The legalities around levies in South Africa – What they are and why they matter

In the world of sectional title living, levies are a fundamental component of property ownership. What, how and why are the questions that this article will address, so let’s delve a little deeper for a better understanding.

What are levies?

Levies are mandatory contributions paid by the owners of sectional title units to the body corporate or homeowner’s association each month. These funds are used to cover the costs associated with the maintenance, management, and administration of the common property and services in a sectional title scheme. The amount payable is typically determined based on the participation quota of each unit.

Why do levies need to be paid by the owners?

• Maintenance and Upkeep: The monthly payment of levies ensures that the common areas and facilities are well-maintained, which helps in preserving and potentially increasing the value of the property.
• Security: Levies often cover the cost of security measures, including guards, surveillance systems, and access control, providing a safer living environment. In South Africa, this is a very high priority to owners and tenants alike and a big selling point for body corporates or homeowner’s association
• Financial Stability: A well-funded body corporate is better positioned to handle unforeseen expenses, such as emergency repairs or legal disputes.
• Enhanced Living Experience: Amenities such as swimming pools, gardens, and recreational areas are maintained through levy payments, enhancing the quality of life and appeal for all residents.
• Reserve Fund: A portion of the levies can be allocated to a reserve fund. This fund is crucial for covering long-term maintenance and major repairs, thereby avoiding the need for imposing special levies that can be financially burdensome for owners.

How do you recover unpaid levies?

When owners default on levy payments, it creates financial strain on the body corporate. Fortunately, there are legal mechanisms to address this:

Letters of Demand: The first step is often a formal letter of demand, requesting payment of the outstanding levies. This document serves as the first step in the legal process to collect outstanding levies and should be executed immediately, upon non-payment, to avoid further unnecessary delays.

CSOS Assistance and Legal Action: If the letter of demand does not yield results, the body corporate can apply to the Community Schemes Ombud Service (CSOS) for a dispute resolution process or initiate legal proceedings in the Small Claims Court or Magistrate’s Court.

Judgment and Attachment: Should the matter proceed to court, and the body corporate obtains a judgment against the defaulting owner, they may apply for a warrant of execution to attach and sell the owner’s movable assets or even the property itself to recover the debt.

Disconnection of Utility Services: Although essential services such as water and electricity cannot be disconnected without a court order, the body corporate can apply to the court for permission to disconnect such services or limit access to amenities until arrears are settled.

Attachment of Movable Assets: In addition to obtaining a judgment, the body corporate can request the court to issue an order for the attachment of the owner’s movable assets. These assets can then be sold, and the proceeds allocated towards settling the outstanding levies.

Adverse Credit Record Listing: Non-payment of levies can be loaded onto TPN Credit Bureau to negatively affect any owners credit record and ability to obtain credit. Payment profile information is the factual information relating to how the owner pays their levies each month and does not need prior written consent to be loaded. Check out our guide to adverse listings for more information on how to protect your rights: https://mrisoftware.tpn.co.za/blog/a-guide-to-adverse-listings/.

Restrictions of Body Corporates’ Actions

While the body corporate has several tools at its disposal to enforce levy payments, there are clear boundaries to its actions:

• Unlawful entry: The body corporate cannot forcibly enter a unit to collect outstanding levies or seize property without a court order.
• Disconnection of Services: Essential services such as water and electricity cannot be disconnected as a means to compel payment unless a court order has been obtained.
• Access Restriction: In South African law, no one can disturb the use and possession of one’s property without a valid court order to do so. Therefore, if a body corporate restricts access to the sectional title scheme without a court order to do so, can set back the body corporate to square one and can open the body corporate to liability in this regard.
• Public Shaming: The body corporate must respect the privacy of owners and cannot publicly shame or disclose the names of those in arrears.

A common misconception is when an owner rents their properties to tenants and their tenants fail to pay rental, owners believe that they do not have to pay their levies. The owner’s obligation to pay levies timeously each month is binding on all owners of a sectional title scheme, regardless of whether their tenants do not pay the rental. The owner must ensure that their actions remain lawful, even if their tenant’s actions are not. Owners can also use the TPN letters of demand to ensure the payment of their rental.

Maintain the financial integrity of your scheme and protect your legal rights

Unpaid levies can jeopardise the financial health of a sectional title scheme, but proactive measures can mitigate these risks. TPN offers legally compliant letters of demand to assist in starting off your legal action for the recovery of outstanding levies.

Contact us to find out how we can support your body corporate in maintaining a stable and prosperous living environment.

Learn more about the TPN Levy Letter of Demand here.

Written by: Rowan Terry, Senior Legal Counsel, TPN from MRI Software