Homeowners risk losing property and vehicles over unpaid levies

When purchasing a property in a community scheme, such as a sectional title development, homeowners association, or retirement village, financial obligations cannot be ignored. 

 Attorney Johlene Wasserman of VDM Incorporated, an expert in sectional title law, warns that failing to meet these obligations can lead to severe consequences. "All members must pay their levies upon transfer of ownership, regardless of written agreement," she stated, highlighting that many community schemes in South Africa are on the brink of collapse due to unpaid levies.

“We all have to pay our levies – and you don’t have to agree to it in writing; you become a member of the community scheme the minute it’s transferred into your name,” she warned. She pointed out that many schemes are on the verge of collapse due to levy defaults. Wasserman said unpaid levies are crippling community schemes throughout South Africa.

The Community Schemes Ombud Service (CSOS) in its 2023/2024 annual report recorded 15,587 dispute applications. Of these, 9,742 were financial issues, dominated by levy arrears and interest disputes. This amounts to about 62.5% of all cases. The CSOS attributes the surge to the tough economic climate and high unemployment.

Wasserman explained that if someone is in arrears of levy payments, and a court judgment has been granted against them, creditors can go the route of a Section 66 application. This refers to a legal process that allows a judgment creditor such as a body corporate or homeowners association to apply for the attachment and sale of a debtor’s movable property to satisfy a debt.

She explains that in practical terms this allows for the seizure of movable assets such as furniture, vehicles, and electronics. These assets may then be sold at public auction, and the proceeds will be used to settle the outstanding debt.

“They may not, however, disconnect water, gas or electricity, restrict access to the complex, or publicly shame or defame owners in arrears. Taking the law into your own hands can backfire. Unlawful disconnections or access restrictions can lead to spoliation claims and serious legal consequences".

Wasserman referred to a recent ruling by the Gauteng High Court, Johannesburg, ruling where it upheld the Bondi Body Corporate’s right to sell a Roodepoort property over unpaid levies totaling nearly R51,000.

Despite the unit’s R1.4 million market value and a mortgage bond exceeding R632,000, the court confirmed that levy arrears are enforceable through sale in execution of a unit - even where the property is bonded - provided all legal requirements are met. While the bondholder remains a secured creditor, levy debts must also be settled before transfer.

In a similar matter, the high court ruled that corporate bodies may disconnect electricity for non-payment—provided they comply with statutory limits. The owner in that case owed nearly R100,000 in levies and utilities, and the court affirmed that legal fees and enforcement costs were recoverable.

Some of the legal principles highlighted by her include that trustees are urged to act within 60 days of arrears to avoid service disruptions and financial instability. She commented that body corporates have a fiduciary duty to protect the scheme and they must act sooner than later to recover the outstanding levies.

“Even if a unit is rented out or the owner disagrees with management decisions, levies must still be paid. There are no exceptions. Owners cannot withhold payment as a form of protest unless they have a court order".

Wasserman said the owner remains responsible. However, under the CSOS Act, the body corporate can apply for an order to redirect rental payments from the tenant until the arrears are cleared. A structured payment plan or engaging with the owner to understand their situation is another option. “But leniency must be balanced with fairness to other owners and the scheme’s financial health,” she said.

Get your news on the go, click here to join the Cape Argus News WhatsApp channel.

Cape Argus