SA Affordable Housing July / August 2018 // Issue: 71 | Page 6

NEWS
Law tightened for sectional
title levy defaulters
Sectional title trustees and homeowner association directors across
South Africa are breathing a sigh of relief as a loophole closes on
arrear defaulters.
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JULY - AUGUST 2018
AFFORDABLE
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Schaefer notes that this has, in many cases, been
severely detrimental to the interests of other owners,
who have either had to pay higher levies to make up
the shortfall created by the defaulting owners or watch
the value of their own investments being undermined
because their body corporate or HOA had to cut back on
maintenance and repairs to the whole complex.
“Now, however, this should happen much less. The
new court rule provides for a reserve or minimum price
to be set by the court that grants any debt judgment
that will result in the sale in execution of a primary
residence, which means that the bank holding the bond
on that property will have to accept any sale concluded
at that price or more. As is the usual practice in such
cases, the buyer will then settle the outstanding levies
so that ownership of the property can be transferred,
and the body corporate or HOA will have recovered
its debt.
“In addition, the defaulting owner will effectively have
been replaced by a new owner who hopefully will not
default and put the finances of the whole complex at risk or
the investments of other owners in jeopardy,” he adds.
recent sectional title legislative change makes it
easier for sectional title trustees and homeowner
association directors to recover arrear levies
from defaulting owners.
The change, made in terms of the Rules Board for
Courts of Law Act of 1985, is set out in Rule 46A of the
Uniform Rules of Court, and quite simply provides for
a court to set a reserve price when a property is to be
sold in execution of a debt judgment.
Andrew Schaefer, managing director of national
property management company Trafalgar, explains
that this will prevent the banks from being able to
unilaterally veto such sales and leave bodies corporate,
HOAs and local authorities with no way to give effect to
any judgments they may have obtained for outstanding
levies, rates and service charges.
The possibility of this happening, he says, is all too
clearly illustrated in the recent Empire Gardens cases
in the Gauteng High Court and the Supreme Court
(Body Corporate v Sithole and another (240/2016)
[2017] ZASCA 28 (27 March 2017)) in which the body
corporate of Empire Gardens, having tried other ways
to recover unpaid levies from an owner in the scheme,
eventually had no choice but to seek a judgment for
the debt, the attachment of the property and a sale in
execution.
The sale was then blocked by Nedbank, because the
owner was not in arrears with her bond repayments
and the price offered for the property at the sheriff’s
auction was much lower than the outstanding home
loan balance. When the body corporate tried to
sequestrate the defaulting owner, the bank also
successfully opposed that, on grounds that the body
corporate would be the only creditor to benefit from
such a move.
Says Schaefer, “This meant that even after lengthy
and costly court actions, the body corporate still had no
way to collect the arrear levies – and no way to stop the
owner from running up further arrears.
“What is more, this has not been an uncommon
occurrence. The banks holding the bonds over
properties in community housing schemes, such as
sectional title complexes and gated estates, have often
vetoed sales in execution in the past and blocked the
recovery of arrear levies.”
Andrew Schaefer, managing director of national property
management company Trafalgar.
Trafalgar currently has more than 80 000 residential
properties worth more than R65-billion under management
in more than 1 300 community housing schemes across
South Africa.