The effect of Rule 46A of the uniform rules of court on Sectional Title property levy defaulters: No way our for judgement debtors
02 July 2018
For the longest time sectional title property trustees and homeowners’ associations (HOAs) in South Africa have battled with the strain... of not being able to recover arrear levies from defaulting owners. Local authorities could also not recover certain amounts in respect of rates and service charges. Needless to say, defaulting sectional title property owners would escape liability for their debt whilst they continued to mount up further charges on their accounts.The notion of levy defaulters having no sanctions placed on them simply because their mortgage bond payments were up to date, as well as the frustration this rang for trustees, HOAs and local authorities, sounded the death knell of an era in which body corporates, HOAs and local authorities could not give effect to any judgments they may have obtained for unsettled levies, rates and other service charges.Rule 46A of the Uniform Rules of Court was pronounced against the backdrop of the resultant detrimental consequences to the investments of other owners, who have had to pay exorbitant levies. The other members (owners) in the sectional title schemes also had to watch the value of their investments depreciate over time. The legislative change made in terms of the Rules Board for Courts of Law Act No. 107 of 1985 makes provision for courts to set a reserve price when immovable property is to be sold in execution of a debt judgment, in particular, primary residential property. The need for this highly anticipated change became evident in the case of Body Corporate v Sithole & Another (240/2016) [2017] ZASCA 28 (27 MARCH 2017).In Body Corporate v Sithole & Another, the Supreme Court of Appeal (the SCA) adjudicated an application for the compulsory sequestration of a default levy payer. This was an appeal from the decision of the High Court dismissing the said application. The Court found that the provisions of section 10(c) of the Insolvency Act No. 24 of 1936, requiring that when such an application is brought before court, the applicant should be able to establish that the grant of such an order would be to the advantage of the general body of creditors, could not be proved. It was held further that there was no basis to find that a body corporate of a sectional title development need not prove pecuniary benefit to the general body of creditors.