Levies are the lifeblood of shared living schemes

Buying into a sectional title scheme may have benefits like shared costs of security and maintenance. The maintenance of the common property and other expenses like building insurance hinges on the payment of levies by every owner. What happens when an owner stops paying?

A 2024 adjudication order from the Community Schemes Ombud Service (CSOS), Marula Lofts Body Corporate v KS Bonga, is applicable for this blog post. Below are the case summary and a few answers to common questions regarding the legal duty to pay levies in South Africa.

The Case: Marula Lofts Body Corporate v KS Bonga (CSOS 7032/GP/23)

I. Summary of the Facts

Marula Lofts Body Corporate (the applicant) started dispute resolution proceedings against KS Bonga (the respondent), the registered owner of Unit 81 within the scheme, because of unpaid levies. The applicant sought to recover an outstanding amount of R16,455.21, which included interest charged at 24% per annum, following the respondent’s failure to settle the account despite demands. The matter went to adjudication after conciliation failed. Although the respondent had the opportunity make submissions, they failed to respond to the allegations or dispute the facts.

 

II. Legal Question

Is the applicant entitled to an order for the payment of arrear contributions and interest from the respondent in terms of section 39(1)(e) of the Community Schemes Ombud Service Act?

 

III. Ratio Decidendi (Reasoning)

The adjudicator set out that the Body Corporate is by statute obliged under the Sectional Titles Schemes Management Act (STSMA) to perform its functions, which includes the authority to raise levies via trustee resolutions.

 

The adjudicator stressed that levies are the “lifeblood” of a community scheme, important for running a complex and for maintenance, and that non-payment by a member negatively impacts the interest of everyone who is a member of the Body Corporate, thus all the owners. Management Rule 21(3)(c) allows for the charging of interest on overdue amounts, if authorised by a trustee resolution.

 

Citing The Body Corporate of Fish Eagle v Group Twelve Investments (PTY) Ltd, the adjudicator noted: A member may not withhold levies just because they dispute the financial wisdom of the expense. As a result, because the applicant provided sufficient evidence of the debt and the respondent failed to dispute the facts, the applicant successfully discharged the onus of proof which is a balance of probabilities.

 

IV. Finding

The order was granted in favour of the applicant, directing the respondent to pay the outstanding amount of R16,455.21.

 

Deep Dive: The Duty to Pay Levies (Q&A)

Based on this adjudication order, here are the answers every Sectional Title owner and trustee needs to know about levies and non-payment.

The Duty to Pay

Q: Why is it important for members to pay their levies?

 

A: Levies are aptly described in the order as the “lifeblood of shared living schemes”. They are essential because the costs for the maintenance, repair, and day-to-day of the scheme—including security and insurance—are shared between the members.

 

Q: What is the legal authority that allows a Body Corporate to charge levies?

 

A: The authority to raise levies comes from the Sectional Titles Schemes Management Act (STSMA) plus the passing of a trustee resolution. The Body Corporate is required to perform these functions assigned to it by the STSMA.

 

Q: Who is responsible for paying these contributions?

 

A: The responsibility lies with the owner(s) of the units at the time the resolutions raising the levies were passed. In this case, the respondent was liable because of ownership of a unit in the scheme.

 

Failure to Pay

Q: Can a member withhold levy payments if they disagree with the Body Corporate’s financial management and decisions?

 

A: No. The adjudicator referenced the matter of The Body Corporate of Fish Eagle v Group Twelve Investments (PTY) Ltd, which held that a member cannot withhold levies on the grounds that they dispute the necessity or financial wisdom of the decision to impose those levies.

 

Q: What are the consequences for the scheme if a member fails to pay?

 

A: The non-payment of a levy can impact a scheme. Failure to pay negatively affects the interest and investment of every member of the BC.

Q: Can the Body Corporate charge interest on overdue levies?

A: Yes. Under Management Rule 21(3)(c), the Body Corporate may charge interest on any overdue amount. This requires a written trustee resolution and must be in accordance with the National Credit Act. In this case, interest was calculated at 24% per annum.

 

Q: How may the Body Corporate recover outstanding levies if a member fails to settle the amount due?

 

A: Levies may be recovered by way of an application to the Community Schemes Ombud Service (CSOS). If the internal remedies are exhausted and the member fails to pay the outstanding levies, the trustees may resolve to proceed with legal action via CSOS to obtain an order for payment.

 

Q: What happens if the respondent does not defend themselves during the adjudication?

 

A: If the applicant presents sufficient evidence (such as a breakdown of the contribution statement, and reasons for the levies) and the respondent fails to dispute the facts, the adjudicator may grant the order on the basis that the applicant has discharged the onus of proof.