Three aspects response

With reference to Mr Kevin Mahon's letter of 28th April 2011- Three aspects - let me point out that the matter is in my opinion regulated quite simply by the provisions of section 89 of the Insolvency Act 24/1936(IA). In my previous letter dated 7th April 2011 calling for the suspension of Chief Registrars Circular 4/2011 I did not refer to the legislation specifically. I also note that Mr. Nqhome has addressed the matter concerning sales in execution so I will not go into that aspect.

I am of the opinion that the levies to which a Home Owners Association (HOA) is entitled to are a tax as envisioned in section 89(5) of IA on the basis that the HOA is a "…body established by or under the authority of any law….". One should be careful when it comes to a HOA not established in terms of law but by a developer of his own accord, as this may not apply to such a body corporate, who may simply be a concurrent creditor.

In terms of section 89(1) IA the trustee is responsible for payment inter alia then to a HOA of the amount owing to the HOA for a period of 2 years immediately preceding sequestration, as well as levies payable from date of sequestration to the date of transfer of that property by the trustee, including any interest due on such tax in respect of any such period.

Levies not collected for a period exceeding two years before sequestration will therefore be part of a concurrent claim only. It is important to note that the HOA must lodge and prove a claim, like any other creditor, or forfeit the outstanding levies. It will therefore be advisable for HOA's to not allow owners of properties in their scheme to fall behind with payment of levies, as that is where they stand to lose money.

It is quite clear that the matter is between the trustee and the HOA from date of sequestration, as set out in section 89 of IA. There is thus no reason to approach the HOA for a consent to the transfer, as the HOA's claim for payment as from date of sequestration is against the trustee, who will deal with the property concerned as instructed at the second meeting of the creditors. Therefore the Registrars Conference Resolutions suspended by Chief Registrars Circular 4/2011 are in fact correct and the suspension should be reversed.

Dudley Lee
10/5/2011