Written by Zerlinda van der Merwe, Co-Founder and Director of TVDM Consultants.
If you’re a trustee or managing agent, especially one who handles debt collection, you’ve probably received that dreaded email or call. An upset owner advising that they won’t be paying their levies until specific concerns in the scheme are addressed.
In a sectional title scheme, it’s essential that within 14 days of levy contributions being approved by the members at the annual general meeting (AGM), each owner receives written notice confirming their levy amount, as determined in accordance with the approved budget. If this is not done, the member will be able to raise a valid defence against the payment of any increase in levies raised. However, even if a budget, and subsequent increase in levies, has not yet been approved by the members at an AGM, contributions levied cannot remain unpaid by members.
Alternative payment options
Firstly, an owner cannot set-off any perceived debt of the body corporate like damages. However, should an owner find themselves in a position where it has become challenging and/or impossible to settle their monthly contributions, an arrangement must be proposed and sought with the scheme as soon as possible.
This arrangement must be reasonable and take into consideration that levies is a recurring debt to the community scheme, and unlike any other debt, the liability does not reach a certain limit and remains stagnant. As such, any proposed settlement must include a portion back payment to the debt incurred and a portion payment towards levies raised on a monthly basis.
It is also possible for a scheme to require that an owner who has fallen into arrears, to make proportionate contributions to the scheme as an annual once-off payment and not monthly as per practice. Provided that the above is contained in a rule or other governance provision, which should further include other associated charges such as interest, collection charges, and legal fees. .
What alternative measures can be taken against arrear levies?
As a further mechanism to ensure compliance and payment, a scheme can provide for the disconnection of services to such an owner in debt, provided;
- that it is provided for in the scheme’s governance documentation AND
- a court has granted an order authorising the disconnection. This order can only be granted once the court has considered whether the disconnection is valid in terms of an agreement between the parties in such a manner as to not prejudice any other member of the community scheme AND
- that the disconnection will be decided in regards to only the portion of the debt that relates to that specific service and its arrears.
Owners cannot refuse to pay levies
Let this serve as a reminder to all owners, whether individuals or companies, that there is no right, under the Sectional Titles Schemes Management Act or any amended governance documentation of a community scheme, to withhold or refuse payment of validly raised levy contributions. Likewise, there is no entitlement to a refund of any contribution lawfully imposed.
Should you require any more information regarding this topic, contact TVDM Consultants on 061 536 3138 or email [email protected].