Collecting sectional title levies when payment is past due

The collection of levies from owners in members of sectional title units are the bane of the lives of most managing agents and trustees of bodies corporate.

The most common way of collecting levies is by way of the issue of summons.  In other words, the managing agent instructs an attorney, on behalf of a body corporate, once the account of the owner goes into arrears, to issue summons for the arrears outstanding on the unit. This method is still widely used in collecting outstanding arrears, but is beset with pitfalls of a practical and dilatory nature.

“What alternative methods of collecting levies and electricity, particularly with regard to large outstanding arrears, are available to managing agents and trustees?”

The practical difficulties with the summons procedure

Once a summons is served, it presently takes anything from two to three months to obtain a judgment, that is, if one is fortunate, by which time the owner has fallen further into arrears.

One used to be able to obtain a judgment and execute (attach) within a month.  However, particularly in the Johannesburg Magistrate’s Court, it is now becoming more difficult to obtain a judgment because of administration difficulties.  Managing agents and trustees should be mindful of this fact.

Delaying difficulties with the summons procedure

Some unscrupulous owners instruct creative attorneys to defend a summons for the purpose of delaying the payment of the arrears.  This incurs unnecessary legal costs.  The owner really does not have a defence and by the time the matter comes to court, the levies are substantial.  It should be borne in mind that presently, it can take anything up to eighteen months for a case to be heard in court.  During this period, invariably no levies or utility fees are being paid but there is a way to deal with such owners.

After judgment has been granted

Once a judgment is obtained, the next process is to attach the movable assets of the owner.

Trustees of bodies corporate should be aware that they should, at all times, be in possession of the current address of the owner.  It is no use instructing the sheriff to attach the movable goods in the unit, as often the units have been rented, and the movable property, i.e. the furniture and appliances, belong to the tenant, unless the unit is let fully furnished.

It often happens that the sheriff finds insufficient movable assets to attach at the owner’s residence. Many practitioners then proceed to instruct the sheriff to remove the goods attached and subsequently arrange for a sale in execution to take place. It is my view that this method wastes time and money in that, pending the sale of the assets, they are stored at the sheriff’s warehouse at considerable expense, which expense must be borne by the body corporate. The proceeds from the sale of the movable assets are often insufficient to cover the storage costs and removal costs, which increases the costs and claim even further.

Some attorneys bring an application to sell the owner’s immovable property. This takes time and often, by the time that the court authorises the sale, there is already a judgement against the immovable property of the bondholder.

Bondholders control the sale of the immovable property, in that they can dictate the price at which the property is to be sold. The body corporate has no say when the sheriff sells a property. Ultimately, when the bondholder has consented to the sale, the new owner will have to pay the arrears owed to the body corporate and the legal costs in full, as transfer of immovable property will not take place in the absence of a clearance certificate being issued by the managing agent.

2019-01-24T11:30:26+00:00January 24th, 2019|Commercial Law, Sectional Title|0 Comments
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