07 Nov Understanding legal fees and levy enforcement in sectional title schemes

A recent ruling by the Johannesburg High Court has brought some clarity for sectional title schemes, especially on collecting overdue levies and recovering legal costs when members do not pay. The case, SS Glen High Body Corporate v. M. Kruger NO (2023/055133), addressed issues many schemes face: can they recover legal fees incurred when chasing unpaid levies?

Why this matters for sectional title schemes

For a sectional title scheme to run smoothly, every member must pay their levies. These fees cover maintenance, security, and other shared expenses. When members do not pay, it disrupts the scheme’s financial health. Often, the body corporate must take legal action to recover these unpaid levies, which leads to additional costs.

In the past, some courts have hesitated to allow these legal fees to be added directly to levy statements. But this ruling confirms that bodies corporate can include legal fees in levy collections—if specific requirements are met.

Key takeaways from the judgment

The Court, referencing earlier cases, ruled that if a body corporate’s rules specifically allow it, legal fees related to recovering levies can be claimed without needing a taxing process. This decision allows bodies corporate to recover these fees as part of the outstanding levy balance, simplifying the process. The judgment emphasised:

Legal fees are recoverable: If a body corporate has incurred legal fees to collect levies, it can add these fees to the amount owed—provided the rules allow for this.

Clear rules are essential: Conduct rules must clearly state that members are responsible for any legal costs linked to levy enforcement. Without this clarity, recovering such fees may be more challenging.

Importance of financial compliance: Members are legally obligated to pay levies. This ensures that every member contributes to the community’s upkeep, promoting financial stability for everyone.

What this means for bodies corporate

This ruling reinforces that bodies corporate have a legal right to pursue unpaid levies and recover related legal fees. It underscores the importance of well-drafted conduct rules, which give bodies corporate the authority to enforce financial obligations.

By clearly outlining these responsibilities in their rules, bodies corporate can ensure smoother management and reduce financial strain due to non-compliant members. This court decision supports fair contributions from all members and the stable operation of sectional title schemes.

For guidance on managing levy collections or other governance matters, feel free to reach out to us. We’re here to help ensure your scheme runs efficiently and stays financially healthy.