referred to the relevant ombud’s office.

It may be presumed that the Legislature did not intend to exclude a body corporate’s right to recover arrear levies from a defaulting owner in a court of law and that the intention was to confer a right of recovery which would come into existence in the circumstances specified, and which may be pursued by action in Court or by application to an ombud.

Bodies Corporate will still retain its common law right to enforce its claim in any court of law and any actions already instituted against a defaulting owner for the recovery of arrear levies, can still be continued against the defaulting owner in that respective Court.

It is trite that courts of law and the legal process generally are open to all. Only in extreme and exceptional cases will a court or the legal process close its door to anyone who wishes to prosecute an action.

HOW DO YOU DECIDE WHETHER TO REFER A LEVY DEFAULTER TO COURT OR TO THE OFFICE OF THE OMBUD?

The Community Schemes Ombud Services (“CSOS”) Act 9 of 2011 was also published in the Gazette in June 2011 and will come into operation on a date fixed by the President by publication in the Gazette. The purpose of the CSOS Act is to provide a legal structure to monitor and control the administration of private and common areas in community schemes and to deal with the various disputes in these schemes by providing effective and affordable dispute resolution services in community schemes, including amongst others, sectional title schemes.

If a body corporate intends recovering arrear levies from an owner, and there is no dispute as to its determination then a body corporate can institute legal action in court to recover the arrear levies from the defaulting owner.

An example of there being no dispute [as given in Body Corporate of Greenacres v Greenacres Unit 17 CC and 1 other 2008 (3) 167 (SCA)], is when an owner ignores a demand for payment of levies or simply refuses, without justification, to pay them. This situation lends itself to there being no dispute and the Body Corporate is entitled to institute legal action in Court to recover its debts.

If, on the other hand, the levy amount is disputed because it has not been properly determined, and if this dispute is raised after the transmission of the levy statement or a letter of demand, then in situations like this, it may be preferable for the body corporate, to make application to the Ombud’s office.

A dispute relating to the recovery of levies or non-payment of levies must exist before any question of application to an ombud is necessary. Even though in terms of Section 39(e) of the CSOS Act, the ombud may make, “an order for the payment or re-payment of a contribution or any other amount”, the appropriate forum for undisputed levy collections, will be a Court of law, as opposed to the Community Ombud service.

It is also important to note that once the adjudicator (in terms of Section 48 of the CSOS Act), has investigated the dispute and made an Order, the adjudicator’s order for the payment of an amount of money such as levies from a defaulting owner, must in terms of section 56 of the CSOS Act, be enforceable as a judgment in a Magistrate’s Court or the High Court, having jurisdiction. This would involve the body corporate executing the Order in Court to successfully recover the payment of the levies.

Accordingly a body corporate that demands payment of levies is entitled to approach a competent Court to enforce its right to recover the levies alternatively the body corporate may make an application to an ombud to provide it with such legal assistance as it requires, and as stipulated in the provisions of the CSOS Act.

The full impact of the above Acts will only become known once the courts have judicially interpreted and tested the various provisions of the above Acts in the Courts to determine when exactly it is necessary to refer a levy defaulter to the ombud’s office or to a court of law.

Without any case law to guide the practical implications of the new Acts, there will be an element of speculation in advising on new legislation. This means that it may take some time before certainty is achieved as to precisely what needs to be done when an owner is in arrears with his levies, and when is it appropriate to refer the matter to Court, even if there is a dispute.

Article reference: Paddocks Press: Volume 7, Issue 5, Page 3