with recovery of the arrears before CSOS . Ignoring ( in our view ) an appreciation of the difference between the two types of levies , the sectional title owners applied to CSOS ( in a counterapplication responding to our application for payment ) for an Order declaring that that a contribution levied on owners or occupiers , or the way it is to be paid , is incorrectly determined or unreasonable , and an order for the adjustment of the contribution to a correct or reasonable amount ( in terms of Section 39 ( 1 )( c ) of the CSOS Act ) and for a consequent order for the payment or re-payment of a contribution or any other amount ( section 39 ( 1 )( e ) of the CSOS Act ).
Our client , the estate , is a non-profit company , duly incorporated , whose directors are empowered to impose levies , and whose members approve the same at every AGM of the members .
As a result of the perception that the sectional title homes were smaller , and of less value , the estate ( and its members ) resolved to discount the levies payable by the sectional title owners , as compared to the freehold owners .
The upshot of the hearing was that , despite discounting the contributions of the sectional title schemes by some 50 %, as compared to freehold owners ( the sectional title owners make up one third of the owners , but they paid only 20 % of the levies ), the CSOS Adjudicator found that the levies should be further reduced to a correct or reasonable amount of only 10 % of the total levies .
This decision completely changes historical budgets – budgets used to plan income and expenditure – after the fact , and after the income planned has already been expended in the interests of all the members . It comes as a complete blindside , and it was not possible to foresee this happening when the budgets were approved and voted , and the monies collected and spent by the estate . Our client has no way of adjusting that year ’ s expenditure to the reduced income , once the Order has been granted .
This prospect should trouble any board member / trustee / manager of a residential community .
We have taken the decision on review under the Promotion of Administrative Justice Act ( Act 3 of 2000 ) for several reasons . However , we are advised by counsel that an additional constitutional issue is to be raised , which we are doing , namely that : section 39 ( 1 )( c ), read with section 39 ( 1 )( e ), is unconstitutional insofar as it affords an adjudicator the power to : a . declare that a contribution levied is
‘ unreasonable ’ b . grant an order for the adjustment of a contribution to a ‘ reasonable ’ amount c . grant an order for the payment , or repayment , of a contribution pursuant to a declaration that a contribution levied is ‘ unreasonable ’.
In our proceedings we will be applying to declare section 39 ( 1 )( c ), read with section 39 ( 1 )( e ) of the CSOS Act , unconstitutional insofar as it affords an adjudicator the above powers .
We will be arguing inter alia that : a . An association cannot know how to determine contributions ( or the way they are to be paid ) to avoid a finding that such are ‘ unreasonable ’ – as there is no guidance in the legislation . It therefore cannot regulate its conduct to avoid such relief . b . In the event of a dispute , an adjudicator is also not guided as to the criteria s / he should use to exercise the section 39 ( 1 ) ( c ) power . c . The unconstitutionality follows from the requirements of the rule of law , enshrined in section 1 ( c ) of the Constitution of the Republic of South Africa , which inter alia requires that legislation must be written in a clear and accessible manner , so that it indicates with reasonable certainty to those bound to the legislation what is required of them so that they may regulate their conduct accordingly .
It is not just the scheme within a scheme issue that is regulated by this law , but all levies , of all schemes . It should be of interest to all boards of directors / trustees , as levies voted and passed in prior years ( sometimes several years back , as happened to our client ) are vulnerable to attack in terms of these provisions of the CSOS Act .
Alan Warrener Warrener de Agrela and Associates Inc
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