For the Sectional Title Body Corporate and management agents, the prospects of collecting outstanding levies and utility bills from defaulting owners has improved considerably since November 2015 when the Court ruled in favour of the Cathkin Peak South Body Corporate.
Until recently, management agents and body corporates dealt with the non-payment of sectional title levies and utility accounts in the same way as with any other debt collection.
Since body corporates would never be allowed, at their own prerogative, to disconnect utility supply to sectional title properties due to non-payment of levies or utility accounts, the debt collection process appeared to have been the only available option left to an agent or body corporate for collection of arrears on levies or utility bills. However, considering the three months waiting period in the Magistrates Court to obtain a default judgement or even worse, litigating for over two years on trial to recover a relatively trivial amount is hardly a viable solution to this common problem as the resulting debt burden of escalating arrears could land a body corporate in financial trouble.
In late 2015 SSLR Incorporated, a law firm specialising in property law, was presented with such a case and instead of following the traditional way to collect the levies and utility dues and arrears, they spearheaded a new approach and won a test case that would change the way these matters are dealt with in South Africa in future.
Instead of the usual debt collection procedures, they followed a new process involving ‘services disconnection action’ by approaching the High Court to recover the full amount owing as well as legal costs in only six-weeks.
Test Case – Non-payment of Sectional Title levies and utility payments
Six weeks after the utility disconnection application was served on the defaulting sectional title property owners, the matter was heard in which:
1. the Court authorised the Body Corporate to:
a) appoint a contractor to disconnect the electricity supply to the premises, unless the defaulting owners made payment of the full outstanding amount in respect of electricity;
b) to restrict or limit the water supply to the premises, unless the owners paid the full arrears amount in respect of water usage.
2. Further to this, the Court ordered the defaulting owners of the sectional title property to make full payment of the arrears amount immediately, the effect of which was that, not only could the Body Corporate immediately disconnect the utility supply in order to mitigate their damages, but also that a Warrant of Execution could be issued summarily in respect of these outstanding amounts.
The sectional title owners also had to pay the legal cost of the application as the legal cost element (prayer) was granted on a scale as between attorney and client, as set out in the Standard Management Rules of most complexes.
A strong message to sectional title defaulters
With the success of this application the Court sent a strong message to defaulting sectional title owners regarding the payment of levies and utility bills of residential properties. It is evident that such orders are no longer limited to commercial, retail and industrial properties, but that the Courts would also be willing to grant these orders with regards to residential properties.
Although Service Disconnection Action involves that the court grants permission for utilities to be disconnected in the event of non-compliance with the payment order, it by no means allows for a body corporate to take the law into its own hands by disconnecting utilities without a court order.
Spoliation and Sectional Title
Limiting, or infringing on, the propriety rights of owners in a sectional title complex, without a court order or following the correct sectionalised property procedural steps, will be tantamount to spoliation. Thus, terminating electricity supply or limiting access to common property without the requisite authority could lead to major damages and the liability for legal costs suffered by a body corporate. It is imperative to abide by the rules and regulations set forth in legislation and the Courts to limit liability and increase the chances at a successful and well-functioning scheme.
Service Disconnection Action
Service Disconnection Action now provides owners and Body Corporates with a process to obtain a real, legal means with which to mitigate damages and collect outstanding amounts quickly and effectively – without running up an account with service providers that the owner would remain responsible for.
Service Disconnection Action is a complex legal process subject to the merits of each particular case. For a discreet consultation and solutions to sectional title legalities, give SSLR Inc. a call or just complete and submit the contact form on their page.