Must the trustees send levy statements to owners in sectional title schemes?

Category Property Management

Must the trustees send levy statements to owners in sectional title schemes?

Article by Dr Carryn Melissa Durham  - Paddocks

The adoption of the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”) has not altered the position that the trustees (or managing agent) should send monthly levy statements to each owner to ensure open and transparent governance, but for different reasons.

The provision dealing with the functions of the body corporate is set out in section 3 of the STSMA, which replaced section 37 of the Sectional Titles Act 95 of 1986, with the important addition of a requirement for the establishment and collection of levies for a reserve fund to cover the cost of future maintenance and repair of common property, in addition to the administrative fund which is now to cover the scheme’s estimated annual operating costs.

Of particular importance section 3(5) of the STSMA, which states that the body corporate must, annually or whenever there is a change in levy, certify in writing:

(a) the amount determined as the contribution of each owner;
(b) the manner in which such contribution is payable;
(c) and the extent to which such contribution has been paid by each owner.

The provision for certificates of contribution amounts and payment requirements and status provided for in section 3(5) of the STSMA obliges the body corporate to confirm in writing when any annual or special contribution is levied. The prescribed management rules contained in Annexure 1 to the Regulations made under the STSMA (“PMRs”) are also relevant in this regard, and deal specifically with notification of, and reminders for payment of annual contributions.

PMR 25 states that:

“(1) The body corporate must, as soon as possible but not later than 14 days after the approval of the budgets referred to in rule 17(6)(j)(iv) by a general meeting, give each member written notice of the contributions and charges due and payable by that member to the body corporate, which notice must
(a) state that the member has an obligation to pay the specified contributions and charges; and
(b) specify the due date for each payment; and
(c) if applicable, state that interest at a rate specified in the notice will be payable on any overdue contributions and charges; and
(d) include details of the dispute resolution process that applies in respect of disputed contributions and charges.
(2) If money owing is not paid on the dates specified in the notice referred to in sub-rule (1), the body corporate must send a final notice to the member, which notice must state
(a) that the member has an obligation to pay the overdue contributions and charges and any applicable interest immediately; and
(b) if applicable
(i) the interest that is payable in respect of the overdue contributions and charges at the date of the final notice; and
(ii) the amount of interest that will accrue daily until the payment of the overdue contributions and charges; and
(c) that the body corporate intends to take action to recover the amount due if the overdue contributions and charges and interest owing are not paid within 14 days after the date the final notice is given.”

In cases where the body corporate has, on the authority of a written trustee resolution and in terms of PMR 21(3)(b), increased the contributions due by the members by a maximum of 10% at the end of a financial year to take account of the anticipated increased liabilities of the body corporate, it is specifically required that the trustees must give members notice, as set out in PMR 25, of such increased contributions.
PMR 25(7) is also relevant as it requires that the body corporate must, on the request in writing by a member, make available a full and detailed account of all amounts debited and credited to the member’s account with the body corporate.

PMR 25 has replaced the previous PMR 31(3), which merely provided that the trustees had to, within 14 days after each annual general meeting, advise each owner in writing of the amount payable by him or her in respect of the approved budget, whereupon such amount shall become payable in instalments, as determined by the trustees.

PMRs 26(1)(a) and (2) deals with the keeping of, and making available for inspection of the financial records of the body corporate, and states that:

“(1)(a) A body corporate must keep proper books of accounts that
(i) record all its income, expenditure, assets and liabilities;
(ii) disclose all amounts recovered from members by the body corporate or any managing agent or other service provider acting on its behalf;
(iii) include individual accounts for each member; and
(iv) contain all other information necessary to allow members to assess the body corporate’s financial situation and their financial situation in regard to the body corporate.
(2) On the application of any member, registered bondholder or of the managing agent, the body corporate must make all or any of the books of account and records available for inspection and copying.”

Nevertheless, none of the abovementioned provisions actually require that the trustees or where appointed, the managing agent send out monthly levy statements. However, each body corporate may decide to act differently in this regard, depending on the size and nature of the scheme; whether the scheme is self-managed and has trustees capable of producing accurate levy statements; whether it employs a managing agent; whether the managing agent’s contract includes the duty to send out monthly levy statements; and what has historically been done in this regard.

My reasoning is that where owners are in arrears, and the body corporate hands the defaulter over to an attorney for debt collection, the Magistrate or Adjudicator of the CSOS will be in a better position to establish for what amounts the owner is in arrears and liable to the body corporate. It will also make it easier to issue the levy clearance certificate in terms of section 15B(3)(a)(i)(aa) to an owner who wishes to sell their unit.

Article reference: Paddocks Press: Volume 12, Issue 08, Page 01.
Posted In: Paddocks Press Newsletter  | 30/08/2017
This article is published under the Creative Commons Attribution license.

Author: Dr Carryn Melissa Durham - Paddocks

Submitted 06 Sep 18 / Views 5151