Unpaid Levies in Community Schemes: Consequences and Legal Ramifications

Strategic Insights -

The failure to pay levies in community schemes can lead to dire consequences, including the sale of a property to settle the debt. Attorney Johlene Wasserman warns that not facing one's financial obligations can have far-reaching effects, particularly in South Africa where many schemes are on the verge of collapse due to levy defaults. The Community Schemes Ombud Service (CSOS) has reported a significant increase in financial disputes, with 62.5% of cases related to levy arrears and interest disputes.

Key Takeaways:

  • Unpaid levies can lead to the sale of a property to settle the debt, as seen in the case of the Bondi Body Corporate, where a Roodepoort property was sold over unpaid levies totaling nearly R51 000.
  • Body corporates have a fiduciary duty to protect the scheme and must act within 60 days of arrears to avoid service disruptions and financial instability.
  • Owners remain responsible for paying levies, even if they disagree with management decisions or rent out their unit.
  • The Community Schemes Ombud Service (CSOS) reported 15,587 dispute applications in its 2023/2024 annual report, with 62.5% of cases related to levy arrears and interest disputes.
  • Creditors can apply for a Section 66 application to attach and sell movable property to satisfy a debt, but must comply with statutory limits.
  • Trustees can redirect rental payments from tenants to settle arrears, and a structured payment plan or engaging with the owner to understand their situation is also an option.
  • Legal fees and enforcement costs are recoverable, as seen in a recent high court ruling where a corporate body was allowed to disconnect electricity for non-payment.

Statistics:

  • 15,587 dispute applications were reported by the Community Schemes Ombud Service (CSOS) in its 2023/2024 annual report.
  • 62.5% of cases reported by CSOS were related to levy arrears and interest disputes.
  • Unpaid levies totaling nearly R51,000 led to the sale of a property in the case of Bondi Body Corporate.
  • The market value of the property was R1.4 million, with a mortgage bond exceeding R632,000.

Sources:

  • Johlene Wasserman, VDM Incorporated, specialist in sectional title law.