Body corporates, their managing agents and fees

During April 2004 the writer was confronted by a body corporate requesting a fee of R850.00 in return for issuing a levy clearance certificate in order to satisfy the provisions of Section 15B3 of the Sectional Titles Act, Act 95 of 1986 ("the Act"). The writer received this request for the fulfilment of a mere administrative function with disgust, amounting to an abuse of process in facilitation of the body corporate's own interest in ensuing payment prior to transfer. This fee was excessive in relation to the function required.

The response to the article Excessive levy clearance fees? posted on GhostDigest shows that the conveyancing community is in agreement that though they contemplate that an administration fee may be charged for the fulfilment of this function, in most instances in practice the fee charged by the body corporate or their managing agents is out of proportion in relation to the function performed.

The initial introduction of charging of an innocent administrative fee by a body corporate, whether direct or indirect through their managing agents, was acceptable to the legal community and conveyancers at large and hardly caused a stir worthwhile of a response. This innocent gesture has grown into a money printing exercise for the performance of an administrative duty which, apart from the fact that it has no apparent foundation in law, in most instances does not relate to the function fulfilled, and is charged and increased at random by some, whereafter others follow at large, increasing the "charges that are being levied in practice". It is inconceivable that whilst a local authority charges about R31.00, a body corporate deems it appropriate to render charges varying from R300.00 to as much as R850.00 to perform a similar function. The different rate that is being applied for administering the same function by different entities and the nature of the variation thereof defies all logic.

The most recent development, following the amendment to the Act during November 2003, was the introduction of tripartite agreements by body corporates and their managing agents in order to address the view that levies are indeed payable yearly in advance when a property is being transferred, similar to the practice of the municipalities. The sustainability of this interpretation is indeed questionable but the writer does not intend to express a view on the matter since it falls beyond the scope of the current discussion. In practice body corporates or their managing agents have introduced a fee of up to R400.00 for the drafting and facilitating of a tripartite agreement between the body corporate, the seller and the purchaser. In most instances a blank document is being forwarded to the conveyancer, who is required to complete and return same, as a condition precedent to a levy clearance certificate being issued.

The developments and practises referred to hereinabove are indicative of the creation of trends and "formal requirements" and is, as will be shown herein, without substance, authority or foundation, if not illegal. In the absence of any regulatory body, there are no official criteria for becoming a managing agent and regretfully several opportunistic individuals have set up businesses in managing the affairs of body corporates without showing the necessary understanding of legal principles involved or the environment within which they operate, yet these individuals are creating requirements at a cost. In general, with acknowledgement to the exceptions, the knowledge, expertise and ability of managing agents are appalling, yet they have found a money printing business with reference to the issuance of the aforementioned documents, levy clearance certificates and the facilitation of tripartite agreements, well knowing that a conveyancer must comply with the provisions of Section 15B(3) of the Act, which provides as follows:

3) The registrar shall not register a transfer of a unit or of an undivided share therein, unless there is produced to him-

(a) a conveyancer's certificate confirming that as at date of registration-

(i) (aa) if a body corporate is deemed to be established in terms of section 36 (1), that body corporate has certified that all moneys due to the body corporate by the transferor in respect of the said unit have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof; or

(bb) if a body corporate is not deemed to be established, no moneys are payable;

The body corporate is aware that a conveyancer would place himself at risk of incurring liability when certifying without receiving the necessary confirmation that all moneys due to the them has indeed been paid. It is arguable that a conveyancer would be able to certify as such upon production of the latest account by the transferor, but in such event such conveyancer does so at his own risk.

A body corporate being a creature of statute in terms of the Act derives its existence, powers, obligations and authority from the provisions of the Act, and the rules and regulations published in terms thereof. It can therefore only act in accordance with the provisions of the aforementioned act and lacks the necessary jurisdiction to impose additional obligations. A managing agent, being an extension of the body corporate, acting in accordance with its mandate, clearly would be subject to the same constaints, restrictions, powers and duties as its principal. This being the case, it is submitted that a body corporate can only sustain the charging of the fees in question provided that it is authorised in terms of the provisions of the Act in terms of which it derives its existence, or any other applicable acts and provided further that it is not in contravening existing legislation. This begs the question:

What is the underlying authority for the charging of these fees, and is it sustainable in law?

It is submitted that body corporates have indulged in a practice in terms of which fees are charged to their members which are without any apparent legal foundation and in some instances amounts to a contravention of the law and therefore illegal, constituting prosecutable offences.

Sectional Titles Act
The duties of the Body corporate are set out in Section 37 of the Act. Section 37(1)(a) to (d) and 37(2) and (3) address the issue of determination of levies. Following such determination, it is inevitable that the accounts created in terms of the ensuing obligations will be in need of administration. Clearly a member is entitled to information regarding his obligations since it would be impossible to determine one's obligation in the absence of an account being rendered or related communication.

Section 37(3) clearly acknowledges this need and provides as follows:

The body corporate shall, on the application of an owner or mortgagee of a unit, or any person authorized by such owner or mortgagee, certify in writing-

(a) the amount determined as the contribution of that owner;

(b) the manner in which such contribution is payable;

(c) the extent to which such contribution has been paid by the owner; and

(d) the amount of any rates and taxes paid by the body corporate in terms of section 51 and not recovered by it.

The body corporate is the only person which can provide the necessary information in order to enable a conveyancer to issue the certificate required in terms of Section 15B(3). It is submitted that the fulfilment of this function and therefore the issuance of a levy clearance certificate is part of the functions of the body corporate in terms of the section referred to hereinabove. With one exception, the Act does not make provision for a body corporate to charge its members any fees for fulfilling its functions in terms of the Act.

Rule 32 of the Management rules (Annexure 8 to the regulations published in terms of the Act) is the only provision authorising the body corporate to charge any fee and that relates to the availability of the rules and in this regard the body corporate is authorised to require payment of a "reasonable amount" in relation to the provision of a copy of the Rules governing the scheme. It is is submitted that the intention of the legislature was to address the costs of copying and a related attendance thereto. It is interesting to note that this authority was not extended to a request for information relating to minutes of meetings provided for in Rule 34(3) of the same rules. Accordingly this rule was designed to be specific, and it is submitted, has limited scope leading to restrictive application. If it was the intention of the legislature to enable a body corporate to recover various kinds of fees from its members whilst performing its functions or carrying out requests it would have provided an authority of an general nature. The presence of Rule 32 supports an interpretation that no fees should be charged unless provided for.

In the absence of any authorisation it is submitted that the body corporate is not entitled to charge its members for the fulfilment of any function for example a request to provide the particulars of the trustees (Sect 37(1)(l)) or to satisfy a request in relation to the insurance of the complex (Sect 37(1)(r )) or for that matter to satisfy an account enquiry (Sect 37 (3)).

The practice of the body corporate to request payment for the provision of information only at the time when a unit is transferred is furthermore indicative of the abuse of the requirement in terms of Section 15B(3) of the Act since it begs the question as to why day to day telephonic enquiries, even whilst the unit is subject to transfer, are not subject to a charge. A member is able to obtain free information in relation to his account at any time but is charged for it when his conveyancer request same, which is preposterous.

If the body corporate does not have the authority to impose payment for execution of its duties then it follows, as aforementioned, that a managing agent is lacking the necessary authority as well.

Deeds Registry Act, Act 47 of 1937
The Deeds Registries Act, which regulates the conveyancing process, does not provide any authority for the charging of these fees either. Rule 35 of the regulations published in terms of section 55 of the Deeds Registries Act provides as follows:

Fees of office.-(1) The fees of office to be charged in respect of any act, matter, or thing required, or permitted, to be done in or in relation to a deeds registry shall be those as specified in the schedule of fees of office, published in terms of regulation 84 of the Regulations in terms of the Deeds Registries Act, 1937 (Act No. 47 of 1937.
(my underlining)

It is submitted that the issuance of a levy clearance certificate constitutes an act performed in relation to the deeds registry with reference to the provisions of Sect 15B of the Act since without same a conveyancer is unable to produce the required certificate without being exposed to risk. The act and regulations do not provide for a fee in relation to the fulfilment of such function or the provision of information in relation thereto.

Attorneys Act, Act 53 of 1973
The Attorneys Act prohibits the charging of fees in relation to the facilitation of a tripartite agreement by any person other than a practising attorney. Section 83(8)(a) of the Attorneys Act provides as follows:

Any person, except a practising practitioner, who for or in expectation of any fee, gain or reward, direct or indirect, to himself or to any other person, draws up or prepares or causes to be drawn up or prepared any of the following documents, namely-

(i) any agreement, deed or writing relating to immovable property or to any right in or to immovable property, other than contracts of lease for periods not exceeding five years, conditions of sale or brokers' notes;
(my underlining)

shall be guilty of an offence and on conviction liable in respect of each offence to a fine not exceeding R2 000 and in default of payment thereof to imprisonment not exceeding six months.

It is submitted that charging of a fee for the drafting or preparation of a tripartite agreement by a body corporate amounts to a contravention of the provisions of the Attorneys Act and hence is not only unenforceable but, in addition, prosecutable. Should a body corporate subscribe to the view that a need exists for the conclusion of such agreements, they should instruct the conveyancer to represent their interest in ensuring compliance with their requirements.

Conclusion
The absence of apparent legal authority to justify the continuance of the practice in terms of which the body corporate, and probably to a larger extent their managing agents, to charge excessive fees for the fulfilment of a function that is of an administrative nature and well within their statutory duties calls for the abolishment thereof. It is submitted that participation and facilitation thereof would amount to the condonation of a practice which does not add value in the manner suggested and amount to the enrichment of those appointed to administer and account. The practice has reached proportions which are far removed from the initial innocent administrative charge and in the absence of standard guideline or fee, which still would not address the legality thereof, or a compulsory regulatory body governing the behaviour of Body corporates and their agents, this practice will remain a license to print money by those manipulating the compliance of Section 15B(3) of the Act.

Stian Dreyer
Silberbauers Brits Attorneys
9 Louwville Street
Bellville
Tel: 021 946 1127
Email: Stian Dreyer