[NOTE: This Article deals with the withholding of levies by owners as a result of disputes that have arisen between the owner and the body corporate/trustees in a sectional title scheme pertaining to the management of the scheme, an increase in levies, or the raising of a special levy. It does not deal with collecting levies from a defaulting owner who has simply failed to make payment of levies without disputing that the levies are due and payable. The collection of undisputed arrear levies is a separate issue].
Owners in sectional title schemes sometimes withhold the payment of levies if they are dissatisfied with the manner in which the trustees are managing the scheme or if they think that the levies are excessive or unnecessary. The mismanagement or perceived mismanagement of the scheme and the raising of levies often causes conflict between the owners and the trustees / body corporate. The High Court has, in a number of cases, considered the issues relating to the imposing of levies by a body corporate, the owners’ obligations in respect of the payment of such levies and the withholding of levies by owners. In one such case (The Body Corporate of Fish Eagle versus Group 12 Investments 2003(5)SA414(W)) the Body Corporate instituted action against an owner (a company) that owed money to the Body Corporate for monthly levies, as well as a special levy and other charges.
The owner raised a number of defences. It contended that (a) the Body Corporate had failed to carry out certain repairs to units in the scheme; (b) that the Body Corporate had increased monthly levies unnecessarily and that the increase had been necessitated by the mismanagement of the scheme by the Body Corporate and; (c) that with regards to the special levy it was not liable to pay such levy because the Body Corporate had sufficient funds in its account when the special levy was imposed.
In the above case the Court held that the owner could not legally:
(a) withhold levies on the basis that the trustees of the scheme had failed to discharge their duties (in this case to carry out certain repairs to units);
(b) refuse to make payment of the increased levies even if the owner believed that the increase was unnecessary;
(c) withhold or refuse to pay a special levy by virtue of the fact that the Body Corporate allegedly had sufficient money in its account at the time the special levy was imposed to cover the expenses for which the special levy was raised.
The Court went on to say that it was the function of the trustees (and not individual owners) to determine the monthly levy which is payable by owners and that once the members of the body corporate (owners) had approved the monthly levies in accordance with the prescribed procedures, then such levies were payable by all owners. In addition, the Court held that the trustees (and not individual owners) are empowered to decide whether or not to impose a special levy.
The Judge stated that the remedies available to an owner in the position of the Defendant in the case were the following:
- to make an application to Court for a Mandatory Order compelling the trustees to discharge their duties;
- to make an application to subject the Body Corporate to administration;
- to convene a meeting of members of the Body Corporate (owners of the scheme) for the purpose of removing and appointing new trustees.
The cases referred to above were heard prior to October 2016 which is the date on which the Sectional Title Schemes Management Act (STSMA) and the Community Schemes Ombud Service Act (CSOSA) came into effect. However, in my view, the existence of the abovementioned legislation has not impacted on the legal position regarding the question of whether an owner of a unit in a sectional title scheme may withhold levies on the basis that trustees have failed to discharge their duties or because they think that approved levies or lawfully imposed special levies are unnecessary. Our law is clear, if an owner refuses to pay annual or special levies which are due and payable, the body corporate is entitled to institute court action to recover such levies and an owner’s attempt to defend such an action on the grounds referred to above will not be successful.
The only difference that the enactment of the STSMA and the CSOSA has made is that the owner of a sectional title unit now has the additional option of seeking recourse through the Ombud established under the CSOSA. But, as stated, this will not prevent a body corporate from issuing summons and taking judgment against such an owner when he fails to pay levies that are due and payable.
(Disclaimer: This article is for information purposes only and do not constitute legal or other professional advice)
Website Design and Development by Blaze Media