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MCS Courier - December 2012

6 December 2012

The Peaks decision
No prima facie proof of a liquidated claim against the owners of the unit, existed due to the fact that the levies claimed had not been determined by means of a trustees’ resolution as required under section 37(2) of the Sectional Titles Act. Estoppel not a defence and cannot endow validity to something which is rendered illegal by operation of statutory or common law. Therefore the levies were not legally determined and were not due and claimable in law.

(Judgment in the case of The Body Corporate of The Peaks Sectional Title Scheme v Spassov was handed down on 20th September 2012. It has not yet been reported).

Caveat
The function of the members to approve a budget does not include the power to determine levies. Trustees, on the other hand, should also refrain from abdicating their decision-making powers in respect of both ordinary and special levies in favour of ‘democratic’ decision-making by the members. In terms of section 37(2) there simply are no levies without a trustees’ resolution.

Is there a cap on interest rates for arrears?
In terms of section 1(2) of the Prescribed Rate of Interest Act (PRIA) the current prescribed rate of interest is 15,5% per annum.

PRIA seems to have been enacted to provide a rate of interest where none has been provided otherwise. I do not see its purpose as placing a limitation on rates of interest. In my view this can be concluded from the ambit of the act as set out in section 1 which describes it as rates of interest not governed by any other law or by an agreement or a trade custom or in any other manner.’ This is very wide and the intention seems to come to the assistance of creditors who have neglected to stipulate a rate of interest.

Accordingly I am of the view that the in duplum rule is the only limitation applicable to interest levied upon owners in respect of amounts mentioned in Management Rule 31(5) and (6).

May trustees conclude resolutions by e-mail
Trustees should be aware of becoming too casual in their meetings, particularly at leisure schemes where trustees often reside at different locations, a type of round robin e-mail practice has developed for holding meetings and making resolutions.

I doubt that a round robin meeting by e-mail qualifies as a proper meeting. To be on the safe side, it is accordingly recommended that, having concluded their e-mail discussions, a formal written resolution or resolutions be sent to all trustees for signing and returned to the body corporate’s domicilium address, to have the signed resolutions on record, in compliance with the provisions of Management Rule 24.

MCS Courier December 2012

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