Collection of Arrears Levy Amounts

Owners of sectional units are required to pay validly raised general and special levies to their bodies corporate. 

When a person default on their levy payments, those who have duly paid end up subsidizing the defaulting person which results in contentions against the body corporate as a whole, who are then prejudiced. 

If the defaulting persists, this could lead to the body corporate experiencing a shortfall in their expected income which may result in them not having enough funds to cover the running expenses of the scheme.

Collection of arrear levy amounts is a priority

Being committed to ensuring that the arrear levy amount is collected should be a priority for the scheme’s trustees and managing agent.

The following steps should be taken when an owner falls into arrears:

  1. Before taking any action against the defaulting owner, the trustees should have resolved to charge an appropriate rate of interest on overdue amounts in terms of prescribed management rule 31(6). This is to ensure that the body corporate does not lose the investment value of the money during the period of the default.
  2. The next step should be a reminder and warning telephone call to the defaulting owner which is made by a trustee or the managing agent, who should keep a note of the conversation, to ensure that the failure to pay is not an oversight or a genuine error.
  3. Once it is established that the failure to pay is not a mistake, the trustees or managing agent should write the defaulting owner a letter of demand giving the owner a specified period in which to settle arrear amount. This should be hand delivered or sent by registered post with a request that acknowledgment be recorded. If the amount is not settled then this would result in legal action to recover the arrear amounts. 
  4. If the defaulting owner fails to settle his/her debt within the period stipulated in the letter of demand, the trustees or managing agent should hand the matter over to a debt collecting attorney who will initiate a magistrate’s court action against the owner to recover the outstanding amount. The trustees should ensure that any claim instituted against an owner by the body corporate’s attorney includes all legal costs incurred on an attorney‐and‐own‐client scale.

In terms of section 15B(3) of the Sectional Titles Act a conveyancer is required to certify that the body corporate has confirmed that the arrear amount of a particular unit has been paid or has been secured to its satisfaction.

Levy clearance certificate 

Therefore if an owner in arrears sells their unit, they will have to obtain a ‘levy clearance certificate’ from the managing agent or trustees before the unit can be legally transferred to the buyer. 

This provision can be used as a tool by the trustees and the managing agent who must refuse to give the owner a levy clearance certificate until all arrear levy amounts owing to the body corporate have been paid in full.

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