The body corporate’s power to prevent the transfer of a unit if the selling owner owes any money to the body corporate, is contained in section Section 15B(3)(a)(i)(aa) of the Sectional Titles Act, 95 of 1986 (the Act).
It says that the Registrar of Deeds may not transfer a sectional title unit unless the conveyancer handling the transfer has certified that there is no money owing to the body corporate in respect of that unit, or if there is, that an arrangement for payment has been made and the body corporate is satisfied with that arrangement.
In order to be able to make that certification, the conveyancer requests a written assurance from the trustees, or managing agent if there is one, that the owner does not, in fact, owe any money. This written assurance is what is commonly referred to as the levy clearance certificate.
Section 15B(3)(a)(ii) is also a clearance certificate but it applies, not to owners who want to transfer their units, but to developers who hold rights to extend the scheme in terms of section 25. Section 37(1)(bA) says the body corporate must charge the developer for any expenses it has in respect of the area subject to the future development rights. These could be substantial costs: a simple example is the water supplied during the construction of the building/s in the phase. The Registrar may not register the cession of the whole or part of that right unless the developer has paid everything it owes to the body corporate.
It is significant that the “levy clearance” provision in the Act refers to “all monies”, not just “contributions”. This means that non-payment of any costs, or potential costs to the body corporate, can be cited as the reason to withhold the certificate until those amounts have been paid. An example could be damage to common property that the body corporate would otherwise have to pay for to repair.
While the levy clearance certificate, strictly, can only be withheld if there is money owing, it is also a useful tool to get other things.
Most managing agents resist the conveyancer’s request for the figures of amounts owing up to the anticipated date of transfer until the conveyancer has provided them with the name, domicilium address and contact details of the new owner, preferred method of delivery on the levy statement and, very usefully, a copy of the rules signed by that person. The managing agent will have a checklist of items such as these, and won’t release the clearance certificate – and thus delay the transfer – until all the items on that list have been taken care off.
The turnover of sectional property is quite high. The threat of not issuing a clearance certificate is a useful tool get owners to pay amounts owing.
Article reference: Paddocks Press: Volume 10, Issue 5, Page 2.
Anton Kelly is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the lead teacher on all the Paddocks courses for the last 5 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.
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