11 Oct CSOS and collecting outstanding levies
Levies – or contributions, as they are referred to in the Sectional Titles Schemes Management Act No 8 of 2011 – are the lifeblood of a body corporate’s successful existence. Without contributions paid by all members, the body corporate is unable to pay for services provided. The direct result of this may include legal action against the body corporate for failure to pay its service providers.
Non-payment of levies
Unfortunately, owners regularly pay their levies late or not at all which places the body corporate in a potential cash flow predicament. The responsibility to pay contributions always rests with the owner; however, when an owner ignores their responsibility, the trustees need to step in and take the necessary action to recover outstanding contributions. First attempts to recover the contributions are normally made by the managing agent following instructions from the trustees.
Prior to 7 October 2016 – when the new legislation came into effect – the ensuing step would have been to instruct an attorney to demand payment from the defaulting owner. Following the letter of demand, further steps could lead to a summons, default judgement, a judgement against the defaulter and at worst, the sale in execution of the section over which contributions are owed.
A costly process
The costs involved in the process of recovering outstanding contributions can add to and escalate the woes of the defaulter. The body corporate effectively funds the process and can only recover its costs once a judgement or sale in execution has been granted. The body corporate may find itself with cash flow concerns to the detriment of owners who pay their contributions regularly. The process is expensive.
The Sectional Titles Schemes Management Act Regulations (section 3.2 & 3.3) now includes the option for bodies corporate to approach the Community Schemes Ombud Services (CSOS) to assist with the recovery of contributions from a defaulting owner by way of an application to the Ombud. It is important to keep in mind that contributions due by owners only become payable after the trustees pass a resolution to that effect.
The costs involved in such an application is minimal compared to the appointment of an attorney. In addition, the process is far quicker and more effective. The importance of the body corporate following procedures and processes to ensure that they enforce the payment of contributions legally is pivotal in the recovery of contributions, regardless of whether the attorney or Ombud route is followed.
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