Sectional Titles

Clearance certificates ...

DATE: 19 APRIL 2004

1) It has been suggested that levies i.r.o sectional title units have to be paid for the full financial year in order to obtain a clearance certificate for transfer purposes i.t.o sec.15B3(a)(i)(aa) of the Sectional Titles Act 1986. The legal basis for those views seems to be sec.37(2) of the Act read with certain of the management rules. I do not agree with those views. This memorandum
  • firstly, argues that the amendment to sec.37(2), occasioned by the Amendment Act 29/2003, cannot have the effect attributed to it; and
  • secondly, even if the amendment has that effect, then there is no reason to deduct that there is any change in the present practice whereby a clearance certificate is lodged which is valid until the end of the month in which transfer takes place.
These two matters are dealt with seriatim below.

2) Sec.32(7) used to read
"(2) Any contribution levied under any provision of subsection (1), shall be due and payable on the passing of a resolution to that effect by the trustees of the body corporate and my be recovered by the body corporate by action in any court (including any magistrate's court) of competent jurisdiction from the persons who were owners of units at the time when such contributions became due"
The amendment substituted the last four words "such contributions became due" with the words "such resolution was passed". My interpretation is that, whether the levies are recoverable from persons who were owners at the time when the resolution was passed or the time when the levies became payable, those owners do not remain liable forever and a day. My view is based on the following considerations:

a) I believe that the wording substituted, namely, "the time when such contribution became due", creates much more uncertainty. The time when the contributions become due could have been any one of the following points in time (in probable historical sequence):
i) The day when the body corporate came into being (Management Rule 31(1) read with sec.36(1)); or
ii) the day of the passing of the resolution "to that effect", i.e. the words in the opening part of this very section 37(2); or
iii) the day on which an owner receives notice from the trustees i.t.o Management Rule 31(3) "whereupon such amount shall become payable".

b) The recovery of the levies from owners at a certain point in time, whether any of the moments referred to above, does not mean that those owners remain liable for the levies for time immemorial. The act recognises and authorises the transfer of units (sec.15B) in which case the body corporate has to certify in terms of sec.15B(3)(a)(i)(aa) that all monies due by the "transferor" has been paid. "Transferor" is not defined, but it can only be the owner from time to time.

c) I come to the conclusion that nothing significant has changed by this amendment. The amendment merely creates certainty where there has been uncertainty. The amendment has selected the date referred to in para.2(a)(ii) above and has ruled out the other possibilities. Nothing else has changed.

3) The question remains whether the clearance certificate should be valid for a year or for a date beyond, but close to, the date of registration, say, the end of the month following registration. Here again, I hold that nothing has changed and certainly not in consequence of an amendment to sec.37(2):
a) The passing of a resolution in terms of Management Rule 31(2) determines the amount of the levy for the ensuing year. The amount is fixed, not the liability for the payment thereof.

b) The determining factor is the determination of the instalments i.t.o Rule 31(3). A clearance certificate valid until the end of the month (or other period determined by the instalments) in which registration takes place should be sufficient.

c) Pretoria conveyancers have confirmed that the Registrar in Pretoria accepts certificates in terms of sec.15B(3)(a)(i)(aa) as before.

4) From the point of view of the property industry, SAPOA should guard against an incorrect interpretation of the amendment starting something which the property industry cannot afford. I suggest that the SAPOA committee as a matter of urgency
  • decides whether there is any substance in the approach adopted by the documents which you have copied to me;
  • liases with the conveyancing committee of the Law Society; and
  • liases with professional managers, probably through the Estate Agents Board.

The conveyancers do not want this, the purchasers will not be able to afford it and the professional managers should be convinced.

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