Arrear levies - Legal process including option to attach rental from tenant to collect levy arrears
Category Sectional-title Advice
Article Provided by Leanne Jooste, B Law Inc. Attorneys
In South Africa, the process for collecting levy arrears typically falls under the jurisdiction of the Sectional Titles Schemes Management Act, 8 of 2011 (STSM Act) and the Prescribed Management Rules (PMR) set out in Annexure 8 of the Regulations to the Sectional Titles Act, 95 of 1986. The process for collecting levy arrears can be summarized as follows:
Issuing of Levy Statements
The Body Corporate or Homeowners' Association, as the case may be, is responsible for issuing regular levy statements to unit owners, detailing the amount due and the due date. Levy payments are typically made on a monthly basis.
Payment deadline
Owners are required to pay their levies by the due date specified in the levy statement. If a unit owner fails to pay, they become in arrears.
Reminders, demand letters, interest, and late payment penalties
The body corporate or homeowners' association may send reminder letters or demand letters to unit owners who are in arrears, urging them to settle their outstanding levies.
The STSM Act allows for the imposition of interest and late payment penalties on overdue levies. The exact interest rate and penalties can be determined by the body corporate, but they must adhere to the prescribed maximum rates set out in the STSM Act.
Issuing of a Letter of Demand
If a unit owner continues to be in arrears, a formal letter of demand can be issued. This letter should outline the amount owed, including any interest and penalties, and provide a reasonable timeframe for the owner to settle the debt.
Legal Action
If the unit owner still does not settle the arrears after receiving the Letter of Demand, the body corporate can consider pursuing further legal action.
Alternative Option once Judgment has been granted (Section 27)
Once judgment has been granted against a defaulting owner for payment of arrear levies, there are various options in the legal system to consider collecting the judgment amount.
The first step would be to have a warrant of execution to attach movable assets issued to start the process. The sheriff might render a return of non-service due to the fact that tenants, and not the owner of the unit in arrears, are residing in the property.
Where a tenant resides in the premises, Section 72 of the Magistrates Court Act (referred to as "Section 72") can be of assistance wherein any debt payable to the benefit of the judgment debtor (being the owner of the unit) can be attached. In terms of Section 27, an interim order will be obtained on an ex parte basis.
The garnishee order will then be served on the tenant (referred to as the "garnishee") with a return date wherein the judgment debtor and/or garnishee will have the opportunity to provide the court with reasons why the garnishee order must not be made a final order of the court with the effect that the rent gets paid to the judgment creditor directly.
In terms of Section 72(2) of the Act, it will be possible for the judgment debtor (or the owner) to provide the court with reasons why the garnishee order should be set aside or amended, wherein only a minimal amount of the debt should be paid to the judgment creditor.
The judgment debtor would then have to prove to the court that he/she has no sufficient means to maintain him/herself and those dependent upon him/her after satisfaction of the garnishee order.
Once the garnishee order has been made final, the garnishee is compelled in terms of the order to pay rentals (the attached debt) to the judgment creditor (the Body Corporate).
The garnishee's co-operation is always risky as even though the garnishee is compelled, by an order of court, to effect payment of the rentals to the judgment creditor, the garnishee will rarely adhere to the order. The court rules provide that should the garnishee default, a warrant of execution may be issued against the garnishee. The garnishee may also be prosecuted for contempt of court due to his/her non-compliance with the court order.
The risks involved when making use of the Section 72 procedure must be carefully considered, seeing that the garnishee can move out of the premises at any time and without notice. The garnishee might also cancel the lease agreement and find alternative accommodation due to the unforeseen action taken against him/her. It is further also possible that the judgment debtor (the owner) evicts the garnishee (by taking the law into his/her own hands) in cases where the garnishee is complying with the court order or to cancel the lease and get a new tenant, which renders the court order ineffective meaning that the aforementioned process should be repeated as soon as a new tenant occupies the premises.
This process is both time-consuming and costly, and seldom delivers a guaranteed result as an effective manner of collection of the judgment debt, specifically due to the fact that a third party (tenant/garnishee) is involved.
In addition, the process is costly, seeing that the court will be approached on two separate occasions which will double the attendance fees. The sheriff's costs will increase the legal fees due to the fact that the application must be served on the garnishee and judgment debtor. The Sheriffs' first attempts are often unsuccessful, and the Sheriff will need to attempt service again.
Sale in Execution
As a last and effective resort, a sale in execution can be arranged, which involves selling the unit owner's property to recover the outstanding levies and associated costs.
It is essential to consult with an attorney or a property management company experienced in sectional title schemes to ensure that the correct legal procedures are followed. The specific details of the process can vary based on the rules and regulations of the specific sectional title scheme, and legal advice should be sought to navigate this process effectively and in accordance with South African law.
De Lucia Group has been servicing the property industry for over 45 years. Contact us to ensure you get the best advice for all your property-related queries. Michael De Lucia - michaeldl@delucia.co.za
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The information contained herein is not intended to constitute advice and shall only be relied upon by you at your own risk. De Lucia Group does not guarantee the accuracy or completeness of any information posted in this newsletter or otherwise. Any information relied upon by you should be independently verified for accuracy. De Lucia Group reserves the right to change the content distributed or published without prior notice.
Author: De Lucia Group
