by Simone Padayachee

A brief overview on sectional title schemes, body corporates and the importance of levies

A sectional title scheme is used to describe the separate ownership of a unit within a complex or development. The owner of the unit will automatically become a member of the body corporate and is bound by the rules and legal obligations that arise.

What is a body corporate?

A body corporate is a legal entity made up of all the owners in the sectional title scheme. It exists to represent the owners and to manage and control the building/complex by making sure that it’s financial, administrative and physical needs are taken care of. In terms of section 3(1) (a) of the Sectional Titles Schemes Management Act of 2011, a body corporate needs to form an administrative fund and a reserve fund to cover expenses. The administrative fund covers the day to day running costs of a scheme, whereas the reserve fund is used to cover the cost of future maintenance. This is where levies come in.

Levies are determined by the body corporate’s annual general meeting, where a budget is approved for expenses that may be incurred for the year. Based on the administrative and reserve budget, the trustees will then determine how much is needed to cover the body corporate’s expenses for the year. This amount is divided between the owners to form the levy amount for the year which is paid in monthly instalments.

There are a number of expenses that levies are used to cover for instance:

• Service providers- such as cleaning, security, gardening and pool maintenance.
• Utility charges- water, electricity, refuse and sewerage.
• Maintenance- electrical, plumbing, painting and gate repairs.
• Body corporate employees- caretakers, gardeners and maintenance workers.

When owners fail to pay their levies, it can cause consequences for the whole sectional title scheme as services will be interrupted and there will be a delay in maintenance.

So, what happens when an owner fails, refuses or neglects to pay their levies

According to the provisions of the Sectional Titles Management Act, the trustees of the body corporate can approach any court for the recovery of outstanding levies. Trustees may also approach the Community Schemes Ombud Services for an order to to compel the owner (debtor) to pay their monthly levies owed to the Body Corporate.

The Community Schemes Ombud Services (CSOS) Collection process is as follows:

An appellant such as the trustees of the Body Corporate may approach CSOS for an order to compel a non-paying member to pay his/her owed levies to the Body Corporate.

Section 38 (1) of the Community Scheme Ombud Services Act (CSOSA) states that ‘any person may make an application, if such person is a party to, or affected materially by, the dispute in question’

The process is as follows:

• An applicant will lodge a dispute with CSOS by lodging a dispute resolution form/ application with CSOS and payment of the required application fee to the CSOS.
• Thereafter, the application will be considered by CSOS and if the application is accepted an acknowledgement letter (bearing a unique reference number) will be sent to the applicant.

Section 39 of CSOSA deals with the types of relief that may be claimed at CSOS and in terms of section 39 (1), it states that the CSOS may grant the relief through ‘an order for the payment or re-payment of a contribution or any other amount’.

An important detail to remember, that in terms of section 56 of CSOSA, an order that is handed down by CSOS has the same validity as an order which has been handed down by the Magistrates Court or High Court (depending on the nature/ value of the dispute).

The collections process as set forth by the Magistrates Court:

Letter of Demand

A letter of demand is sent to the debtor, the debtor is given 10 days to settle the amount in full. It is advisable as such demand notifies the debtor of their breach and gives the debtor an opportunity to make alternative payment arrangements before the legal process ensues. It is important that a receipt of the letter by the debtor is confirmed.

Summons

• If the debtor does not respond within the period of time stated in the letter of demand, a summons is issued to the debtor on behalf of the body corporate to formally begin the legal process.
• The summons must include the following:
• The body corporate’s details
• The debtor’s details
• Details of the unit in question
• Reference to sections of the STSMA which highlight the obligation to pay levies
• The outstanding amount
• After the summons has been issued, it is then delivered to the debtor by the sheriff of the court, after which the owner has 10 days to defend the action. Failure to defend the action in any way may result in default judgement.

Default judgement application

Application to the court is made for default judgement and once received is sent to the Magistrate for consideration of such request. Should all the requirements for the application be met, the Magistrate will grant the default judgement.

These requirements include:

• Sufficient completion of details of summons
• Particulars of the claim
• Legal service of relevant documents was made
• Absence of the defendant’s notice of intention to defend

Warrant of execution

The plaintiff may issue an execution warrant against all moveable property or goods which belong to the debtor. The sheriff is required to issue to warrant at the debtor’s actual residential address.

Should the debtor not make the necessary payment arrangements once receiving the warrant, the sheriff is instructed to remove all moveable assets which are sold at a Sale in Execution.

Should none of these steps prove successful in the collection of arrear levies, more drastic steps may be taken such as auctioning the property or an application for a garnishee order.