Dealing with problematic levy contributors

The owners of units in Sectional Title schemes that do not pay their levies place an unacceptable and burden on the other members of the scheme, and in some instances the trustees must resort to raising a special levy to cover the body corporate’s ongoing financial obligations. In these instances, because defaulters are unlikely to contribute to the special levy, they create an even greater financial burden for the other members.

Sometimes, the case of non-payment is due to lack of finances and in these cases, it is advisable for those who cannot afford to live in the complex to sell as soon as they can and find alternative accommodation, rather than wait for the case to get to the extreme of having their assets attached or possibly the unit being sold in execution. Trustees should keep in mind that when they hand an account over to attorneys for collection, that it will not be paid immediately and will incur further costs.

To collect the arrear levy’s efficiently, it is important that the trustees appoint an experienced sectional title attorney who understands the Sectional Titles Act. Collections of levies are not an easy task, and it is a good idea to involve collection experts as early as possible and they must be given all the backing documentation to execute the collection process efficiently. The documents that will be needed by the attorneys are: the participation quota schedule, a copy of the approved budget, the last AGM minutes, the levies schedule, the trustees’ resolution in terms of which the levies were determined, and a general ledger account of the defaulting owner, showing what is owed.

The target of the attorneys who handle the collections will always be to collect as much of the monies owed in the shortest time possible. There are various ways of recovering costs, e.g. a warrant of execution against movable property could be granted, in which case the Sheriff of the court will determine and write up the moveable assets that can be removed for sale at auction. If there are no attachable assets, or the Sheriff could not find the owner, it needs to be decided whether to trace the owner and what to do next. With some cases, there are various options: if the owner has equity in property, how many properties he owns, and his salary and employment situation. It will then be determined whether a garnishee order must be pursued, whether to apply for the rental income to be attached or whether to apply for the unit itself to be sold in execution.

As a drastic step of action, the debtor can also be sequestrated / liquidated. From the start of the collection process to the body corporate receiving money, up to three years could have passed, and the trustees will have had to make plans to cover these amounts in the meantime. The quicker the matter can be dealt with, the quicker the body corporate receives the monies owed, so it is of utmost importance that the trustees have their ‘ducks in a row’ in terms of resolutions, minutes, financial records, etcetera, so that the attorneys can get on with the job of collecting the outstanding amounts.