According to the BusinessDay, the amendment may mean that if a sectional title unit holder sells his unit at the beginning of the financial year, he could be liable for all the levies for the balance of the year before a clearance certificate is issued.
Marina Constas, who is a director of Biccari Bollo Mariano Attorneys and a fellow of the Association of Arbitrators, says there was always confusion surrounding the seller's liability for a special levy imposed by the body corporate prior to registration taking place.
She believes the matter has been taken too far by confusing the issue of payment of levies and special levies in making the seller liable for the entire financial year. She thinks this amendment was made in error and that it should apply to special levies only and not to ordinary levies. If no error has been made and government intends the seller to be liable for the balance of the levies, she says that the seller can avoid the costs by entering into a tripartite agreement with the purchaser and body corporate, whereby the purchaser would be liable as in the past.
However, Sunday Ogunronbi, director of land planning and property law in the land affairs department, disagrees with Constas, saying that section 37 (2) of the act, before and after the amendment, provides only that the person who was the owner when the resolution to pay levies was approved by the body corporate is responsible for paying those levies.
Tertius Maree, writing in Die Burger - Verwarring oor oordrag van deeltitel-eenhede - agrees with Constas in his interpretation of this section and suggests two ways to deal with it:
- The trustees ask for the outstanding balance before issuing the clearance certificate. The conveyancer then makes a pro rata division from the date of transfer between the seller and buyer, just as is done with municipal clearance certificates.
- A tripartite agreement is entered into between the buyer the seller and the body corporate in which the buyer undertakes to assume the sellers levy obligation. Note however, merely mentioning in the contract of sale that that the buyer will be responsible for the balance of the levies is not a tripartite agreement, and therefore unenforceable by the body corporate should he fail to pay.
Only our government could come up with this one. The up-front payment of municipal rates for conventional properties is bad enough, but levies on ST units comprise, rates, water, insurance, cleaning staff, provision for maintenance, etc. etc. The levies on my inexpensive flat are over a thousand Rand per month. That's equal to the rates on a very expensive freehold home.
Why on earth should the seller be responsible for the purchaser's water, etc., for perhaps 11 months. Many Bodies Corporate (including the one in the building where I own a flat) raise special levies BEFORE using the money, so that owners who want to pay off the levy over 6 months do not have to pay interest as the money will not be disbursed until it has all been collected. Why should a seller pay for repairs or maintenance that will only be done perhaps a year after he sold his flat ? Why are conveyancers not asked for input BEFORE the government acts on these ideas they come up with ?
It's not really the Seller who will bear the burden of paying all levies due for a particular financial year because there is almost always a clause in a Contract of Sale providing for recovery of such disbursments from the purchaser. So if a body corporate's financial year runs from 1st March in one year to 28th February in the next year, and a purchaser of a flat contracts to take possession on, say 1st October, such purchaser will have to refund to the Seller all the levies prepaid by the Seller for the period October to February.
The nett effect is discrimatory in that it creates yet another obstacle for low incomf families to own their homes. And seeing as I do not have to spell out in just which race group the majority of low income families are, I have no doubt that bodies corporate will eagerly use this "instrument" to keep these families out of their buildings.
I agree with Sara Scheiner that in practice the levies for the balance of the year should and will be recovered from the purchaser, not the seller. The idea expressed by some that it constitutes an additional levies payment, is of course wrong - it is only payment upfront of levies that will have to be paid later in any event.
I also agree that it could be quite onerous for some purchasers. For this reason I strongly recommend the use of a partite agreement which would in effect preserve the status quo. The problem has been created by the persons responsible for drafting the amendment. I understand that the effect discussed here was unintended. Only the legislature can fix the situation.
The fact that the drafters did not foresee this problem, is very worrying. In part this, and similar, problems arise in sectional title legislation because of the lack of representation of owners on the Regulations Board. It is heartening that the Department of Land Affairs have shown that they understand the need for consumer protection by taking the first steps towards the appointment of a Sectional Title Ombudsman. Such appointment could become a turning point in the entire sectional title scenario and could be instrumental in consumer aspects enjoying the focus which it deserves.
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